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

State Tax Online Filing

How To File A Tax Extension 20111040x Tax Return For Prior Year InstructionsWhere To File Your State Taxes For FreeAmended Tax Return For 20101040ez WorksheetFree File GovHow Do You Do An Amendment To Your Tax ReturnMyfreetaxes Com BaltimorecashHow To File 2011 Taxes Late OnlineIncome Tax Amendment FormFree Federal And State Tax Filing 20121040ez Tax Form1040nr Free FileHow Do I File My 2012 Taxes NowNeed Help Filing A 1040xE File State Taxes OnlyFiling Past Year Tax Returns2013 1040 Ez1040ez Online FormFiling An Amended Tax ReturnWww.irs.gov Form 1040xPrior Year TaxesFill 1040xFilling Out 1040xAmending Tax Return2012 1040a1040 Es Payment VoucherHow To File A 1040x Form To The IrsCan You Still E File 2010 Tax ReturnsCan I File 2010 Taxes In 2012File Free 2012 Tax Return2011 1040 Form DownloadTurbotax 2011 Software2009 Tax FormHow To File State Taxes Only2012 Tax Forms 1040ezH&r Block Military Free FileAmend Income Tax ReturnAmend Income TaxHandr Block

State Tax Online Filing

State tax online filing Internal Revenue Bulletin:  2009-36  September 8, 2009  Rev. State tax online filing Proc. State tax online filing 2009-37 Table of Contents SECTION 1. State tax online filing PURPOSE SECTION 2. State tax online filing BACKGROUND SECTION 3. State tax online filing SCOPE SECTION 4. State tax online filing ELECTION PROCEDURES SECTION 5. State tax online filing REQUIRED INFORMATION STATEMENT SECTION 6. State tax online filing EFFECTIVE DATE SECTION 7. State tax online filing TRANSITION RULE SECTION 8. State tax online filing PAPERWORK REDUCTION ACT DRAFTING INFORMATION SECTION 1. State tax online filing PURPOSE . State tax online filing 01 This revenue procedure provides the exclusive procedures for taxpayers to make an election to defer recognizing discharge of indebtedness income (“COD income”) under § 108(i) of the Internal Revenue Code. State tax online filing . State tax online filing 02 This revenue procedure also requires taxpayers making the § 108(i) election to provide additional information on returns beginning with the taxable year following the taxable year for which the taxpayer makes the election. State tax online filing This revenue procedure describes the time and manner of providing this additional information. State tax online filing . State tax online filing 03 The Internal Revenue Service and Treasury Department intend to issue additional guidance under § 108(i) that may include regulations addressing matters in this revenue procedure. State tax online filing Taxpayers should be aware that these regulations may be retroactive. State tax online filing See § 7805(b)(2). State tax online filing This revenue procedure may be modified to provide procedures consistent with additional guidance. State tax online filing SECTION 2. State tax online filing BACKGROUND . State tax online filing 01 Section 108(i), Generally. State tax online filing Section 108(i) was added to the Code by § 1231 of the American Recovery and Reinvestment Tax Act of 2009, Pub. State tax online filing L. State tax online filing No. State tax online filing 111-5, 123 Stat. State tax online filing 338. State tax online filing In general, § 108(i) provides that, at the election of a taxpayer, COD income realized in connection with a reacquisition after December 31, 2008, and before January 1, 2011, of an applicable debt instrument is includible in gross income ratably over a 5-taxable-year inclusion period, beginning with the taxpayer’s fourth or fifth taxable year following the taxable year of the reacquisition. State tax online filing Generally, if a taxpayer makes a § 108(i) election and reacquires (or is treated as reacquiring) the applicable debt instrument generating the COD income for a new debt instrument with original issue discount (“OID”), then interest deductions for this OID also are deferred, as provided in § 108(i)(2). State tax online filing The OID deferral rule, however, does not apply if the amount of OID is less than a de minimis amount, as determined under § 1273(a)(3) and § 1. State tax online filing 1273-1(d) of the Income Tax Regulations. State tax online filing The OID deferral rule in § 108(i)(2) applies at the entity level for a pass-through entity. State tax online filing For example, a partnership (and therefore its partners) may not deduct currently the OID described in § 108(i)(2)(A)(i). State tax online filing A taxpayer must take into account any item of income or deduction deferred under § 108(i), and not previously taken into account, in the taxable year in which certain events occur (such as the liquidation of the taxpayer and upon other events specified in administrative guidance). State tax online filing See § 108(i)(5)(D). State tax online filing The rule regarding acceleration of deferred COD income and OID deductions also applies in the case of certain dispositions by persons holding ownership interests in pass-through entities. State tax online filing Section 108(i)(5)(D)(ii). State tax online filing For purposes of § 108(i), regulated investment companies (as defined in § 851(a)) and real estate investment trusts (as defined in § 856(a)) are not pass-through entities. State tax online filing . State tax online filing 02 Applicable Debt Instrument. State tax online filing Section 108(i)(3)(A) defines the term “applicable debt instrument” to mean any debt instrument issued by a C corporation or by any other person in connection with the conduct of a trade or business by that person. State tax online filing The term “debt instrument” means any bond, debenture, note, certificate, or any other instrument or contractual arrangement constituting indebtedness within the meaning of § 1275(a)(1). State tax online filing Section 108(i)(3)(B). State tax online filing For purposes of § 108(i), in the case of an intercompany obligation (as defined in § 1. State tax online filing 1502-13(g)(2)(ii)), an applicable debt instrument includes only an instrument for which COD income is realized upon the instrument’s deemed satisfaction under § 1. State tax online filing 1502-13(g)(5). State tax online filing . State tax online filing 03 Reacquisition. State tax online filing Section 108(i)(4)(A) defines the term “reacquisition” to mean, with respect to any applicable debt instrument, any acquisition of the debt instrument by the debtor that issued (or is otherwise the obligor under) the debt instrument, or a person related to the debtor under § 108(e)(4). State tax online filing The term “acquisition” includes an acquisition of the debt instrument for cash or other property, the exchange of the debt instrument for another debt instrument (including an exchange resulting from a modification of the debt instrument), the exchange of the debt instrument for corporate stock or a partnership interest, the contribution of the debt instrument to capital, and the complete forgiveness of the indebtedness by the holder of the debt instrument. State tax online filing See § 108(i)(4)(B). State tax online filing The term “acquisition” also includes an indirect acquisition within the meaning of § 1. State tax online filing 108-2(c) if a direct acquisition of the debt instrument would qualify for an election under § 108(i). State tax online filing For example, if a corporation acquires debt of a partnership that the partnership issued in connection with its trade or business, and the partnership and corporation become related within six months of the corporation’s acquisition of the debt, the indirect acquisition is an acquisition for which an election under § 108(i) may be made. State tax online filing . State tax online filing 04 General Requirements for the Section 108(i) Election. State tax online filing Section 108(i)(5)(B) provides, in general, that a taxpayer makes the § 108(i) election by including a statement that clearly identifies the applicable debt instrument with the return of tax imposed for the taxable year in which the reacquisition of the instrument occurs. State tax online filing (For purposes of this revenue procedure, a return of tax or income tax return includes an information return, and a taxpayer includes a person that files an information return. State tax online filing ) The statement must include the amount of income to which § 108(i)(1) applies and other information the Service may prescribe. State tax online filing Once made, a § 108(i) election is irrevocable and, except as provided in section 7 of this revenue procedure, may not be modified. State tax online filing . State tax online filing 05 Section 108(i) Elections Made by Pass-through Entities. State tax online filing In the case of COD income realized by a pass-through entity from the reacquisition of an applicable debt instrument, the pass-through entity makes the § 108(i) election. State tax online filing Section 108(i)(5)(B)(iii). State tax online filing . State tax online filing 06 Additional Information on Subsequent Years’ Returns. State tax online filing Section 108(i)(7) authorizes the Service to issue guidance necessary or appropriate for applying § 108(i), including requiring reporting the election and other information on returns of tax for subsequent taxable years. State tax online filing . State tax online filing 07 Exclusivity. State tax online filing Section 108(i)(5)(C) provides that if a taxpayer elects to apply § 108(i) to an applicable debt instrument, § 108(a)(1)(A), (B), (C), and (D) do not apply to COD income deferred under § 108(i). State tax online filing . State tax online filing 08 Allocation of Deferred COD Income on Partnership Indebtedness. State tax online filing Section 4. State tax online filing 04(3) of this revenue procedure describes how a partnership may elect under § 108(i) to defer a portion of the COD income realized from the reacquisition of an applicable debt instrument. State tax online filing If a partnership elects to defer all or any portion of COD income realized from the reacquisition of an applicable debt instrument, all of the COD income with respect to that debt instrument, without regard to § 108(i), is allocated to the partners in the partnership immediately before the reacquisition in the manner in which the income would be included in the distributive shares of these partners under § 704 and the regulations thereunder, including § 1. State tax online filing 704-1(b)(2)(iii). State tax online filing Each partner’s share of this COD income is the partner’s COD income amount (“COD income amount”). State tax online filing The partner’s COD income amount that is deferred under § 108(i) is the partner’s deferred amount (“deferred amount”). State tax online filing The partner’s COD income amount that is not deferred and is included in the partner’s distributive share of partnership income for the taxable year of the partnership in which the reacquisition occurs is the partner’s included amount (“included amount”). State tax online filing . State tax online filing 09 Partner’s Deferred § 752 Amount. State tax online filing A decrease in a partner’s share of a partnership liability resulting from the reacquisition of an applicable debt instrument that is not treated as a current distribution of money to the partner under § 752 by reason of § 108(i)(6) is the partner’s deferred § 752 amount (“deferred § 752 amount”). State tax online filing A partner’s deferred § 752 amount may not exceed the lesser of (i) the partner’s deferred amount or (ii) gain that the partner would recognize in the year of reacquisition under § 731 as a result of the reacquisition absent § 108(i)(6). State tax online filing To determine the amount of gain the partner would recognize under clause (ii) of the preceding sentence, the amount of any deemed distribution of money under § 752(b) resulting from the decrease in the partner’s share of a reacquired applicable debt instrument that is treated as an advance or draw of money under § 1. State tax online filing 731-1(a)(1)(ii) is determined as if no COD income resulting from the reacquisition of the applicable debt instrument is deferred under § 108(i). State tax online filing See Rev. State tax online filing Rul. State tax online filing 92-97, 1992-2 C. State tax online filing B. State tax online filing 124, and Rev. State tax online filing Rul. State tax online filing 94-4, 1994-1 C. State tax online filing B. State tax online filing 195. State tax online filing A partner’s deferred § 752 amount is treated as a distribution of money to the partner under § 752 at the same time, and to the extent remaining in the same amount, as the partner recognizes the COD income deferred under § 108(i). State tax online filing . State tax online filing 10 Allocation of Deferred COD Income on S Corporation Indebtedness. State tax online filing For purposes of § 108(i), an S corporation’s COD income deferred under § 108(i) is shared pro rata only among those shareholders that are shareholders of the S corporation immediately before the reacquisition transaction. State tax online filing . State tax online filing 11 Deferred COD Income, Earnings and Profits, and Alternative Minimum Taxable Income. State tax online filing (1) In general. State tax online filing The Service and Treasury Department intend to issue regulations regarding the computation of a corporation’s earnings and profits with respect to COD income and OID deductions that are deferred under § 108(i). State tax online filing These regulations generally will provide that deferred COD income increases earnings and profits in the taxable year that it is realized and not in the taxable year or years that the deferred COD income is includible in gross income. State tax online filing OID deductions deferred under § 108(i) generally will decrease earnings and profits in the taxable year or years in which the deduction would be allowed without regard to § 108(i). State tax online filing COD income and OID deductions that are deferred increase or decrease adjusted current earnings under § 56(g)(4) in the taxable year or years that the income or deduction is includible or deductible in determining taxable income. State tax online filing See § 1. State tax online filing 56(g)-1(c)(1). State tax online filing (2) Exceptions for certain special status corporations. State tax online filing The Service and Treasury Department intend to issue regulations providing that in the case of regulated investment companies and real estate investment trusts, COD income deferred under § 108(i) generally increases earnings and profits in the taxable year or years in which the deferred COD income is includible in gross income and not in the year that the deferred COD income is realized. State tax online filing OID deductions deferred under § 108(i) generally decrease earnings and profits in the taxable year or years that the deferred OID deductions are deductible. State tax online filing . State tax online filing 12 Extension of Time to Make Election. State tax online filing Under § 301. State tax online filing 9100-1 of the Procedure and Administration Regulations, the Service may grant an extension of time to make a regulatory election. State tax online filing An election is a regulatory election if the due date is prescribed by regulation or other published guidance of general applicability. State tax online filing Section 301. State tax online filing 9100-2(a) provides an automatic 12-month extension from the due date for making certain regulatory elections. State tax online filing SECTION 3. State tax online filing SCOPE This revenue procedure applies to taxpayers that realize COD income from a reacquisition after December 31, 2008, and before January 1, 2011, of an applicable debt instrument, as provided in § 108(i). State tax online filing SECTION 4. State tax online filing ELECTION PROCEDURES . State tax online filing 01 In General. State tax online filing (1) A taxpayer within the scope of this revenue procedure makes the § 108(i) election by— (a) Attaching a statement meeting the requirements of section 4. State tax online filing 05 of this revenue procedure to the taxpayer’s timely filed (including extensions) original federal income tax return for the taxable year in which the reacquisition of the applicable debt instrument occurs, and (b) If applicable, satisfying the additional requirements of section 4. State tax online filing 07, 4. State tax online filing 08, 4. State tax online filing 09, or 4. State tax online filing 10 of this revenue procedure. State tax online filing (2) The Service grants an automatic extension of 12 months from the due date prescribed in section 4. State tax online filing 01(1)(a) of this revenue procedure for making the § 108(i) election. State tax online filing The rules that apply to an automatic extension under § 301. State tax online filing 9100-2(a) apply to this automatic extension. State tax online filing . State tax online filing 02 Section 108(i) Elections Made by Members of Consolidated Groups. State tax online filing The common parent of a consolidated group makes the § 108(i) election on behalf of all members of the group. State tax online filing See § 1. State tax online filing 1502-77(a). State tax online filing . State tax online filing 03 Aggregation Rule. State tax online filing A taxpayer within the scope of this revenue procedure may treat two or more applicable debt instruments that are part of the same issue and that are reacquired during the same taxable year as one applicable debt instrument for purposes of this revenue procedure. State tax online filing A pass-through entity may not treat two or more applicable debt instruments as one applicable debt instrument under this section 4. State tax online filing 03 if the owners and their ownership interests in the pass-through entity immediately prior to the reacquisition of each applicable debt instrument are not identical. State tax online filing . State tax online filing 04 Partial Elections. State tax online filing (1) A taxpayer within the scope of this revenue procedure may make an election for any portion of COD income realized from the reacquisition of any applicable debt instrument. State tax online filing Thus, for example, if a taxpayer realizes $100 of COD income from the reacquisition of an applicable debt instrument, the taxpayer may elect under § 108(i)(1) to defer only $40 of the $100 of COD income. State tax online filing The taxpayer may exclude from income the portion of COD income that the taxpayer does not elect to defer under § 108(i) ($60 in this example) under § 108(a)(1)(A), (B), (C), or (D), if applicable. State tax online filing (2) A taxpayer is not required to make an election for the same portion of COD income arising from each applicable debt instrument that it reacquires, but may make an election for different portions of COD income arising from different applicable debt instruments (whether or not part of the same issue). State tax online filing Thus, for example, if a taxpayer realizes $100 of COD income from the reacquisition of an applicable debt instrument (Instrument A) and $100 of COD income from the reacquisition of a different applicable debt instrument (Instrument B), the taxpayer may elect to defer all or a portion of the COD income associated with Instrument A and none or a different portion of the COD income associated with Instrument B. State tax online filing (3) A partnership that elects to defer less than all of the COD income realized from the reacquisition of an applicable debt instrument may determine, in any manner, the portion, if any, of a partner’s COD income amount that is the partner’s deferred amount and the portion, if any, of a partner’s COD income amount that is the partner’s included amount. State tax online filing Thus, for example, one partner’s deferred amount may be zero while another partner’s deferred amount may equal that partner’s COD income amount (or any portion thereof). State tax online filing A partner may exclude from income the partner’s included amount under § 108(a)(1)(A), (B), (C), or (D), if applicable. State tax online filing The provisions of this section 4. State tax online filing 04(3) apply for purposes of § 108(i) only and are not intended as an interpretation of or a change to existing law under § 704. State tax online filing . State tax online filing 05 Contents of Election Statement. State tax online filing A statement meets the requirements of this section 4. State tax online filing 05 if the statement— (1) Label. State tax online filing States “Section 108(i) Election” across the top. State tax online filing (2) Required information. State tax online filing Provides, for each applicable debt instrument the reacquisition of which generates COD income that the taxpayer is electing to defer under § 108(i)— (a) The name and taxpayer identification numbers, if any, of the issuer or issuers of the applicable debt instrument; (b) A general description of the applicable debt instrument (including the issue and maturity dates) and, in the case of any person other than a C corporation, a general description of the person’s trade or business to which the applicable debt instrument is connected; (c) A general description of the reacquisition transaction or transactions generating the COD income (including the date(s) of the transaction(s)); (d) The total amount of COD income for the applicable debt instrument that results from the reacquisition (in the case of a partnership, the aggregate of the partners’ COD income amounts) and a general description of the manner in which this amount is calculated; (e) The amount of COD income for the applicable debt instrument that the taxpayer is electing to defer under § 108(i); (f) In the case of a partnership, a list of partners that have a deferred amount, their identifying information and each partner’s deferred amount; and in the case of an S corporation, a list of shareholders with COD income deferred under § 108(i), their identifying information and each shareholder’s share of the S corporation’s deferred COD income; and (g) In cases in which a new debt instrument is issued or deemed issued in exchange for the applicable debt instrument (including exchanges under § 108(e)(4), § 108(i)(2)(B), and § 1. State tax online filing 1001-3), the issuer’s name, the issuer’s taxpayer identification number, if any, a general description of the new debt instrument and whether the new debt instrument has OID, and if the new debt instrument has OID, a schedule of the OID that the issuer expects to accrue each taxable year on the instrument and the amount of OID that the issuer expects to defer under § 108(i)(2) each taxable year. State tax online filing . State tax online filing 06 Supplemental information. State tax online filing The statement described in section 4. State tax online filing 05 of this revenue procedure may specify for each applicable debt instrument an amount greater than the amount identified in section 4. State tax online filing 05(2)(e) of this revenue procedure that the taxpayer elects to defer under § 108(i) in the event the Service subsequently concludes that the taxpayer understated the amount of COD income described in section 4. State tax online filing 05(2)(d) of this revenue procedure. State tax online filing This additional amount of COD income the taxpayer elects to defer may be described as the entire additional COD income, or as a percentage of any additional COD income. State tax online filing If the taxpayer is a partnership, the partnership must specify each partner’s share of the partnership’s additional COD income that would be deferred (the partner’s additional deferred amount), which the partnership may describe for each partner as the partner’s entire share of the partnership’s additional COD income or as a percentage of the partner’s share of the partnership’s additional COD income. State tax online filing If the taxpayer is an S corporation, the S corporation must specify each shareholder’s share of the S corporation’s additional COD income that would be deferred, which the S corporation may describe for each shareholder as the shareholder’s entire share of the S corporation’s additional COD income or as a percentage of the shareholder’s share of the S corporation’s additional COD income. State tax online filing In the case of partnerships and S corporations, the additional COD income and the portion of additional COD income that would be deferred are allocated or determined as provided in sections 2. State tax online filing 08, 2. State tax online filing 10 and, if applicable, 4. State tax online filing 04(3) of this revenue procedure, respectively, as if the additional COD income was realized. State tax online filing . State tax online filing 07 Additional Requirements for Certain Partnerships Making a § 108(i) Election. State tax online filing The rules of this section 4. State tax online filing 07 apply to partnerships other than partnerships described in section 4. State tax online filing 10 of this revenue procedure. State tax online filing (1) Information filing on Schedule K-1 (Form 1065 and Form 1065-B). State tax online filing For the taxable year in which the § 108(i) election is made, the partnership must report on the Schedule K-1 (Form 1065 or Form 1065-B), Partner’s Share of Income, Deductions, Credits, etc. State tax online filing , in the manner specified in the instructions to the forms, for each partner § 108(i) information on an aggregate basis for all applicable debt instruments for which a § 108(i) election is made. State tax online filing Partnerships reporting § 108(i) information on the 2008 Schedule K-1 (Form 1065 or Form 1065-B) must report for each partner on an aggregate basis for all applicable debt instruments for which a § 108(i) election is made: (a) The partner’s deferred amount that the partner must include in income in the current taxable year under § 108(i)(1) or § 108(i)(5)(D)(i) or (ii), in box 11 (“other income”) using code F for Schedule K-1 (Form 1065) or in box 9 (“other”) using code U for Schedule K-1 (Form 1065-B); (b) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(2)(A)(ii) or § 108(i)(5)(D)(i) or (ii), in box 13 (“other deductions”) using code W for Schedule K-1 (Form 1065) or in box 9 (“other”) using code U for Schedule K-1 (Form 1065-B); (c) The partner’s deferred amount that has not been included in income in the current or prior taxable years, in box 20 (“other information”) using code X for Schedule K-1 (Form 1065) or in box 9 (“other”) using code U for Schedule K-1 (Form 1065-B); (d) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) that has not been deducted in the current or prior taxable years, in box 20 (“other information”) using code X for Schedule K-1 (Form 1065) or in box 9 (“other”) using code U for Schedule K-1 (Form 1065-B); (e) The partner’s deferred § 752 amount that is treated as a distribution of money to the partner under § 752 in the current taxable year, in box 20 (“other information”) using code X for Schedule K-1 (Form 1065) or in box 9 (“other”) using code U for Schedule K-1 (Form 1065-B); and (f) The partner’s deferred § 752 amount remaining as of the end of the current taxable year, in box 20 (“other information”) using code X for Schedule K-1 (Form 1065) or in box 9 (“other”) using code U for Schedule K-1 (Form 1065-B). State tax online filing (2) Election information statement provided to partners. State tax online filing The partnership must attach to the Schedule K-1 (Form 1065 or Form 1065-B) provided to each partner for the taxable year in which the § 108(i) election is made a statement satisfying the requirements of this section 4. State tax online filing 07(2). State tax online filing The partnership should not attach these statements to the Schedules K-1 that are filed with the Service, but must retain these statements, and each partner must retain that partner’s statement, in their respective books and records. State tax online filing A statement meets the requirements of this section 4. State tax online filing 07(2) if the statement— (a) Label. State tax online filing States “Section 108(i) Election Information Statement for Partners” across the top. State tax online filing (b) Required information. State tax online filing Clearly identifies for each applicable debt instrument to which an election under § 108(i) applies— (i) The partner’s COD income amount, the partner’s deferred amount, and the partner’s included amount; (ii) The partner’s deferred amount that the partner must include in income in the current taxable year under § 108(i)(5)(D)(i) or (ii); (iii) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) in the current taxable year; (iv) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(5)(D)(i) or (ii); (v) The partner’s share of each liability of the partnership described in section 4. State tax online filing 05(2)(g) of this revenue procedure; (vi) The partner’s share of the decrease in the partnership liability that results from the reacquisition of the applicable debt instrument; (vii) The partner’s share of the decrease in the partnership liability that results from the reacquisition of the applicable debt instrument that is treated as a distribution of money to the partner under § 752 in the current taxable year; (viii) The partner’s deferred § 752 amount as described in section 2. State tax online filing 09 of this revenue procedure; (ix) The partner’s additional deferred amount as described in section 4. State tax online filing 06 of this revenue procedure; and (x) The date of the reacquisition transaction generating the COD income. State tax online filing (c) If a partner fails to provide the written statement required by section 4. State tax online filing 07(3) of this revenue procedure, the partnership must indicate that the amounts described in section 4. State tax online filing 07(2)(b)(vii) and (viii) of this revenue procedure cannot be calculated because the partner did not provide the information necessary to report these amounts. State tax online filing (3) Partner reporting requirements. State tax online filing The partnership must make reasonable efforts prior to making a § 108(i) election to secure from each partner with a deferred amount for which it does not have the information necessary to compute the partner’s basis in its partnership interest (and its deferred § 752 amount as described in section 2. State tax online filing 09 of this revenue procedure) a written statement signed under penalties of perjury that includes this information. State tax online filing Each partner with a deferred amount must provide this written statement to the partnership within 30 days of the date of request by the partnership. State tax online filing A partner’s failure to comply with this reporting requirement does not invalidate the partnership’s election under § 108(i) for an applicable debt instrument only if the partnership makes reasonable efforts before making the § 108(i) election to obtain the written statement from the partner and otherwise complies with the requirements of section 4 of this revenue procedure. State tax online filing If a partner provides its written statement under this section 4. State tax online filing 07(3) after the partnership has provided to the partner the Section 108(i) Election Information Statement for Partners, the partnership must provide to the partner a revised Section 108(i) Election Information Statement for Partners reporting the information required under section 4. State tax online filing 07(2)(b)(vii) and (viii) of this revenue procedure and report the partner’s deferred § 752 amount on the partner’s Schedule K-1 (Form 1065 or Form 1065-B) in subsequent taxable years. State tax online filing . State tax online filing 08 Additional Requirements for an S Corporation Making a § 108(i) Election. State tax online filing (1) Information filing on Schedule K-1 (Form 1120S). State tax online filing For the taxable year in which the § 108(i) election is made, the S corporation must report on the Schedule K-1 (Form 1120S), Shareholder’s Share of Income, Deductions, Credits, etc. State tax online filing , in the manner specified in the instructions to the forms, for each shareholder § 108(i) information on an aggregate basis for all applicable debt instruments for which a § 108(i) election is made. State tax online filing S corporations reporting § 108(i) information on the 2008 Schedule K-1 (Form 1120S) must report for each shareholder, on an aggregate basis for all applicable debt instruments for which a § 108(i) election is made, the shareholder’s share of the S corporation’s: (a) COD income deferred under § 108(i) that the shareholder must include in income in the current taxable year under § 108(i)(1) or § 108(i)(5)(D)(i) or (ii), in box 10 (“other income”) using code E; (b) OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(2)(A)(ii), or § 108(i)(5)(D)(i) or (ii), in box 12 (“other deductions”) using code S; (c) COD income deferred under § 108(i) that has not been included in income in the current or prior taxable years, in box 17 (“other information”) using code T; and (d) OID deduction deferred under § 108(i)(2)(A)(i) that has not been deducted in the current or prior taxable years, in box 17 (“other information”) using code T. State tax online filing (2) Election information statement provided to shareholders. State tax online filing The S corporation must attach to the Schedule K-1 (Form 1120S) provided to each shareholder for the taxable year in which the § 108(i) election is made, a statement satisfying the requirements of this section 4. State tax online filing 08(2). State tax online filing The S corporation should not attach these statements to the Schedules K-1 that are filed with the Service, but must retain these statements, and each shareholder must retain that shareholder’s statement, in their respective books and records. State tax online filing A statement meets the requirements of this section 4. State tax online filing 08(2) if the statement— (a) Label. State tax online filing States “Section 108(i) Election Information Statement for Shareholders” across the top. State tax online filing (b) Required information. State tax online filing Clearly identifies for each applicable debt instrument to which an election under § 108(i) applies, the shareholder’s share of the S corporation’s— (i) COD income that the S corporation elects to defer under § 108(i); (ii) COD income deferred under § 108(i) that the shareholder must include in income in the current taxable year under § 108(i)(5)(D)(i) or (ii); (iii) OID deduction deferred under § 108(i)(2)(A)(i) in the current taxable year; (iv) OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(5)(D)(i) or (ii); and (v) Additional COD income that would be deferred as described in section 4. State tax online filing 06 of this revenue procedure. State tax online filing . State tax online filing 09 Section 108(i) Elections Made on Behalf of Certain Foreign Corporations. State tax online filing The controlling domestic shareholder(s) (or common parent of the controlling domestic shareholder(s), if applicable) of a controlled foreign corporation or a noncontrolled § 902 corporation not otherwise required to file a return of tax may make the § 108(i) election on behalf of the foreign corporation by satisfying the requirements of § 1. State tax online filing 964-1(c)(3). State tax online filing Each controlling domestic shareholder must attach a statement identifying the foreign corporation and satisfying the requirements of section 4. State tax online filing 05 of this revenue procedure and, if applicable, section 4. State tax online filing 06 of this revenue procedure, to its federal income tax return for the taxable year ending within or with the taxable year of the foreign corporation for which the § 108(i) election is made. State tax online filing . State tax online filing 10 Section 108(i) Elections Made By Certain Foreign Partnerships. State tax online filing The rules of this section 4. State tax online filing 10 apply to a foreign partnership making a § 108(i) election that is not otherwise required to file a federal partnership return (“nonfiling foreign partnership”). State tax online filing See § 1. State tax online filing 6031(a)-1(b). State tax online filing (1) A nonfiling foreign partnership making the election must attach a statement satisfying the requirements of section 4. State tax online filing 05 of this revenue procedure and, if applicable, section 4. State tax online filing 06 of this revenue procedure, to a partnership return satisfying the requirements of § 1. State tax online filing 6031(a)-1(b)(5) it files with the Service. State tax online filing In addition, a nonfiling foreign partnership must include in the information required in section 4. State tax online filing 05(2)(d) and (e) of this revenue procedure the aggregate amounts for all partners as well as the aggregate amounts for all U. State tax online filing S. State tax online filing persons (as defined in § 7701(a)(30)) and controlled foreign corporation(s) that are partners with deferred amounts in the nonfiling foreign partnership (“affected partners”). State tax online filing (2) The nonfiling foreign partnership must make the election, in accordance with § 1. State tax online filing 6031(a)-1(b)(5), by the date provided in section 4. State tax online filing 01(1)(a) of this revenue procedure, as if it had a filing obligation for the taxable year in which the reacquisition of the applicable debt instrument occurs. State tax online filing (3) For each affected partner, the partnership must file with the Service a Schedule K-1 (Form 1065) and report on the Schedule K-1 (Form 1065) for the affected partner as provided in section 4. State tax online filing 07(1) of this revenue procedure. State tax online filing Except for this § 108(i) information, the partnership need not complete Part III of the Schedule K-1 (Form 1065). State tax online filing The partnership must provide a copy of the respective Schedule K-1 (Form 1065) to each affected partner and must also attach to the Schedule K-1 (Form 1065) provided to each affected partner a statement satisfying the requirements of section 4. State tax online filing 07(2) of this revenue procedure by the date provided in section 4. State tax online filing 01(1)(a) of this revenue procedure. State tax online filing The partnership should not attach any statement described in section 4. State tax online filing 07(2) of this revenue procedure to the Schedules K-1 that are filed with the Service. State tax online filing However, the partnership must retain the statements provided to the affected partners, and each affected partner must retain that partner’s statement, in their respective books and records. State tax online filing (4) The partnership and each affected partner must satisfy the requirements of section 4. State tax online filing 07(3) of this revenue procedure. State tax online filing . State tax online filing 11 Protective § 108(i) Election. State tax online filing (1) In general. State tax online filing A taxpayer may make a protective election under § 108(i) for an applicable debt instrument if the taxpayer concludes that a particular transaction does not result in the realization of COD income, reports the transaction on its federal income tax return in a manner consistent with the taxpayer’s conclusion, and would be within the scope of this revenue procedure if the taxpayer’s conclusion were incorrect. State tax online filing If the Service at any time determines the taxpayer’s conclusion that the particular transaction does not result in the realization of COD income is incorrect, the taxpayer’s protective election is treated as a valid, irrevocable election under § 108(i). State tax online filing Thus, if a taxpayer makes a protective election, the Service subsequently may require the taxpayer to report COD income deferred pursuant to the valid and irrevocable protective election even if the statute of limitations has expired for the year in which the COD income was realized and the protective election was made. State tax online filing A taxpayer makes a protective election by attaching a statement satisfying the requirements of this section 4. State tax online filing 11(1) to the taxpayer’s original federal income tax return within the period described in section 4. State tax online filing 01(1)(a) of this revenue procedure. State tax online filing The taxpayer also must attach the election to its federal income tax return in each of the 8 or 9 taxable years, as applicable, following the taxable year of the election. State tax online filing A statement meets the requirements of this section 4. State tax online filing 11(1) if the statement— (a) States “Section 108(i) Protective Election” across the top; (b) Provides the information required under section 4. State tax online filing 05(2)(a), (b), and (c) of this revenue procedure; (c) Provides that the amounts described in sections 4. State tax online filing 05(2)(d) and (e) of this revenue procedure are zero; and (d) Provides the information described in section 4. State tax online filing 06 of this revenue procedure. State tax online filing (2) Statements provided to shareholders and partners. State tax online filing (a) For each applicable debt instrument, a partnership or S corporation that makes a protective election must attach to the Schedule K-1 (Form 1065, Form 1065-B, or Form 1120S) it provides each of its partners or shareholders, as the case may be, for the taxable year in which the protective election is made a statement containing the information described in section 4. State tax online filing 11(1)(b) of this revenue procedure (an S corporation need not provide its shareholders with the date(s) of the transaction(s) that would constitute the reacquisition transaction or transactions) and the partner’s or shareholder’s share of the additional COD income that would be deferred as described in section 4. State tax online filing 11(1)(d) of this revenue procedure. State tax online filing (b) The partnership or S corporation should not attach the statements described in this section 4. State tax online filing 11(2) to the Schedules K-1 that are filed with the Service but must retain these statements, and each partner and shareholder must retain that partner’s or shareholder’s statement, in their respective books and records. State tax online filing . State tax online filing 12 Election-Year Reporting by Tiered Pass-Through Entities. State tax online filing (1) A partnership required to file a U. State tax online filing S. State tax online filing partnership return other than under § 1. State tax online filing 6031(a)-1(b)(5), or an S corporation, that receives a Schedule K-1 (Form 1065 or Form 1065-B) reflecting its share of any items listed in section 4. State tax online filing 07(1) of this revenue procedure, must report on the Schedules K-1 (Form 1065, Form 1065-B, or Form 1120S) to its partners or shareholders, as the case may be, each partner’s or shareholder’s share of those items (an S corporation only reports to its shareholders the items described in section 4. State tax online filing 07(1)(a) through (d) of this revenue procedure). State tax online filing (2) If a partnership described in section 4. State tax online filing 12(1) of this revenue procedure receives a statement described in sections 4. State tax online filing 07(2) or 4. State tax online filing 10(3) of this revenue procedure or this section 4. State tax online filing 12(2), it must provide each of its partners a statement containing the partner’s share of each of the items listed on each statement received by the partnership, including the information described in section 4. State tax online filing 07(2)(b)(x) of this revenue procedure. State tax online filing If an S corporation receives a statement described in sections 4. State tax online filing 07(2) or 4. State tax online filing 10(3) of this revenue procedure or this section 4. State tax online filing 12(2), it must provide each of its shareholders a statement containing the shareholder’s share of each of the items listed on each statement received by the S corporation that are described in section 4. State tax online filing 07(2)(b)(i), (ii), (iii), (iv) and (ix) of this revenue procedure. State tax online filing The partnership or S corporation must attach this statement or statements to the Schedule K-1 (Form 1065, Form 1065-B, or Form 1120S) that it provides to each of its partners or shareholders, as the case may be, for the taxable year of the partnership or S corporation. State tax online filing The partnership or S corporation should not attach these statements to the Schedules K-1 that are filed with the Service but must retain these statements, and each partner and shareholder must retain that partner’s or shareholder’s statement, in their respective books and records. State tax online filing (3) A partnership that receives a statement described in this section 4 identifying its COD income amount with respect to an applicable debt instrument must allocate its COD income amount, without regard to § 108(i), to the partners in the partnership immediately before the reacquisition transaction in the manner in which the income would be included in the distributive shares of these partners under § 704 and the regulations thereunder, including § 1. State tax online filing 704-1(b)(2)(iii). State tax online filing The partnership may determine in any manner the portion, if any, of a partner’s COD income amount that is the partner’s deferred amount and the portion, if any, of a partner’s COD income amount that is the partner’s included amount. State tax online filing No partner’s deferred amount with respect to an applicable debt instrument may exceed its COD income amount with respect to the applicable debt instrument, and the aggregate of deferred amounts of its partners with respect to an applicable debt instrument must equal the partnership’s deferred amount with respect to the applicable debt instrument. State tax online filing The partnership allocates amounts described in section 4. State tax online filing 06 of this revenue procedure under this section 4. State tax online filing 12(3) as if the additional COD income was realized. State tax online filing (4) The deferred § 752 amount for partners in a partnership making a § 108(i) election is calculated only for the partnership’s direct partners. State tax online filing No further adjustment to the deferred § 752 amount is made to reflect the basis or other attributes of partners that are indirect partners in the partnership. State tax online filing (5) If an S corporation receives a statement described in this section 4 identifying its COD income amount, deferred amount, included amount or additional COD income that would be deferred with respect to an applicable debt instrument, these amounts are shared pro rata only among those shareholders that are shareholders in the S corporation immediately before the reacquisition transaction. State tax online filing (6) This paragraph 4. State tax online filing 12(6) provides the rules for Category 1 and Category 2 filers of Form 8865, Return of U. State tax online filing S. State tax online filing Persons With Respect to Certain Foreign Partnerships, as defined in the instructions for Form 8865, if the foreign partnership, for which the Category 1 or Category 2 filer has a filing requirement, receives a Schedule K-1 (Form 1065 or Form 1065-B) reflecting the partnership’s share of any items listed in section 4. State tax online filing 07(1) of this revenue procedure, or a statement described in sections 4. State tax online filing 07(2) or 4. State tax online filing 10(3) of this revenue procedure (because the foreign partnership owns an interest directly or indirectly in another partnership in which an election was made under § 108(i) with respect to that foreign partnership’s distributive share from the other entity). State tax online filing (a) For each partner for whom the Category 1 filer is required to complete a Schedule K-1 (Form 8865) (which includes the Category 1 filer itself), the Category 1 filer must: (i) Include the information described in section 4. State tax online filing 07(1) of this revenue procedure in the Schedule K-1 (Form 8865) that the Category 1 filer files with the Service and completes for the partner; (ii) Produce a statement containing the partner’s share of the items listed on each statement received by the partnership; and (iii) Attach the statement described in section 4. State tax online filing 12(6)(a)(ii) of this revenue procedure to each Schedule K-1 (Form 8865) that it is required to provide to a partner of the foreign partnership. State tax online filing (b) A Category 2 filer must include its share of the information described in section 4. State tax online filing 07(1) on the Schedule K-1 (Form 8865) that it is required to complete. State tax online filing Category 2 filers also must complete a statement containing their share of the items listed on each statement received by the partnership. State tax online filing (c) The Category 1 and Category 2 filers should not attach the statements described in sections 4. State tax online filing 12(6)(a)(ii) and 4. State tax online filing 12(6)(b) of this revenue procedure, respectively, to the Schedules K-1 that are filed with the Service. State tax online filing However, Category 1 filers must retain the statements they complete and each partner must retain its own statement, in their respective books and records. State tax online filing (7) If as a result of § 108(i)(5)(D)(ii), a partner of a partnership described in section 4. State tax online filing 12(1) of this revenue procedure or a shareholder of an S corporation described in section 4. State tax online filing 12(1) of this revenue procedure must recognize items deferred under § 108(i), the partnership or S corporation must report these items on the Schedule K-1 (Form 1065, Form 1065-B, or Form 1120S) and statements provided to the partner or shareholder pursuant to section 4. State tax online filing 12(1) and (2) of this revenue procedure. State tax online filing Similar rules apply to Category 1 and Category 2 filers (Form 8865) described in section 4. State tax online filing 12(6) of this revenue procedure. State tax online filing (8) The provisions of section 4. State tax online filing 12(2), (3), (5) and (6) of this revenue procedure also apply to a statement received that is described in section 4. State tax online filing 11(2) of this revenue procedure, except that the information that must be provided are those items described in section 4. State tax online filing 11(1)(b) of this revenue procedure (an S corporation need not provide its shareholders with the date(s) of the transaction(s) that would constitute the reacquisition transaction or transactions) and the share of the partner or shareholder in the amounts described in section 4. State tax online filing 11(1)(d) of this revenue procedure. State tax online filing SECTION 5. State tax online filing REQUIRED INFORMATION STATEMENT . State tax online filing 01 Annual Information Statements. State tax online filing Pursuant to § 108(i)(7)(B), a taxpayer that makes an election under § 108(i) (except for a protective election under section 4. State tax online filing 11(1) of this revenue procedure) must attach a statement meeting the requirements of section 5. State tax online filing 02 of this revenue procedure to its federal income tax return for each taxable year beginning with the taxable year following the taxable year for which the taxpayer makes the election and ending with the first taxable year in which all items deferred under § 108(i) have been recognized. State tax online filing . State tax online filing 02 Contents of Statement. State tax online filing A statement meets the requirements of this section 5. State tax online filing 02 if the statement— (1) Label. State tax online filing States “Section 108(i) Information Statement” across the top; (2) Required information. State tax online filing Clearly identifies for each applicable debt instrument to which an election under § 108(i) applies— (a) COD income deferred under § 108(i) that is included in income in the current taxable year under § 108(i)(1); (b) COD income deferred under § 108(i) that is included in income in the current taxable year under § 108(i)(5)(D), including a description and date of the acceleration event described in § 108(i)(5)(D); (c) COD income deferred under § 108(i) that has not been included in income in the current or prior taxable years (in the case of a partnership, the aggregate of the partners’ deferred amounts that have not been included in income in the current or prior taxable years, and in the case of an S corporation, the S corporation’s COD income deferred under § 108(i) that has not been included in income in the current or prior taxable years); (d) OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(2)(A)(ii); (e) OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(5)(D); and (f) OID deduction deferred under § 108(i)(2)(A)(i) that has not been deducted in the current or prior taxable years. State tax online filing (3) Election attached. State tax online filing Includes a copy of the election statement described in section 4. State tax online filing 05 of this revenue procedure. State tax online filing . State tax online filing 03 Additional Annual Reporting Requirements for Certain Partnerships. State tax online filing The rules of this section 5. State tax online filing 03 apply to partnerships other than partnerships described in section 5. State tax online filing 05 of this revenue procedure. State tax online filing (1) In general. State tax online filing A partnership that makes an election under § 108(i) (except for a protective election under section 4. State tax online filing 11(1) of this revenue procedure) must attach to its federal income tax returns the statements required under section 5. State tax online filing 01 of this revenue procedure. State tax online filing In addition, for each taxable year in which a statement is required under section 5. State tax online filing 01 of this revenue procedure, the partnership must report on the Schedule K-1 (Form 1065 or Form 1065-B) for each partner § 108(i) information in the manner described in section 4. State tax online filing 07(1) of this revenue procedure. State tax online filing (2) Annual information statements provided to partners. State tax online filing The partnership must attach to the Schedule K-1 (Form 1065) provided to each partner for each taxable year in which a statement is required under section 5. State tax online filing 01 of this revenue procedure, a statement meeting the requirements of this section 5. State tax online filing 03(2). State tax online filing The partnership should not attach these statements to the Schedules K-1 that are filed with the Service, but must retain these statements, and each partner must retain that partner’s statement, in their respective books and records. State tax online filing A statement meets the requirements of this section 5. State tax online filing 03(2) if the statement— (a) Label. State tax online filing States “Section 108(i) Annual Information Statement for Partners” across the top of the statement. State tax online filing (b) Required information. State tax online filing Clearly identifies for each applicable debt instrument to which a § 108(i) election applies— (i) The partner’s deferred amount that has not been included in income as of the end of the prior taxable year; (ii) The partner’s deferred amount that the partner must include in income in the current taxable year under § 108(i)(1); (iii) The partner’s deferred amount that the partner must include in income in the current taxable year under § 108(i)(5)(D)(i) or (ii); (iv) The partner’s deferred amount that has not been included in income in the current or prior taxable years; (v) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) in the current taxable year; (vi) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(2)(A)(ii); (vii) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(5)(D)(i) or (ii); (viii) The partner’s share of the partnership’s OID deduction deferred under § 108(i)(2)(A)(i) that has not been deducted in the current or prior taxable years; and (ix) The partner’s deferred § 752 amount that is treated as a distribution of money to the partner under § 752 in the current taxable year and any remaining deferred § 752 amount. State tax online filing If a partner fails to provide the written statement required by section 4. State tax online filing 07(3) of this revenue procedure, the partnership must indicate that the amounts described in this section 5. State tax online filing 03(2)(b)(ix) cannot be calculated because the partner did not provide the information necessary to report these amounts. State tax online filing . State tax online filing 04 Additional Annual Reporting Requirements for an S Corporation. State tax online filing (1) In general. State tax online filing An S corporation that makes an election under § 108(i) (except for a protective election under section 4. State tax online filing 11(1) of this revenue procedure) must attach to its federal income tax returns the statements required under section 5. State tax online filing 01 of this revenue procedure. State tax online filing In addition, for each taxable year in which a statement is required under section 5. State tax online filing 01 of this revenue procedure, the S corporation must report on the Schedule K-1 (Form 1120S) for each shareholder § 108(i) information in the manner described in section 4. State tax online filing 08(1) of this revenue procedure. State tax online filing (2) Annual information statements provided to shareholders. State tax online filing The S corporation must attach to the Schedule K-1 (Form 1120S) provided to each shareholder for each taxable year in which a statement is required under section 5. State tax online filing 01 of this revenue procedure a statement meeting the requirements of this section 5. State tax online filing 04(2). State tax online filing The S corporation should not attach these statements to the Schedules K-1 that are filed with the Service, but must retain these statements, and each shareholder must retain that shareholder’s statement, in their respective books and records. State tax online filing A statement meets the requirements of this section 5. State tax online filing 04(2) if the statement— (a) Label. State tax online filing States “Section 108(i) Annual Information Statement for Shareholders” across the top; (b) Required information. State tax online filing Clearly identifies for each applicable debt instrument to which an election under § 108(i) applies, the shareholder’s share of the S corporation’s— (i) COD income deferred under § 108(i) that has not been included in income as of the end of the prior taxable year; (ii) COD income deferred under § 108(i) that the shareholder must include in income in the current taxable year under § 108(i)(1); (iii) COD income deferred under § 108(i) that the shareholder must include in income in the current taxable year under § 108(i)(5)(D)(i) or (ii); (iv) COD income deferred under § 108(i) that has not been included in income in the current or prior taxable years; (v) OID deduction deferred under § 108(i)(2)(A)(i) in the current taxable year; (vi) OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(2)(A)(ii); (vii) OID deduction deferred under § 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under § 108(i)(5)(D)(i) or (ii); and (viii) OID deduction deferred under § 108(i)(2)(A)(i) that has not been deducted in the current or prior taxable years. State tax online filing . State tax online filing 05 Additional Annual Reporting Requirements for Certain Foreign Partnerships. State tax online filing (1) The rules of this section 5. State tax online filing 05 apply to nonfiling foreign partnerships. State tax online filing (2) A nonfiling foreign partnership that makes an election under § 108(i) (except for a protective election under section 4. State tax online filing 11(1) of this revenue procedure) must file federal income tax returns with the Service containing the information under § 1. State tax online filing 6031(a)-1(b)(5) for each taxable year in which a statement is required by section 5. State tax online filing 01 of this revenue procedure. State tax online filing (3) The nonfiling foreign partnership must attach to its federal income tax returns the statements required under section 5. State tax online filing 01 of this revenue procedure, but only for that portion of the COD income allocated to affected partners. State tax online filing (4) For each taxable year in which a statement is required under section 5. State tax online filing 01 of this revenue procedure, the nonfiling foreign partnership must provide each affected partner a Schedule K-1 (Form 1065) reporting § 108(i) information in the manner described in section 4. State tax online filing 07(1) of this revenue procedure. State tax online filing Except for this § 108(i) information, the partnership need not complete Part III of the Schedule K-1 (Form 1065). State tax online filing The partnership must provide each affected partner with a copy of the Schedule K-1 (Form 1065) by the date provided in § 1. State tax online filing 6031(b)-1T(b). State tax online filing The partnership must attach the Schedules K-1 (Form 1065) to the federal income tax returns filed with the Service pursuant to section 5. State tax online filing 05(2) of this revenue procedure. State tax online filing (5) For each taxable year for which a statement is required under section 5. State tax online filing 01 of this revenue procedure, the nonfiling foreign partnership must attach to each affected partner’s Schedule K-1 (Form 1065) a statement meeting the requirements of section 5. State tax online filing 03(2) of this revenue procedure. State tax online filing The partnership should not attach these statements to the Schedules K-1 that are filed with the Service, but must retain the statements, and each partner must retain that partner’s statement, in their respective books and records. State tax online filing . State tax online filing 06 Information Statements Made on Behalf of Certain Foreign Corporations. State tax online filing Each controlling domestic shareholder must attach a statement identifying the foreign corporation and meeting the requirements of section 5. State tax online filing 02 of this revenue procedure to the shareholder’s federal income tax return for each taxable year for which a statement is required under section 5. State tax online filing 01 of this revenue procedure. State tax online filing . State tax online filing 07 Additional Annual Reporting Requirements for Tiered Pass-Through Entities. State tax online filing (1) A partnership required to file a U. State tax online filing S. State tax online filing partnership return other than under § 1. State tax online filing 6031(a)-1(b)(5), or an S corporation, that receives a Schedule K-1 (Form 1065 or Form 1065-B) described in the second sentence of section 5. State tax online filing 03(1) of this revenue procedure reflecting its share of any § 108(i) information must report on the Schedules K-1 (Form 1065, Form 1065-B, or Form 1120S) to its partners or shareholders, as the case may be, each partner’s or shareholder’s share of those items (an S corporation only reports to its shareholders the items described in section 4. State tax online filing 07(1)(a) through (d) of this revenue procedure). State tax online filing (2) If a partnership described in section 5. State tax online filing 07(1) of this revenue procedure receives a statement described in sections 5. State tax online filing 03(2) or 5. State tax online filing 05(5) of this revenue procedure or this section 5. State tax online filing 07(2), it must provide each of its partners a statement containing the partner’s share of each of the items listed on each statement received by the partnership. State tax online filing If an S corporation receives a statement described in sections 5. State tax online filing 03(2) or 5. State tax online filing 05(5) of this revenue procedure or this section 5. State tax online filing 07(2), it must provide each of its shareholders a statement containing the shareholder’s share of each of the items listed on each statement received by the S corporation that are described in section 5. State tax online filing 03(2)(b)(i) through (viii) of this revenue procedure. State tax online filing The partnership or S corporation must attach the statement or statements to the Schedule K-1 (Form 1065 or Form 1065-B) or Schedule K-1 (Form 1120S) that is provided to each of its partners or shareholders, as the case may be, for the taxable year of the partnership or S corporation. State tax online filing The partnership or S corporation should not attach these statements to the Schedules K-1 that are filed with the Service, but must retain these statements, and each partner and shareholder must retain that partner’s or shareholder’s statement, in their respective books and records. State tax online filing (3) This paragraph 5. State tax online filing 07(3) provides the rules for persons described in section 4. State tax online filing 12(6) of this revenue procedure if the foreign partnership, for which the Category 1 or 2 filer has a filing requirement, receives a Schedule K-1 (Form 1065 or Form 1065-B) reflecting the partnership’s share of any items described in the second sentence of section 5. State tax online filing 03(1) of this revenue procedure, or a statement described in sections 5. State tax online filing 03(2) or 5. State tax online filing 05(5) of this revenue procedure (because the foreign partnership owns an interest directly or indirectly in another partnership in which an election was made under § 108(i) with respect to that foreign partnership’s distributive share from the other entity). State tax online filing (a) For each partner for whom the Category 1 filer is required to complete a Schedule K-1 (Form 8865) (which includes the Category 1 filer itself), the Category 1 filer must: (i) Include the information described in section 4. State tax online filing 07(1) of this revenue procedure in the Schedule K-1 (Form 8865) that the Category 1 filer files with the Service and completes for the partner; (ii) Produce a statement containing the partner’s share of the items listed on each statement received by the partnership; and (iii) Attach the statement described in section 5. State tax online filing 07(3)(a)(ii) of this revenue procedure to each Schedule K-1 (Form 8865) that it is required to provide to a partner of the foreign partnership. State tax online filing (b) A Category 2 filer must include its share of the information described in section 4. State tax online filing 07(1) on the Schedule K-1 (Form 8865) that it is required to complete. State tax online filing Category 2 filers also must complete a statement containing their share of the items listed on each statement received by the partnership. State tax online filing (c) The Category 1 and Category 2 filers should not attach the statements described in sections 5. State tax online filing 07(3)(a)(ii) and 5. State tax online filing 07(3)(b) of this revenue procedure, respectively, to the Schedules K-1 that are filed with the Service. State tax online filing However, Category 1 filers must retain the statements they complete and each partner must retain its own statement, in their respective books and records. State tax online filing (4) If as a result of § 108(i)(5)(D)(ii), a partner of a partnership described in section 5. State tax online filing 07(1) of this revenue procedure or a shareholder of an S corporation described in section 5. State tax online filing 07(1) of this revenue procedure must recognize items deferred under § 108(i), the partnership or S corporation must report these items on the Schedule K-1 (Form 1065, Form 1065-B, or Form 1120S) and statements provided to the partner or shareholder pursuant to section 5. State tax online filing 07(1) and (2) of this revenue procedure. State tax online filing Similar rules apply to Category 1 and Category 2 filers (Form 8865) described in section 4. State tax online filing 12(6) of this revenue procedure. State tax online filing SECTION 6. State tax online filing EFFECTIVE DATE This revenue procedure is effective for reacquisitions of applicable debt instruments in taxable years ending after December 31, 2008. State tax online filing SECTION 7. State tax online filing TRANSITION RULE . State tax online filing 01 Noncomplying Election. State tax online filing Except as otherwise provided in this section 7. State tax online filing 01, the Service will treat a § 108(i) election as effective if a taxpayer files an election with the taxpayer’s federal income tax return filed on or before September 16, 2009, using any reasonable procedure to make the election. State tax online filing However, an election that does not comply with section 4 of this revenue procedure will not be effective unless the taxpayer on or before November 16, 2009, files an amended return for the taxable year of the election and complies with the requirements of section 4 of this revenue procedure. State tax online filing . State tax online filing 02 Modification of Election. State tax online filing A taxpayer that files a § 108(i) election on or before September 16, 2009, may modify that election by filing an amended return on or before November 16, 2009 (for example, to modify the amount of COD income the taxpayer elects to defer). State tax online filing To be effective, a modification of an election described in the preceding sentence must satisfy the requirements for an election described in section 4 of this revenue procedure. State tax online filing . State tax online filing 03 Notations. State tax online filing A taxpayer that files the amended return on paper must write “Section 108(i) Election” on the top of the first page. State tax online filing A taxpayer that files the amended return electronically should indicate “Section 108(i) Election” on the return. State tax online filing See Publication 4163, Modernized e-File (MeF) Information for Authorized IRS e-file Providers for Business Returns Tax Year 2008 for more details. State tax online filing SECTION 8. State tax online filing PAPERWORK REDUCTION ACT The collection of information contained in this revenue procedure has been reviewed and approved by the Office of Management and Budget in accordance with the Paperwork Reduction Act (44 U. State tax online filing S. State tax online filing C. State tax online filing 3507) under control number 1545-2147. State tax online filing An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number. State tax online filing The collection of information in this revenue procedure is in sections 4, 5 and 7. State tax online filing This information is required to determine the amount of income and deductions a taxpayer elects to defer and to track those amounts until the taxpayer has reported all deferred income and deductions on the taxpayer’s tax return. State tax online filing This information will be used during examination to verify that a taxpayer has correctly deferred income and deductions. State tax online filing The collection of information is required to obtain a benefit. State tax online filing The likely respondents are C corporations, shareholders of S corporations, partners of partnerships, and other individuals engaged in a trade or business, that reacquire applicable debt instruments in 2009 or 2010. State tax online filing The estimated total annual reporting burden is 300,000 hours. State tax online filing The estimated annual burden per respondent varies from 1 to 8 hours, depending on individual circumstances, with an estimated average of 6 hours. State tax online filing The estimated number of respondents is 50,000. State tax online filing Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. State tax online filing Generally, tax returns and return information are confidential, as required by § 6103. State tax online filing DRAFTING INFORMATION The principal authors of this revenue procedure are Megan A. State tax online filing Stoner of the Office of Associate Chief Counsel (Passthroughs & Special Industries) and Craig Wojay of the Office of Associate Chief Counsel (Income Tax & Accounting). State tax online filing For further information regarding this revenue procedure, contact Megan A. State tax online filing Stoner at (202) 622-3070 for questions involving partnerships and S corporations, William E. State tax online filing Blanchard at (202) 622-3950 for questions involving OID, Ronald M. State tax online filing Gootzeit at (202) 622-3860 for questions involving foreign entities, Robert Rhyne at (202) 622-7790 for questions involving earnings and profits and consolidated groups, and Craig Wojay at (202) 622-4920 for questions on § 108(i) generally (not toll-free calls). State tax online filing Prev  Up  Next   Home   More Internal Revenue Bulletins
Español

U.S. Senate

The U.S. Senate and the U.S. House of Representatives make up the two chambers of Congress. The Senate has 100 members, 2 from each state, who are elected to serve for a term of 6 years.

The State Tax Online Filing

State tax online filing Publication 587 - Main Content Table of Contents Qualifying for a DeductionExclusive Use Regular Use Trade or Business Use Principal Place of Business Place To Meet Patients, Clients, or Customers Separate Structure Figuring the DeductionUsing Actual Expenses Using the Simplified Method Daycare Facility Standard meal and snack rates. State tax online filing Sale or Exchange of Your HomeGain on Sale Depreciation Basis Adjustment Reporting the Sale More Information Business Furniture and EquipmentListed Property Property Bought for Business Use Personal Property Converted to Business Use Recordkeeping Where To DeductSelf-Employed Persons Employees Partners How To Get Tax HelpLow Income Taxpayer Clinics Worksheet To Figure the Deduction for Business Use of Your HomeInstructions for the Worksheet Worksheets To Figure the Deduction for Business Use of Your Home (Simplified Method) Instructions for the Simplified Method Worksheet Instructions for the Daycare Facility Worksheet Instructions for the Area Adjustment Worksheet Qualifying for a Deduction Generally, you cannot deduct items related to your home, such as mortgage interest, real estate taxes, utilities, maintenance, rent, depreciation, or property insurance, as business expenses. State tax online filing However, you may be able to deduct expenses related to the business use of part of your home if you meet specific requirements. State tax online filing Even then, the deductible amount of these types of expenses may be limited. State tax online filing Use this section and Figure A, later, to decide if you can deduct expenses for the business use of your home. State tax online filing To qualify to deduct expenses for business use of your home, you must use part of your home: Exclusively and regularly as your principal place of business (defined later), Exclusively and regularly as a place where you meet or deal with patients, clients, or customers in the normal course of your trade or business, In the case of a separate structure which is not attached to your home, in connection with your trade or business, On a regular basis for certain storage use (see Storage of inventory or product samples , later), For rental use (see Publication 527), or As a daycare facility (see Daycare Facility , later). State tax online filing Additional tests for employee use. State tax online filing   If you are an employee and you use a part of your home for business, you may qualify for a deduction for its business use. State tax online filing You must meet the tests discussed earlier plus: Your business use must be for the convenience of your employer, and You must not rent any part of your home to your employer and use the rented portion to perform services as an employee for that employer. State tax online filing If the use of the home office is merely appropriate and helpful, you cannot deduct expenses for the business use of your home. State tax online filing Exclusive Use To qualify under the exclusive use test, you must use a specific area of your home only for your trade or business. State tax online filing The area used for business can be a room or other separately identifiable space. State tax online filing The space does not need to be marked off by a permanent partition. State tax online filing You do not meet the requirements of the exclusive use test if you use the area in question both for business and for personal purposes. State tax online filing Example. State tax online filing You are an attorney and use a den in your home to write legal briefs and prepare clients' tax returns. State tax online filing Your family also uses the den for recreation. State tax online filing The den is not used exclusively in your trade or business, so you cannot claim a deduction for the business use of the den. State tax online filing Exceptions to Exclusive Use You do not have to meet the exclusive use test if either of the following applies. State tax online filing You use part of your home for the storage of inventory or product samples (discussed next). State tax online filing You use part of your home as a daycare facility, discussed later under Daycare Facility . State tax online filing Note. State tax online filing With the exception of these two uses, any portion of the home used for business purposes must meet the exclusive use test. State tax online filing Storage of inventory or product samples. State tax online filing    If you use part of your home for storage of inventory or product samples, you can deduct expenses for the business use of your home without meeting the exclusive use test. State tax online filing However, you must meet all the following tests. State tax online filing You sell products at wholesale or retail as your trade or business. State tax online filing You keep the inventory or product samples in your home for use in your trade or business. State tax online filing Your home is the only fixed location of your trade or business. State tax online filing You use the storage space on a regular basis. State tax online filing The space you use is a separately identifiable space suitable for storage. State tax online filing Example. State tax online filing Your home is the only fixed location of your business of selling mechanics' tools at retail. State tax online filing You regularly use half of your basement for storage of inventory and product samples. State tax online filing You sometimes use the area for personal purposes. State tax online filing The expenses for the storage space are deductible even though you do not use this part of your basement exclusively for business. State tax online filing Regular Use To qualify under the regular use test, you must use a specific area of your home for business on a regular basis. State tax online filing Incidental or occasional business use is not regular use. State tax online filing You must consider all facts and circumstances in determining whether your use is on a regular basis. State tax online filing Trade or Business Use To qualify under the trade-or-business-use test, you must use part of your home in connection with a trade or business. State tax online filing If you use your home for a profit-seeking activity that is not a trade or business, you cannot take a deduction for its business use. State tax online filing Example. State tax online filing You use part of your home exclusively and regularly to read financial periodicals and reports, clip bond coupons, and carry out similar activities related to your own investments. State tax online filing You do not make investments as a broker or dealer. State tax online filing So, your activities are not part of a trade or business and you cannot take a deduction for the business use of your home. State tax online filing Principal Place of Business You can have more than one business location, including your home, for a single trade or business. State tax online filing To qualify to deduct the expenses for the business use of your home under the principal place of business test, your home must be your principal place of business for that trade or business. State tax online filing To determine whether your home is your principal place of business, you must consider: The relative importance of the activities performed at each place where you conduct business, and The amount of time spent at each place where you conduct business. State tax online filing Your home office will qualify as your principal place of business if you meet the following requirements. State tax online filing You use it exclusively and regularly for administrative or management activities of your trade or business. State tax online filing You have no other fixed location where you conduct substantial administrative or management activities of your trade or business. State tax online filing If, after considering your business locations, your home cannot be identified as your principal place of business, you cannot deduct home office expenses. State tax online filing However, see the later discussions under Place To Meet Patients, Clients, or Customers and Separate Structure for other ways to qualify to deduct home office expenses. State tax online filing Administrative or management activities. State tax online filing   There are many activities that are administrative or managerial in nature. State tax online filing The following are a few examples. State tax online filing Billing customers, clients, or patients. State tax online filing Keeping books and records. State tax online filing Ordering supplies. State tax online filing Setting up appointments. State tax online filing Forwarding orders or writing reports. State tax online filing Administrative or management activities performed at other locations. State tax online filing   The following activities performed by you or others will not disqualify your home office from being your principal place of business. State tax online filing You have others conduct your administrative or management activities at locations other than your home. State tax online filing (For example, another company does your billing from its place of business. State tax online filing ) You conduct administrative or management activities at places that are not fixed locations of your business, such as in a car or a hotel room. State tax online filing You occasionally conduct minimal administrative or management activities at a fixed location outside your home. State tax online filing You conduct substantial nonadministrative or nonmanagement business activities at a fixed location outside your home. State tax online filing (For example, you meet with or provide services to customers, clients, or patients at a fixed location of the business outside your home. State tax online filing ) You have suitable space to conduct administrative or management activities outside your home, but choose to use your home office for those activities instead. State tax online filing Please click here for the text description of the image. State tax online filing Can you deduct business use of the home expenses? Example 1. State tax online filing John is a self-employed plumber. State tax online filing Most of John's time is spent at customers' homes and offices installing and repairing plumbing. State tax online filing He has a small office in his home that he uses exclusively and regularly for the administrative or management activities of his business, such as phoning customers, ordering supplies, and keeping his books. State tax online filing John writes up estimates and records of work completed at his customers' premises. State tax online filing He does not conduct any substantial administrative or management activities at any fixed location other than his home office. State tax online filing John does not do his own billing. State tax online filing He uses a local bookkeeping service to bill his customers. State tax online filing John's home office qualifies as his principal place of business for deducting expenses for its use. State tax online filing He uses the home office for the administrative or managerial activities of his plumbing business and he has no other fixed location where he conducts these administrative or managerial activities. State tax online filing His choice to have his billing done by another company does not disqualify his home office from being his principal place of business. State tax online filing He meets all the qualifications, including principal place of business, so he can deduct expenses (subject to certain limitations, explained later) for the business use of his home. State tax online filing Example 2. State tax online filing Pamela is a self-employed sales representative for several different product lines. State tax online filing She has an office in her home that she uses exclusively and regularly to set up appointments and write up orders and other reports for the companies whose products she sells. State tax online filing She occasionally writes up orders and sets up appointments from her hotel room when she is away on business overnight. State tax online filing Pamela's business is selling products to customers at various locations throughout her territory. State tax online filing To make these sales, she regularly visits customers to explain the available products and take orders. State tax online filing Pamela's home office qualifies as her principal place of business for deducting expenses for its use. State tax online filing She conducts administrative or management activities there and she has no other fixed location where she conducts substantial administrative or management activities. State tax online filing The fact that she conducts some administrative or management activities in her hotel room (not a fixed location) does not disqualify her home office from being her principal place of business. State tax online filing She meets all the qualifications, including principal place of business, so she can deduct expenses (subject to certain limitations, explained later) for the business use of her home. State tax online filing Example 3. State tax online filing Paul is a self-employed anesthesiologist. State tax online filing He spends the majority of his time administering anesthesia and postoperative care in three local hospitals. State tax online filing One of the hospitals provides him with a small shared office where he could conduct administrative or management activities. State tax online filing Paul very rarely uses the office the hospital provides. State tax online filing He uses a room in his home that he has converted to an office. State tax online filing He uses this room exclusively and regularly to conduct all the following activities. State tax online filing Contacting patients, surgeons, and hospitals regarding scheduling. State tax online filing Preparing for treatments and presentations. State tax online filing Maintaining billing records and patient logs. State tax online filing Satisfying continuing medical education requirements. State tax online filing Reading medical journals and books. State tax online filing Paul's home office qualifies as his principal place of business for deducting expenses for its use. State tax online filing He conducts administrative or management activities for his business as an anesthesiologist there and he has no other fixed location where he conducts substantial administrative or management activities for this business. State tax online filing His choice to use his home office instead of the one provided by the hospital does not disqualify his home office from being his principal place of business. State tax online filing His performance of substantial nonadministrative or nonmanagement activities at fixed locations outside his home also does not disqualify his home office from being his principal place of business. State tax online filing He meets all the qualifications, including principal place of business, so he can deduct expenses (subject to certain limitations, explained later) for the business use of his home. State tax online filing Example 4. State tax online filing Kathleen is employed as a teacher. State tax online filing She is required to teach and meet with students at the school and to grade papers and tests. State tax online filing The school provides her with a small office where she can work on her lesson plans, grade papers and tests, and meet with parents and students. State tax online filing The school does not require her to work at home. State tax online filing Kathleen prefers to use the office she has set up in her home and does not use the one provided by the school. State tax online filing She uses this home office exclusively and regularly for the administrative duties of her teaching job. State tax online filing Kathleen must meet the convenience-of-the-employer test, even if her home qualifies as her principal place of business for deducting expenses for its use. State tax online filing Her employer provides her with an office and does not require her to work at home, so she does not meet the convenience-of-the-employer test and cannot claim a deduction for the business use of her home. State tax online filing More Than One Trade or Business The same home office can be the principal place of business for two or more separate business activities. State tax online filing Whether your home office is the principal place of business for more than one business activity must be determined separately for each of your trade or business activities. State tax online filing You must use the home office exclusively and regularly for one or more of the following purposes. State tax online filing As the principal place of business for one or more of your trades or businesses. State tax online filing As a place to meet or deal with patients, clients, or customers in the normal course of one or more of your trades or businesses. State tax online filing If your home office is a separate structure, in connection with one or more of your trades or businesses. State tax online filing You can use your home office for more than one business activity, but you cannot use it for any nonbusiness (i. State tax online filing e. State tax online filing , personal) activities. State tax online filing If you are an employee, any use of the home office in connection with your employment must be for the convenience of your employer. State tax online filing See Rental to employer , later, if you rent part of your home to your employer. State tax online filing Example. State tax online filing Tracy White is employed as a teacher. State tax online filing Her principal place of work is the school, which provides her office space to do her school work. State tax online filing She also has a mail order jewelry business. State tax online filing All her work in the jewelry business is done in her home office and the office is used exclusively for that business. State tax online filing If she meets all the other tests, she can deduct expenses for the business use of her home for the jewelry business. State tax online filing If Tracy also uses the office for work related to her teaching, she must meet the exclusive use test for both businesses to qualify for the deduction. State tax online filing As an employee, Tracy must also meet the convenience-of-the-employer test to qualify for the deduction. State tax online filing She does not meet this test for her work as a teacher, so she cannot claim a deduction for the business use of her home for either activity. State tax online filing Place To Meet Patients, Clients, or Customers If you meet or deal with patients, clients, or customers in your home in the normal course of your business, even though you also carry on business at another location, you can deduct your expenses for the part of your home used exclusively and regularly for business if you meet both the following tests. State tax online filing You physically meet with patients, clients, or customers on your premises. State tax online filing Their use of your home is substantial and integral to the conduct of your business. State tax online filing Doctors, dentists, attorneys, and other professionals who maintain offices in their homes generally will meet this requirement. State tax online filing Using your home for occasional meetings and telephone calls will not qualify you to deduct expenses for the business use of your home. State tax online filing The part of your home you use exclusively and regularly to meet patients, clients, or customers does not have to be your principal place of business. State tax online filing Example. State tax online filing June Quill, a self-employed attorney, works 3 days a week in her city office. State tax online filing She works 2 days a week in her home office used only for business. State tax online filing She regularly meets clients there. State tax online filing Her home office qualifies for a business deduction because she meets clients there in the normal course of her business. State tax online filing Separate Structure You can deduct expenses for a separate free-standing structure, such as a studio, workshop, garage, or barn, if you use it exclusively and regularly for your business. State tax online filing The structure does not have to be your principal place of business or a place where you meet patients, clients, or customers. State tax online filing Example. State tax online filing John Berry operates a floral shop in town. State tax online filing He grows the plants for his shop in a greenhouse behind his home. State tax online filing He uses the greenhouse exclusively and regularly in his business, so he can deduct the expenses for its use, subject to certain limitations, explained later. State tax online filing Figuring the Deduction After you determine that you meet the tests under Qualifying for a Deduction , you can begin to figure how much you can deduct. State tax online filing When figuring the amount you can deduct for the business use of your home, you will use either your actual expenses or a simplified method. State tax online filing Electing to use the simplified method. State tax online filing   The simplified method is an alternative to the calculation, allocation, and substantiation of actual expenses. State tax online filing You choose whether or not to figure your deduction using the simplified method each taxable year. State tax online filing See Using the Simplified Method , later. State tax online filing Rental to employer. State tax online filing   If you rent part of your home to your employer and you use the rented part in performing services for your employer as an employee, your deduction for the business use of your home is limited. State tax online filing You can deduct mortgage interest, qualified mortgage insurance premiums, real estate taxes, and personal casualty losses for the rented part, subject to any limitations. State tax online filing However, you cannot deduct otherwise allowable trade or business expenses, business casualty losses, or depreciation related to the use of your home (or use the simplified method as an alternative to deducting these actual expenses) in performing services for your employer. State tax online filing Using Actual Expenses If you do not or cannot elect to use the simplified method for a home, you will figure your deduction for that home using your actual expenses. State tax online filing You will also need to figure the percentage of your home used for business and the limit on the deduction. State tax online filing If you are an employee or a partner, or you use your home in your farming business and you file Schedule F (Form 1040), you can use the Worksheet To Figure the Deduction for Business Use of Your Home, near the end of this publication, to help you figure your deduction. State tax online filing If you use your home in a trade or business and you file Schedule C (Form 1040), you will use Form 8829 to figure your deduction. State tax online filing Part-year use. State tax online filing   You cannot deduct expenses for the business use of your home incurred during any part of the year you did not use your home for business purposes. State tax online filing For example, if you begin using part of your home for business on July 1, and you meet all the tests from that date until the end of the year, consider only your expenses for the last half of the year in figuring your allowable deduction. State tax online filing Expenses related to tax-exempt income. State tax online filing   Generally, you cannot deduct expenses that are related to tax-exempt allowances. State tax online filing However, if you receive a tax-exempt parsonage allowance or a tax-exempt military allowance, your expenses for mortgage interest and real estate taxes are deductible under the normal rules. State tax online filing No deduction is allowed for other expenses related to the tax-exempt allowance. State tax online filing   If your housing is provided free of charge and the value of the housing is tax exempt, you cannot deduct the rental value of any portion of the housing. State tax online filing Actual Expenses You must divide the expenses of operating your home between personal and business use. State tax online filing The part of a home operating expense you can use to figure your deduction depends on both of the following. State tax online filing Whether the expense is direct, indirect, or unrelated. State tax online filing The percentage of your home used for business. State tax online filing Table 1, next, describes the types of expenses you may have and the extent to which they are deductible. State tax online filing Table 1. State tax online filing Types of Expenses  Expense  Description  Deductibility Direct Expenses only for  the business part  of your home. State tax online filing Deductible in full. State tax online filing *   Examples:  Painting or repairs  only in the area  used for business. State tax online filing Exception: May be only partially  deductible in a daycare facility. State tax online filing See Daycare Facility , later. State tax online filing Indirect Expenses for  keeping up and running your  entire home. State tax online filing Deductible based on the percentage of your home used for business. State tax online filing *   Examples:  Insurance, utilities, and  general repairs. State tax online filing   Unrelated Expenses only for  the parts of your  home not used  for business. State tax online filing Not deductible. State tax online filing   Examples:  Lawn care or painting  a room not used  for business. State tax online filing   *Subject to the deduction limit, discussed later. State tax online filing Form 8829 and the Worksheet To Figure the Deduction for Business Use of Your Home have separate columns for direct and indirect expenses. State tax online filing Certain expenses are deductible whether or not you use your home for business. State tax online filing If you qualify to deduct business use of the home expenses, use the business percentage of these expenses to figure your total business use of the home deduction. State tax online filing These expenses include the following. State tax online filing Real estate taxes. State tax online filing Qualified mortgage insurance premiums. State tax online filing Deductible mortgage interest. State tax online filing Casualty losses. State tax online filing Other expenses are deductible only if you use your home for business. State tax online filing You can use the business percentage of these expenses to figure your total business use of the home deduction. State tax online filing These expenses generally include (but are not limited to) the following. State tax online filing Depreciation (covered under Depreciating Your Home , later). State tax online filing Insurance. State tax online filing Rent paid for the use of property you do not own but use in your trade or business. State tax online filing Repairs. State tax online filing Security system. State tax online filing Utilities and services. State tax online filing Real estate taxes. State tax online filing   To figure the business part of your real estate taxes, multiply the real estate taxes paid by the percentage of your home used for business. State tax online filing   For more information on the deduction for real estate taxes, see Publication 530, Tax Information for Homeowners. State tax online filing Deductible mortgage interest. State tax online filing   To figure the business part of your deductible mortgage interest, multiply this interest by the percentage of your home used for business. State tax online filing You can include interest on a second mortgage in this computation. State tax online filing If your total mortgage debt is more than $1,000,000 or your home equity debt is more than $100,000, your deduction may be limited. State tax online filing For more information on what interest is deductible, see Publication 936, Home Mortgage Interest Deduction. State tax online filing Qualified mortgage insurance premiums. State tax online filing   To figure the business part of your qualified mortgage insurance premiums, multiply the premiums by the percentage of your home used for business. State tax online filing You can include premiums for insurance on a second mortgage in this computation. State tax online filing If your adjusted gross income is more than $100,000 ($50,000 if your filing status is married filing separately), your deduction may be limited. State tax online filing For more information, see Publication 936, and Line 13 in the Instructions for Schedule A (Form 1040). State tax online filing Casualty losses. State tax online filing    If you have a casualty loss on your home that you use for business, treat the casualty loss as a direct expense, an indirect expense, or an unrelated expense, depending on the property affected. State tax online filing A direct expense is the loss on the portion of the property you use only in your business. State tax online filing Use the entire loss to figure the business use of the home deduction. State tax online filing An indirect expense is the loss on property you use for both business and personal purposes. State tax online filing Use only the business portion to figure the deduction. State tax online filing An unrelated expense is the loss on property you do not use in your business. State tax online filing Do not use any of the loss to figure the deduction. State tax online filing Example. State tax online filing You meet the rules to take a deduction for an office in your home that is 10% of the total area of your house. State tax online filing A storm damages your roof. State tax online filing This is an indirect expense as the roof is part of the whole house and is considered to be used both for business and personal purposes. State tax online filing You would complete Form 4684, Casualties and Thefts, to report your loss. State tax online filing You complete both section A (Personal Use Property) and section B (Business and Income-Producing Property) as your home is used both for business and personal purposes. State tax online filing Since you use 90% of your home for personal purposes, use 90% of the cost or adjusted basis of your home, insurance or other reimbursement, and fair market value, both before and after the storm, to figure the amounts to enter on lines 2, 3, 5, and 6 of Form 4684. State tax online filing Since you use 10% of your home for business purposes, use 10% of the cost or adjusted basis of your home, insurance or other reimbursement, and fair market value, both before and after the storm, to figure the amounts to enter on lines 20, 21, 23, and 24 of Form 4684. State tax online filing Forms and worksheets to use. State tax online filing   If you are filing Schedule C (Form 1040), get Form 8829 and follow the instructions for casualty losses. State tax online filing If you are an employee or a partner, or you file Schedule F (Form 1040), use the Worksheet To Figure the Deduction for Business Use of Your Home, near the end of this publication. State tax online filing You will also need to get Form 4684. State tax online filing More information. State tax online filing   For more information on casualty losses, see Publication 547, Casualties, Disasters, and Thefts. State tax online filing Insurance. State tax online filing   You can deduct the cost of insurance that covers the business part of your home. State tax online filing However, if your insurance premium gives you coverage for a period that extends past the end of your tax year, you can deduct only the business percentage of the part of the premium that gives you coverage for your tax year. State tax online filing You can deduct the business percentage of the part that applies to the following year in that year. State tax online filing Rent. State tax online filing   If you rent the home you occupy and meet the requirements for business use of the home, you can deduct part of the rent you pay. State tax online filing To figure your deduction, multiply your rent payments by the percentage of your home used for business. State tax online filing   If you own your home, you cannot deduct the fair rental value of your home. State tax online filing However, see Depreciating Your Home , later. State tax online filing Repairs. State tax online filing   The cost of repairs that relate to your business, including labor (other than your own labor), is a deductible expense. State tax online filing For example, a furnace repair benefits the entire home. State tax online filing If you use 10% of your home for business, you can deduct 10% of the cost of the furnace repair. State tax online filing   Repairs keep your home in good working order over its useful life. State tax online filing Examples of common repairs are patching walls and floors, painting, wallpapering, repairing roofs and gutters, and mending leaks. State tax online filing However, repairs are sometimes treated as a permanent improvement and are not deductible. State tax online filing See Permanent improvements , later, under Depreciating Your Home. State tax online filing Security system. State tax online filing   If you install a security system that protects all the doors and windows in your home, you can deduct the business part of the expenses you incur to maintain and monitor the system. State tax online filing You also can take a depreciation deduction for the part of the cost of the security system relating to the business use of your home. State tax online filing Utilities and services. State tax online filing   Expenses for utilities and services, such as electricity, gas, trash removal, and cleaning services, are primarily personal expenses. State tax online filing However, if you use part of your home for business, you can deduct the business part of these expenses. State tax online filing Generally, the business percentage for utilities is the same as the percentage of your home used for business. State tax online filing Telephone. State tax online filing   The basic local telephone service charge, including taxes, for the first telephone line into your home (i. State tax online filing e. State tax online filing , landline) is a nondeductible personal expense. State tax online filing However, charges for business long-distance phone calls on that line, as well as the cost of a second line into your home used exclusively for business, are deductible business expenses. State tax online filing Do not include these expenses as a cost of using your home for business. State tax online filing Deduct these charges separately on the appropriate form or schedule. State tax online filing For example, if you file Schedule C (Form 1040), deduct these expenses on line 25, Utilities (instead of line 30, Expenses for business use of your home). State tax online filing Depreciating Your Home If you own your home and qualify to deduct expenses for its business use, you can claim a deduction for depreciation. State tax online filing Depreciation is an allowance for the wear and tear on the part of your home used for business. State tax online filing You cannot depreciate the cost or value of the land. State tax online filing You recover its cost when you sell or otherwise dispose of the property. State tax online filing Before you figure your depreciation deduction, you need to know the following information. State tax online filing The month and year you started using your home for business. State tax online filing The adjusted basis and fair market value of your home (excluding land) at the time you began using it for business. State tax online filing The cost of any improvements before and after you began using the property for business. State tax online filing The percentage of your home used for business. State tax online filing See Business Percentage , later. State tax online filing Adjusted basis defined. State tax online filing   The adjusted basis of your home is generally its cost, plus the cost of any permanent improvements you made to it, minus any casualty losses or depreciation deducted in earlier tax years. State tax online filing For a discussion of adjusted basis, see Publication 551. State tax online filing Permanent improvements. State tax online filing   A permanent improvement increases the value of property, adds to its life, or gives it a new or different use. State tax online filing Examples of improvements are replacing electric wiring or plumbing, adding a new roof or addition, paneling, or remodeling. State tax online filing    You must carefully distinguish between repairs and improvements. State tax online filing See Repairs , earlier, under Actual Expenses. State tax online filing You also must keep accurate records of these expenses. State tax online filing These records will help you decide whether an expense is a deductible or a capital (added to the basis) expense. State tax online filing However, if you make repairs as part of an extensive remodeling or restoration of your home, the entire job is an improvement. State tax online filing Example. State tax online filing You buy an older home and fix up two rooms as a beauty salon. State tax online filing You patch the plaster on the ceilings and walls, paint, repair the floor, install an outside door, and install new wiring, plumbing, and other equipment. State tax online filing Normally, the patching, painting, and floor work are repairs and the other expenses are permanent improvements. State tax online filing However, because the work gives your property a new use, the entire remodeling job is a permanent improvement and its cost is added to the basis of the property. State tax online filing You cannot deduct any portion of it as a repair expense. State tax online filing Adjusting for depreciation deducted in earlier years. State tax online filing   Decrease the basis of your property by the depreciation you deducted, or could have deducted, on your tax returns under the method of depreciation you properly selected. State tax online filing If you deducted less depreciation than you could have under the method you selected, decrease the basis by the amount you could have deducted under that method. State tax online filing If you did not deduct any depreciation, decrease the basis by the amount you could have deducted. State tax online filing   If you deducted more depreciation than you should have, decrease your basis by the amount you should have deducted, plus the part of the excess depreciation you deducted that actually decreased your tax liability for any year. State tax online filing   If you deducted the incorrect amount of depreciation, see Publication 946. State tax online filing Fair market value defined. State tax online filing   The fair market value of your home is the price at which the property would change hands between a buyer and a seller, neither having to buy or sell, and both having reasonable knowledge of all necessary facts. State tax online filing Sales of similar property, on or about the date you begin using your home for business, may be helpful in determining the property's fair market value. State tax online filing Figuring the depreciation deduction for the current year. State tax online filing   If you began using your home for business before 2013, continue to use the same depreciation method you used in past tax years. State tax online filing   If you began using your home for business for the first time in 2013, depreciate the business part as nonresidential real property under the modified accelerated cost recovery system (MACRS). State tax online filing Under MACRS, nonresidential real property is depreciated using the straight line method over 39 years. State tax online filing For more information on MACRS and other methods of depreciation, see Publication 946. State tax online filing   To figure the depreciation deduction, you must first figure the part of the cost of your home that can be depreciated (depreciable basis). State tax online filing The depreciable basis is figured by multiplying the percentage of your home used for business by the smaller of the following. State tax online filing The adjusted basis of your home (excluding land) on the date you began using your home for business. State tax online filing The fair market value of your home (excluding land) on the date you began using your home for business. State tax online filing Depreciation table. State tax online filing   If 2013 was the first year you used your home for business, you can figure your 2013 depreciation for the business part of your home by using the appropriate percentage from the following table. State tax online filing Table 2. State tax online filing MACRS Percentage Table for 39-Year Nonresidential Real Property Month First Used for Business Percentage To Use 1 2. State tax online filing 461% 2 2. State tax online filing 247% 3 2. State tax online filing 033% 4 1. State tax online filing 819% 5 1. State tax online filing 605% 6 1. State tax online filing 391% 7 1. State tax online filing 177% 8 0. State tax online filing 963% 9 0. State tax online filing 749% 10 0. State tax online filing 535% 11 0. State tax online filing 321% 12 0. State tax online filing 107%   Multiply the depreciable basis of the business part of your home by the percentage from the table for the first month you use your home for business. State tax online filing See Publication 946 for the percentages for the remaining tax years of the recovery period. State tax online filing Example. State tax online filing In May, George Miller began to use one room in his home exclusively and regularly to meet clients. State tax online filing This room is 8% of the square footage of his home. State tax online filing He bought the home in 2003 for $125,000. State tax online filing He determined from his property tax records that his adjusted basis in the house (exclusive of land) is $115,000. State tax online filing In May, the house had a fair market value of $165,000. State tax online filing He multiplies his adjusted basis of $115,000 (which is less than the fair market value) by 8%. State tax online filing The result is $9,200, his depreciable basis for the business part of the house. State tax online filing George files his return based on the calendar year. State tax online filing May is the 5th month of his tax year. State tax online filing He multiplies his depreciable basis of $9,200 by 1. State tax online filing 605% (. State tax online filing 01605), the percentage from the table for the 5th month. State tax online filing His depreciation deduction is $147. State tax online filing 66. State tax online filing Depreciating permanent improvements. State tax online filing   Add the costs of permanent improvements made before you began using your home for business to the basis of your property. State tax online filing Depreciate these costs as part of the cost of your home as explained earlier. State tax online filing The costs of improvements made after you begin using your home for business (that affect the business part of your home, such as a new roof) are depreciated separately. State tax online filing Multiply the cost of the improvement by the business-use percentage and depreciate the result over the recovery period that would apply to your home if you began using it for business at the same time as the improvement. State tax online filing For improvements made this year, the recovery period is 39 years. State tax online filing For the percentage to use for the first year, see Table 2, earlier. State tax online filing For more information on recovery periods, see Publication 946. State tax online filing Business Percentage To find the business percentage, compare the size of the part of your home that you use for business to your whole house. State tax online filing Use the resulting percentage to figure the business part of the expenses for operating your entire home. State tax online filing You can use any reasonable method to determine the business percentage. State tax online filing The following are two commonly used methods for figuring the percentage. State tax online filing Divide the area (length multiplied by the width) used for business by the total area of your home. State tax online filing If the rooms in your home are all about the same size, you can divide the number of rooms used for business by the total number of rooms in your home. State tax online filing Example 1. State tax online filing Your office is 240 square feet (12 feet × 20 feet). State tax online filing Your home is 1,200 square feet. State tax online filing Your office is 20% (240 ÷ 1,200) of the total area of your home. State tax online filing Your business percentage is 20%. State tax online filing Example 2. State tax online filing You use one room in your home for business. State tax online filing Your home has 10 rooms, all about equal size. State tax online filing Your office is 10% (1 ÷ 10) of the total area of your home. State tax online filing Your business percentage is 10%. State tax online filing Use lines 1-7 of Form 8829, or lines 1-3 on the Worksheet To Figure the Deduction for Business Use of Your Home (near the end of this publication) to figure your business percentage. State tax online filing Deduction Limit If your gross income from the business use of your home equals or exceeds your total business expenses (including depreciation), you can deduct all your business expenses related to the use of your home. State tax online filing If your gross income from the business use of your home is less than your total business expenses, your deduction for certain expenses for the business use of your home is limited. State tax online filing Your deduction of otherwise nondeductible expenses, such as insurance, utilities, and depreciation of your home (with depreciation of your home taken last), that are allocable to the business, is limited to the gross income from the business use of your home minus the sum of the following. State tax online filing The business part of expenses you could deduct even if you did not use your home for business (such as mortgage interest, real estate taxes, and casualty and theft losses that are allowable as itemized deductions on Schedule A (Form 1040)). State tax online filing These expenses are discussed in detail under Actual Expenses , earlier. State tax online filing The business expenses that relate to the business activity in the home (for example, business phone, supplies, and depreciation on equipment), but not to the use of the home itself. State tax online filing If you are self-employed, do not include in (2) above your deduction for one-half of your self-employment tax. State tax online filing Carryover of unallowed expenses. State tax online filing   If your deductions are greater than the current year's limit, you can carry over the excess to the next year in which you use actual expenses. State tax online filing They are subject to the deduction limit for that year, whether or not you live in the same home during that year. State tax online filing Figuring the deduction limit and carryover. State tax online filing   If you are an employee or a partner, or you file Schedule F (Form 1040), use the Worksheet To Figure the Deduction for Business Use of Your Home, near the end of this publication. State tax online filing If you file Schedule C (Form 1040), figure your deduction limit and carryover on Form 8829. State tax online filing Example. State tax online filing You meet the requirements for deducting expenses for the business use of your home. State tax online filing You use 20% of your home for business. State tax online filing In 2013, your business expenses and the expenses for the business use of your home are deducted from your gross income in the following order. State tax online filing    Gross income from business $6,000 Minus:   Deductible mortgage interest and real estate taxes (20%) 3,000 Business expenses not related to the use of your home (100%) (business phone, supplies, and depreciation on equipment) 2,000 Deduction limit $1,000 Minus other expenses allocable to business use of home:   Maintenance, insurance, and utilities (20%) 800 Depreciation allowed (20% = $1,600 allowable, but subject to balance of deduction limit) 200 Other expenses up to the deduction limit $1,000 Depreciation carryover to 2014 ($1,600 − $200) (subject to deduction limit in 2014) $1,400   You can deduct all of the business part of your deductible mortgage interest and real estate taxes ($3,000). State tax online filing You also can deduct all of your business expenses not related to the use of your home ($2,000). State tax online filing Additionally, you can deduct all of the business part of your expenses for maintenance, insurance, and utilities, because the total ($800) is less than the $1,000 deduction limit. State tax online filing Your deduction for depreciation for the business use of your home is limited to $200 ($1,000 minus $800) because of the deduction limit. State tax online filing You can carry over the $1,400 balance and add it to your depreciation for 2014, subject to your deduction limit in 2014. State tax online filing More than one place of business. State tax online filing   If part of the gross income from your trade or business is from the business use of part of your home and part is from a place other than your home, you must determine the part of your gross income from the business use of your home before you figure the deduction limit. State tax online filing In making this determination, consider the time you spend at each location, the business investment in each location, and any other relevant facts and circumstances. State tax online filing If your home office qualifies as your principal place of business, you can deduct your daily transportation costs between your home and another work location in the same trade or business. State tax online filing For more information on transportation costs, see Publication 463, Travel, Entertainment, Gift, and Car Expenses. State tax online filing Using the Simplified Method The simplified method is an alternative to the calculation, allocation, and substantiation of actual expenses. State tax online filing In most cases, you will figure your deduction by multiplying $5, the prescribed rate, by the area of your home used for a qualified business use. State tax online filing The area you use to figure your deduction is limited to 300 square feet. State tax online filing See Simplified Amount , later, for information about figuring the amount of the deduction. State tax online filing For more information about the simplified method, see Revenue Procedure 2013-13, 2013-06 I. State tax online filing R. State tax online filing B. State tax online filing 478, available at www. State tax online filing irs. State tax online filing gov/irb/2013-06_IRB/ar09. State tax online filing html. State tax online filing Actual expenses and depreciation of your home. State tax online filing   If you elect to use the simplified method, you cannot deduct any actual expenses for the business except for business expenses that are not related to the use of the home. State tax online filing You also cannot deduct any depreciation (including any additional first-year depreciation) or section 179 expense for the portion of the home that is used for a qualified business use. State tax online filing The depreciation deduction allowable for that portion of the home is deemed to be zero for a year you use the simplified method. State tax online filing If you figure your deduction for business use of the home using actual expenses in a subsequent year, you will have to use the appropriate optional depreciation table for MACRS to figure your depreciation. State tax online filing More information. State tax online filing   For more information about claiming depreciation in a subsequent year, see Revenue Procedure 2013-13, 2013-06 I. State tax online filing R. State tax online filing B. State tax online filing 478, available at www. State tax online filing irs. State tax online filing gov/irb/2013-06_IRB/ar09. State tax online filing html. State tax online filing See Publication 946 for the optional depreciation tables Although you cannot deduct any depreciation or section 179 expense for the portion of your home used for a qualified business use, you may still claim depreciation or the section 179 expense deduction on other assets used in the business (for example, furniture and equipment). State tax online filing Expenses deductible without regard to business use. State tax online filing   When using the simplified method, treat as personal expenses those business expenses related to the use of the home that are deductible without regard to whether there is a qualified business use of the home. State tax online filing These expenses include mortgage interest, real estate taxes, and casualty losses, subject to any limitations. State tax online filing See Where To Deduct , later. State tax online filing If you also rent part of your home, you must still allocate these expenses between rental use and personal use (for this purpose, personal use includes business use reported using the simplified method). State tax online filing No deduction of carryover of actual expenses. State tax online filing   If you used actual expenses to figure your deduction for business use of the home in a prior year and your deduction was limited, you cannot deduct the disallowed amount carried over from the prior year during a year you figure your deduction using the simplified method. State tax online filing Instead, you will continue to carry over the disallowed amount to the next year that you use actual expenses to figure your deduction. State tax online filing Electing the Simplified Method You choose whether or not to figure your deduction using the simplified method each taxable year. State tax online filing Make the election for a home by using the simplified method to figure the deduction for the qualified business use of that home on a timely filed, original federal income tax return. State tax online filing An election for a taxable year, once made, is irrevocable. State tax online filing A change from using the simplified method in one year to actual expenses in a succeeding taxable year, or vice-versa, is not a change in method of accounting and does not require the consent of the Commissioner. State tax online filing Shared use. State tax online filing   If you share your home with someone else who also uses the home in a business that qualifies for this deduction, each of you make your own election. State tax online filing More than one qualified business use. State tax online filing   If you conduct more than one business that qualifies for this deduction in your home, your election to use the simplified method applies to all your qualified business uses of that home. State tax online filing More than one home. State tax online filing   If you used more than one home during the year (for example, you moved during the year), you can elect to use the simplified method for only one of the homes. State tax online filing You must figure the deduction for any other home using actual expenses. State tax online filing Simplified Amount Your deduction for the qualified business use of a home is the sum of each amount you figure for a separate qualified business use of your home. State tax online filing To figure your deduction for the business use of a home using the simplified method, you will need to know the following information for each qualified business use of the home. State tax online filing The allowable area of your home used in conducting the business. State tax online filing If you did not conduct the business for the entire year in the home or the area changed during the year, you will need to know the allowable area you used and the number of days you conducted the business for each month. State tax online filing The gross income from the business use of your home. State tax online filing The amount of the business expenses that are not related to the use of your home. State tax online filing If the qualified business use is for a daycare facility that uses space in your home on a regular (but not exclusive) basis, you will also need to know the percentage of time that part of your home is used for daycare. State tax online filing To figure the amount you can deduct for qualified business use of your home using the simplified method, follow these 3 steps. State tax online filing Multiply the allowable area by $5 (or less than $5 if the qualified business use is for a daycare that uses space in your home on a regular, but not exclusive, basis). State tax online filing See Allowable area and Space used regularly for daycare , later. State tax online filing Subtract the expenses from the business that are not related to the use of the home from the gross income related to the business use of the home. State tax online filing If these expenses are greater than the gross income from the business use of the home, then you cannot take a deduction for this business use of the home. State tax online filing See Gross income limitation , later. State tax online filing Take the smaller of the amounts from (1) and (2). State tax online filing This is the amount you can deduct for this qualified business use of your home using the simplified method. State tax online filing If you are an employee or a partner, or you use your home in your farming business and file Schedule F (Form 1040), you can use the Simplified Method Worksheet, near the end of this publication, to help you figure your deduction. State tax online filing If you use your home in a trade or business and you file Schedule C (Form 1040), you will use the Simplified Method Worksheet in your Instructions for Schedule C to figure your deduction. State tax online filing Allowable area. State tax online filing   In most cases, the allowable area is the smaller of the actual area (in square feet) of your home used in conducting the business and 300 square feet. State tax online filing Your allowable area may be smaller if you conducted the business as a qualified joint venture with your spouse, the area used by the business was shared with another qualified business use, you used the home for the business for only part of the year, or the area used by the business changed during the year. State tax online filing You can use the Area Adjustment Worksheet (for simplified method), near the end of this publication, to help you figure your allowable area for a qualified business use. State tax online filing Area used by a qualified joint venture. State tax online filing   If the qualified business use of the home is also a qualified joint venture, you and your spouse will figure the deduction for the business use separately. State tax online filing Split the actual area used in conducting business between you and your spouse in the same manner you split your other tax attributes. State tax online filing Then, each spouse will figure the allowable area separately. State tax online filing For more information about qualified joint ventures, see Qualified Joint Venture in the Instructions for Schedule C. State tax online filing Shared use. State tax online filing   If you share your home with someone else who uses the home to conduct business that also qualifies for this deduction, you may not include the same square feet to figure your deduction as the other person. State tax online filing You must allocate the shared space between you and the other person in a reasonable manner. State tax online filing Example. State tax online filing Kristin and Lindsey are roommates. State tax online filing Kristin uses 300 square feet of their home for a qualified business use. State tax online filing Lindsey uses 200 square feet of their home for a separate qualified business use. State tax online filing The qualified business uses share 100 square feet. State tax online filing In addition to the portion that they do not share, Kristin and Lindsey can both claim 50 of the 100 square feet or divide the 100 square feet between them in any reasonable manner. State tax online filing If divided evenly, Kristin could claim 250 square feet using the simplified method and Lindsey could claim 150 square feet. State tax online filing More than one qualified business use. State tax online filing   If you conduct more than one business qualifying for the deduction, you are limited to a maximum of 300 square feet for all of the businesses. State tax online filing Allocate the actual square footage used (up to the maximum of 300 square feet) among your qualified business uses in a reasonable manner. State tax online filing However, do not allocate more square feet to a qualified business use than you actually use for that business. State tax online filing Rental use. State tax online filing   The simplified method does not apply to rental use. State tax online filing A rental use that qualifies for the deduction must be figured using actual expenses. State tax online filing If the rental use and a qualified business use share the same area, you will have to allocate the actual area used between the two uses. State tax online filing You cannot use the same area to figure a deduction for the qualified business use as you are using to figure the deduction for the rental use. State tax online filing Part-year use or area changes. State tax online filing   If your qualified business use was for a portion of the taxable year (for example, a seasonal business or a business that begins during the taxable year) or you changed the square footage of your qualified business use, your deduction is limited to the average monthly allowable square footage. State tax online filing You calculate the average monthly allowable square footage by adding the amount of allowable square feet you used in each month and dividing the sum by 12. State tax online filing When determining the average monthly allowable square footage, you cannot take more than 300 square feet into account for any one month. State tax online filing Additionally, if your qualified business use was less than 15 days in a month, you must use -0- for that month. State tax online filing Example 1. State tax online filing Andy files his federal income tax return on a calendar year basis. State tax online filing On July 20, he began using 420 square feet of his home for a qualified business use. State tax online filing He continued to use the 420 square feet until the end of the year. State tax online filing His average monthly allowable square footage is 125 square feet, which is figured using 300 square feet for each month August through December divided by the number of months in the taxable year ((0 + 0 + 0 + 0 + 0 + 0 + 0 + 300 + 300 + 300 + 300 + 300)/12). State tax online filing Example 2. State tax online filing Amy files her federal income tax return on a calendar year basis. State tax online filing On April 20, she began using 100 square feet of her home for a qualified business use. State tax online filing On August 5, she expanded the area of her qualified use to 330 square feet. State tax online filing Amy continued to use the 330 square feet until the end of the year. State tax online filing Her average monthly allowable square footage is 150 square feet, which is figured using 100 square feet for May through July and 300 square feet for August through December divided by the number of months in the taxable year ((0 + 0 + 0 + 0 + 100 + 100 +100 + 300 + 300 + 300 + 300 + 300)/12). State tax online filing Gross income limitation. State tax online filing   Your deduction for business use of the home is limited to an amount equal to the gross income derived from the qualified business use of the home reduced by the business deductions that are unrelated to the use of your home. State tax online filing If the business deductions that are unrelated to the use of your home are greater than the gross income derived from the qualified business use of your home, then you cannot take a deduction for this qualified business use of your home. State tax online filing Business expenses not related to use of the home. State tax online filing   These expenses relate to the business activity in the home, but not to the use of the home itself. State tax online filing You can still deduct business expenses that are unrelated to the use of the home. State tax online filing See Where To Deduct , later. State tax online filing Examples of business expenses that are unrelated to the use of the home are advertising, wages, supplies, dues, and depreciation for equipment. State tax online filing Space used regularly for daycare. State tax online filing   If you do not use the area of your home exclusively for daycare, you must reduce the prescribed rate (maximum $5 per square foot) before figuring your deduction. State tax online filing The reduced rate will equal the prescribed rate times a fraction. State tax online filing The numerator of the fraction is the number of hours that the space was used during the year for daycare and the denominator is the total number of hours during the year that the space was available for all uses. State tax online filing You can use the Daycare Facility Worksheet (for simplified method), near the end of this publication, to help you figure the reduced rate. State tax online filing    If you used at least 300 square feet for daycare regularly and exclusively during the year, then you do not need to reduce the prescribed rate or complete the Daycare Facility Worksheet. State tax online filing Daycare Facility If you use space in your home on a regular basis for providing daycare, you may be able to claim a deduction for that part of your home even if you use the same space for nonbusiness purposes. State tax online filing To qualify for this exception to the exclusive use rule, you must meet both of the following requirements. State tax online filing You must be in the trade or business of providing daycare for children, persons age 65 or older, or persons who are physically or mentally unable to care for themselves. State tax online filing You must have applied for, been granted, or be exempt from having, a license, certification, registration, or approval as a daycare center or as a family or group daycare home under state law. State tax online filing You do not meet this requirement if your application was rejected or your license or other authorization was revoked. State tax online filing Figuring the deduction. State tax online filing   If you elect to use the simplified method for your home, figure your deduction as described earlier in Using the Simplified Method under Figuring the Deduction. State tax online filing    If you are figuring your deduction using actual expenses and you regularly use part of your home for daycare, figure what part is used for daycare, as explained in Business Percentage , earlier, under Figuring the Deduction. State tax online filing If you also use that part exclusively for daycare, deduct all the allocable expenses, subject to the deduction limit, as explained earlier. State tax online filing   If the use of part of your home as a daycare facility is regular, but not exclusive, you must figure the percentage of time that part of your home is used for daycare. State tax online filing A room that is available for use throughout each business day and that you regularly use in your business is considered to be used for daycare throughout each business day. State tax online filing You do not have to keep records to show the specific hours the area was used for business. State tax online filing You can use the area occasionally for personal reasons. State tax online filing However, a room you use only occasionally for business does not qualify for the deduction. State tax online filing To find the percentage of time you actually use your home for business, compare the total time used for business to the total time that part of your home can be used for all purposes. State tax online filing You can compare the hours of business use in a week with the number of hours in a week (168). State tax online filing Or you can compare the hours of business use for the year with the number of hours in the year (8,760 in 2013). State tax online filing If you started or stopped using your home for daycare in 2013, you must prorate the number of hours based on the number of days the home was available for daycare. State tax online filing Example 1. State tax online filing Mary Lake used her basement to operate a daycare business for children. State tax online filing She figures the business percentage of the basement as follows. State tax online filing Square footage of the basement Square footage of her home = 1,600 3,200 = 50%           She used the basement for daycare an average of 12 hours a day, 5 days a week, for 50 weeks a year. State tax online filing During the other 12 hours a day, the family could use the basement. State tax online filing She figures the percentage of time the basement was used for daycare as follows. State tax online filing Number of hours used for daycare (12 x 5 x 50) Total number of hours in the year (24 x 365) = 3,000 8,760 = 34. State tax online filing 25%           Mary can deduct 34. State tax online filing 25% of any direct expenses for the basement. State tax online filing However, because her indirect expenses are for the entire house, she can deduct only 17. State tax online filing 13% of the indirect expenses. State tax online filing She figures the percentage for her indirect expenses as follows. State tax online filing Business percentage of the basement 50% Multiplied by: Percentage of time used for daycare × 34. State tax online filing 25% Percentage for indirect expenses 17. State tax online filing 13% Mary completes Form 8829, Part I, figuring the percentage of her home used for business, including the percentage of time the basement was used. State tax online filing In Part II, Mary figures her deductible expenses. State tax online filing She uses the following information to complete Part II. State tax online filing Gross income from her daycare business $50,000 Expenses not related to the business use of the home $25,000 Tentative profit $25,000 Rent $8,400 Utilities $850 Painting the basement $500 Mary enters her tentative profit, $25,000, on line 8. State tax online filing (This figure is the same as the amount on line 29 of her Schedule C (Form 1040). State tax online filing ) The expenses she paid for rent and utilities relate to her entire home. State tax online filing Therefore, she enters the amount paid for rent on line 18, column (b), and the amount paid for utilities on line 20, column (b). State tax online filing She shows the total of these expenses on line 22, column (b). State tax online filing For line 23, she multiplies the amount on line 22, column (b) by the percentage on line 7 and enters the result, $1,585. State tax online filing Mary paid $500 to have the basement painted. State tax online filing The painting is a direct expense. State tax online filing However, because she did not use the basement exclusively for daycare, she must multiply $500 by the percentage of time the basement was used for daycare (34. State tax online filing 25% – line 6). State tax online filing She enters $171 (34. State tax online filing 25% × $500) on line 19, column (a). State tax online filing She adds line 22, column (a), and line 23 and enters $1,756 ($171 + $1,585) on line 25. State tax online filing This is less than her deduction limit (line 15), so she can deduct the entire amount. State tax online filing She follows the instructions to complete the rest of Part II and enters $1,756 on lines 33 and 35. State tax online filing She then carries the $1,756 to line 30 of her Schedule C (Form 1040). State tax online filing Example 2. State tax online filing Assume the same facts as in Example 1 except that Mary also has another room that was available each business day for children to take naps in. State tax online filing Although she did not keep a record of the number of hours the room was actually used for naps, it was used for part of each business day. State tax online filing Since the room was available for business use during regular operating hours each business day and was used regularly in the business, it is considered used for daycare throughout each business day. State tax online filing The basement and room are 60% of the total area of her home. State tax online filing In figuring her expenses, 34. State tax online filing 25% of any direct expenses for the basement and room are deductible. State tax online filing In addition, 20. State tax online filing 55% (34. State tax online filing 25% × 60%) of her indirect expenses are deductible. State tax online filing Example 3. State tax online filing Assume the same facts as in Example 1 except that Mary stopped using her home for a daycare facility on June 24, 2013. State tax online filing She used the basement for daycare an average of 12 hours a day, 5 days a week, but for only 25 weeks of the year. State tax online filing During the other 12 hours a day, the family could still use the basement. State tax online filing She figures the percentage of time the basement was used for business as follows. State tax online filing Number of hours used for daycare (12 x 5 x 25) Total number of hours during period used (24 x 175) = 1,500 4,200 = 35. State tax online filing 71%           Mary can deduct 35. State tax online filing 71% of any direct expenses for the basement. State tax online filing However, because her indirect expenses are for the entire house, she can deduct only 17. State tax online filing 86% of the indirect expenses. State tax online filing She figures the percentage for her indirect expenses as follows. State tax online filing Business percentage of the basement 50% Multiplied by: Percentage of time used for daycare × 35. State tax online filing 71% Percentage for indirect expenses 17. State tax online filing 86% Meals. State tax online filing   If you provide food for your daycare recipients, do not include the expense as a cost of using your home for business. State tax online filing Claim it as a separate deduction on your Schedule C (Form 1040). State tax online filing You can never deduct the cost of food consumed by you or your family. State tax online filing You can deduct as a business expense 100% of the actual cost of food consumed by your daycare recipients (see Standard meal and snack rates , later, for an optional method for eligible children) and generally only 50% of the cost of food consumed by your employees. State tax online filing However, you can deduct 100% of the cost of food consumed by your employees if its value can be excluded from their wages as a de minimis fringe benefit. State tax online filing For more information on meals that meet these requirements, see Meals in chapter 2 of Publication 15-B, Employer's Tax Guide to Fringe Benefits. State tax online filing   If you deduct the actual cost of food for your daycare business, keep a separate record (with receipts) of your family's food costs. State tax online filing   Reimbursements you receive from a sponsor under the Child and Adult Care Food Program of the Department of Agriculture are taxable only to the extent they exceed your expenses for food for eligible children. State tax online filing If your reimbursements are more than your expenses for food, show the difference as income in Part I of Schedule C (Form 1040). State tax online filing If your food expenses are greater than the reimbursements, show the difference as an expense in Part V of Schedule C (Form 1040). State tax online filing Do not include payments or expenses for your own children if they are eligible for the program. State tax online filing Follow this procedure even if you receive a Form 1099-MISC, Miscellaneous Income, reporting a payment from the sponsor. State tax online filing Standard meal and snack rates. State tax online filing   If you qualify as a family daycare provider, you can use the standard meal and snack rates, instead of actual costs, to compute the deductible cost of meals and snacks provided to eligible children. State tax online filing For these purposes: A family daycare provider is a person engaged in the business of providing family daycare. State tax online filing Family daycare is childcare provided to eligible children in the home of the family daycare provider. State tax online filing The care must be non-medical, not involve a transfer of legal custody, and generally last less than 24 hours each day. State tax online filing Eligible children are minor children receiving family daycare in the home of the family daycare provider. State tax online filing Eligible children do not include children who are full-time or part-time residents in the home where the childcare is provided or children whose parents or guardians are residents of the same home. State tax online filing Eligible children do not include children who receive daycare services for personal reasons of the provider. State tax online filing For example, if a provider provides daycare services for a relative as a favor to that relative, that child is not an eligible child. State tax online filing   You can compute the deductible cost of each meal and snack you actually purchased and served to an eligible child during the time period you provided family daycare using the standard meal and snack rates shown in Table 3, later. State tax online filing You can use the standard meal and snack rates for a maximum of one breakfast, one lunch, one dinner, and three snacks per eligible child per day. State tax online filing If you receive reimbursement for a particular meal or snack, you can deduct only the portion of the applicable standard meal or snack rate that is more than the amount of the reimbursement. State tax online filing   You can use either the standard meal and snack rates or actual costs to calculate the deductible cost of food provided to eligible children in the family daycare for any particular tax year. State tax online filing If you choose to use the standard meal and snack rates for a particular tax year, you must use the rates for all your deductible food costs for eligible children during that tax year. State tax online filing However, if you use the standard meal and snack rates in any tax year, you can use actual costs to compute the deductible cost of food in any other tax year. State tax online filing   If you use the standard meal and snack rates, you must maintain records to substantiate the computation of the total amount deducted for the cost of food provided to eligible children. State tax online filing The records kept should include the name of each child, dates and hours of attendance in the daycare, and the type and quantity of meals and snacks served. State tax online filing This information can be recorded in a log similar to the one shown in Exhibit A, near the end of this publication. State tax online filing   The standard meal and snack rates include beverages, but do not include non-food supplies used for food preparation, service, or storage, such as containers, paper products, or utensils. State tax online filing These expenses can be claimed as a separate deduction on your Schedule C (Form 1040). State tax online filing     Table 3. State tax online filing Standard Meal and Snack Rates1 Location of Family Daycare Provider Breakfast Lunch Dinner Snack States other than Alaska an