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Turbo tax ez form 4. Turbo tax ez form   Reporting Gains and Losses Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Information Returns Schedule D and Form 8949Long and Short Term Net Gain or Loss Treatment of Capital Losses Capital Gains Tax Rates Form 4797Mark-to-market election. Turbo tax ez form Introduction This chapter explains how to report capital gains and losses and ordinary gains and losses from sales, exchanges, and other dispositions of property. Turbo tax ez form Although this discussion refers to Schedule D (Form 1040) and Form 8949, many of the rules discussed here also apply to taxpayers other than individuals. Turbo tax ez form However, the rules for property held for personal use usually will not apply to taxpayers other than individuals. Turbo tax ez form Topics - This chapter discusses: Information returns Schedule D (Form 1040) Form 4797 Form 8949 Useful Items - You may want to see: Publication 550 Investment Income and Expenses 537 Installment Sales Form (and Instructions) Schedule D (Form 1040) Capital Gains and Losses 1099-B Proceeds From Broker and Barter Exchange Transactions 1099-S Proceeds From Real Estate Transactions 4684 Casualties and Thefts 4797 Sales of Business Property 6252 Installment Sale Income 6781 Gains and Losses from Section 1256 Contracts and Straddles 8824 Like-Kind Exchanges 8949 Sales and Other Dispositions of Capital Assets See chapter 5 for information about getting publications and forms. Turbo tax ez form Information Returns If you sell or exchange certain assets, you should receive an information return showing the proceeds of the sale. Turbo tax ez form This information is also provided to the IRS. Turbo tax ez form Form 1099-B. Turbo tax ez form   If you sold property, such as stocks, bonds, or certain commodities, through a broker, you should receive Form 1099-B, Proceeds From Broker and Barter Exchange Transactions, or a substitute statement from the broker. Turbo tax ez form Use the Form 1099-B or a substitute statement to complete Form 8949 and/or Schedule D. Turbo tax ez form Whether or not you receive 1099-B, you must report all taxable sales of stock, bonds, commodities, etc. Turbo tax ez form on Form 8949 and/or Schedule D, as applicable. Turbo tax ez form For more information on figuring gains and losses from these transactions, see chapter 4 in Publication 550. Turbo tax ez form For information on reporting the gains and losses, see the Instructions for Form 8949 and the Instructions for Schedule D (Form 1040). Turbo tax ez form Form 1099-S. Turbo tax ez form   An information return must be provided on certain real estate transactions. Turbo tax ez form Generally, the person responsible for closing the transaction (the “real estate reporting person”) must report on Form 1099-S sales or exchanges of the following types of property. Turbo tax ez form Land (improved or unimproved), including air space. Turbo tax ez form An inherently permanent structure, including any residential, commercial, or industrial building. Turbo tax ez form A condominium unit and its related fixtures and common elements (including land). Turbo tax ez form Stock in a cooperative housing corporation. Turbo tax ez form If you sold or exchanged any of the above types of property, the “real estate reporting person” must give you a copy of Form 1099-S or a statement containing the same information as the Form 1099-S. Turbo tax ez form The “real estate reporting person” could include the buyer's attorney, your attorney, the title or escrow company, a mortgage lender, your broker, the buyer's broker, or the person acquiring the biggest interest in the property. Turbo tax ez form   For more information see chapter 4 in Publication 550. Turbo tax ez form Also, see the Instructions for Form 8949. Turbo tax ez form Schedule D and Form 8949 Form 8949. Turbo tax ez form   Individuals, corporations, and partnerships, use Form 8949 to report the following. Turbo tax ez form    Sales or exchanges of capital assets, including stocks, bonds, etc. Turbo tax ez form , and real estate (if not reported on another form or schedule such as Form 4684, 4797, 6252, 6781, or 8824). Turbo tax ez form Include these transactions even if you did not receive a Form 1099-B or 1099-S. Turbo tax ez form Gains from involuntary conversions (other than from casualty or theft) of capital assets not held for business or profit. Turbo tax ez form Nonbusiness bad debts. Turbo tax ez form   Individuals, If you are filing a joint return, complete as many copies of Form 8949 as you need to report all of your and your spouse's transactions. Turbo tax ez form You and your spouse may list your transactions on separate forms or you may combine them. Turbo tax ez form However, you must include on your Schedule D the totals from all Forms 8949 for both you and your spouse. Turbo tax ez form    Corporations and electing large partnerships also use Form 8949 to report their share of gain or loss from a partnership, S Corporation, estate or trust. Turbo tax ez form   Business entities meeting certain criteria, may have an exception to some of the normal requirements for completing Form 8949. Turbo tax ez form See the Instructions for Form 8949. Turbo tax ez form Schedule D. Turbo tax ez form    Use Schedule D (Form 1040) to figure the overall gain or loss from transactions reported on Form 8949, and to report certain transactions you do not have to report on Form 8949. Turbo tax ez form Before completing Schedule D, you may have to complete other forms as shown below. Turbo tax ez form    Complete all applicable lines of Form 8949 before completing lines 1b, 2, 3, 8b, 9, or 10 of your applicable Schedule D. Turbo tax ez form Enter on Schedule D the combined totals from all your Forms 8949. Turbo tax ez form For a sale, exchange, or involuntary conversion of business property, complete Form 4797 (discussed later). Turbo tax ez form For a like-kind exchange, complete Form 8824. Turbo tax ez form See Reporting the exchange under Like-Kind Exchanges in chapter 1. Turbo tax ez form For an installment sale, complete Form 6252. Turbo tax ez form See Publication 537. Turbo tax ez form For an involuntary conversion due to casualty or theft, complete Form 4684. Turbo tax ez form See Publication 547, Casualties, Disasters, and Thefts. Turbo tax ez form For a disposition of an interest in, or property used in, an activity to which the at-risk rules apply, complete Form 6198, At-Risk Limitations. Turbo tax ez form See Publication 925, Passive Activity and At-Risk Rules. Turbo tax ez form For a disposition of an interest in, or property used in, a passive activity, complete Form 8582, Passive Activity Loss Limitations. Turbo tax ez form See Publication 925. Turbo tax ez form For gains and losses from section 1256 contracts and straddles, complete Form 6781. Turbo tax ez form See Publication 550. Turbo tax ez form Personal-use property. Turbo tax ez form   Report gain on the sale or exchange of property held for personal use (such as your home) on Form 8949 and Schedule D (Form 1040), as applicable. Turbo tax ez form Loss from the sale or exchange of property held for personal use is not deductible. Turbo tax ez form But if you had a loss from the sale or exchange of real estate held for personal use for which you received a Form 1099-S, report the transaction on Form 8949 and Schedule D, even though the loss is not deductible. Turbo tax ez form See the Instructions for Schedule D (Form 1040) and the Instructions for Form 8949 for information on how to report the transaction. Turbo tax ez form Long and Short Term Where you report a capital gain or loss depends on how long you own the asset before you sell or exchange it. Turbo tax ez form The time you own an asset before disposing of it is the holding period. Turbo tax ez form If you received a Form 1099-B, (or substitute statement) box 1c may help you determine whether the gain or loss is short-term or long-term. Turbo tax ez form If you hold a capital asset 1 year or less, the gain or loss from its disposition is short term. Turbo tax ez form Report it in Part I of Form 8949 and/or Schedule D, as applicable. Turbo tax ez form If you hold a capital asset longer than 1 year, the gain or loss from its disposition is long term. Turbo tax ez form Report it in Part II of Form 8949 and/or Schedule D, as applicable. Turbo tax ez form   Table 4-1. Turbo tax ez form Do I Have a Short-Term or Long-Term Gain or Loss? IF you hold the property. Turbo tax ez form . Turbo tax ez form . Turbo tax ez form  THEN you have a. Turbo tax ez form . Turbo tax ez form . Turbo tax ez form 1 year or less, Short-term capital gain or  loss. Turbo tax ez form More than 1 year, Long-term capital gain or  loss. Turbo tax ez form These distinctions are essential to correctly arrive at your net capital gain or loss. Turbo tax ez form Capital losses are allowed in full against capital gains plus up to $3,000 of ordinary income. Turbo tax ez form See Capital Gains Tax Rates, later. Turbo tax ez form Holding period. Turbo tax ez form   To figure if you held property longer than 1 year, start counting on the day following the day you acquired the property. Turbo tax ez form The day you disposed of the property is part of your holding period. Turbo tax ez form Example. Turbo tax ez form If you bought an asset on June 19, 2012, you should start counting on June 20, 2012. Turbo tax ez form If you sold the asset on June 19, 2013, your holding period is not longer than 1 year, but if you sold it on June 20, 2013, your holding period is longer than 1 year. Turbo tax ez form Patent property. Turbo tax ez form   If you dispose of patent property, you generally are considered to have held the property longer than 1 year, no matter how long you actually held it. Turbo tax ez form For more information, see Patents in chapter 2. Turbo tax ez form Inherited property. Turbo tax ez form   If you inherit property, you are considered to have held the property longer than 1 year, regardless of how long you actually held it. Turbo tax ez form Installment sale. Turbo tax ez form   The gain from an installment sale of an asset qualifying for long-term capital gain treatment in the year of sale continues to be long term in later tax years. Turbo tax ez form If it is short term in the year of sale, it continues to be short term when payments are received in later tax years. Turbo tax ez form    The date the installment payment is received determines the capital gains rate that should be applied not the date the asset was sold under an installment contract. Turbo tax ez form Nontaxable exchange. Turbo tax ez form   If you acquire an asset in exchange for another asset and your basis for the new asset is figured, in whole or in part, by using your basis in the old property, the holding period of the new property includes the holding period of the old property. Turbo tax ez form That is, it begins on the same day as your holding period for the old property. Turbo tax ez form Example. Turbo tax ez form You bought machinery on December 4, 2012. Turbo tax ez form On June 4, 2013, you traded this machinery for other machinery in a nontaxable exchange. Turbo tax ez form On December 5, 2013, you sold the machinery you got in the exchange. Turbo tax ez form Your holding period for this machinery began on December 5, 2012. Turbo tax ez form Therefore, you held it longer than 1 year. Turbo tax ez form Corporate liquidation. Turbo tax ez form   The holding period for property you receive in a liquidation generally starts on the day after you receive it if gain or loss is recognized. Turbo tax ez form Profit-sharing plan. Turbo tax ez form   The holding period of common stock withdrawn from a qualified contributory profit-sharing plan begins on the day following the day the plan trustee delivered the stock to the transfer agent with instructions to reissue the stock in your name. Turbo tax ez form Gift. Turbo tax ez form   If you receive a gift of property and your basis in it is figured using the donor's basis, your holding period includes the donor's holding period. Turbo tax ez form For more information on basis, see Publication 551, Basis of Assets. Turbo tax ez form Real property. Turbo tax ez form   To figure how long you held real property, start counting on the day after you received title to it or, if earlier, the day after you took possession of it and assumed the burdens and privileges of ownership. Turbo tax ez form   However, taking possession of real property under an option agreement is not enough to start the holding period. Turbo tax ez form The holding period cannot start until there is an actual contract of sale. Turbo tax ez form The holding period of the seller cannot end before that time. Turbo tax ez form Repossession. Turbo tax ez form   If you sell real property but keep a security interest in it and then later repossess it, your holding period for a later sale includes the period you held the property before the original sale, as well as the period after the repossession. Turbo tax ez form Your holding period does not include the time between the original sale and the repossession. Turbo tax ez form That is, it does not include the period during which the first buyer held the property. Turbo tax ez form Nonbusiness bad debts. Turbo tax ez form   Nonbusiness bad debts are short-term capital losses. Turbo tax ez form For information on nonbusiness bad debts, see chapter 4 of Publication 550. Turbo tax ez form    Net Gain or Loss The totals for short-term capital gains and losses and the totals for long-term capital gains and losses must be figured separately. Turbo tax ez form Net short-term capital gain or loss. Turbo tax ez form   Combine your short-term capital gains and losses, including your share of short-term capital gains or losses from partnerships, S corporations, and fiduciaries and any short-term capital loss carryover. Turbo tax ez form Do this by adding all your short-term capital gains. Turbo tax ez form Then add all your short-term capital losses. Turbo tax ez form Subtract the lesser total from the other. Turbo tax ez form The result is your net short-term capital gain or loss. Turbo tax ez form Net long-term capital gain or loss. Turbo tax ez form   Follow the same steps to combine your long-term capital gains and losses. Turbo tax ez form Include the following items. Turbo tax ez form Net section 1231 gain from Part I, Form 4797, after any adjustment for nonrecaptured section 1231 losses from prior tax years. Turbo tax ez form Capital gain distributions from regulated investment companies (mutual funds) and real estate investment trusts. Turbo tax ez form Your share of long-term capital gains or losses from partnerships, S corporations, and fiduciaries. Turbo tax ez form Any long-term capital loss carryover. Turbo tax ez form The result from combining these items with other long-term capital gains and losses is your net long-term capital gain or loss. Turbo tax ez form Net gain. Turbo tax ez form   If the total of your capital gains is more than the total of your capital losses, the difference is taxable. Turbo tax ez form Different tax rates may apply to the part that is a net capital gain. Turbo tax ez form See Capital Gains Tax Rates, later. Turbo tax ez form Net loss. Turbo tax ez form   If the total of your capital losses is more than the total of your capital gains, the difference is deductible. Turbo tax ez form But there are limits on how much loss you can deduct and when you can deduct it. Turbo tax ez form See Treatment of Capital Losses, next. Turbo tax ez form    Treatment of Capital Losses If your capital losses are more than your capital gains, you can deduct the difference as a capital loss deduction even if you do not have ordinary income to offset it. Turbo tax ez form The yearly limit on the amount of the capital loss you can deduct is $3,000 ($1,500 if you are married and file a separate return). Turbo tax ez form Table 4-2. Turbo tax ez form Holding Period for Different Types of Acquisitions Type of acquisition: When your holding period starts: Stocks and bonds bought on a securities market Day after trading date you bought security. Turbo tax ez form Ends on trading date you sold security. Turbo tax ez form U. Turbo tax ez form S. Turbo tax ez form Treasury notes and bonds If bought at auction, day after notification of bid acceptance. Turbo tax ez form If bought through subscription, day after subscription was submitted. Turbo tax ez form Nontaxable exchanges Day after date you acquired old property. Turbo tax ez form Gift If your basis is giver's adjusted basis, same day as giver's holding period began. Turbo tax ez form If your basis is FMV, day after date of gift. Turbo tax ez form Real property bought Generally, day after date you received title to the property. Turbo tax ez form Real property repossessed Day after date you originally received title to the property, but does not include time between the original sale and date of repossession. Turbo tax ez form Capital loss carryover. Turbo tax ez form   Generally, you have a capital loss carryover if either of the following situations applies to you. Turbo tax ez form Your net loss is more than the yearly limit. Turbo tax ez form Your taxable income without your deduction for exemptions is less than zero. Turbo tax ez form If either of these situations applies to you for 2013, see Capital Losses under Reporting Capital Gains and Losses in chapter 4 of Publication 550 to figure the amount you can carryover to 2014. Turbo tax ez form Example. Turbo tax ez form Bob and Gloria Sampson sold property in 2013. Turbo tax ez form The sale resulted in a capital loss of $7,000. Turbo tax ez form The Sampsons had no other capital transactions. Turbo tax ez form On their joint 2013 return, the Sampsons deduct $3,000, the yearly limit. Turbo tax ez form They had taxable income of $2,000. Turbo tax ez form The unused part of the loss, $4,000 ($7,000 − $3,000), is carried over to 2014. Turbo tax ez form If the Sampsons' capital loss had been $2,000, it would not have been more than the yearly limit. Turbo tax ez form Their capital loss deduction would have been $2,000. Turbo tax ez form They would have no carryover to 2014. Turbo tax ez form Short-term and long-term losses. Turbo tax ez form   When you carry over a loss, it retains its original character as either long term or short term. Turbo tax ez form A short-term loss you carry over to the next tax year is added to short-term losses occurring in that year. Turbo tax ez form A long-term loss you carry over to the next tax year is added to long-term losses occurring in that year. Turbo tax ez form A long-term capital loss you carry over to the next year reduces that year's long-term gains before its short-term gains. Turbo tax ez form   If you have both short-term and long-term losses, your short-term losses are used first against your allowable capital loss deduction. Turbo tax ez form If, after using your short-term losses, you have not reached the limit on the capital loss deduction, use your long-term losses until you reach the limit. Turbo tax ez form To figure your capital loss carryover from 2013 to 2014 use the Capital Loss Carryover Worksheet in the 2013 Instructions for Schedule D (Form 1040). Turbo tax ez form Joint and separate returns. Turbo tax ez form   On a joint return, the capital gains and losses of spouses are figured as the gains and losses of an individual. Turbo tax ez form If you are married and filing a separate return, your yearly capital loss deduction is limited to $1,500. Turbo tax ez form Neither you nor your spouse can deduct any part of the other's loss. Turbo tax ez form   If you and your spouse once filed separate returns and are now filing a joint return, combine your separate capital loss carryovers. Turbo tax ez form However, if you and your spouse once filed jointly and are now filing separately, any capital loss carryover from the joint return can be deducted only on the return of the spouse who actually had the loss. Turbo tax ez form Death of taxpayer. Turbo tax ez form   Capital losses cannot be carried over after a taxpayer's death. Turbo tax ez form They are deductible only on the final income tax return filed on the decedent's behalf. Turbo tax ez form The yearly limit discussed earlier still applies in this situation. Turbo tax ez form Even if the loss is greater than the limit, the decedent's estate cannot deduct the difference or carry it over to following years. Turbo tax ez form Corporations. Turbo tax ez form   A corporation can deduct capital losses only up to the amount of its capital gains. Turbo tax ez form In other words, if a corporation has a net capital loss, it cannot be deducted in the current tax year. Turbo tax ez form It must be carried to other tax years and deducted from capital gains occurring in those years. Turbo tax ez form For more information, see Publication 542. Turbo tax ez form Capital Gains Tax Rates The tax rates that apply to a net capital gain are generally lower than the tax rates that apply to other income. Turbo tax ez form These lower rates are called the maximum capital gains rates. Turbo tax ez form The term “net capital gain” means the amount by which your net long-term capital gain for the year is more than your net short-term capital loss. Turbo tax ez form For 2013, the maximum tax rates for individuals are 0%, 15%, 20%, 25%, and 28%. Turbo tax ez form Also, individuals, use the Qualified Dividends and Capital Gain Worksheet in the Instructions for Form 1040, or the Schedule D Tax Computation Worksheet in the Instructions for Schedule D (Form 1040) (whichever applies) to figure your tax if you have qualified dividends or net capital gain. Turbo tax ez form For more information, see chapter 4 of Publication 550. Turbo tax ez form Also see the Instructions for Schedule D (Form 1040). Turbo tax ez form Unrecaptured section 1250 gain. Turbo tax ez form   Generally, this is the part of any long-term capital gain on section 1250 property (real property) that is due to depreciation. Turbo tax ez form Unrecaptured section 1250 gain cannot be more than the net section 1231 gain or include any gain otherwise treated as ordinary income. Turbo tax ez form Use the worksheet in the Schedule D instructions to figure your unrecaptured section 1250 gain. Turbo tax ez form For more information about section 1250 property and net section 1231 gain, see chapter 3. Turbo tax ez form Form 4797 Use Form 4797 to report: The sale or exchange of: Property used in your trade or business; Depreciable and amortizable property; Oil, gas, geothermal, or other mineral properties; and Section 126 property. Turbo tax ez form The involuntary conversion (from other than casualty or theft) of property used in your trade or business and capital assets held in connection with a trade or business or a transaction entered into for profit. Turbo tax ez form The disposition of noncapital assets (other than inventory or property held primarily for sale to customers in the ordinary course of your trade or business). Turbo tax ez form The disposition of capital assets not reported on Schedule D. Turbo tax ez form The gain or loss (including any related recapture) for partners and S corporation shareholders from certain section 179 property dispositions by partnerships (other than electing large partnerships) and S corporations. Turbo tax ez form The computation of recapture amounts under sections 179 and 280F(b)(2) when the business use of section 179 or listed property decreases to 50% or less. Turbo tax ez form Gains or losses treated as ordinary gains or losses, if you are a trader in securities or commodities and made a mark-to-market election under Internal Revenue Code section 475(f). Turbo tax ez form You can use Form 4797 with Form 1040, 1065, 1120, or 1120S. Turbo tax ez form Section 1231 gains and losses. Turbo tax ez form   Show any section 1231 gains and losses in Part I. Turbo tax ez form Carry a net gain to Schedule D (Form 1040) as a long-term capital gain. Turbo tax ez form Carry a net loss to Part II of Form 4797 as an ordinary loss. Turbo tax ez form   If you had any nonrecaptured net section 1231 losses from the preceding 5 tax years, reduce your net gain by those losses and report the amount of the reduction as an ordinary gain in Part II. Turbo tax ez form Report any remaining gain on Schedule D (Form 1040). Turbo tax ez form See Section 1231 Gains and Losses in chapter 3. Turbo tax ez form Ordinary gains and losses. Turbo tax ez form   Show any ordinary gains and losses in Part II. Turbo tax ez form This includes a net loss or a recapture of losses from prior years figured in Part I of Form 4797. Turbo tax ez form It also includes ordinary gain figured in Part III. Turbo tax ez form Mark-to-market election. Turbo tax ez form   If you made a mark-to-market election, you should report all gains and losses from trading as ordinary gains and losses in Part II of Form 4797, instead of as capital gains and losses on Form 8949 and Schedule D (Form 1040). Turbo tax ez form See the Instructions for Form 4797. Turbo tax ez form Also see Special Rules for Traders in Securities, in chapter 4 of Publication 550. Turbo tax ez form Ordinary income from depreciation. Turbo tax ez form   Figure the ordinary income from depreciation on personal property and additional depreciation on real property (as discussed in chapter 3) in Part III. Turbo tax ez form Carry the ordinary income to Part II of Form 4797 as an ordinary gain. Turbo tax ez form Carry any remaining gain to Part I as section 1231 gain, unless it is from a casualty or theft. Turbo tax ez form Carry any remaining gain from a casualty or theft to Form 4684. Turbo tax ez form Prev  Up  Next   Home   More Online Publications
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Low Income Taxpayer Clinics

Low Income Taxpayer Clinics (LITCs) represent low income individuals in disputes with the Internal Revenue Service, including audits, appeals, collection matters, and federal tax litigation. LITCs can also help taxpayers respond to IRS notices and correct account problems. Some LITCs provide education for low income taxpayers and taxpayers who speak English as a second language (ESL) about their taxpayer rights and responsibilities.

LITC services are free or low cost for eligible taxpayers. LITCs are independent from the IRS but receive some of their funding from the IRS through the LITC grant program. Each clinic determines whether prospective clients meet income guidelines and other criteria before agreeing to represent them.

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The LITC program is administered by the Taxpayer Advocate Service (TAS). TAS is your voice at the IRS. We help taxpayers whose problems with the IRS are causing financial difficulties, who have tried but haven’t been able to resolve their problems with the IRS, and those who believe an IRS system or procedure isn’t working as it should. If you believe you’re eligible for TAS assistance, call us toll-free at 1–877–777–4778. For more information, go to www.irs.gov/advocate.

Page Last Reviewed or Updated: 06-Mar-2014

The Turbo Tax Ez Form

Turbo tax ez form 4. Turbo tax ez form   Transportation Table of Contents Parking fees. Turbo tax ez form Advertising display on car. Turbo tax ez form Car pools. Turbo tax ez form Hauling tools or instruments. Turbo tax ez form Union members' trips from a union hall. Turbo tax ez form Car ExpensesStandard Mileage Rate Actual Car Expenses Leasing a Car Disposition of a Car This chapter discusses expenses you can deduct for business transportation when you are not traveling away from home as defined in chapter 1. Turbo tax ez form These expenses include the cost of transportation by air, rail, bus, taxi, etc. Turbo tax ez form , and the cost of driving and maintaining your car. Turbo tax ez form Transportation expenses include the ordinary and necessary costs of all of the following. Turbo tax ez form Getting from one workplace to another in the course of your business or profession when you are traveling within the city or general area that is your tax home. Turbo tax ez form Tax home is defined in chapter 1. Turbo tax ez form Visiting clients or customers. Turbo tax ez form Going to a business meeting away from your regular workplace. Turbo tax ez form Getting from your home to a temporary workplace when you have one or more regular places of work. Turbo tax ez form These temporary workplaces can be either within the area of your tax home or outside that area. Turbo tax ez form Transportation expenses do not include expenses you have while traveling away from home overnight. Turbo tax ez form Those expenses are travel expenses discussed in chapter 1 . Turbo tax ez form However, if you use your car while traveling away from home overnight, use the rules in this chapter to figure your car expense deduction. Turbo tax ez form See Car Expenses , later. Turbo tax ez form Daily transportation expenses you incur while traveling from home to one or more regular places of business are generally nondeductible commuting expenses. Turbo tax ez form However, there may be exceptions to this general rule. Turbo tax ez form You can deduct daily transportation expenses incurred going between your residence and a temporary work station outside the metropolitan area where you live. Turbo tax ez form Also, daily transportation expenses can be deducted if: (1) you have one or more regular work locations away from your residence or (2) your residence is your principal place of business and you incur expenses going between the residence and another work location in the same trade or business, regardless of whether the work is temporary or permanent and regardless of the distance. Turbo tax ez form Illustration of transportation expenses. Turbo tax ez form    Figure B , earlier, illustrates the rules that apply for deducting transportation expenses when you have a regular or main job away from your home. Turbo tax ez form You may want to refer to it when deciding whether you can deduct your transportation expenses. Turbo tax ez form Temporary work location. Turbo tax ez form   If you have one or more regular work locations away from your home and you commute to a temporary work location in the same trade or business, you can deduct the expenses of the daily round-trip transportation between your home and the temporary location, regardless of distance. Turbo tax ez form   If your employment at a work location is realistically expected to last (and does in fact last) for 1 year or less, the employment is temporary unless there are facts and circumstances that would indicate otherwise. Turbo tax ez form   If your employment at a work location is realistically expected to last for more than 1 year or if there is no realistic expectation that the employment will last for 1 year or less, the employment is not temporary, regardless of whether it actually lasts for more than 1 year. Turbo tax ez form   If employment at a work location initially is realistically expected to last for 1 year or less, but at some later date the employment is realistically expected to last more than 1 year, that employment will be treated as temporary (unless there are facts and circumstances that would indicate otherwise) until your expectation changes. Turbo tax ez form It will not be treated as temporary after the date you determine it will last more than 1 year. Turbo tax ez form   If the temporary work location is beyond the general area of your regular place of work and you stay overnight, you are traveling away from home. Turbo tax ez form You may have deductible travel expenses as discussed in chapter 1 . Turbo tax ez form No regular place of work. Turbo tax ez form   If you have no regular place of work but ordinarily work in the metropolitan area where you live, you can deduct daily transportation costs between home and a temporary work site outside that metropolitan area. Turbo tax ez form   Generally, a metropolitan area includes the area within the city limits and the suburbs that are considered part of that metropolitan area. Turbo tax ez form   You cannot deduct daily transportation costs between your home and temporary work sites within your metropolitan area. Turbo tax ez form These are nondeductible commuting expenses. Turbo tax ez form Two places of work. Turbo tax ez form   If you work at two places in one day, whether or not for the same employer, you can deduct the expense of getting from one workplace to the other. Turbo tax ez form However, if for some personal reason you do not go directly from one location to the other, you cannot deduct more than the amount it would have cost you to go directly from the first location to the second. Turbo tax ez form   Transportation expenses you have in going between home and a part-time job on a day off from your main job are commuting expenses. Turbo tax ez form You cannot deduct them. Turbo tax ez form Armed Forces reservists. Turbo tax ez form   A meeting of an Armed Forces reserve unit is a second place of business if the meeting is held on a day on which you work at your regular job. Turbo tax ez form You can deduct the expense of getting from one workplace to the other as just discussed under Two places of work . Turbo tax ez form   You usually cannot deduct the expense if the reserve meeting is held on a day on which you do not work at your regular job. Turbo tax ez form In this case, your transportation generally is a nondeductible commuting expense. Turbo tax ez form However, you can deduct your transportation expenses if the location of the meeting is temporary and you have one or more regular places of work. Turbo tax ez form   If you ordinarily work in a particular metropolitan area but not at any specific location and the reserve meeting is held at a temporary location outside that metropolitan area, you can deduct your transportation expenses. Turbo tax ez form   If you travel away from home overnight to attend a guard or reserve meeting, you can deduct your travel expenses. Turbo tax ez form These expenses are discussed in chapter 1 . Turbo tax ez form   If you travel more than 100 miles away from home in connection with your performance of services as a member of the reserves, you may be able to deduct some of your reserve-related travel costs as an adjustment to gross income rather than as an itemized deduction. Turbo tax ez form For more information, see Armed Forces Reservists Traveling More Than 100 Miles From Home under Special Rules, in chapter 6. Turbo tax ez form Commuting expenses. Turbo tax ez form   You cannot deduct the costs of taking a bus, trolley, subway, or taxi, or of driving a car between your home and your main or regular place of work. Turbo tax ez form These costs are personal commuting expenses. Turbo tax ez form You cannot deduct commuting expenses no matter how far your home is from your regular place of work. Turbo tax ez form You cannot deduct commuting expenses even if you work during the commuting trip. Turbo tax ez form Example. Turbo tax ez form You sometimes use your cell phone to make business calls while commuting to and from work. Turbo tax ez form Sometimes business associates ride with you to and from work, and you have a business discussion in the car. Turbo tax ez form These activities do not change the trip from personal to business. Turbo tax ez form You cannot deduct your commuting expenses. Turbo tax ez form Parking fees. Turbo tax ez form    Fees you pay to park your car at your place of business are nondeductible commuting expenses. Turbo tax ez form You can, however, deduct business-related parking fees when visiting a customer or client. Turbo tax ez form Advertising display on car. Turbo tax ez form   Putting display material that advertises your business on your car does not change the use of your car from personal use to business use. Turbo tax ez form If you use this car for commuting or other personal uses, you still cannot deduct your expenses for those uses. Turbo tax ez form Car pools. Turbo tax ez form   You cannot deduct the cost of using your car in a nonprofit car pool. Turbo tax ez form Do not include payments you receive from the passengers in your income. Turbo tax ez form These payments are considered reimbursements of your expenses. Turbo tax ez form However, if you operate a car pool for a profit, you must include payments from passengers in your income. Turbo tax ez form You can then deduct your car expenses (using the rules in this publication). Turbo tax ez form Hauling tools or instruments. Turbo tax ez form   Hauling tools or instruments in your car while commuting to and from work does not make your car expenses deductible. Turbo tax ez form However, you can deduct any additional costs you have for hauling tools or instruments (such as for renting a trailer you tow with your car). Turbo tax ez form Union members' trips from a union hall. Turbo tax ez form   If you get your work assignments at a union hall and then go to your place of work, the costs of getting from the union hall to your place of work are nondeductible commuting expenses. Turbo tax ez form Although you need the union to get your work assignments, you are employed where you work, not where the union hall is located. Turbo tax ez form Office in the home. Turbo tax ez form   If you have an office in your home that qualifies as a principal place of business, you can deduct your daily transportation costs between your home and another work location in the same trade or business. Turbo tax ez form (See Publication 587, Business Use of Your Home, for information on determining if your home office qualifies as a principal place of business. Turbo tax ez form ) Examples of deductible transportation. Turbo tax ez form   The following examples show when you can deduct transportation expenses based on the location of your work and your home. Turbo tax ez form Example 1. Turbo tax ez form You regularly work in an office in the city where you live. Turbo tax ez form Your employer sends you to a 1-week training session at a different office in the same city. Turbo tax ez form You travel directly from your home to the training location and return each day. Turbo tax ez form You can deduct the cost of your daily round-trip transportation between your home and the training location. Turbo tax ez form Example 2. Turbo tax ez form Your principal place of business is in your home. Turbo tax ez form You can deduct the cost of round-trip transportation between your qualifying home office and your client's or customer's place of business. Turbo tax ez form Example 3. Turbo tax ez form You have no regular office, and you do not have an office in your home. Turbo tax ez form In this case, the location of your first business contact inside the metropolitan area is considered your office. Turbo tax ez form Transportation expenses between your home and this first contact are nondeductible commuting expenses. Turbo tax ez form Transportation expenses between your last business contact and your home are also nondeductible commuting expenses. Turbo tax ez form While you cannot deduct the costs of these trips, you can deduct the costs of going from one client or customer to another. Turbo tax ez form Car Expenses If you use your car for business purposes, you ordinarily can deduct car expenses. Turbo tax ez form You generally can use one of the two following methods to figure your deductible expenses. Turbo tax ez form Standard mileage rate. Turbo tax ez form Actual car expenses. Turbo tax ez form If you use actual expenses to figure your deduction for a car you lease, there are rules that affect the amount of your lease payments you can deduct. Turbo tax ez form See Leasing a Car , later. Turbo tax ez form In this publication, “car” includes a van, pickup, or panel truck. Turbo tax ez form For the definition of “car” for depreciation purposes, see Car defined under Actual Car Expenses, later. Turbo tax ez form Rural mail carriers. Turbo tax ez form   If you are a rural mail carrier, you may be able to treat the qualified reimbursement you received as your allowable expense. Turbo tax ez form Because the qualified reimbursement is treated as paid under an accountable plan, your employer should not include the reimbursement in your income. Turbo tax ez form   If your vehicle expenses are more than the amount of your reimbursement, you can deduct the unreimbursed expenses as an itemized deduction on Schedule A (Form 1040). Turbo tax ez form You must complete Form 2106 and attach it to your Form 1040, U. Turbo tax ez form S. Turbo tax ez form Individual Income Tax Return. Turbo tax ez form   A “qualified reimbursement” is the reimbursement you receive that meets both of the following conditions. Turbo tax ez form It is given as an equipment maintenance allowance (EMA) to employees of the U. Turbo tax ez form S. Turbo tax ez form Postal Service. Turbo tax ez form It is at the rate contained in the 1991 collective bargaining agreement. Turbo tax ez form Any later agreement cannot increase the qualified reimbursement amount by more than the rate of inflation. Turbo tax ez form See your employer for information on your reimbursement. Turbo tax ez form    If you are a rural mail carrier and received a qualified reimbursement, you cannot use the standard mileage rate. Turbo tax ez form Standard Mileage Rate You may be able to use the standard mileage rate to figure the deductible costs of operating your car for business purposes. Turbo tax ez form For 2013, the standard mileage rate for the cost of operating your car for business use is 56½ cents per mile. Turbo tax ez form If you use the standard mileage rate for a year, you cannot deduct your actual car expenses for that year. Turbo tax ez form You cannot deduct depreciation, lease payments, maintenance and repairs, gasoline (including gasoline taxes), oil, insurance, or vehicle registration fees. Turbo tax ez form See Choosing the standard mileage rate and Standard mileage rate not allowed, later. Turbo tax ez form You generally can use the standard mileage rate whether or not you are reimbursed and whether or not any reimbursement is more or less than the amount figured using the standard mileage rate. Turbo tax ez form See chapter 6 for more information on reimbursements . Turbo tax ez form Choosing the standard mileage rate. Turbo tax ez form   If you want to use the standard mileage rate for a car you own, you must choose to use it in the first year the car is available for use in your business. Turbo tax ez form Then, in later years, you can choose to use either the standard mileage rate or actual expenses. Turbo tax ez form   If you want to use the standard mileage rate for a car you lease, you must use it for the entire lease period. Turbo tax ez form For leases that began on or before December 31, 1997, the standard mileage rate must be used for the entire portion of the lease period (including renewals) that is after 1997. Turbo tax ez form   You must make the choice to use the standard mileage rate by the due date (including extensions) of your return. Turbo tax ez form You cannot revoke the choice. Turbo tax ez form However, in later years, you can switch from the standard mileage rate to the actual expenses method. Turbo tax ez form If you change to the actual expenses method in a later year, but before your car is fully depreciated, you have to estimate the remaining useful life of the car and use straight line depreciation. Turbo tax ez form Example. Turbo tax ez form Larry is an employee who occasionally uses his own car for business purposes. Turbo tax ez form He purchased the car in 2011, but he did not claim any unreimbursed employee expenses on his 2011 tax return. Turbo tax ez form Because Larry did not use the standard mileage rate the first year the car was available for business use, he cannot use the standard mileage rate in 2013 to claim unreimbursed employee business expenses. Turbo tax ez form   For more information about depreciation included in the standard mileage rate, see Exception under Methods of depreciation, later. Turbo tax ez form Standard mileage rate not allowed. Turbo tax ez form   You cannot use the standard mileage rate if you: Use five or more cars at the same time (such as in fleet operations), Claimed a depreciation deduction for the car using any method other than straight line, for example, MACRS (as discussed later under Depreciation Deduction), Claimed a section 179 deduction (discussed later) on the car, Claimed the special depreciation allowance on the car, Claimed actual car expenses after 1997 for a car you leased, or Are a rural mail carrier who received a qualified reimbursement. Turbo tax ez form (See Rural mail carriers , earlier. Turbo tax ez form ) Note. Turbo tax ez form You can elect to use the standard mileage rate if you used a car for hire (such as a taxi) unless the standard mileage rate is otherwise not allowed, as discussed above. Turbo tax ez form Five or more cars. Turbo tax ez form   If you own or lease five or more cars that are used for business at the same time, you cannot use the standard mileage rate for the business use of any car. Turbo tax ez form However, you may be able to deduct your actual expenses for operating each of the cars in your business. Turbo tax ez form See Actual Car Expenses , later, for information on how to figure your deduction. Turbo tax ez form   You are not using five or more cars for business at the same time if you alternate using (use at different times) the cars for business. Turbo tax ez form   The following examples illustrate the rules for when you can and cannot use the standard mileage rate for five or more cars. Turbo tax ez form Example 1. Turbo tax ez form Marcia, a salesperson, owns three cars and two vans that she alternates using for calling on her customers. Turbo tax ez form She can use the standard mileage rate for the business mileage of the three cars and the two vans because she does not use them at the same time. Turbo tax ez form Example 2. Turbo tax ez form Tony and his employees use his four pickup trucks in his landscaping business. Turbo tax ez form During the year, he traded in two of his old trucks for two newer ones. Turbo tax ez form Tony can use the standard mileage rate for the business mileage of all six of the trucks he owned during the year. Turbo tax ez form Example 3. Turbo tax ez form Chris owns a repair shop and an insurance business. Turbo tax ez form He and his employees use his two pickup trucks and van for the repair shop. Turbo tax ez form Chris alternates using his two cars for the insurance business. Turbo tax ez form No one else uses the cars for business purposes. Turbo tax ez form Chris can use the standard mileage rate for the business use of the pickup trucks, van, and the cars because he never has more than four vehicles used for business at the same time. Turbo tax ez form Example 4. Turbo tax ez form Maureen owns a car and four vans that are used in her housecleaning business. Turbo tax ez form Her employees use the vans, and she uses the car to travel to various customers. Turbo tax ez form Maureen cannot use the standard mileage rate for the car or the vans. Turbo tax ez form This is because all five vehicles are used in Maureen's business at the same time. Turbo tax ez form She must use actual expenses for all vehicles. Turbo tax ez form Interest. Turbo tax ez form   If you are an employee, you cannot deduct any interest paid on a car loan. Turbo tax ez form This applies even if you use the car 100% for business as an employee. Turbo tax ez form   However, if you are self-employed and use your car in your business, you can deduct that part of the interest expense that represents your business use of the car. Turbo tax ez form For example, if you use your car 60% for business, you can deduct 60% of the interest on Schedule C (Form 1040). Turbo tax ez form You cannot deduct the part of the interest expense that represents your personal use of the car. Turbo tax ez form    If you use a home equity loan to purchase your car, you may be able to deduct the interest. Turbo tax ez form See Publication 936, Home Mortgage Interest Deduction, for more information. Turbo tax ez form Personal property taxes. Turbo tax ez form   If you itemize your deductions on Schedule A (Form 1040), you can deduct on line 7 state and local personal property taxes on motor vehicles. Turbo tax ez form You can take this deduction even if you use the standard mileage rate or if you do not use the car for business. Turbo tax ez form   If you are self-employed and use your car in your business, you can deduct the business part of state and local personal property taxes on motor vehicles on Schedule C (Form 1040), Schedule C-EZ (Form 1040), or Schedule F (Form 1040). Turbo tax ez form If you itemize your deductions, you can include the remainder of your state and local personal property taxes on the car on Schedule A (Form 1040). Turbo tax ez form Parking fees and tolls. Turbo tax ez form   In addition to using the standard mileage rate, you can deduct any business-related parking fees and tolls. Turbo tax ez form (Parking fees you pay to park your car at your place of work are nondeductible commuting expenses. Turbo tax ez form ) Sale, trade-in, or other disposition. Turbo tax ez form   If you sell, trade in, or otherwise dispose of your car, you may have a gain or loss on the transaction or an adjustment to the basis of your new car. Turbo tax ez form See Disposition of a Car , later. Turbo tax ez form Actual Car Expenses If you do not use the standard mileage rate, you may be able to deduct your actual car expenses. Turbo tax ez form If you qualify to use both methods, you may want to figure your deduction both ways to see which gives you a larger deduction. Turbo tax ez form Actual car expenses include: Depreciation Licenses Lease  payments Registration  fees Gas Insurance Repairs Oil Garage rent Tires Tolls Parking fees   If you have fully depreciated a car that you still use in your business, you can continue to claim your other actual car expenses. Turbo tax ez form Continue to keep records, as explained later in chapter 5 . Turbo tax ez form Business and personal use. Turbo tax ez form   If you use your car for both business and personal purposes, you must divide your expenses between business and personal use. Turbo tax ez form You can divide your expense based on the miles driven for each purpose. Turbo tax ez form Example. Turbo tax ez form You are a sales representative for a clothing firm and drive your car 20,000 miles during the year: 12,000 miles for business and 8,000 miles for personal use. Turbo tax ez form You can claim only 60% (12,000 ÷ 20,000) of the cost of operating your car as a business expense. Turbo tax ez form Employer-provided vehicle. Turbo tax ez form   If you use a vehicle provided by your employer for business purposes, you can deduct your actual unreimbursed car expenses. Turbo tax ez form You cannot use the standard mileage rate. Turbo tax ez form See Vehicle Provided by Your Employer in chapter 6. Turbo tax ez form Interest on car loans. Turbo tax ez form   If you are an employee, you cannot deduct any interest paid on a car loan. Turbo tax ez form This interest is treated as personal interest and is not deductible. Turbo tax ez form If you are self-employed and use your car in that business, see Interest , earlier, under Standard Mileage Rate. Turbo tax ez form Taxes paid on your car. Turbo tax ez form   If you are an employee, you can deduct personal property taxes paid on your car if you itemize deductions. Turbo tax ez form Enter the amount paid on line 7 of Schedule A (Form 1040). Turbo tax ez form Sales taxes. Turbo tax ez form   Generally, sales taxes on your car are part of your car's basis and are recovered through depreciation, discussed later. Turbo tax ez form Fines and collateral. Turbo tax ez form   You cannot deduct fines you pay or collateral you forfeit for traffic violations. Turbo tax ez form Casualty and theft losses. Turbo tax ez form   If your car is damaged, destroyed, or stolen, you may be able to deduct part of the loss not covered by insurance. Turbo tax ez form See Publication 547, Casualties, Disasters, and Thefts, for information on deducting a loss on your car. Turbo tax ez form Depreciation and section 179 deductions. Turbo tax ez form   Generally, the cost of a car, plus sales tax and improvements, is a capital expense. Turbo tax ez form Because the benefits last longer than 1 year, you generally cannot deduct a capital expense. Turbo tax ez form However, you can recover this cost through the section 179 deduction (the deduction allowed by section 179 of the Internal Revenue Code), special depreciation allowance, and depreciation deductions. Turbo tax ez form Depreciation allows you to recover the cost over more than 1 year by deducting part of it each year. Turbo tax ez form The section 179 deduction , special depreciation allowance , and depreciation deductions are discussed later. Turbo tax ez form   Generally, there are limits on these deductions. Turbo tax ez form Special rules apply if you use your car 50% or less in your work or business. Turbo tax ez form   You can claim a section 179 deduction and use a depreciation method other than straight line only if you do not use the standard mileage rate to figure your business-related car expenses in the year you first place a car in service. Turbo tax ez form   If, in the year you first place a car in service, you claim either a section 179 deduction or use a depreciation method other than straight line for its estimated useful life, you cannot use the standard mileage rate on that car in any future year. Turbo tax ez form Car defined. Turbo tax ez form   For depreciation purposes, a car is any four-wheeled vehicle (including a truck or van) made primarily for use on public streets, roads, and highways. Turbo tax ez form Its unloaded gross vehicle weight must not be more than 6,000 pounds. Turbo tax ez form A car includes any part, component, or other item physically attached to it or usually included in the purchase price. Turbo tax ez form   A car does not include: An ambulance, hearse, or combination ambulance-hearse used directly in a business, A vehicle used directly in the business of transporting persons or property for pay or hire, or A truck or van that is a qualified nonpersonal use vehicle. Turbo tax ez form Qualified nonpersonal use vehicles. Turbo tax ez form   These are vehicles that by their nature are not likely to be used more than a minimal amount for personal purposes. Turbo tax ez form They include trucks and vans that have been specially modified so that they are not likely to be used more than a minimal amount for personal purposes, such as by installation of permanent shelving and painting the vehicle to display advertising or the company's name. Turbo tax ez form Delivery trucks with seating only for the driver, or only for the driver plus a folding jump seat, are qualified nonpersonal use vehicles. Turbo tax ez form More information. Turbo tax ez form   See Depreciation Deduction , later, for more information on how to depreciate your vehicle. Turbo tax ez form Section 179 Deduction The section 179 deduction allows you to treat a portion or all of the cost of a car as a current expense. Turbo tax ez form If you choose to deduct all or part of the cost as a current expense, you must reduce your depreciable basis in the car by the amount of the section 179 deduction. Turbo tax ez form There is a limit on the total section 179 deduction, special depreciation allowance, and depreciation deduction for cars, trucks, and vans that may reduce or eliminate any benefit from claiming the section 179 deduction. Turbo tax ez form See Depreciation Limits, later. Turbo tax ez form You can claim the section 179 deduction only in the year you place the car in service. Turbo tax ez form For this purpose, a car is placed in service when it is ready and available for a specifically assigned use, whether in a trade or business, a tax-exempt activity, a personal activity, or for the production of income. Turbo tax ez form Even if you are not using the property, it is in service when it is ready and available for its specifically assigned use. Turbo tax ez form A car first used for personal purposes cannot qualify for the deduction in a later year when its use changes to business. Turbo tax ez form Example. Turbo tax ez form In 2012, you bought a new car and used it for personal purposes. Turbo tax ez form In 2013, you began to use it for business. Turbo tax ez form Changing its use to business use does not qualify the cost of your car for a section 179 deduction in 2013. Turbo tax ez form However, you can claim a depreciation deduction for the business use of the car starting in 2013. Turbo tax ez form See Depreciation Deduction , later. Turbo tax ez form More than 50% business use requirement. Turbo tax ez form   You must use the property more than 50% for business to claim any section 179 deduction. Turbo tax ez form If you used the property more than 50% for business, multiply the cost of the property by the percentage of business use. Turbo tax ez form The result is the cost of the property that can qualify for the section 179 deduction. Turbo tax ez form Example. Turbo tax ez form Peter purchased a car in April 2013 for $24,500 and used it 60% for business. Turbo tax ez form Based on his business usage, the total cost of Peter's car that qualifies for the section 179 deduction is $14,700 ($24,500 cost × 60% business use). Turbo tax ez form But see Limit on total section 179, special depreciation allowance, and depreciation deduction , discussed later. Turbo tax ez form Limits. Turbo tax ez form   There are limits on: The amount of the section 179 deduction, The section 179 deduction for sport utility and certain other vehicles, and The total amount of the section 179 deduction, special depreciation allowance, and depreciation deduction (discussed later ) you can claim for a qualified property. Turbo tax ez form Limit on the amount of the section 179 deduction. Turbo tax ez form   For 2013, the total amount you can choose to deduct under section 179 generally cannot be more than $500,000. Turbo tax ez form   If the cost of your section 179 property placed in service in 2013 is over $2,000,000, you must reduce the $500,000 dollar limit (but not below zero) by the amount of cost over $2,000,000. Turbo tax ez form If the cost of your section 179 property placed in service during 2013 is $2,500,000 or more, you cannot take a section 179 deduction. Turbo tax ez form   The total amount you can deduct under section 179 each year after you apply the limits listed above cannot be more than the taxable income from the active conduct of any trade or business during the year. Turbo tax ez form   If you are married and file a joint return, you and your spouse are treated as one taxpayer in determining any reduction to the dollar limit, regardless of which of you purchased the property or placed it in service. Turbo tax ez form   If you and your spouse file separate returns, you are treated as one taxpayer for the dollar limit. Turbo tax ez form You must allocate the dollar limit (after any reduction) between you. Turbo tax ez form   For more information on the above section 179 deduction limits, see Publication 946. Turbo tax ez form Limit for sport utility and certain other vehicles. Turbo tax ez form   For sport utility and certain other vehicles placed in service in 2013, the portion of the vehicle's cost taken into account in figuring your section 179 deduction is limited to $25,000. Turbo tax ez form This rule applies to any four-wheeled vehicle primarily designed or used to carry passengers over public streets, roads, or highways, that is not subject to any of the passenger automobile limits explained under Depreciation Limits , later, and that is rated at no more than 14,000 pounds gross vehicle weight. Turbo tax ez form However, the $25,000 limit does not apply to any vehicle: Designed to have a seating capacity of more than nine persons behind the driver's seat, Equipped with a cargo area of at least 6 feet in interior length that is an open area or is designed for use as an open area but is enclosed by a cap and is not readily accessible directly from the passenger compartment, or That has an integral enclosure, fully enclosing the driver compartment and load carrying device, does not have seating rearward of the driver's seat, and has no body section protruding more than 30 inches ahead of the leading edge of the windshield. Turbo tax ez form    Limit on total section 179, special depreciation allowance, and depreciation deduction. Turbo tax ez form   Generally, the total amount of section 179, special depreciation allowance, and depreciation deduction you can claim for a car that is qualified property and that you placed in service in 2013 is $11,160. Turbo tax ez form The limit is reduced if your business use of the car is less than 100%. Turbo tax ez form See Depreciation Limits , later, for more information. Turbo tax ez form Example. Turbo tax ez form In the earlier example under More than 50% business use requirement, Peter had a car with a cost (for purposes of the section 179 deduction) of $14,700. Turbo tax ez form However, based on Peter's business usage of his car, the total of his section 179, special depreciation allowance, and depreciation deductions is limited to $6,696 ($11,160 limit x 60% business use). Turbo tax ez form Cost of car. Turbo tax ez form   For purposes of the section 179 deduction, the cost of the car does not include any amount figured by reference to any other property held by you at any time. Turbo tax ez form For example, if you buy (for cash and a trade-in) a new car to use in your business, your cost for purposes of the section 179 deduction does not include your adjusted basis in the car you trade in for the new car. Turbo tax ez form Your cost includes only the cash you paid. Turbo tax ez form Basis of car for depreciation. Turbo tax ez form   The amount of the section 179 deduction reduces your basis in your car. Turbo tax ez form If you choose the section 179 deduction, you must subtract the amount of the deduction from the cost of your car. Turbo tax ez form The resulting amount is the basis in your car you use to figure your depreciation deduction. Turbo tax ez form When to choose. Turbo tax ez form   If you want to take the section 179 deduction, you must make the choice in the tax year you place the car in service for business or work. Turbo tax ez form How to choose. Turbo tax ez form    Employees use Form 2106 to make this choice and report the section 179 deduction. Turbo tax ez form All others use Form 4562. Turbo tax ez form   File the appropriate form with either of the following. Turbo tax ez form Your original tax return filed for the year the property was placed in service (whether or not you file it timely). Turbo tax ez form An amended return filed within the time prescribed by law. Turbo tax ez form An election made on an amended return must specify the item of section 179 property to which the election applies and the part of the cost of each such item to be taken into account. Turbo tax ez form The amended return must also include any resulting adjustments to taxable income. Turbo tax ez form    You must keep records that show the specific identification of each piece of qualifying section 179 property. Turbo tax ez form These records must show how you acquired the property, the person you acquired it from, and when you placed it in service. Turbo tax ez form Revoking an election. Turbo tax ez form   An election (or any specification made in the election) to take a section 179 deduction for 2013 can only be revoked with the Commissioner's approval. Turbo tax ez form Recapture of section 179 deduction. Turbo tax ez form   To be eligible to claim the section 179 deduction, you must use your car more than 50% for business or work in the year you acquired it. Turbo tax ez form If your business use of the car is 50% or less in a later tax year during the recovery period, you have to recapture (include in income) in that later year any excess depreciation. Turbo tax ez form Any section 179 deduction claimed on the car is included in calculating the excess depreciation. Turbo tax ez form For information on this calculation, see Excess depreciation , later in this chapter under Car Used 50% or Less for Business. Turbo tax ez form Dispositions. Turbo tax ez form   If you dispose of a car on which you had claimed the section 179 deduction, the amount of that deduction is treated as a depreciation deduction for recapture purposes. Turbo tax ez form You treat any gain on the disposition of the property as ordinary income up to the amount of the section 179 deduction and any allowable depreciation (unless you establish the amount actually allowed). Turbo tax ez form For information on the disposition of a car, see Disposition of a Car , later. Turbo tax ez form Special Depreciation Allowance You may be able to claim the special depreciation allowance for your car, truck, or van, if it is qualified property and was placed in service in 2013. Turbo tax ez form The allowance is an additional depreciation deduction of 50% of the car's depreciable basis (after any section 179 deduction, but before figuring your regular depreciation deduction under MACRS). Turbo tax ez form The special depreciation allowance applies only for the first year the car is placed in service. Turbo tax ez form To qualify for the allowance more than 50% of the use of the car must be in a qualified business use (as defined under Depreciation Deduction, later). Turbo tax ez form Combined depreciation. Turbo tax ez form   Your combined section 179 deduction, special depreciation allowance, and regular MACRS depreciation deduction is limited to the maximum allowable depreciation deduction for cars of $11,160 ($3,160 if you elect not to claim the special depreciation allowance). Turbo tax ez form For trucks and vans, the first-year limit remains at $11,360 ($3,360 if you elect not to claim the special depreciation allowance). Turbo tax ez form See Depreciation Limits , later in this chapter. Turbo tax ez form Qualified car. Turbo tax ez form   To be a qualified car (including trucks and vans), the car must meet all of the following tests. Turbo tax ez form You purchased the car new on or after January 1, 2008, but only if no binding written contract to acquire the car existed before January 1, 2008, You placed the car in service in your trade or business before January 1, 2014, You used the car more than 50% in a qualified business use. Turbo tax ez form Election not to claim the special depreciation allowance. Turbo tax ez form   You can elect not to claim the special depreciation allowance for your car, truck, or van, that is qualified property. Turbo tax ez form If you make this election, it applies to all 5-year property placed in service during the year. Turbo tax ez form   To make the election, attach a statement to your timely filed return (including extensions) indicating the class of property (5-year for cars) for which you are making the election and that you are electing not to claim the special depreciation allowance for qualified property acquired on or after January 1, 2008. Turbo tax ez form    Unless you elect not to claim the special depreciation allowance, you must reduce the car's adjusted basis by the amount of the allowance, even if the allowance was not claimed. Turbo tax ez form Depreciation Deduction If you use actual car expenses to figure your deduction for a car you own and use in your business, you can claim a depreciation deduction. Turbo tax ez form This means you can deduct a certain amount each year as a recovery of your cost or other basis in your car. Turbo tax ez form You generally need to know the following things about the car you intend to depreciate. Turbo tax ez form Your basis in the car. Turbo tax ez form The date you place the car in service. Turbo tax ez form The method of depreciation and recovery period you will use. Turbo tax ez form Basis. Turbo tax ez form   Your basis in a car for figuring depreciation is generally its cost. Turbo tax ez form This includes any amount you borrow or pay in cash, other property, or services. Turbo tax ez form   Generally, you figure depreciation on your car, truck, or van using your unadjusted basis (see Unadjusted basis , later). Turbo tax ez form However, in some situations you will use your adjusted basis (your basis reduced by depreciation allowed or allowable in earlier years). Turbo tax ez form For one of these situations see Exception under Methods of depreciation, later. Turbo tax ez form   If you change the use of a car from personal to business, your basis for depreciation is the lesser of the fair market value or your adjusted basis in the car on the date of conversion. Turbo tax ez form Additional rules concerning basis are discussed later in this chapter under Unadjusted basis . Turbo tax ez form Placed in service. Turbo tax ez form   You generally place a car in service when it is available for use in your work or business, in an income-producing activity, or in a personal activity. Turbo tax ez form Depreciation begins when the car is placed in service for use in your work or business or for the production of income. Turbo tax ez form   For purposes of computing depreciation, if you first start using the car only for personal use and later convert it to business use, you place the car in service on the date of conversion. Turbo tax ez form Car placed in service and disposed of in the same year. Turbo tax ez form   If you place a car in service and dispose of it in the same tax year, you cannot claim any depreciation deduction for that car. Turbo tax ez form Methods of depreciation. Turbo tax ez form   Generally, you figure depreciation on cars using the Modified Accelerated Cost Recovery System (MACRS). Turbo tax ez form MACRS is discussed later in this chapter. Turbo tax ez form Exception. Turbo tax ez form   If you used the standard mileage rate in the first year of business use and change to the actual expenses method in a later year, you cannot depreciate your car under the MACRS rules. Turbo tax ez form You must use straight line depreciation over the estimated remaining useful life of the car. Turbo tax ez form   To figure depreciation under the straight line method, you must reduce your basis in the car (but not below zero) by a set rate per mile for all miles for which you used the standard mileage rate. Turbo tax ez form The rate per mile varies depending on the year(s) you used the standard mileage rate. Turbo tax ez form For the rate(s) to use, see Depreciation adjustment when you used the standard mileage rate under Disposition of a Car, later. Turbo tax ez form   This reduction of basis is in addition to those basis adjustments described later under Unadjusted basis . Turbo tax ez form You must use your adjusted basis in your car to figure your depreciation deduction. Turbo tax ez form For additional information on the straight line method of depreciation, see Publication 946. Turbo tax ez form More-than-50%-use test. Turbo tax ez form   Generally, you must use your car more than 50% for qualified business use (defined next) during the year to use MACRS. Turbo tax ez form You must meet this more-than-50%-use test each year of the recovery period (6 years under MACRS) for your car. Turbo tax ez form   If your business use is 50% or less, you must use the straight line method to depreciate your car. Turbo tax ez form This is explained later under Car Used 50% or Less for Business . Turbo tax ez form Qualified business use. Turbo tax ez form   A qualified business use is any use in your trade or business. Turbo tax ez form It does not include use for the production of income (investment use). Turbo tax ez form However, you do combine your business and investment use to compute your depreciation deduction for the tax year. Turbo tax ez form Use of your car by another person. Turbo tax ez form   Do not treat any use of your car by another person as use in your trade or business unless that use meets one of the following conditions. Turbo tax ez form It is directly connected with your business. Turbo tax ez form It is properly reported by you as income to the other person (and, if you have to, you withhold tax on the income). Turbo tax ez form It results in a payment of fair market rent. Turbo tax ez form This includes any payment to you for the use of your car. Turbo tax ez form Business use changes. Turbo tax ez form   If you used your car more than 50% in qualified business use in the year you placed it in service, but 50% or less in a later year (including the year of disposition), you have to change to the straight line method of depreciation. Turbo tax ez form See Qualified business use 50% or less in a later year under Car Used 50% or Less for Business, later. Turbo tax ez form    Property does not cease to be used more than 50% in qualified business use by reason of a transfer at death. Turbo tax ez form Use for more than one purpose. Turbo tax ez form   If you use your car for more than one purpose during the tax year, you must allocate the use to the various purposes. Turbo tax ez form You do this on the basis of mileage. Turbo tax ez form Figure the percentage of qualified business use by dividing the number of miles you drive your car for business purposes during the year by the total number of miles you drive the car during the year for any purpose. Turbo tax ez form Change from personal to business use. Turbo tax ez form   If you change the use of a car from 100% personal use to business use during the tax year, you may not have mileage records for the time before the change to business use. Turbo tax ez form In this case, you figure the percentage of business use for the year as follows. Turbo tax ez form Determine the percentage of business use for the period following the change. Turbo tax ez form Do this by dividing business miles by total miles driven during that period. Turbo tax ez form Multiply the percentage in (1) by a fraction. Turbo tax ez form The numerator (top number) is the number of months the car is used for business and the denominator (bottom number) is 12. Turbo tax ez form Example. Turbo tax ez form You use a car only for personal purposes during the first 6 months of the year. Turbo tax ez form During the last 6 months of the year, you drive the car a total of 15,000 miles of which 12,000 miles are for business. Turbo tax ez form This gives you a business use percentage of 80% (12,000 ÷ 15,000) for that period. Turbo tax ez form Your business use for the year is 40% (80% × 6/12). Turbo tax ez form Limits. Turbo tax ez form   The amount you can claim for section 179, special depreciation allowance, and depreciation deductions may be limited. Turbo tax ez form The maximum amount you can claim depends on the year in which you placed your car in service. Turbo tax ez form You have to reduce the maximum amount if you did not use the car exclusively for business. Turbo tax ez form See Depreciation Limits , later. Turbo tax ez form Unadjusted basis. Turbo tax ez form   You use your unadjusted basis (often referred to as your basis or your basis for depreciation) to figure your depreciation using the MACRS depreciation chart, explained later under Modified Accelerated Cost Recovery System (MACRS) . Turbo tax ez form Your unadjusted basis for figuring depreciation is your original basis increased or decreased by certain amounts. Turbo tax ez form   To figure your unadjusted basis, begin with your car's original basis, which generally is its cost. Turbo tax ez form Cost includes sales taxes (see Sales taxes , earlier), destination charges, and dealer preparation. Turbo tax ez form Increase your basis by any substantial improvements you make to your car, such as adding air conditioning or a new engine. Turbo tax ez form Decrease your basis by any section 179 deduction, special depreciation allowance, gas guzzler tax, clean-fuel vehicle deduction (for vehicles placed in service before Jan. Turbo tax ez form 1, 2006), and alternative motor vehicle credit. Turbo tax ez form   See Form 8910 for information on the alternative motor vehicle credit. Turbo tax ez form If your business use later falls to 50% or less, you may have to recapture (include in your income) any excess depreciation. Turbo tax ez form See Car Used 50% or Less for Business, later, for more information. Turbo tax ez form If you acquired the car by gift or inheritance, see Publication 551, Basis of Assets, for information on your basis in the car. Turbo tax ez form Improvements. Turbo tax ez form   A major improvement to a car is treated as a new item of 5-year recovery property. Turbo tax ez form It is treated as placed in service in the year the improvement is made. Turbo tax ez form It does not matter how old the car is when the improvement is added. Turbo tax ez form Follow the same steps for depreciating the improvement as you would for depreciating the original cost of the car. Turbo tax ez form However, you must treat the improvement and the car as a whole when applying the limits on the depreciation deductions. Turbo tax ez form Your car's depreciation deduction for the year (plus any section 179 deduction, special depreciation allowance, and depreciation on any improvements) cannot be more than the depreciation limit that applies for that year. Turbo tax ez form See Depreciation Limits , later. Turbo tax ez form Car trade-in. Turbo tax ez form   If you traded one car (the “old car”) for another car (the “new car”) in 2013, there are two ways you can treat the transaction. Turbo tax ez form You can elect to treat the transaction as a tax-free disposition of the old car and the purchase of the new car. Turbo tax ez form If you make this election, you treat the old car as disposed of at the time of the trade-in. Turbo tax ez form The depreciable basis of the new car is the adjusted basis of the old car (figured as if 100% of the car's use had been for business purposes) plus any additional amount you paid for the new car. Turbo tax ez form You then figure your depreciation deduction for the new car beginning with the date you placed it in service. Turbo tax ez form You make this election by completing Form 2106, Part II, Section D. Turbo tax ez form This method is explained later, beginning at Effect of trade-in on basis . Turbo tax ez form If you do not make the election described in (1), you must figure depreciation separately for the remaining basis of the old car and for any additional amount you paid for the new car. Turbo tax ez form You must apply two depreciation limits (see Depreciation Limits , later). Turbo tax ez form The limit that applies to the remaining basis of the old car generally is the amount that would have been allowed had you not traded in the old car. Turbo tax ez form The limit that applies to the additional amount you paid for the new car generally is the limit that applies for the tax year, reduced by the depreciation allowance for the remaining basis of the old car. Turbo tax ez form You must use Form 4562 to compute your depreciation deduction. Turbo tax ez form You cannot use Form 2106, Part II, Section D. Turbo tax ez form This method is explained in Publication 946. Turbo tax ez form   If you elect to use the method described in (1), you must do so on a timely filed tax return (including extensions). Turbo tax ez form Otherwise, you must use the method described in (2). Turbo tax ez form Effect of trade-in on basis. Turbo tax ez form   The discussion that follows applies to trade-ins of cars in 2013, where the election was made to treat the transaction as a tax-free disposition of the old car and the purchase of the new car. Turbo tax ez form For information on how to figure depreciation for cars involved in a like-kind exchange (trade-in) in 2013, for which the election was not made, see Publication 946 and Regulations section 1. Turbo tax ez form 168(i)-6(d)(3). Turbo tax ez form Traded car used only for business. Turbo tax ez form   If you trade in a car you used only in your business for another car that will be used only in your business, your original basis in the new car is your adjusted basis in the old car, plus any additional amount you pay for the new car. Turbo tax ez form Example. Turbo tax ez form Paul trades in a car that has an adjusted basis of $5,000 for a new car. Turbo tax ez form In addition, he pays cash of $20,000 for the new car. Turbo tax ez form His original basis of the new car is $25,000 (his $5,000 adjusted basis in the old car plus the $20,000 cash paid). Turbo tax ez form Paul's unadjusted basis is $25,000 unless he claims the section 179 deduction, special depreciation allowance, or has other increases or decreases to his original basis, discussed under Unadjusted basis , earlier. Turbo tax ez form Traded car used partly in business. Turbo tax ez form   If you trade in a car you used partly in your business for a new car you will use in your business, you must make a “trade-in” adjustment for the personal use of the old car. Turbo tax ez form This adjustment has the effect of reducing your basis in your old car, but not below zero, for purposes of figuring your depreciation deduction for the new car. Turbo tax ez form (This adjustment is not used, however, when you determine the gain or loss on the later disposition of the new car. Turbo tax ez form See Publication 544, Sales and Other Dispositions of Assets, for information on how to report the disposition of your car. Turbo tax ez form )   To figure the unadjusted basis of your new car for depreciation, first add to your adjusted basis in the old car any additional amount you pay for the new car. Turbo tax ez form Then subtract from that total the excess, if any, of: The total of the amounts that would have been allowable as depreciation during the tax years before the trade if 100% of the use of the car had been business and investment use, over The total of the amounts actually allowed as depreciation during those years. Turbo tax ez form For information about figuring depreciation, see Modified Accelerated Cost Recovery System (MACRS) , which follows Example 2, later. Turbo tax ez form Modified Accelerated Cost Recovery System (MACRS). Turbo tax ez form   The Modified Accelerated Cost Recovery System (MACRS) is the name given to the tax rules for getting back (recovering) through depreciation deductions the cost of property used in a trade or business or to produce income. Turbo tax ez form   The maximum amount you can deduct is limited, depending on the year you placed your car in service. Turbo tax ez form See Depreciation Limits , later. Turbo tax ez form Recovery period. Turbo tax ez form   Under MACRS, cars are classified as 5-year property. Turbo tax ez form You actually depreciate the cost of a car, truck, or van over a period of 6 calendar years. Turbo tax ez form This is because your car is generally treated as placed in service in the middle of the year, and you claim depreciation for one-half of both the first year and the sixth year. Turbo tax ez form Depreciation deduction for certain Indian reservation property. Turbo tax ez form   Shorter recovery periods are provided under MACRS for qualified Indian reservation property placed in service on Indian reservations after 1993 and before 2014. Turbo tax ez form The recovery that applies for a business-use car is 3 years instead of 5 years. Turbo tax ez form However, the depreciation limits, discussed later, will still apply. Turbo tax ez form   For more information on the qualifications for this shorter recovery period and the percentages to use in figuring the depreciation deduction, see chapter 4 of Publication 946. Turbo tax ez form Depreciation methods. Turbo tax ez form   You can use one of the following methods to depreciate your car. Turbo tax ez form The 200% declining balance method (200% DB) over a 5-year recovery period that switches to the straight line method when that method provides an equal or greater deduction. Turbo tax ez form The 150% declining balance method (150% DB) over a 5-year recovery period that switches to the straight line method when that method provides an equal or greater deduction. Turbo tax ez form The straight line method (SL) over a 5-year recovery period. Turbo tax ez form    If you use Table 4-1 (discussed later under MACRS depreciation chart) to determine your depreciation rate for 2013, you do not need to determine in what year using the straight line method provides an equal or greater deduction. Turbo tax ez form This is because the chart has the switch to the straight line method built into its rates. Turbo tax ez form   Before choosing a method, you may wish to consider the following facts. Turbo tax ez form Using the straight line method provides equal yearly deductions throughout the recovery period. Turbo tax ez form Using the declining balance methods provides greater deductions during the earlier recovery years with the deductions generally getting smaller each year. Turbo tax ez form MACRS depreciation chart. Turbo tax ez form   A 2013 MACRS Depreciation Chart and instructions are included in this chapter as Table 4-1 . Turbo tax ez form Using this table will make it easy for you to figure the 2013 depreciation deduction for your car. Turbo tax ez form A similar chart appears in the Instructions for Form 2106. Turbo tax ez form    You may have to use the tables in Publication 946 instead of using this MACRS Depreciation Chart. Turbo tax ez form   You must use the Depreciation Tables in Publication 946 rather than the 2013 MACRS Depreciation Chart in this publication if any one of the following four conditions applies to you. Turbo tax ez form You file your return on a fiscal year basis. Turbo tax ez form You file your return for a short tax year (less than 12 months). Turbo tax ez form During the year, all of the following conditions apply. Turbo tax ez form You placed some property in service from January through September. Turbo tax ez form You placed some property in service from October through December. Turbo tax ez form Your basis in the property you placed in service from October through December (excluding nonresidential real property, residential rental property, and property placed in service and disposed of in the same year) was more than 40% of your total bases in all property you placed in service during the year. Turbo tax ez form   You placed qualified property in service on an Indian reservation. Turbo tax ez form Depreciation in future years. Turbo tax ez form   If you use the percentages from the chart, you generally must continue to use them for the entire recovery period of your car. Turbo tax ez form However, you cannot continue to use the chart if your basis in your car is adjusted because of a casualty. Turbo tax ez form In that case, for the year of the adjustment and the remaining recovery period, figure the depreciation without the chart using your adjusted basis in the car at the end of the year of the adjustment and over the remaining recovery period. Turbo tax ez form See Figuring the Deduction Without Using the Tables in chapter 4 of Publication 946. Turbo tax ez form    In future years, do not use the chart in this edition of the publication. Turbo tax ez form Instead, use the chart in the publication or the form instructions for those future years. Turbo tax ez form Disposition of car during recovery period. Turbo tax ez form   If you dispose of the car before the end of the recovery period, you are generally allowed a half year of depreciation in the year of disposition unless you purchased the car during the last quarter of a year. Turbo tax ez form See Depreciation deduction for the year of disposition under Disposition of a Car, later, for information on how to figure the depreciation allowed in the year of disposition. Turbo tax ez form How to use the 2013 chart. Turbo tax ez form   To figure your depreciation deduction for 2013, find the percentage in the column of Table 4-1 based on the date that you first placed the car in service and the depreciation method that you are using. Turbo tax ez form Multiply the unadjusted basis of your car (defined earlier) by that percentage to determine the amount of your depreciation deduction. Turbo tax ez form If you prefer to figure your depreciation deduction without the help of the chart, see Publication 946. Turbo tax ez form    Your deduction cannot be more than the maximum depreciation limit for cars. Turbo tax ez form See Depreciation Limits, later. Turbo tax ez form Example. Turbo tax ez form Phil bought a used truck in February 2012 to use exclusively in his landscape business. Turbo tax ez form He paid $9,200 for the truck with no trade-in. Turbo tax ez form Phil did not claim any section 179 deduction, the truck did not qualify for the special depreciation allowance, and he chose to use the 200% DB method to get the largest depreciation deduction in the early years. Turbo tax ez form Phil used the MACRS depreciation chart in 2012 to find his percentage. Turbo tax ez form The unadjusted basis of his truck equals its cost because Phil used it exclusively for business. Turbo tax ez form He multiplied the unadjusted basis of his truck, $9,200, by the percentage that applied, 20%, to figure his 2012 depreciation deduction of $1,840. Turbo tax ez form In 2013, Phil used the truck for personal purposes when he repaired his father's cabin. Turbo tax ez form His records show that the business use of his truck was 90% in 2013. Turbo tax ez form Phil used Table 4-1 to find his percentage. Turbo tax ez form Reading down the first column for the date placed in service and across to the 200% DB column, he locates his percentage, 32%. Turbo tax ez form He multiplies the unadjusted basis of his truck, $8,280 ($9,200 cost × 90% business use), by 32% to figure his 2013 depreciation deduction of $2,650. Turbo tax ez form Depreciation Limits There are limits on the amount you can deduct for depreciation of your car, truck, or van. Turbo tax ez form The section 179 deduction and special depreciation allowance are treated as depreciation for purposes of the limits. Turbo tax ez form The maximum amount you can deduct each year depends on the year you place the car in service. Turbo tax ez form These limits are shown in the following tables. Turbo tax ez form   Maximum Depreciation Deduction for Cars Date       4th & Placed 1st 2nd 3rd Later In Service Year Year Year Years 2012–2013 $11,1601 $5,100 $3,050 $1,875 2010–2011 11,0602 4,900 2,950 1,775 2008–2009 10,9603 4,800 2,850 1,775 2007 3,060 4,900 2,850 1,775 2006 2,960 4,800 2,850 1,775 2005 2,960 4,700 2,850 1,675 2004 10,6103 4,800 2,850 1,675 5/06/2003– 12/31/2003 10,7104 4,900 2,950 1,775 1/01/2003– 5/05/2003 7,6605 4,900 2,950 1,775 2001–2002 7,6605 4,900 2,950 1,775 2000 3,060 4,900 2,950 1,775 1$3,160 if the car is not qualified property or if you elect not to claim the special depreciation allowance. Turbo tax ez form 2$3,060 if the car is not qualified property or if you elect not to claim the special depreciation allowance. Turbo tax ez form 3$2,960 if the car is not qualified property or if you elect not to claim the special depreciation allowance. Turbo tax ez form 4$7,660 if you acquired the car before 5/6/2003. Turbo tax ez form $3,060 if the car is not qualified property or if you elect not to claim any special depreciation allowance. Turbo tax ez form 5$3,060 if you acquired the car before 9/11/2001, the car is not qualified property, or you elect not to claim the special depreciation allowance. Turbo tax ez form Trucks and vans. Turbo tax ez form   For 2013, the maximum depreciation deductions for trucks and vans are generally higher than those for cars. Turbo tax ez form A truck or van is a passenger automobile that is classified by the manufacturer as a truck or van and rated at 6,000 pounds gross vehicle weight or less. Turbo tax ez form For trucks and vans placed in service before 2003, use the Maximum Depreciation Deduction for Cars table. Turbo tax ez form Maximum Depreciation Deduction for Trucks and Vans Date       4th & Placed 1st 2nd 3rd Later In Service Year Year Year Years 2013 $11,3601 $5,400 $3,250 $1,975 2012 $11,3601 $5,300 $3,150 $1,875 2011 11,2601 5,200 3,150 1,875 2010 11,1601 5,100 3,050 1,875 2009 11,0601 4,900 2,950 1,775 2008 11,1601 5,100 3,050 1,875 2007 3,260 5,200 3,050 1,875 2005–2006 3,260 5,200 3,150 1,875 2004 10,9101 5,300 3,150 1,875 2003 11,0101,2 5,400 3,250 1,975 1If the special depreciation allowance does not apply or you make the election not to claim the special depreciation allowance, the first-year limit is $3,360 for 2012 and 2013, $3,260 for 2011, $3,160 for 2010, $3,060 for 2009, $3,160 for 2008, $3,260 for 2004, and $3,360 for 2003. Turbo tax ez form 2If the truck or van was acquired before 5/06/2003, the truck or van is qualified property, and you claim the special depreciation allowance for the truck or van, the maximum deduction is $7,960. Turbo tax ez form Car used less than full year. Turbo tax ez form   The depreciation limits are not reduced if you use a car for less than a full year. Turbo tax ez form This means that you do not reduce the limit when you either place a car in service or dispose of a car during the year. Turbo tax ez form However, the depreciation limits are reduced if you do not use the car exclusively for business and investment purposes. Turbo tax ez form See Reduction for personal use , next. Turbo tax ez form Reduction for personal use. Turbo tax ez form   The depreciation limits are reduced based on your percentage of personal use. Turbo tax ez form If you use a car less than 100% in your business or work, you must determine the depreciation deduction limit by multiplying the limit amount by the percentage of business and investment use during the tax year. Turbo tax ez form Section 179 deduction. Turbo tax ez form   The section 179 deduction is treated as a depreciation deduction. Turbo tax ez form If you place a car that is not a truck or van in service in 2013, use it only for business, and choose the section 179 deduction, the special depreciation allowance, and the depreciation deduction for that car for 2013 is limited to $11,160. Turbo tax ez form Example. Turbo tax ez form On September 4, 2013, Jack bought a used car for $10,000 and placed it in service. Turbo tax ez form He used it 80% for his business, and he chooses to take a section 179 deduction for the car. Turbo tax ez form The car is not qualified property for purposes of the special depreciation allowance. Turbo tax ez form Before applying the limit, Jack figures his maximum section 179 deduction to be $8,000. Turbo tax ez form This is the cost of his qualifying property (up to the maximum $500,000 amount) multiplied by his business use ($10,000 × 80%). Turbo tax ez form Jack then figures that his section 179 deduction for 2013 is limited to $2,528 (80% of $3,160). Turbo tax ez form He then figures his unadjusted basis of $5,472 (($10,000 × 80%) − $2,528) for determining his depreciation deduction. Turbo tax ez form Jack has reached his maximum depreciation deduction for 2013. Turbo tax ez form For 2014, Jack will use his unadjusted basis of $5,472 to figure his depreciation deduction. Turbo tax ez form Deductions in years after the recovery period. Turbo tax ez form   If the depreciation deductions for your car are reduced under the passenger automobile limits (discussed earlier), you will have unrecovered basis in your car at the end of the recovery period. Turbo tax ez form If you continue to use your car for business, you can deduct that unrecovered basis (subject to depreciation limits) after the recovery period ends. Turbo tax ez form Unrecovered basis. Turbo tax ez form   This is your cost or other basis in the car reduced by any clean-fuel vehicle deduction (for vehicles placed in service before January 1, 2006), alternative motor vehicle credit, electric vehicle credit, gas guzzler tax, and depreciation (including any special depreciation allowance , discussed earlier, unless you elect not to claim it) and section 179 deductions that would have been allowable if you had used the car 100% for business and investment use. Turbo tax ez form The recovery period. Turbo tax ez form   For 5-year property, your recovery period is 6 calendar years. Turbo tax ez form A part year's depreciation is allowed in the first calendar year, a full year's depreciation is allowed in each of the next 4 calendar years, and a part year's depreciation is allowed in the 6th calendar year. Turbo tax ez form   Under MACRS, your recovery period is the same whether you use declining balance or straight line depreciation. Turbo tax ez form You determine your unrecovered basis in the 7th year after you placed the car in service. Turbo tax ez form How to treat unrecovered basis. Turbo tax ez form   If you continue to use your car for business after the recovery period, you can claim a depreciation deduction in each succeeding tax year until you recover your basis in the car. Turbo tax ez form The maximum amount you can deduct each year is determined by the date you placed the car in service and your business-use percentage. Turbo tax ez form For example, no deduction is allowed for a year you use your car 100% for personal purposes. Turbo tax ez form Example. Turbo tax ez form In April 2007, Bob bought and placed in service a car he used exclusively in his business. Turbo tax ez form The car cost $31,500. Turbo tax ez form Bob did not claim a section 179 deduction or the special depreciation allowance for the car. Turbo tax ez form He continued to use the car 100% in his business throughout the recovery period (2007 through 2012). Turbo tax ez form For those years, Bob used the MACRS Depreciation Chart (200% declining balance method) and the Maximum Depreciation Deduction for Cars table, earlier, for the applicable tax year to compute his depreciation deductions during the recovery period. Turbo tax ez form Bob's depreciation deductions were subject to the depreciation limits so he will have unrecovered basis at the end of the recovery period as shown in the following table. Turbo tax ez form      MACRS     Deprec. Turbo tax ez form Year % Amount Limit Allowed 2007 20. Turbo tax ez form 00 $6,300 $3,060 $ 3,060 2008 32. Turbo tax ez form 00 10,080 4,900 4,900 2009 19. Turbo tax ez form 20 6,048 2,850 2,850 2010 11. Turbo tax ez form 52 3,629 1,775 1,775 2011 11. Turbo tax ez form 52 3,629 1,775 1,775 2012 5. Turbo tax ez form 76 1,814 1,775 1,775 Total $31,500   16,135 For the correct limit, see Maximum Depreciation Deduction for Cars under “Depreciation Limits,” earlier, for the maximum amount of depreciation allowed each year. Turbo tax ez form   At the end of 2012, Bob had an unrecovered basis in the car of $15,365 ($31,500 – $16,135). Turbo tax ez form If Bob continued to use the car 100% for business in 2013 and later years, he can claim a depreciation deduction equal to the lesser of $1,775 or his remaining unrecovered basis. Turbo tax ez form   If Bob's business use of the car was less than 100% during any year, his depreciation deduction would be less than the maximum amount allowable for that year. Turbo tax ez form However, in determining his unrecovered basis in the car, he would still reduce his original basis by the maximum amount allowable as if the business use had been 100%. Turbo tax ez form For example, if Bob had used his car 60% for business instead of 100%, his allowable depreciation deductions would have been $9,681 ($16,135 × 60%), but he still would have to reduce his basis by $16,135 to determine his unrecovered basis. Turbo tax ez form Table 4-1. Turbo tax ez form 2013 MACRS Depreciation Chart (Use to Figure Depreciation for 2013. Turbo tax ez form ) If you claim actual expenses for your car, use the chart below to find the depreciation method and percentage to use for your 2013 return for cars placed in service in 2013. Turbo tax ez form   First, using the left column, find the date you first placed the car in service in 2013. Turbo tax ez form Then select the depreciation method and percentage from column (a), (b), or (c) following the rules explained in this chapter. Turbo tax ez form For cars placed in service before 2013, you must use the same method you used on last year's return unless a decline in your business use requires you to change to the straight line method. Turbo tax ez form Refer back to the MACRS Depreciation Chart for the year you placed the car in service. Turbo tax ez form (See Car Used 50% or Less for Business . Turbo tax ez form )  Multiply the unadjusted basis of your car by your business use percentage. Turbo tax ez form Multiply the result by the percentage you found in the chart to find the amount of your depreciation deduction for 2013. Turbo tax ez form (Also see Depreciation Limits . Turbo tax ez form )   If you placed your car in service after September of any year and you placed other business property in service during the same year, you may have to use the Jan. Turbo tax ez form 1—Sept. Turbo tax ez form 30 percentage instead of the Oct. Turbo tax ez form 1—Dec. Turbo tax ez form 31 percentage for your car. Turbo tax ez form               To find out if this applies to you, determine: 1) the basis of all business property you placed in service after September of that year and 2) the basis of all business property you placed in service during that entire year. Turbo tax ez form If the basis of the property placed in service after September is not more than 40% of the basis of all property (certain property is excluded) placed in service for the entire year, use the percentage for Jan. Turbo tax ez form 1—Sept. Turbo tax ez form 30 for figuring depreciation for your car. Turbo tax ez form See Which Convention Applies? in chapter 4 of Publication 946 for more details. Turbo tax ez form               Example. Turbo tax ez form You buy machinery (basis of $32,000) in May 2013 and a new van (basis of $20,000) in October 2013, both used 100% in your business. Turbo tax ez form You