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1040 Tax Forms For 2011

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1040 Tax Forms For 2011

1040 tax forms for 2011 5. 1040 tax forms for 2011   Additional Rules for Listed Property Table of Contents Introduction Useful Items - You may want to see: What Is Listed Property?Passenger Automobiles Other Property Used for Transportation Computers and Related Peripheral Equipment Can Employees Claim a Deduction? What Is the Business-Use Requirement?How To Allocate Use Qualified Business Use Recapture of Excess Depreciation Lessee's Inclusion Amount Do the Passenger Automobile Limits Apply?Maximum Depreciation Deduction Deductions After the Recovery Period Deductions For Passenger Automobiles Acquired in a Trade-in What Records Must Be Kept?Adequate Records How Is Listed Property Information Reported? Introduction This chapter discusses the deduction limits and other special rules that apply to certain listed property. 1040 tax forms for 2011 Listed property includes cars and other property used for transportation, property used for entertainment, and certain computers. 1040 tax forms for 2011 Deductions for listed property (other than certain leased property) are subject to the following special rules and limits. 1040 tax forms for 2011 Deduction for employees. 1040 tax forms for 2011 If your use of the property is not for your employer's convenience or is not required as a condition of your employment, you cannot deduct depreciation or rent expenses for your use of the property as an employee. 1040 tax forms for 2011 Business-use requirement. 1040 tax forms for 2011 If the property is not used predominantly (more than 50%) for qualified business use, you cannot claim the section 179 deduction or a special depreciation allowance. 1040 tax forms for 2011 In addition, you must figure any depreciation deduction under the Modified Accelerated Cost Recovery System (MACRS) using the straight line method over the ADS recovery period. 1040 tax forms for 2011 You may also have to recapture (include in income) any excess depreciation claimed in previous years. 1040 tax forms for 2011 A similar inclusion amount applies to certain leased property. 1040 tax forms for 2011 Passenger automobile limits and rules. 1040 tax forms for 2011 Annual limits apply to depreciation deductions (including section 179 deductions and any special depreciation allowance) for certain passenger automobiles. 1040 tax forms for 2011 You can continue to deduct depreciation for the unrecovered basis resulting from these limits after the end of the recovery period. 1040 tax forms for 2011 This chapter defines listed property and explains the special rules and depreciation deduction limits that apply, including the special inclusion amount rule for leased property. 1040 tax forms for 2011 It also discusses the recordkeeping rules for listed property and explains how to report information about the property on your tax return. 1040 tax forms for 2011 Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 535 Business Expenses 587 Business Use of Your Home (Including Use by Daycare Providers) Form (and Instructions) 2106 Employee Business Expenses 2106-EZ Unreimbursed Employee Business Expenses 4562 Depreciation and Amortization 4797 Sales of Business Property See chapter 6 for information about getting publications and forms. 1040 tax forms for 2011 What Is Listed Property? Listed property is any of the following. 1040 tax forms for 2011 Passenger automobiles (as defined later). 1040 tax forms for 2011 Any other property used for transportation, unless it is an excepted vehicle. 1040 tax forms for 2011 Property generally used for entertainment, recreation, or amusement (including photographic, phonographic, communication, and video-recording equipment). 1040 tax forms for 2011 Computers and related peripheral equipment, unless used only at a regular business establishment and owned or leased by the person operating the establishment. 1040 tax forms for 2011 A regular business establishment includes a portion of a dwelling unit that is used both regularly and exclusively for business as discussed in Publication 587. 1040 tax forms for 2011 Improvements to listed property. 1040 tax forms for 2011   An improvement made to listed property that must be capitalized is treated as a new item of depreciable property. 1040 tax forms for 2011 The recovery period and method of depreciation that apply to the listed property as a whole also apply to the improvement. 1040 tax forms for 2011 For example, if you must depreciate the listed property using the straight line method, you also must depreciate the improvement using the straight line method. 1040 tax forms for 2011 Passenger Automobiles A passenger automobile is any four-wheeled vehicle made primarily for use on public streets, roads, and highways and rated at 6,000 pounds or less of unloaded gross vehicle weight (6,000 pounds or less of gross vehicle weight for trucks and vans). 1040 tax forms for 2011 It includes any part, component, or other item physically attached to the automobile at the time of purchase or usually included in the purchase price of an automobile. 1040 tax forms for 2011 The following vehicles are not considered passenger automobiles for these purposes. 1040 tax forms for 2011 An ambulance, hearse, or combination ambulance-hearse used directly in a trade or business. 1040 tax forms for 2011 A vehicle used directly in the trade or business of transporting persons or property for pay or hire. 1040 tax forms for 2011 A truck or van that is a qualified nonpersonal use vehicle. 1040 tax forms for 2011 Qualified nonpersonal use vehicles. 1040 tax forms for 2011   Qualified nonpersonal use vehicles are vehicles that by their nature are not likely to be used more than a minimal amount for personal purposes. 1040 tax forms for 2011 They include the trucks and vans listed as excepted vehicles under Other Property Used for Transportation , next. 1040 tax forms for 2011 They also include trucks and vans that have been specially modified so that they are not likely to be used more than a minimal amount for personal purposes, such as by installation of permanent shelving and painting the vehicle to display advertising or the company's name. 1040 tax forms for 2011 For a detailed discussion of passenger automobiles, including leased passenger automobiles, see  Publication 463. 1040 tax forms for 2011 Other Property Used for Transportation Although vehicles used to transport persons or property for pay or hire and vehicles rated at more than the 6,000-pound threshold are not passenger automobiles, they are still “other property used for transportation” and are subject to the special rules for listed property. 1040 tax forms for 2011 Other property used for transportation includes trucks, buses, boats, airplanes, motorcycles, and any other vehicles used to transport persons or goods. 1040 tax forms for 2011 Excepted vehicles. 1040 tax forms for 2011   Other property used for transportation does not include the following qualified nonpersonal use vehicles (defined earlier under Passenger Automobiles ). 1040 tax forms for 2011 Clearly marked police and fire vehicles. 1040 tax forms for 2011 Unmarked vehicles used by law enforcement officers if the use is officially authorized. 1040 tax forms for 2011 Ambulances used as such and hearses used as such. 1040 tax forms for 2011 Any vehicle with a loaded gross vehicle weight of over 14,000 pounds that is designed to carry cargo. 1040 tax forms for 2011 Bucket trucks (cherry pickers), cement mixers, dump trucks (including garbage trucks), flatbed trucks, and refrigerated trucks. 1040 tax forms for 2011 Combines, cranes and derricks, and forklifts. 1040 tax forms for 2011 Delivery trucks with seating only for the driver, or only for the driver plus a folding jump seat. 1040 tax forms for 2011 Qualified moving vans. 1040 tax forms for 2011 Qualified specialized utility repair trucks. 1040 tax forms for 2011 School buses used in transporting students and employees of schools. 1040 tax forms for 2011 Other buses with a capacity of at least 20 passengers that are used as passenger buses. 1040 tax forms for 2011 Tractors and other special purpose farm vehicles. 1040 tax forms for 2011 Clearly marked police and fire vehicle. 1040 tax forms for 2011   A clearly marked police or fire vehicle is a vehicle that meets all the following requirements. 1040 tax forms for 2011 It is owned or leased by a governmental unit or an agency or instrumentality of a governmental unit. 1040 tax forms for 2011 It is required to be used for commuting by a police officer or fire fighter who, when not on a regular shift, is on call at all times. 1040 tax forms for 2011 It is prohibited from being used for personal use (other than commuting) outside the limit of the police officer's arrest powers or the fire fighter's obligation to respond to an emergency. 1040 tax forms for 2011 It is clearly marked with painted insignia or words that make it readily apparent that it is a police or fire vehicle. 1040 tax forms for 2011 A marking on a license plate is not a clear marking for these purposes. 1040 tax forms for 2011 Qualified moving van. 1040 tax forms for 2011   A qualified moving van is any truck or van used by a professional moving company for moving household or business goods if the following requirements are met. 1040 tax forms for 2011 No personal use of the van is allowed other than for travel to and from a move site or for minor personal use, such as a stop for lunch on the way from one move site to another. 1040 tax forms for 2011 Personal use for travel to and from a move site happens no more than five times a month on average. 1040 tax forms for 2011 Personal use is limited to situations in which it is more convenient to the employer, because of the location of the employee's residence in relation to the location of the move site, for the van not to be returned to the employer's business location. 1040 tax forms for 2011 Qualified specialized utility repair truck. 1040 tax forms for 2011   A truck is a qualified specialized utility repair truck if it is not a van or pickup truck and all the following apply. 1040 tax forms for 2011 The truck was specifically designed for and is used to carry heavy tools, testing equipment, or parts. 1040 tax forms for 2011 Shelves, racks, or other permanent interior construction has been installed to carry and store the tools, equipment, or parts and would make it unlikely that the truck would be used, other than minimally, for personal purposes. 1040 tax forms for 2011 The employer requires the employee to drive the truck home in order to be able to respond in emergency situations for purposes of restoring or maintaining electricity, gas, telephone, water, sewer, or steam utility services. 1040 tax forms for 2011 Computers and Related Peripheral Equipment A computer is a programmable, electronically activated device capable of accepting information, applying prescribed processes to the information, and supplying the results of those processes with or without human intervention. 1040 tax forms for 2011 It consists of a central processing unit with extensive storage, logic, arithmetic, and control capabilities. 1040 tax forms for 2011 Related peripheral equipment is any auxiliary machine which is designed to be controlled by the central processing unit of a computer. 1040 tax forms for 2011 The following are neither computers nor related peripheral equipment. 1040 tax forms for 2011 Any equipment that is an integral part of other property that is not a computer. 1040 tax forms for 2011 Typewriters, calculators, adding and accounting machines, copiers, duplicating equipment, and similar equipment. 1040 tax forms for 2011 Equipment of a kind used primarily for the user's amusement or entertainment, such as video games. 1040 tax forms for 2011 Can Employees Claim a Deduction? If you are an employee, you can claim a depreciation deduction for the use of your listed property (whether owned or rented) in performing services as an employee only if your use is a business use. 1040 tax forms for 2011 The use of your property in performing services as an employee is a business use only if both the following requirements are met. 1040 tax forms for 2011 The use is for your employer's convenience. 1040 tax forms for 2011 The use is required as a condition of your employment. 1040 tax forms for 2011 If these requirements are not met, you cannot deduct depreciation (including the section 179 deduction) or rent expenses for your use of the property as an employee. 1040 tax forms for 2011 Employer's convenience. 1040 tax forms for 2011   Whether the use of listed property is for your employer's convenience must be determined from all the facts. 1040 tax forms for 2011 The use is for your employer's convenience if it is for a substantial business reason of the employer. 1040 tax forms for 2011 The use of listed property during your regular working hours to carry on your employer's business generally is for the employer's convenience. 1040 tax forms for 2011 Condition of employment. 1040 tax forms for 2011   Whether the use of listed property is a condition of your employment depends on all the facts and circumstances. 1040 tax forms for 2011 The use of property must be required for you to perform your duties properly. 1040 tax forms for 2011 Your employer does not have to require explicitly that you use the property. 1040 tax forms for 2011 However, a mere statement by the employer that the use of the property is a condition of your employment is not sufficient. 1040 tax forms for 2011 Example 1. 1040 tax forms for 2011 Virginia Sycamore is employed as a courier with We Deliver, which provides local courier services. 1040 tax forms for 2011 She owns and uses a motorcycle to deliver packages to downtown offices. 1040 tax forms for 2011 We Deliver explicitly requires all delivery persons to own a car or motorcycle for use in their employment. 1040 tax forms for 2011 Virginia's use of the motorcycle is for the convenience of We Deliver and is required as a condition of employment. 1040 tax forms for 2011 Example 2. 1040 tax forms for 2011 Bill Nelson is an inspector for Uplift, a construction company with many sites in the local area. 1040 tax forms for 2011 He must travel to these sites on a regular basis. 1040 tax forms for 2011 Uplift does not furnish an automobile or explicitly require him to use his own automobile. 1040 tax forms for 2011 However, it pays him for any costs he incurs in traveling to the various sites. 1040 tax forms for 2011 The use of his own automobile or a rental automobile is for the convenience of Uplift and is required as a condition of employment. 1040 tax forms for 2011 Example 3. 1040 tax forms for 2011 Assume the same facts as in Example 2 except that Uplift furnishes a car to Bill, who chooses to use his own car and receive payment for using it. 1040 tax forms for 2011 The use of his own car is neither for the convenience of Uplift nor required as a condition of employment. 1040 tax forms for 2011 Example 4. 1040 tax forms for 2011 Marilyn Lee is a pilot for Y Company, a small charter airline. 1040 tax forms for 2011 Y requires pilots to obtain 80 hours of flight time annually in addition to flight time spent with the airline. 1040 tax forms for 2011 Pilots usually can obtain these hours by flying with the Air Force Reserve or by flying part-time with another airline. 1040 tax forms for 2011 Marilyn owns her own airplane. 1040 tax forms for 2011 The use of her airplane to obtain the required flight hours is neither for the convenience of the employer nor required as a condition of employment. 1040 tax forms for 2011 Example 5. 1040 tax forms for 2011 David Rule is employed as an engineer with Zip, an engineering contracting firm. 1040 tax forms for 2011 He occasionally takes work home at night rather than work late in the office. 1040 tax forms for 2011 He owns and uses a home computer which is virtually identical to the office model. 1040 tax forms for 2011 His use of the computer is neither for the convenience of his employer nor required as a condition of employment. 1040 tax forms for 2011 What Is the Business-Use Requirement? You can claim the section 179 deduction and a special depreciation allowance for listed property and depreciate listed property using GDS and a declining balance method if the property meets the business-use requirement. 1040 tax forms for 2011 To meet this requirement, listed property must be used predominantly (more than 50% of its total use) for qualified business use. 1040 tax forms for 2011 If this requirement is not met, the following rules apply. 1040 tax forms for 2011 Property not used predominantly for qualified business use during the year it is placed in service does not qualify for the section 179 deduction. 1040 tax forms for 2011 Property not used predominantly for qualified business use during the year it is placed in service does not qualify for a special depreciation allowance. 1040 tax forms for 2011 Any depreciation deduction under MACRS for property not used predominantly for qualified business use during any year must be figured using the straight line method over the ADS recovery period. 1040 tax forms for 2011 This rule applies each year of the recovery period. 1040 tax forms for 2011 Excess depreciation on property previously used predominantly for qualified business use must be recaptured (included in income) in the first year in which it is no longer used predominantly for qualified business use. 1040 tax forms for 2011 A lessee must add an inclusion amount to income in the first year in which the leased property is not used predominantly for qualified business use. 1040 tax forms for 2011 Being required to use the straight line method for an item of listed property not used predominantly for qualified business use is not the same as electing the straight line method. 1040 tax forms for 2011 It does not mean that you have to use the straight line method for other property in the same class as the item of listed property. 1040 tax forms for 2011 Exception for leased property. 1040 tax forms for 2011   The business-use requirement generally does not apply to any listed property leased or held for leasing by anyone regularly engaged in the business of leasing listed property. 1040 tax forms for 2011   You are considered regularly engaged in the business of leasing listed property only if you enter into contracts for the leasing of listed property with some frequency over a continuous period of time. 1040 tax forms for 2011 This determination is made on the basis of the facts and circumstances in each case and takes into account the nature of your business in its entirety. 1040 tax forms for 2011 Occasional or incidental leasing activity is insufficient. 1040 tax forms for 2011 For example, if you lease only one passenger automobile during a tax year, you are not regularly engaged in the business of leasing automobiles. 1040 tax forms for 2011 An employer who allows an employee to use the employer's property for personal purposes and charges the employee for the use is not regularly engaged in the business of leasing the property used by the employee. 1040 tax forms for 2011 How To Allocate Use To determine whether the business-use requirement is met, you must allocate the use of any item of listed property used for more than one purpose during the year among its various uses. 1040 tax forms for 2011 For passenger automobiles and other means of transportation, allocate the property's use on the basis of mileage. 1040 tax forms for 2011 You determine the percentage of qualified business use by dividing the number of miles you drove the vehicle for business purposes during the year by the total number of miles you drove the vehicle for all purposes (including business miles) during the year. 1040 tax forms for 2011 For other listed property, allocate the property's use on the basis of the most appropriate unit of time the property is actually used (rather than merely being available for use). 1040 tax forms for 2011 For example, you can determine the percentage of business use of a computer by dividing the number of hours you used the computer for business purposes during the year by the total number of hours you used the computer for all purposes (including business use) during the year. 1040 tax forms for 2011 Entertainment use. 1040 tax forms for 2011   Treat the use of listed property for entertainment, recreation, or amusement purposes as a business use only to the extent you can deduct expenses (other than interest and property tax expenses) due to its use as an ordinary and necessary business expense. 1040 tax forms for 2011 Commuting use. 1040 tax forms for 2011   The use of an automobile for commuting is not business use, regardless of whether work is performed during the trip. 1040 tax forms for 2011 For example, a business telephone call made on a car telephone while commuting to work does not change the character of the trip from commuting to business. 1040 tax forms for 2011 This is also true for a business meeting held in a car while commuting to work. 1040 tax forms for 2011 Similarly, a business call made on an otherwise personal trip does not change the character of a trip from personal to business. 1040 tax forms for 2011 The fact that an automobile is used to display material that advertises the owner's or user's trade or business does not convert an otherwise personal use into business use. 1040 tax forms for 2011 Use of your automobile by another person. 1040 tax forms for 2011   If someone else uses your automobile, do not treat that use as business use unless one of the following conditions applies. 1040 tax forms for 2011 That use is directly connected with your business. 1040 tax forms for 2011 You properly report the value of the use as income to the other person and withhold tax on the income where required. 1040 tax forms for 2011 You are paid a fair market rent. 1040 tax forms for 2011 Treat any payment to you for the use of the automobile as a rent payment for purposes of item (3). 1040 tax forms for 2011 Employee deductions. 1040 tax forms for 2011   If you are an employee, do not treat your use of listed property as business use unless it is for your employer's convenience and is required as a condition of your employment. 1040 tax forms for 2011 See Can Employees Claim a Deduction , earlier. 1040 tax forms for 2011 Qualified Business Use Qualified business use of listed property is any use of the property in your trade or business. 1040 tax forms for 2011 However, it does not include the following uses. 1040 tax forms for 2011 The leasing of property to any 5% owner or related person (to the extent the property is used by a 5% owner or person related to the owner or lessee of the property). 1040 tax forms for 2011 The use of property as pay for the services of a 5% owner or related person. 1040 tax forms for 2011 The use of property as pay for services of any person (other than a 5% owner or related person), unless the value of the use is included in that person's gross income and income tax is withheld on that amount where required. 1040 tax forms for 2011 Property does not stop being used predominantly for qualified business use because of a transfer at death. 1040 tax forms for 2011 Exception for leasing or compensatory use of aircraft. 1040 tax forms for 2011   Treat the leasing of any aircraft by a 5% owner or related person, or the compensatory use of any aircraft, as a qualified business use if at least 25% of the total use of the aircraft during the year is for a qualified business use. 1040 tax forms for 2011 5% owner. 1040 tax forms for 2011   For a business entity that is not a corporation, a 5% owner is any person who owns more than 5% of the capital or profits interest in the business. 1040 tax forms for 2011   For a corporation, a 5% owner is any person who owns, or is considered to own, either of the following. 1040 tax forms for 2011 More than 5% of the outstanding stock of the corporation. 1040 tax forms for 2011 Stock possessing more than 5% of the total combined voting power of all stock in the corporation. 1040 tax forms for 2011 Related persons. 1040 tax forms for 2011   For a description of related persons, see Related persons in the discussion on property owned or used in 1986 under What Method Can You Use To Depreciate Your Property in chapter 1 . 1040 tax forms for 2011 For this purpose, however, treat as related persons only the relationships listed in items (1) through (10) of that discussion and substitute “50%” for “10%” each place it appears. 1040 tax forms for 2011 Examples. 1040 tax forms for 2011   The following examples illustrate whether the use of business property is qualified business use. 1040 tax forms for 2011 Example 1. 1040 tax forms for 2011 John Maple is the sole proprietor of a plumbing contracting business. 1040 tax forms for 2011 John employs his brother, Richard, in the business. 1040 tax forms for 2011 As part of Richard's pay, he is allowed to use one of the company automobiles for personal use. 1040 tax forms for 2011 The company includes the value of the personal use of the automobile in Richard's gross income and properly withholds tax on it. 1040 tax forms for 2011 The use of the automobile is pay for the performance of services by a related person, so it is not a qualified business use. 1040 tax forms for 2011 Example 2. 1040 tax forms for 2011 John, in Example 1, allows unrelated employees to use company automobiles for personal purposes. 1040 tax forms for 2011 He does not include the value of the personal use of the company automobiles as part of their compensation and he does not withhold tax on the value of the use of the automobiles. 1040 tax forms for 2011 This use of company automobiles by employees is not a qualified business use. 1040 tax forms for 2011 Example 3. 1040 tax forms for 2011 James Company Inc. 1040 tax forms for 2011 owns several automobiles that its employees use for business purposes. 1040 tax forms for 2011 The employees also are allowed to take the automobiles home at night. 1040 tax forms for 2011 The fair market value of each employee's use of an automobile for any personal purpose, such as commuting to and from work, is reported as income to the employee and James Company withholds tax on it. 1040 tax forms for 2011 This use of company automobiles by employees, even for personal purposes, is a qualified business use for the company. 1040 tax forms for 2011 Investment Use The use of property to produce income in a nonbusiness activity (investment use) is not a qualified business use. 1040 tax forms for 2011 However, you can treat the investment use as business use to figure the depreciation deduction for the property in a given year. 1040 tax forms for 2011 Example 1. 1040 tax forms for 2011 Sarah Bradley uses a home computer 50% of the time to manage her investments. 1040 tax forms for 2011 She also uses the computer 40% of the time in her part-time consumer research business. 1040 tax forms for 2011 Sarah's home computer is listed property because it is not used at a regular business establishment. 1040 tax forms for 2011 She does not use the computer predominantly for qualified business use. 1040 tax forms for 2011 Therefore, she cannot elect a section 179 deduction or claim a special depreciation allowance for the computer. 1040 tax forms for 2011 She must depreciate it using the straight line method over the ADS recovery period. 1040 tax forms for 2011 Her combined business/investment use for determining her depreciation deduction is 90%. 1040 tax forms for 2011 Example 2. 1040 tax forms for 2011 If Sarah uses her computer 30% of the time to manage her investments and 60% of the time in her consumer research business, it is used predominantly for qualified business use. 1040 tax forms for 2011 She can elect a section 179 deduction and, if she does not deduct all the computer's cost, she can claim a special depreciation allowance and depreciate the computer using the 200% declining balance method over the GDS recovery period. 1040 tax forms for 2011 Her combined business/investment use for determining her depreciation deduction is 90%. 1040 tax forms for 2011 Recapture of Excess Depreciation If you used listed property more than 50% in a qualified business use in the year you placed it in service, you must recapture (include in income) excess depreciation in the first year you use it 50% or less. 1040 tax forms for 2011 You also increase the adjusted basis of your property by the same amount. 1040 tax forms for 2011 Excess depreciation is: The depreciation allowable for the property (including any section 179 deduction and special depreciation allowance claimed) for years before the first year you do not use the property predominantly for qualified business use, minus The depreciation that would have been allowable for those years if you had not used the property predominantly for qualified business use in the year you placed it in service. 1040 tax forms for 2011 To determine the amount in (2) above, you must refigure the depreciation using the straight line method and the ADS recovery period. 1040 tax forms for 2011 Example. 1040 tax forms for 2011 In June 2009, Ellen Rye purchased and placed in service a pickup truck that cost $18,000. 1040 tax forms for 2011 She used it only for qualified business use for 2009 through 2012. 1040 tax forms for 2011 Ellen claimed a section 179 deduction of $10,000 based on the purchase of the truck. 1040 tax forms for 2011 She began depreciating it using the 200% DB method over a 5-year GDS recovery period. 1040 tax forms for 2011 The pickup truck's gross vehicle weight was over 6,000 pounds, so it was not subject to the passenger automobile limits discussed later under Do the Passenger Automobile Limits Apply. 1040 tax forms for 2011 During 2013, she used the truck 50% for business and 50% for personal purposes. 1040 tax forms for 2011 She includes $4,018 excess depreciation in her gross income for 2013. 1040 tax forms for 2011 The excess depreciation is determined as follows. 1040 tax forms for 2011 Total section 179 deduction ($10,000) and depreciation claimed ($6,618) for 2009 through 2012. 1040 tax forms for 2011 (Depreciation is from Table A-1. 1040 tax forms for 2011 ) $16,618 Minus: Depreciation allowable (Table A-8):     2009 – 10% of $18,000 $1,800   2010 – 20% of $18,000 3,600   2011 – 20% of $18,000 3,600   2012 – 20% of $18,000 3,600 12,600 Excess depreciation $4,018 If Ellen's use of the truck does not change to 50% for business and 50% for personal purposes until 2015, there will be no excess depreciation. 1040 tax forms for 2011 The total depreciation allowable using Table A-8 through 2015 will be $18,000, which equals the total of the section 179 deduction and depreciation she will have claimed. 1040 tax forms for 2011 Where to figure and report recapture. 1040 tax forms for 2011   Use Form 4797, Part IV, to figure the recapture amount. 1040 tax forms for 2011 Report the recapture amount as other income on the same form or schedule on which you took the depreciation deduction. 1040 tax forms for 2011 For example, report the recapture amount as other income on Schedule C (Form 1040) if you took the depreciation deduction on Schedule C. 1040 tax forms for 2011 If you took the depreciation deduction on Form 2106, report the recapture amount as other income on Form 1040, line 21. 1040 tax forms for 2011 Lessee's Inclusion Amount If you use leased listed property other than a passenger automobile for business/investment use, you must include an amount in your income in the first year your qualified business-use percentage is 50% or less. 1040 tax forms for 2011 Your qualified business-use percentage is the part of the property's total use that is qualified business use (defined earlier). 1040 tax forms for 2011 For the inclusion amount rules for a leased passenger automobile, see Leasing a Car in chapter 4 of Publication 463. 1040 tax forms for 2011 The inclusion amount is the sum of Amount A and Amount B, described next. 1040 tax forms for 2011 However, see the special rules for the inclusion amount, later, if your lease begins in the last 9 months of your tax year or is for less than one year. 1040 tax forms for 2011 Amount A. 1040 tax forms for 2011   Amount A is: The fair market value of the property, multiplied by The business/investment use for the first tax year the qualified business-use percentage is 50% or less, multiplied by The applicable percentage from Table A-19 in Appendix A . 1040 tax forms for 2011   The fair market value of the property is the value on the first day of the lease term. 1040 tax forms for 2011 If the capitalized cost of an item of listed property is specified in the lease agreement, you must treat that amount as the fair market value. 1040 tax forms for 2011 Amount B. 1040 tax forms for 2011   Amount B is: The fair market value of the property, multiplied by The average of the business/investment use for all tax years the property was leased that precede the first tax year the qualified business-use percentage is 50% or less, multiplied by The applicable percentage from Table A–20 in Appendix A . 1040 tax forms for 2011 Maximum inclusion amount. 1040 tax forms for 2011   The inclusion amount cannot be more than the sum of the deductible amounts of rent for the tax year in which the lessee must include the amount in gross income. 1040 tax forms for 2011 Inclusion amount worksheet. 1040 tax forms for 2011   The following worksheet is provided to help you figure the inclusion amount for leased listed property. 1040 tax forms for 2011 Inclusion Amount Worksheet for Leased Listed Property 1. 1040 tax forms for 2011 Fair market value   2. 1040 tax forms for 2011 Business/investment use for first year business use is 50% or less   3. 1040 tax forms for 2011 Multiply line 1 by line 2. 1040 tax forms for 2011   4. 1040 tax forms for 2011 Rate (%) from Table A-19   5. 1040 tax forms for 2011 Multiply line 3 by line 4. 1040 tax forms for 2011 This is Amount A. 1040 tax forms for 2011   6. 1040 tax forms for 2011 Fair market value   7. 1040 tax forms for 2011 Average business/investment use for years property leased before the first year business use is 50% or less . 1040 tax forms for 2011 . 1040 tax forms for 2011 . 1040 tax forms for 2011 . 1040 tax forms for 2011 . 1040 tax forms for 2011 . 1040 tax forms for 2011 . 1040 tax forms for 2011 . 1040 tax forms for 2011 . 1040 tax forms for 2011 . 1040 tax forms for 2011 . 1040 tax forms for 2011 . 1040 tax forms for 2011 . 1040 tax forms for 2011   8. 1040 tax forms for 2011 Multiply line 6 by line 7   9. 1040 tax forms for 2011 Rate (%) from Table A-20   10. 1040 tax forms for 2011 Multiply line 8 by line 9. 1040 tax forms for 2011 This is Amount B. 1040 tax forms for 2011   11. 1040 tax forms for 2011 Add line 5 and line 10. 1040 tax forms for 2011 This is your inclusion amount. 1040 tax forms for 2011 Enter here and as other income on the form or schedule on which you originally took the deduction (for example, Schedule C or F (Form 1040), Form 1040, Form 1120, etc. 1040 tax forms for 2011 )         Example. 1040 tax forms for 2011 On February 1, 2011, Larry House, a calendar year taxpayer, leased and placed in service a computer with a fair market value of $3,000. 1040 tax forms for 2011 The lease is for a period of 5 years. 1040 tax forms for 2011 Larry does not use the computer at a regular business establishment, so it is listed property. 1040 tax forms for 2011 His business use of the property (all of which is qualified business use) is 80% in 2011, 60% in 2012, and 40% in 2013. 1040 tax forms for 2011 He must add an inclusion amount to gross income for 2013, the first tax year his qualified business-use percentage is 50% or less. 1040 tax forms for 2011 The computer has a 5-year recovery period under both GDS and ADS. 1040 tax forms for 2011 2013 is the third tax year of the lease, so the applicable percentage from Table A-19 is −19. 1040 tax forms for 2011 8%. 1040 tax forms for 2011 The applicable percentage from Table A-20 is 22. 1040 tax forms for 2011 0%. 1040 tax forms for 2011 Larry's deductible rent for the computer for 2013 is $800. 1040 tax forms for 2011 Larry uses the Inclusion amount worksheet. 1040 tax forms for 2011 to figure the amount he must include in income for 2013. 1040 tax forms for 2011 His inclusion amount is $224, which is the sum of −$238 (Amount A) and $462 (Amount B). 1040 tax forms for 2011 Inclusion Amount Worksheet for Leased Listed Property 1. 1040 tax forms for 2011 Fair market value $3,000   2. 1040 tax forms for 2011 Business/investment use for first year business use is 50% or less 40 % 3. 1040 tax forms for 2011 Multiply line 1 by line 2. 1040 tax forms for 2011 1,200   4. 1040 tax forms for 2011 Rate (%) from Table A-19 −19. 1040 tax forms for 2011 8 % 5. 1040 tax forms for 2011 Multiply line 3 by line 4. 1040 tax forms for 2011 This is Amount A. 1040 tax forms for 2011 −238   6. 1040 tax forms for 2011 Fair market value 3,000   7. 1040 tax forms for 2011 Average business/investment use for years property leased before the first year business use is 50% or less 70 % 8. 1040 tax forms for 2011 Multiply line 6 by line 7 2,100   9. 1040 tax forms for 2011 Rate (%) from Table A-20 22. 1040 tax forms for 2011 0 % 10. 1040 tax forms for 2011 Multiply line 8 by line 9. 1040 tax forms for 2011 This is Amount B. 1040 tax forms for 2011 462   11. 1040 tax forms for 2011 Add line 5 and line 10. 1040 tax forms for 2011 This is your inclusion amount. 1040 tax forms for 2011 Enter here and as other income on the form or schedule on which you originally took the deduction (for example, Schedule C or F (Form 1040), Form 1040, Form 1120, etc. 1040 tax forms for 2011 ) $224           Lease beginning in the last 9 months of your tax year. 1040 tax forms for 2011    The inclusion amount is subject to a special rule if all the following apply. 1040 tax forms for 2011 The lease term begins within 9 months before the close of your tax year. 1040 tax forms for 2011 You do not use the property predominantly (more than 50%) for qualified business use during that part of the tax year. 1040 tax forms for 2011 The lease term continues into your next tax year. 1040 tax forms for 2011 Under this special rule, add the inclusion amount to income in the next tax year. 1040 tax forms for 2011 Figure the inclusion amount by taking into account the average of the business/investment use for both tax years (line 2 of the Inclusion Amount Worksheet for Leased Listed Property) and the applicable percentage for the tax year the lease term begins. 1040 tax forms for 2011 Skip lines 6 through 9 of the worksheet and enter zero on line 10. 1040 tax forms for 2011 Example 1. 1040 tax forms for 2011 On August 1, 2012, Julie Rule, a calendar year taxpayer, leased and placed in service an item of listed property. 1040 tax forms for 2011 The property is 5-year property with a fair market value of $10,000. 1040 tax forms for 2011 Her property has a recovery period of 5 years under ADS. 1040 tax forms for 2011 The lease is for 5 years. 1040 tax forms for 2011 Her business use of the property was 50% in 2012 and 90% in 2013. 1040 tax forms for 2011 She paid rent of $3,600 for 2012, of which $3,240 is deductible. 1040 tax forms for 2011 She must include $147 in income in 2013. 1040 tax forms for 2011 The $147 is the sum of Amount A and Amount B. 1040 tax forms for 2011 Amount A is $147 ($10,000 × 70% × 2. 1040 tax forms for 2011 1%), the product of the fair market value, the average business use for 2012 and 2013, and the applicable percentage for year one from Table A-19 . 1040 tax forms for 2011 Amount B is zero. 1040 tax forms for 2011 Lease for less than one year. 1040 tax forms for 2011   A special rule for the inclusion amount applies if the lease term is less than one year and you do not use the property predominantly (more than 50%) for qualified business use. 1040 tax forms for 2011 The amount included in income is the inclusion amount (figured as described in the preceding discussions) multiplied by a fraction. 1040 tax forms for 2011 The numerator of the fraction is the number of days in the lease term and the denominator is 365 (or 366 for leap years). 1040 tax forms for 2011   The lease term for listed property other than residential rental or nonresidential real property includes options to renew. 1040 tax forms for 2011 If you have two or more successive leases that are part of the same transaction (or a series of related transactions) for the same or substantially similar property, treat them as one lease. 1040 tax forms for 2011 Example 2. 1040 tax forms for 2011 On October 1, 2012, John Joyce, a calendar year taxpayer, leased and placed in service an item of listed property that is 3-year property. 1040 tax forms for 2011 This property had a fair market value of $15,000 and a recovery period of 5 years under ADS. 1040 tax forms for 2011 The lease term was 6 months (ending on March 31, 2013), during which he used the property 45% in business. 1040 tax forms for 2011 He must include $71 in income in 2013. 1040 tax forms for 2011 The $71 is the sum of Amount A and Amount B. 1040 tax forms for 2011 Amount A is $71 ($15,000 × 45% × 2. 1040 tax forms for 2011 1% × 183/365), the product of the fair market value, the average business use for both years, and the applicable percentage for year one from Table A-19 , prorated for the length of the lease. 1040 tax forms for 2011 Amount B is zero. 1040 tax forms for 2011 Where to report inclusion amount. 1040 tax forms for 2011   Report the inclusion amount figured as described in the preceding discussions as other income on the same form or schedule on which you took the deduction for your rental costs. 1040 tax forms for 2011 For example, report the inclusion amount as other income on Schedule C (Form 1040) if you took the deduction on Schedule C. 1040 tax forms for 2011 If you took the deduction for rental costs on Form 2106, report the inclusion amount as other income on Form 1040, line 21. 1040 tax forms for 2011 Do the Passenger Automobile Limits Apply? The depreciation deduction, including the section 179 deduction and special depreciation allowance, you can claim for a passenger automobile (defined earlier) each year is limited. 1040 tax forms for 2011 This section describes the maximum depreciation deduction amounts for 2013 and explains how to deduct, after the recovery period, the unrecovered basis of your property that results from applying the passenger automobile limit. 1040 tax forms for 2011 Exception for leased cars. 1040 tax forms for 2011   The passenger automobile limits generally do not apply to passenger automobiles leased or held for leasing by anyone regularly engaged in the business of leasing passenger automobiles. 1040 tax forms for 2011 For information on when you are considered regularly engaged in the business of leasing listed property, including passenger automobiles, see Exception for leased property , earlier, under What Is the Business-Use Requirement . 1040 tax forms for 2011 Maximum Depreciation Deduction The passenger automobile limits are the maximum depreciation amounts you can deduct for a passenger automobile. 1040 tax forms for 2011 They are based on the date you placed the automobile in service. 1040 tax forms for 2011 Passenger Automobiles The maximum deduction amounts for most passenger automobiles are shown in the following table. 1040 tax forms for 2011 Maximum Depreciation Deduction for Passenger Automobiles Date       4th & Placed 1st 2nd 3rd Later In Service Year Year Year Years 2013 $11,1601 $5,100 $3,050 $1,875 2012 11,1601 5,100 3,050 1,875 2011 11,0602 4,900 2,950 1,775 2010 11,0602  4,900 2,950 1,775 2009 10,9603 4,800 2,850 1,775 2008 10,9603  4,800 2,850 1,775 2007 3,060 4,900 2,850 1,775 2006 2,960 4,800 2,850 1,775 2005 2,960 4,700 2,850 1,675 2004 10,6104 4,800 2,850 1,675 5/06/2003– 12/31/2003 10,7105 4,900 2,950 1,775 1/01/2003– 5/05/2003 7,6606 4,900 2,950 1,775 1If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,160. 1040 tax forms for 2011 2If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,060. 1040 tax forms for 2011 3If you elected not to claim any special depreciation allowance for the vehicle or the vehicle is not qualified property, the maximum deduction is $2,960. 1040 tax forms for 2011 4If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $2,960. 1040 tax forms for 2011 5If you acquired the vehicle before 5/06/03, the maximum deduction is $7,660. 1040 tax forms for 2011 If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $3,060. 1040 tax forms for 2011 6If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $3,060. 1040 tax forms for 2011 If your business/investment use of the automobile is less than 100%, you must reduce the maximum deduction amount by multiplying the maximum amount by the percentage of business/investment use determined on an annual basis during the tax year. 1040 tax forms for 2011 If you have a short tax year, you must reduce the maximum deduction amount by multiplying the maximum amount by a fraction. 1040 tax forms for 2011 The numerator of the fraction is the number of months and partial months in the short tax year and the denominator is 12. 1040 tax forms for 2011 Example. 1040 tax forms for 2011 On April 15, 2013, Virginia Hart bought and placed in service a new car for $14,500. 1040 tax forms for 2011 She used the car only in her business. 1040 tax forms for 2011 She files her tax return based on the calendar year. 1040 tax forms for 2011 She does not elect a section 179 deduction and elected not to claim any special depreciation allowance for the car. 1040 tax forms for 2011 Under MACRS, a car is 5-year property. 1040 tax forms for 2011 Since she placed her car in service on April 15 and used it only for business, she uses the percentages in Table A-1 to figure her MACRS depreciation on the car. 1040 tax forms for 2011 Virginia multiplies the $14,500 unadjusted basis of her car by 0. 1040 tax forms for 2011 20 to get her MACRS depreciation of $2,900 for 2013. 1040 tax forms for 2011 This $2,900 is below the maximum depreciation deduction of $3,160 for passenger automobiles placed in service in 2013. 1040 tax forms for 2011 She can deduct the full $2,900. 1040 tax forms for 2011 Electric Vehicles The maximum depreciation deductions for passenger automobiles that are produced to run primarily on electricity are higher than those for other automobiles. 1040 tax forms for 2011 The maximum deduction amounts for electric vehicles placed in service after August 5, 1997, and before January 1, 2007, are shown in the following table. 1040 tax forms for 2011 Owners of electric vehicles placed in service after December 31, 2006, should use the table of maximum deduction amounts later for electric vehicles classified as passenger automobiles or use the table of maximum deduction amounts for trucks and vans later, for electric vehicles classified as trucks and vans. 1040 tax forms for 2011 Maximum Depreciation Deduction For Electric Vehicles Date       4th & Placed 1st 2nd 3rd Later In Service Year Year Year Years 2006 $8,980 $14,400 $8,650 $5,225 2005 8,880 14,200 8,450 5,125 2004 31,8301 14,300 8,550 5,125 5/06/2003– 12/31/2003 32,0302 14,600 8,750 5,225 1/01/2003– 5/05/2003 22,8803 14,600 8,750 5,225 1If you elected not to claim any special depreciation allowance for the vehicle or the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $8,880. 1040 tax forms for 2011 2If you acquired the vehicle before 5/06/03, the maximum deduction is $22,880. 1040 tax forms for 2011 If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $9,080. 1040 tax forms for 2011 3 If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $9,080. 1040 tax forms for 2011 Trucks and Vans The maximum depreciation deductions for trucks and vans placed in service after 2002 are higher than those for other passenger automobiles. 1040 tax forms for 2011 The maximum deduction amounts for trucks and vans are shown in the following table. 1040 tax forms for 2011 Maximum Depreciation Deduction For Trucks and Vans Date       4th & Placed 1st 2nd 3rd Later In Service Year Year Year Years 2013 $11,3601 $5,400 $3,250 $1,975 2012 11,3601 5,300 3,150 1,875 2011 11,2602 5,200 3,150 1,875 2010 11,1603 5,100 3,050 1,875 2009 11,0604 4,900 2,950 1,775 2008 11,1605 5,100 3,050 1,875 2007 3,260 5,200 3,050 1,875 2006 3,260 5,200 3,150 1,875 2005 3,260 5,200 3,150 1,875 2004 10,9106 5,300 3,150 1,875 5/06/2003– 12/31/2003 11,0107 5,400 3,250 1,975 1/01/2003– 5/05/2003 7,9608 5,400 3,250 1,975 1 If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,360. 1040 tax forms for 2011 2 If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,260. 1040 tax forms for 2011 3 If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,160. 1040 tax forms for 2011 4 If you elect not to claim any special depreciation allowance for the vehicle or the vehicle is not qualified property, the maximum deduction is $3,060. 1040 tax forms for 2011 5If you elected not to claim any special depreciation allowance for the vehicle or the vehicle is not qualified property, the maximum deduction is $3,160. 1040 tax forms for 2011 6If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, or the maximum deduction is $3,260. 1040 tax forms for 2011 7 If you acquired the vehicle before 5/06/03, the maximum deduction is $7,960. 1040 tax forms for 2011 If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $3,360. 1040 tax forms for 2011 8 If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $3,360. 1040 tax forms for 2011 Depreciation Worksheet for Passenger Automobiles You can use the following worksheet to figure your depreciation deduction using the percentage tables. 1040 tax forms for 2011 Then use the information from this worksheet to prepare Form 4562. 1040 tax forms for 2011 Depreciation Worksheet for Passenger Automobiles   Part I   1. 1040 tax forms for 2011 MACRS system (GDS or ADS)     2. 1040 tax forms for 2011 Property class     3. 1040 tax forms for 2011 Date placed in service     4. 1040 tax forms for 2011 Recovery period     5. 1040 tax forms for 2011 Method and convention     6. 1040 tax forms for 2011 Depreciation rate (from tables)     7. 1040 tax forms for 2011 Maximum depreciation deduction for this year from the appropriate table       8. 1040 tax forms for 2011 Business/investment-use percentage       9. 1040 tax forms for 2011 Multiply line 7 by line 8. 1040 tax forms for 2011 This is your adjusted maximum depreciation deduction       10. 1040 tax forms for 2011 Section 179 deduction claimed this year (not more than line 9). 1040 tax forms for 2011 Enter -0- if this is not the year you placed the car in service. 1040 tax forms for 2011         Note. 1040 tax forms for 2011  1) If line 10 is equal to line 9, stop here. 1040 tax forms for 2011 Your combined section 179 and depreciation deduction (including your special depreciation allowance) is limited to the amount on line 9. 1040 tax forms for 2011  2) If line 10 is less than line 9, complete Part II. 1040 tax forms for 2011   Part II   11. 1040 tax forms for 2011 Subtract line 10 from line 9. 1040 tax forms for 2011 This is the limit on the amount you can deduct for depreciation (including any special depreciation allowance )       12. 1040 tax forms for 2011 Cost or other basis (reduced by any alternative motor vehicle credit 1or credit for electric vehicles 2)       13. 1040 tax forms for 2011 Multiply line 12 by line 8. 1040 tax forms for 2011 This is your business/investment cost       14. 1040 tax forms for 2011 Section 179 deduction claimed in the year you placed the car in service       15. 1040 tax forms for 2011 Subtract line 14 from line 13. 1040 tax forms for 2011 This is your tentative basis for depreciation       16. 1040 tax forms for 2011 Multiply line 15 by . 1040 tax forms for 2011 50 if the 50% special depreciation allowance applies. 1040 tax forms for 2011 This is your special depreciation allowance. 1040 tax forms for 2011 Enter -0- if this is not the year you placed the car in service, the car is not qualified property, or you elected not to claim a special depreciation allowance       Note 1) If line 16 is equal to line 11, stop here. 1040 tax forms for 2011 Your depreciation deduction (including your special depreciation allowance) is limited to the amount on line 11. 1040 tax forms for 2011  2) If line 16 is less than line 11, complete Part III. 1040 tax forms for 2011   Part III   17. 1040 tax forms for 2011 Subtract line 16 from 11. 1040 tax forms for 2011 This is the limit on the amount you can deduct for MACRS depreciation       18. 1040 tax forms for 2011 Subtract line 16 from line 15. 1040 tax forms for 2011 This is your basis for depreciation. 1040 tax forms for 2011       19. 1040 tax forms for 2011 Multiply line 18 by line 6. 1040 tax forms for 2011 This is your tentative MACRS depreciation deduction. 1040 tax forms for 2011       20. 1040 tax forms for 2011 Enter the lesser of line 17 or line 19. 1040 tax forms for 2011 This is your MACRS depreciation deduction. 1040 tax forms for 2011     1 When figuring the amount to enter on line 12, do not reduce your cost or other basis by any section 179 deduction you claimed for your car. 1040 tax forms for 2011 2 Reduce the basis by the lesser of $4,000 or 10% of the cost of the vehicle even if the credit is less than that amount. 1040 tax forms for 2011             Deductions After the Recovery Period If the depreciation deductions for your automobile are reduced under the passenger automobile limits, you will have unrecovered basis in your automobile at the end of the recovery period. 1040 tax forms for 2011 If you continue to use the automobile for business, you can deduct that unrecovered basis after the recovery period ends. 1040 tax forms for 2011 You can claim a depreciation deduction in each succeeding tax year until you recover your full basis in the car. 1040 tax forms for 2011 The maximum amount you can deduct each year is determined by the date you placed the car in service and your business/investment-use percentage. 1040 tax forms for 2011 See Maximum Depreciation Deduction , earlier. 1040 tax forms for 2011 Unrecovered basis is the cost or other basis of the passenger automobile reduced by any clean-fuel vehicle deduction, electric vehicle credit, depreciation, and section 179 deductions that would have been allowable if you had used the car 100% for business and investment use and the passenger automobile limits had not applied. 1040 tax forms for 2011 You cannot claim a depreciation deduction for listed property other than passenger automobiles after the recovery period ends. 1040 tax forms for 2011 There is no unrecovered basis at the end of the recovery period because you are considered to have used this property 100% for business and investment purposes during all of the recovery period. 1040 tax forms for 2011 Example. 1040 tax forms for 2011 In May 2007, you bought and placed in service a car costing $31,500. 1040 tax forms for 2011 The car was 5-year property under GDS (MACRS). 1040 tax forms for 2011 You did not elect a section 179 deduction and elected not to claim any special depreciation allowance for the car. 1040 tax forms for 2011 You used the car exclusively for business during the recovery period (2007 through 2012). 1040 tax forms for 2011 You figured your depreciation as shown below. 1040 tax forms for 2011 Year Percentage Amount Limit   Allowed 2007 20. 1040 tax forms for 2011 0% $6,300 $2,960   $2,960 2008 32. 1040 tax forms for 2011 0 10,080 4,800   4,800 2009 19. 1040 tax forms for 2011 2 6,048 2,850   2,850 2010 11. 1040 tax forms for 2011 52 3,629 1,675   1,675 2011 11. 1040 tax forms for 2011 52 3,629 1,675   1,675 2012 5. 1040 tax forms for 2011 76 1,814 1,675   1,675 Total   $15,635 At the end of 2012, you had an unrecovered basis of $15,865 ($31,500 − $15,635). 1040 tax forms for 2011 If in 2013 and later years you continue to use the car 100% for business, you can deduct each year the lesser of $1,675 or your remaining unrecovered basis. 1040 tax forms for 2011 If your business use of the car had been less than 100% during any year, your depreciation deduction would have been less than the maximum amount allowable for that year. 1040 tax forms for 2011 However, in figuring your unrecovered basis in the car, you would still reduce your basis by the maximum amount allowable as if the business use had been 100%. 1040 tax forms for 2011 For example, if you had used your car 60% for business instead of 100%, your allowable depreciation deductions would have been $9,519 ($15,865 × 60%), but you still would have to reduce your basis by $15,865 to determine your unrecovered basis. 1040 tax forms for 2011 Deductions For Passenger Automobiles Acquired in a Trade-in If you acquire a passenger automobile in a trade-in, depreciate the carryover basis separately as if the trade-in did not occur. 1040 tax forms for 2011 Depreciate the part of the new automobile's basis that exceeds its carryover basis (excess basis) as if it were newly placed in service property. 1040 tax forms for 2011 This excess basis is the additional cash paid for the new automobile in the trade-in. 1040 tax forms for 2011 The depreciation figured for the two components of the basis (carryover basis and excess basis) is subject to a single passenger automobile limit. 1040 tax forms for 2011 Special rules apply in determining the passenger automobile limits. 1040 tax forms for 2011 These rules and examples are discussed in section 1. 1040 tax forms for 2011 168(i)-6(d)(3) of the regulations. 1040 tax forms for 2011 Instead of figuring depreciation for the carryover basis and the excess basis separately, you can elect to treat the old automobile as disposed of and both of the basis components for the new automobile as if placed in service at the time of the trade-in. 1040 tax forms for 2011 For more information, including how to make this election, see Election out under Property Acquired in a Like-kind Exchange or Involuntary Conversion in chapter 4 and sections 1. 1040 tax forms for 2011 168(i)-6(i) and 1. 1040 tax forms for 2011 168(i)-6(j) of the regulations. 1040 tax forms for 2011 What Records Must Be Kept? You cannot take any depreciation or section 179 deduction for the use of listed property unless you can prove your business/investment use with adequate records or with sufficient evidence to support your own statements. 1040 tax forms for 2011 For listed property, you must keep records for as long as any recapture can still occur. 1040 tax forms for 2011 Recapture can occur in any tax year of the recovery period. 1040 tax forms for 2011 Adequate Records To meet the adequate records requirement, you must maintain an account book, diary, log, statement of expense, trip sheet, or similar record or other documentary evidence that, together with the receipt, is sufficient to establish each element of an expenditure or use. 1040 tax forms for 2011 You do not have to record information in an account book, diary, or similar record if the information is already shown on the receipt. 1040 tax forms for 2011 However, your records should back up your receipts in an orderly manner. 1040 tax forms for 2011 Elements of expenditure or use. 1040 tax forms for 2011   Your records or other documentary evidence must support all the following. 1040 tax forms for 2011 The amount of each separate expenditure, such as the cost of acquiring the item, maintenance and repair costs, capital improvement costs, lease payments, and any other expenses. 1040 tax forms for 2011 The amount of each business and investment use (based on an appropriate measure, such as mileage for vehicles and time for other listed property), and the total use of the property for the tax year. 1040 tax forms for 2011 The date of the expenditure or use. 1040 tax forms for 2011 The business or investment purpose for the expenditure or use. 1040 tax forms for 2011   Written documents of your expenditure or use are generally better evidence than oral statements alone. 1040 tax forms for 2011 You do not have to keep a daily log. 1040 tax forms for 2011 However, some type of record containing the elements of an expenditure or the business or investment use of listed property made at or near the time of the expenditure or use and backed up by other documents is preferable to a statement you prepare later. 1040 tax forms for 2011 Timeliness. 1040 tax forms for 2011   You must record the elements of an expenditure or use at the time you have full knowledge of the elements. 1040 tax forms for 2011 An expense account statement made from an account book, diary, or similar record prepared or maintained at or near the time of the expenditure or use generally is considered a timely record if, in the regular course of business: The statement is given by an employee to the employer, or The statement is given by an independent contractor to the client or customer. 1040 tax forms for 2011   For example, a log maintained on a weekly basis, that accounts for use during the week, will be considered a record made at or near the time of use. 1040 tax forms for 2011 Business purpose supported. 1040 tax forms for 2011   Generally, an adequate record of business purpose must be in the form of a written statement. 1040 tax forms for 2011 However, the amount of detail necessary to establish a business purpose depends on the facts and circumstances of each case. 1040 tax forms for 2011 A written explanation of the business purpose will not be required if the purpose can be determined from the surrounding facts and circumstances. 1040 tax forms for 2011 For example, a salesperson visiting customers on an established sales route will not normally need a written explanation of the business purpose of his or her travel. 1040 tax forms for 2011 Business use supported. 1040 tax forms for 2011   An adequate record contains enough information on each element of every business or investment use. 1040 tax forms for 2011 The amount of detail required to support the use depends on the facts and circumstances. 1040 tax forms for 2011 For example, a taxpayer who uses a truck for both business and personal purposes and whose only business use of the truck is to make customer deliveries on an established route can satisfy the requirement by recording the length of the route, including the total number of miles driven during the tax year and the date of each trip at or near the time of the trips. 1040 tax forms for 2011   Although you generally must prepare an adequate written record, you can prepare a record of the business use of listed property in a computer memory device that uses a logging program. 1040 tax forms for 2011 Separate or combined expenditures or uses. 1040 tax forms for 2011   Each use by you normally is considered a separate use. 1040 tax forms for 2011 However, you can combine repeated uses as a single item. 1040 tax forms for 2011   Record each expenditure as a separate item. 1040 tax forms for 2011 Do not combine it with other expenditures. 1040 tax forms for 2011 If you choose, however, you can combine amounts you spent for the use of listed property during a tax year, such as for gasoline or automobile repairs. 1040 tax forms for 2011 If you combine these expenses, you do not need to support the business purpose of each expense. 1040 tax forms for 2011 Instead, you can divide the expenses based on the total business use of the listed property. 1040 tax forms for 2011   You can account for uses that can be considered part of a single use, such as a round trip or uninterrupted business use, by a single record. 1040 tax forms for 2011 For example, you can account for the use of a truck to make deliveries at several locations that begin and end at the business premises and can include a stop at the business in between deliveries by a single record of miles driven. 1040 tax forms for 2011 You can account for the use of a passenger automobile by a salesperson for a business trip away from home over a period of time by a single record of miles traveled. 1040 tax forms for 2011 Minimal personal use (such as a stop for lunch between two business stops) is not an interruption of business use. 1040 tax forms for 2011 Confidential information. 1040 tax forms for 2011   If any of the information on the elements of an expenditure or use is confidential, you do not need to include it in the account book or similar record if you record it at or near the time of the expenditure or use. 1040 tax forms for 2011 You must keep it elsewhere and make it available as support to the IRS director for your area on request. 1040 tax forms for 2011 Substantial compliance. 1040 tax forms for 2011   If you have not fully supported a particular element of an expenditure or use, but have complied with the adequate records requirement for the expenditure or use to the satisfaction of the IRS director for your area, you can establish this element by any evidence the IRS director for your area deems adequate. 1040 tax forms for 2011   If you fail to establish to the satisfaction of the IRS director for your area that you have substantially complied with the adequate records requirement for an element of an expenditure or use, you must establish the element as follows. 1040 tax forms for 2011 By your own oral or written statement containing detailed information as to the element. 1040 tax forms for 2011 By other evidence sufficient to establish the element. 1040 tax forms for 2011   If the element is the cost or amount, time, place, or date of an expenditure or use, its supporting evidence must be direct evidence, such as oral testimony by witnesses or a written statement setting forth detailed information about the element or the documentary evidence. 1040 tax forms for 2011 If the element is the business purpose of an expenditure, its supporting evidence can be circumstantial evidence. 1040 tax forms for 2011 Sampling. 1040 tax forms for 2011   You can maintain an adequate record for part of a tax year and use that record to support your business and investment use of listed property for the entire tax year if it can be shown by other evidence that the periods for which you maintain an adequate record are representative of the use throughout the year. 1040 tax forms for 2011 Example 1. 1040 tax forms for 2011 Denise Williams, a sole proprietor and calendar year taxpayer, operates an interior decorating business out of her home. 1040 tax forms for 2011 She uses her automobile for local business visits to the homes or offices of clients, for meetings with suppliers and subcontractors, and to pick up and deliver items to clients. 1040 tax forms for 2011 There is no other business use of the automobile, but she and family members also use it for personal purposes. 1040 tax forms for 2011 She maintains adequate records for the first 3 months of the year showing that 75% of the automobile use was for business. 1040 tax forms for 2011 Subcontractor invoices and paid bills show that her business continued at approximately the same rate for the rest of the year. 1040 tax forms for 2011 If there is no change in circumstances, such as the purchase of a second car for exclusive use in her business, the determination that her combined business/investment use of the automobile for the tax year is 75% rests on sufficient supporting evidence. 1040 tax forms for 2011 Example 2. 1040 tax forms for 2011 Assume the same facts as in Example 1, except that Denise maintains adequate records during the first week of every month showing that 75% of her use of the automobile is for business. 1040 tax forms for 2011 Her business invoices show that her business continued at the same rate during the later weeks of each month so that her weekly records are representative of the automobile's business use throughout the month. 1040 tax forms for 2011 The determination that her business/investment use of the automobile for the tax year is 75% rests on sufficient supporting evidence. 1040 tax forms for 2011 Example 3. 1040 tax forms for 2011 Bill Baker, a sole proprietor and calendar year taxpayer, is a salesman in a large metropolitan area for a company that manufactures household products. 1040 tax forms for 2011 For the first 3 weeks of each month, he occasionally uses his own automobile for business travel within the metropolitan area. 1040 tax forms for 2011 During these weeks, his business use of the automobile does not follow a consistent pattern. 1040 tax forms for 2011 During the fourth week of each month, he delivers all business orders taken during the previous month. 1040 tax forms for 2011 The business use of his automobile, as supported by adequate records, is 70% of its total use during that fourth week. 1040 tax forms for 2011 The determination based on the record maintained during the fourth week of the month that his business/investment use of the automobile for the tax year is 70% does not rest on sufficient supporting evidence because his use during that week is not representative of use during other periods. 1040 tax forms for 2011 Loss of records. 1040 tax forms for 2011   When you establish that failure to produce adequate records is due to loss of the records through circumstances beyond your control, such as through fire, flood, earthquake, or other casualty, you have the right to support a deduction by reasonable reconstruction of your expenditures and use. 1040 tax forms for 2011 How Is Listed Property Information Reported? You must provide the information about your listed property requested in Part V of Form 4562, Section A, if you claim either of the following deductions. 1040 tax forms for 2011 Any deduction for a vehicle. 1040 tax forms for 2011 A depreciation deduction for any other listed property. 1040 tax forms for 2011 If you claim any deduction for a vehicle, you also must provide the information requested in Section B. 1040 tax forms for 2011 If you provide the vehicle for your employee's use, the employee must give you this information. 1040 tax forms for 2011 If you provide any vehicle for use by an employee, you must first answer the questions in Section C to see if you meet an exception to completing Section B for that vehicle. 1040 tax forms for 2011 Vehicles used by your employees. 1040 tax forms for 2011   You do not have to complete Section B, Part V, for vehicles used by your employees who are not more-than-5% owners or related persons if you meet at least one of the following requirements. 1040 tax forms for 2011 You maintain a written policy statement that prohibits one of the following uses of the vehicles. 1040 tax forms for 2011 All personal use including commuting. 1040 tax forms for 2011 Personal use, other than commuting, by employees who are not officers, directors, or 1%-or-more owners. 1040 tax forms for 2011 You treat all use of the vehicles by your employees as personal use. 1040 tax forms for 2011 You provide more than five vehicles for use by your employees, and you keep in your records the information on their use given to you by the employees. 1040 tax forms for 2011 For demonstrator automobiles provided to full-time salespersons, you maintain a written policy statement that limits the total mileage outside the salesperson's normal working hours and prohibits use of the automobile by anyone else, for vacation trips, or to store personal possessions. 1040 tax forms for 2011 Exceptions. 1040 tax forms for 2011   If you file Form 2106, 2106-EZ, or Schedule C-EZ (Form 1040), and you are not required to file Form 4562, report information about listed property on that form and not on Form 4562. 1040 tax forms for 2011 Also, if you file Schedule C (Form 1040) and are claiming the standard mileage rate or actual vehicle expenses (except depreciation) and you are not required to file Form 4562 for any other reason, report vehicle information in Part IV of Schedule C and not on Form 4562. 1040 tax forms for 2011 Prev  Up  Next   Home   More Online Publications
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Index of State and Local Consumer Agencies

The 1040 Tax Forms For 2011

1040 tax forms for 2011 Index A Assistance (see Tax help) C Cancellation of indebtedness, Exclusion of Certain Cancellations of Indebtedness by Reason of the Severe Storms, Tornadoes, or Flooding Casualty and theft losses, Casualty and Theft Losses Charitable contributions, Temporary Suspension of Limits on Charitable Contributions Child tax credit, Earned Income Credit and Child Tax Credit Clean-up costs, Demolition and Clean-up Costs Copy of tax return, request for, Request for copy of tax return. 1040 tax forms for 2011 Credits: Child tax, Earned Income Credit and Child Tax Credit Earned income, Earned Income Credit and Child Tax Credit Education, Education Credits Employee retention, Employee Retention Credit Employer housing, Employer Housing Credit and Exclusion Rehabilitation tax, Increase in Rehabilitation Tax Credit D Demolition costs, Demolition and Clean-up Costs Distributions: Home purchase or construction, Repayment of Qualified Distributions for the Purchase or Construction of a Main Home Qualified disaster recovery assistance, Qualified disaster recovery assistance distribution. 1040 tax forms for 2011 Repayment of, Repayment of Qualified Disaster Recovery Assistance Distributions Taxation of, Taxation of Qualified Disaster Recovery Assistance Distributions E Earned income credit, Earned Income Credit and Child Tax Credit Education credits, Education Credits Eligible retirement plan, Eligible retirement plan. 1040 tax forms for 2011 Employee retention credit, Employee Retention Credit Employer housing credit, Employer Housing Credit and Exclusion Exemption, additional for housing, Additional Exemption for Housing Individuals Displaced by the Severe Storms, Tornadoes, or Flooding F Federal mortgage subsidy, recapture of, Recapture of Federal Mortgage Subsidy Free tax services, How To Get Tax Help H Help (see Tax help) Hope credit (see Education credits) I Involuntary conversion (see Replacement period for nonrecognition of gain) IRAs and other retirement plans, IRAs and Other Retirement Plans L Lifetime learning credit (see Education credits) M Mileage reimbursements, charitable volunteers, Mileage Reimbursements to Charitable Volunteers More information (see Tax help) N Net operating losses, Net Operating Losses P Publications (see Tax help) Q Qualified disaster recovery assistance distribution, Qualified disaster recovery assistance distribution. 1040 tax forms for 2011 Qualified disaster recovery assistance loss, Qualified disaster recovery assistance loss. 1040 tax forms for 2011 R Rehabilitation tax credit, Increase in Rehabilitation Tax Credit Relocation, temporary, Tax Relief for Temporary Relocation Replacement period for nonrecognition of gain, Replacement Period for Nonrecognition of Gain Retirement plan, eligible, Eligible retirement plan. 1040 tax forms for 2011 Retirement plans, IRAs and Other Retirement Plans S Standard mileage rate, charitable use, Standard Mileage Rate for Charitable Use of Vehicles T Tax help, How To Get Tax Help Tax return: Request for copy, Request for copy of tax return. 1040 tax forms for 2011 Request for transcript, Request for transcript of tax return. 1040 tax forms for 2011 Taxpayer Advocate, Contacting your Taxpayer Advocate. 1040 tax forms for 2011 Temporary relocation, Tax Relief for Temporary Relocation Theft losses, Casualty and Theft Losses Transcript of tax return, request for, Request for transcript of tax return. 1040 tax forms for 2011 TTY/TDD information, How To Get Tax Help Prev  Up     Home   More Online Publications