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1040ex Form

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1040ex Form

1040ex form Internal Revenue Bulletin:  2013-12  March 18, 2013  Rev. 1040ex form Proc. 1040ex form 2013-21 Table of Contents SECTION 1. 1040ex form PURPOSE SECTION 2. 1040ex form BACKGROUND SECTION 3. 1040ex form SCOPE SECTION 4. 1040ex form APPLICATION. 1040ex form 01 Limitations on Depreciation Deductions for Certain Automobiles. 1040ex form . 1040ex form 02 Inclusions in Income of Lessees of Passenger Automobiles. 1040ex form SECTION 5. 1040ex form EFFECTIVE DATE SECTION 6. 1040ex form DRAFTING INFORMATION SECTION 1. 1040ex form PURPOSE This revenue procedure provides: (1) limitations on depreciation deductions for owners of passenger automobiles first placed in service by the taxpayer during calendar year 2013, including separate tables of limitations on depreciation deductions for trucks and vans; and (2) the amounts that must be included in income by lessees of passenger automobiles first leased by the taxpayer during calendar year 2013, including a separate table of inclusion amounts for lessees of trucks and vans. 1040ex form The tables detailing these depreciation limitations and lessee inclusion amounts reflect the automobile price inflation adjustments required by § 280F(d)(7) of the Internal Revenue Code. 1040ex form SECTION 2. 1040ex form BACKGROUND . 1040ex form 01 For owners of passenger automobiles, § 280F(a) imposes dollar limitations on the depreciation deduction for the year the taxpayer places the passenger automobile in service and for each succeeding year. 1040ex form For passenger automobiles placed in service after 1988, § 280F(d)(7) requires the Internal Revenue Service to increase the amounts allowable as depreciation deductions by a price inflation adjustment amount. 1040ex form The method of calculating this price inflation amount for trucks and vans placed in service in or after calendar year 2003 uses a different CPI “automobile component” (the “new trucks” component) than that used in the price inflation amount calculation for other passenger automobiles (the “new cars” component), resulting in somewhat higher depreciation deductions for trucks and vans. 1040ex form This change reflects the higher rate of price inflation for trucks and vans since 1988. 1040ex form . 1040ex form 02 Section 331(a) of the American Taxpayer Relief Act of 2012, Pub. 1040ex form L. 1040ex form No. 1040ex form 112-240, 126 Stat. 1040ex form 2313 (Jan. 1040ex form 2, 2013) (the “Act”) extended the 50 percent additional first year depreciation deduction under § 168(k) to qualified property acquired by the taxpayer after December 31, 2007, and before January 1, 2014, if no written binding contract for the acquisition of the property existed before January 1, 2008, and if the taxpayer places the property in service generally before January 1, 2014. 1040ex form Section 168(k)(2)(F)(i) increases the first year depreciation allowed under § 280F(a)(1)(A)(i) by $8,000 for passenger automobiles to which the additional first year depreciation deduction under § 168(k) (hereinafter, referred to as “§ 168(k) additional first year depreciation deduction”) applies. 1040ex form . 1040ex form 03 Section 168(k)(2)(D)(i) provides that the § 168(k) additional first year depreciation deduction does not apply to any property required to be depreciated under the alternative depreciation system of § 168(g), including property described in § 280F(b)(1). 1040ex form Section 168(k)(2)(D)(iii) permits a taxpayer to elect out of the § 168(k) additional first year depreciation deduction for any class of property. 1040ex form Section 168(k)(4), as amended by the Act, permits a corporation to elect to increase the alternative minimum tax (“AMT”) credit limitation under § 53(c), instead of claiming the § 168(k) additional first year depreciation deduction for all eligible qualified property placed in service after December 31, 2012, that is round 3 extension property (as defined in § 168(k)(4)(J)(iv)). 1040ex form Accordingly, this revenue procedure provides tables for passenger automobiles for which the § 168(k) additional first year depreciation deduction applies. 1040ex form This revenue procedure also provides tables for passenger automobiles for which the § 168(k) additional first year depreciation deduction does not apply, either because taxpayer: (1) purchased the passenger automobile used; (2) did not use the passenger automobile during 2013 more than 50 percent for business purposes; (3) elected out of the § 168(k) additional first year depreciation deduction pursuant to § 168(k)(2)(D)(iii); or (4) elected to increase the § 53 AMT credit limitation in lieu of claiming § 168(k) additional first year depreciation. 1040ex form . 1040ex form 04 Section 280F(c) requires a reduction in the deduction allowed to the lessee of a leased passenger automobile. 1040ex form The reduction must be substantially equivalent to the limitations on the depreciation deductions imposed on owners of passenger automobiles. 1040ex form Under § 1. 1040ex form 280F-7(a) of the Income Tax Regulations, this reduction requires a lessee to include in gross income an amount determined by applying a formula to the amount obtained from a table. 1040ex form One table applies to lessees of trucks and vans and another table applies to all other passenger automobiles. 1040ex form Each table shows inclusion amounts for a range of fair market values for each taxable year after the passenger automobile is first leased. 1040ex form SECTION 3. 1040ex form SCOPE . 1040ex form 01 The limitations on depreciation deductions in section 4. 1040ex form 01(2) of this revenue procedure apply to passenger automobiles (other than leased passenger automobiles) that are placed in service by the taxpayer in calendar year 2013, and continue to apply for each taxable year that the passenger automobile remains in service. 1040ex form . 1040ex form 02 The tables in section 4. 1040ex form 02 of this revenue procedure apply to leased passenger automobiles for which the lease term begins during calendar year 2013. 1040ex form Lessees of these passenger automobiles must use these tables to determine the inclusion amount for each taxable year during which the passenger automobile is leased. 1040ex form See Rev. 1040ex form Proc. 1040ex form 2008-22, 2008-1 C. 1040ex form B. 1040ex form 658, for passenger automobiles first leased during calendar year 2008; Rev. 1040ex form Proc. 1040ex form 2009-24, 2009-17 I. 1040ex form R. 1040ex form B. 1040ex form 885, for passenger automobiles first leased during calendar year 2009; Rev. 1040ex form Proc. 1040ex form 2010-18, 2010-09 I. 1040ex form R. 1040ex form B. 1040ex form 427, as amplified and modified by section 4. 1040ex form 03 of Rev. 1040ex form Proc. 1040ex form 2011-21, 2011-12 I. 1040ex form R. 1040ex form B. 1040ex form 560, for passenger automobiles first leased during calendar year 2010; Rev. 1040ex form Proc. 1040ex form 2011-21, for passenger automobiles first leased during calendar year 2011; and Rev. 1040ex form Proc. 1040ex form 2012-23, 2012-14 I. 1040ex form R. 1040ex form B. 1040ex form 712, for passenger automobiles first leased during calendar year 2012. 1040ex form SECTION 4. 1040ex form APPLICATION . 1040ex form 01 Limitations on Depreciation Deductions for Certain Automobiles. 1040ex form (1) Amount of the inflation adjustment. 1040ex form (a) Passenger automobiles (other than trucks or vans). 1040ex form Under § 280F(d)(7)(B)(i), the automobile price inflation adjustment for any calendar year is the percentage (if any) by which the CPI automobile component for October of the preceding calendar year exceeds the CPI automobile component for October 1987. 1040ex form Section 280F(d)(7)(B)(ii) defines the term “CPI automobile component” as the automobile component of the Consumer Price Index for all Urban Consumers published by the Department of Labor. 1040ex form The new car component of the CPI was 115. 1040ex form 2 for October 1987 and 143. 1040ex form 787 for October 2012. 1040ex form The October 2012 index exceeded the October 1987 index by 28. 1040ex form 587. 1040ex form Therefore, the automobile price inflation adjustment for 2013 for passenger automobiles (other than trucks and vans) is 24. 1040ex form 8 percent (28. 1040ex form 587/115. 1040ex form 2 x 100%). 1040ex form The dollar limitations in § 280F(a) are multiplied by a factor of 0. 1040ex form 248, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations applicable to passenger automobiles (other than trucks and vans) for calendar year 2013. 1040ex form This adjustment applies to all passenger automobiles (other than trucks and vans) that are first placed in service in calendar year 2013. 1040ex form (b) Trucks and vans. 1040ex form To determine the dollar limitations for trucks and vans first placed in service during calendar year 2013, the Service uses the new truck component of the CPI instead of the new car component. 1040ex form The new truck component of the CPI was 112. 1040ex form 4 for October 1987 and 149. 1040ex form 386 for October 2012. 1040ex form The October 2012 index exceeded the October 1987 index by 36. 1040ex form 986. 1040ex form Therefore, the automobile price inflation adjustment for 2013 for trucks and vans is 32. 1040ex form 9 percent (36. 1040ex form 986/112. 1040ex form 4 x 100%). 1040ex form The dollar limitations in § 280F(a) are multiplied by a factor of 0. 1040ex form 329, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations for trucks and vans. 1040ex form This adjustment applies to all trucks and vans that are first placed in service in calendar year 2013. 1040ex form (2) Amount of the limitation. 1040ex form Tables 1 through 4 contain the dollar amount of the depreciation limitation for each taxable year for passenger automobiles a taxpayer places in service in calendar year 2013. 1040ex form Use Table 1 for a passenger automobile (other than a truck or van), and Table 2 for a truck or van, placed in service in calendar year 2013 for which the § 168(k) additional first year depreciation deduction applies. 1040ex form Use Table 3 for a passenger automobile (other than a truck or van), and Table 4 for a truck or van, placed in service in calendar year 2013 for which the § 168(k) additional first year depreciation deduction does not apply. 1040ex form REV. 1040ex form PROC. 1040ex form 2013-21 TABLE 1 DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) PLACED IN SERVICE IN CALENDAR YEAR 2013 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION APPLIES Tax Year Amount 1st Tax Year $11,160 2nd Tax Year $5,100 3rd Tax Year $3,050 Each Succeeding Year $1,875 REV. 1040ex form PROC. 1040ex form 2013-21 TABLE 2 DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE IN CALENDAR YEAR 2013 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION APPLIES Tax Year Amount 1st Tax Year $11,360 2nd Tax Year $5,400 3rd Tax Year $3,250 Each Succeeding Year $1,975 REV. 1040ex form PROC. 1040ex form 2013-21 TABLE 3 DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) PLACED IN SERVICE IN CALENDAR YEAR 2013 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION DOES NOT APPLY Tax Year Amount 1st Tax Year $3,160 2nd Tax Year $5,100 3rd Tax Year $3,050 Each Succeeding Year $1,875 REV. 1040ex form PROC. 1040ex form 2013-21 TABLE 4 DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE IN CALENDAR YEAR 2013 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION DOES NOT APPLY Tax Year Amount 1st Tax Year $3,360 2nd Tax Year $5,400 3rd Tax Year $3,250 Each Succeeding Year $1,975 . 1040ex form 02 Inclusions in Income of Lessees of Passenger Automobiles. 1040ex form A taxpayer must follow the procedures in § 1. 1040ex form 280F-7(a) for determining the inclusion amounts for passenger automobiles first leased in calendar year 2013. 1040ex form In applying these procedures, lessees of passenger automobiles other than trucks and vans should use Table 5 of this revenue procedure, while lessees of trucks and vans should use Table 6 of this revenue procedure. 1040ex form REV. 1040ex form PROC. 1040ex form 2013-21 TABLE 5 DOLLAR AMOUNTS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2013 Fair Market Value of Passenger Automobile Tax Year During Lease Over Not Over 1st 2nd 3rd 4th 5th & later $19,000 $19,500 2 4 6 7 8 19,500 20,000 2 5 6 9 9 20,000 20,500 2 5 8 9 11 20,500 21,000 3 6 8 10 12 21,000 21,500 3 6 10 11 13 21,500 22,000 3 7 10 13 14 22,000 23,000 4 8 11 14 16 23,000 24,000 4 9 14 16 18 24,000 25,000 5 10 15 18 21 25,000 26,000 5 12 16 21 23 26,000 27,000 6 12 19 23 25 27,000 28,000 6 14 20 25 28 28,000 29,000 7 15 22 27 30 29,000 30,000 7 16 24 29 33 30,000 31,000 8 17 26 31 35 31,000 32,000 8 19 27 33 38 32,000 33,000 9 20 29 35 40 33,000 34,000 10 21 31 37 43 34,000 35,000 10 22 33 39 45 35,000 36,000 11 23 35 41 48 36,000 37,000 11 25 36 43 50 37,000 38,000 12 26 38 45 53 38,000 39,000 12 27 40 47 55 39,000 40,000 13 28 42 49 58 40,000 41,000 13 29 44 52 59 41,000 42,000 14 30 45 54 63 42,000 43,000 14 32 47 56 64 43,000 44,000 15 33 48 59 67 44,000 45,000 15 34 51 60 69 45,000 46,000 16 35 52 63 72 46,000 47,000 17 36 54 65 74 47,000 48,000 17 38 55 67 77 48,000 49,000 18 39 57 69 79 49,000 50,000 18 40 59 71 82 50,000 51,000 19 41 61 73 84 51,000 52,000 19 42 63 75 87 52,000 53,000 20 43 65 77 89 53,000 54,000 20 45 66 79 92 54,000 55,000 21 46 68 81 94 55,000 56,000 21 47 70 84 96 56,000 57,000 22 48 72 85 99 57,000 58,000 22 50 73 88 101 58,000 59,000 23 51 75 90 103 59,000 60,000 24 52 76 92 106 60,000 62,000 24 54 79 95 110 62,000 64,000 25 56 83 99 115 64,000 66,000 27 58 87 103 120 66,000 68,000 28 60 90 108 125 68,000 70,000 29 63 93 112 130 70,000 72,000 30 65 97 117 134 72,000 74,000 31 68 100 121 139 74,000 76,000 32 70 104 125 144 76,000 78,000 33 73 107 129 149 78,000 80,000 34 75 111 133 154 80,000 85,000 36 79 117 141 162 85,000 90,000 39 85 126 151 174 90,000 95,000 41 91 135 162 186 95,000 100,000 44 97 144 172 199 100,000 110,000 48 106 157 188 217 110,000 120,000 53 118 174 210 241 120,000 130,000 59 129 193 230 266 130,000 140,000 64 141 210 252 290 140,000 150,000 70 153 227 273 315 150,000 160,000 75 165 245 294 339 160,000 170,000 80 177 263 315 363 170,000 180,000 86 189 280 336 388 180,000 190,000 91 201 298 357 412 190,000 200,000 97 212 316 378 436 200,000 210,000 102 224 333 400 461 210,000 220,000 107 236 351 420 486 220,000 230,000 113 248 368 442 509 230,000 240,000 118 260 386 463 534 240,000 And up 124 272 403 484 558 REV. 1040ex form PROC. 1040ex form 2013-21 TABLE 6 DOLLAR AMOUNTS FOR TRUCKS AND VANS WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2013 Fair Market Value of Truck or Van Tax Year During Lease Over Not Over 1st 2nd 3rd 4th 5th & later $19,000 $19,500 1 3 4 5 6 19,500 20,000 2 3 5 6 7 20,000 20,500 2 4 6 7 8 20,500 21,000 2 5 7 8 9 21,000 21,500 2 5 8 9 11 21,500 22,000 3 6 8 10 12 22,000 23,000 3 7 10 11 14 23,000 24,000 4 8 11 14 16 24,000 25,000 4 9 14 16 18 25,000 26,000 5 10 15 18 21 26,000 27,000 5 12 17 20 23 27,000 28,000 6 13 18 23 25 28,000 29,000 6 14 20 25 28 29,000 30,000 7 15 22 27 30 30,000 31,000 7 16 24 29 33 31,000 32,000 8 17 26 31 35 32,000 33,000 8 19 27 33 38 33,000 34,000 9 20 29 35 41 34,000 35,000 10 21 31 37 43 35,000 36,000 10 22 33 39 46 36,000 37,000 11 23 35 41 48 37,000 38,000 11 25 36 43 51 38,000 39,000 12 26 38 45 53 39,000 40,000 12 27 40 48 55 40,000 41,000 13 28 42 49 58 41,000 42,000 13 29 44 52 60 42,000 43,000 14 30 46 54 62 43,000 44,000 14 32 47 56 65 44,000 45,000 15 33 48 59 67 45,000 46,000 15 34 51 60 70 46,000 47,000 16 35 52 63 72 47,000 48,000 17 36 54 65 74 48,000 49,000 17 38 55 67 77 49,000 50,000 18 39 57 69 79 50,000 51,000 18 40 59 71 82 51,000 52,000 19 41 61 73 84 52,000 53,000 19 42 63 75 87 53,000 54,000 20 43 65 77 89 54,000 55,000 20 45 66 80 91 55,000 56,000 21 46 68 81 94 56,000 57,000 21 47 70 84 96 57,000 58,000 22 48 72 86 98 58,000 59,000 22 50 73 88 101 59,000 60,000 23 51 75 90 103 60,000 62,000 24 52 78 93 108 62,000 64,000 25 55 81 97 113 64,000 66,000 26 57 85 101 118 66,000 68,000 27 60 88 106 122 68,000 70,000 28 62 92 110 127 70,000 72,000 29 64 96 114 132 72,000 74,000 30 67 99 118 137 74,000 76,000 31 69 103 122 142 76,000 78,000 32 72 105 127 147 78,000 80,000 34 73 110 131 151 80,000 85,000 35 78 116 138 160 85,000 90,000 38 84 124 149 172 90,000 95,000 41 90 133 160 184 95,000 100,000 44 95 142 171 196 100,000 110,000 48 104 156 186 214 110,000 120,000 53 116 173 207 240 120,000 130,000 58 128 191 228 264 130,000 140,000 64 140 208 249 288 140,000 150,000 69 152 226 270 313 150,000 160,000 75 164 243 292 336 160,000 170,000 80 176 261 312 361 170,000 180,000 85 188 278 334 386 180,000 190,000 91 199 296 355 410 190,000 200,000 96 211 314 376 434 200,000 210,000 101 223 332 397 459 210,000 220,000 107 235 349 418 483 220,000 230,000 112 247 367 439 507 230,000 240,000 118 259 384 460 532 240,000 And up 123 271 401 482 556 SECTION 5. 1040ex form EFFECTIVE DATE This revenue procedure applies to passenger automobiles that a taxpayer first places in service or first leases during calendar year 2013. 1040ex form SECTION 6. 1040ex form DRAFTING INFORMATION The principal author of this revenue procedure is Bernard P. 1040ex form Harvey of the Office of Associate Chief Counsel (Income Tax & Accounting). 1040ex form For further information regarding this revenue procedure, contact Mr. 1040ex form Harvey at (202) 622-4930 (not a toll-free call). 1040ex form Prev  Up  Next   Home   More Internal Revenue Bulletins
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The 1040ex Form

1040ex form 5. 1040ex form   Taxes Table of Contents What's New Introduction Topics - This chapter discusses: Useful Items - You may want to see: When To Deduct Taxes Real Estate TaxesSeparate elections. 1040ex form Making the election. 1040ex form Form 3115. 1040ex form Income TaxesAccrual of contested income taxes. 1040ex form Employment Taxes Other TaxesAdditional Medicare Tax. 1040ex form What's New Additional Medicare Tax. 1040ex form  Beginning in 2013, you must withhold a 0. 1040ex form 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. 1040ex form Also, self-employed individuals may be required to pay Additional Medicare Tax on self-employment income. 1040ex form See Employment Taxes , and Self-employment tax , later. 1040ex form Introduction You can deduct various federal, state, local, and foreign taxes directly attributable to your trade or business as business expenses. 1040ex form You cannot deduct federal income taxes, estate and gift taxes, or state inheritance, legacy, and succession taxes. 1040ex form Topics - This chapter discusses: When to deduct taxes Real estate taxes Income taxes Employment taxes Other taxes Useful Items - You may want to see: Publication 15 (Circular E), Employer's Tax Guide 334 Tax Guide for Small Business 510 Excise Taxes 538 Accounting Periods and Methods 551 Basis of Assets Form (and Instructions) Sch A (Form 1040) Itemized Deductions Sch SE (Form 1040) Self-Employment Tax 3115 Application for Change in Accounting Method 8959 Additional Medicare Tax See chapter 12 for information about getting publications and forms. 1040ex form When To Deduct Taxes Generally, you can only deduct taxes in the year you pay them. 1040ex form This applies whether you use the cash method or an accrual method of accounting. 1040ex form Under an accrual method, you can deduct a tax before you pay it if you meet the exception for recurring items discussed under Economic Performance in Publication 538. 1040ex form You can also elect to ratably accrue real estate taxes as discussed later under Real Estate Taxes . 1040ex form Limit on accrual of taxes. 1040ex form   A taxing jurisdiction can require the use of a date for accruing taxes that is earlier than the date it originally required. 1040ex form However, if you use an accrual method, and can deduct the tax before you pay it, use the original accrual date for the year of change and all future years to determine when you can deduct the tax. 1040ex form Example. 1040ex form Your state imposes a tax on personal property used in a trade or business conducted in the state. 1040ex form This tax is assessed and becomes a lien as of July 1 (accrual date). 1040ex form In 2013, the state changed the assessment and lien dates from July 1, 2014, to December 31, 2013, for property tax year 2014. 1040ex form Use the original accrual date (July 1, 2014) to determine when you can deduct the tax. 1040ex form You must also use the July 1 accrual date for all future years to determine when you can deduct the tax. 1040ex form Uniform capitalization rules. 1040ex form   Uniform capitalization rules apply to certain taxpayers who produce real property or tangible personal property for use in a trade or business or for sale to customers. 1040ex form They also apply to certain taxpayers who acquire property for resale. 1040ex form Under these rules, you either include certain costs in inventory or capitalize certain expenses related to the property, such as taxes. 1040ex form For more information, see chapter 1. 1040ex form Carrying charges. 1040ex form   Carrying charges include taxes you pay to carry or develop real estate or to carry, transport, or install personal property. 1040ex form You can elect to capitalize carrying charges not subject to the uniform capitalization rules if they are otherwise deductible. 1040ex form For more information, see chapter 7. 1040ex form Refunds of taxes. 1040ex form   If you receive a refund for any taxes you deducted in an earlier year, include the refund in income to the extent the deduction reduced your federal income tax in the earlier year. 1040ex form For more information, see Recovery of amount deducted (tax benefit rule) in chapter 1. 1040ex form    You must include in income any interest you receive on tax refunds. 1040ex form Real Estate Taxes Deductible real estate taxes are any state, local, or foreign taxes on real estate levied for the general public welfare. 1040ex form The taxing authority must base the taxes on the assessed value of the real estate and charge them uniformly against all property under its jurisdiction. 1040ex form Deductible real estate taxes generally do not include taxes charged for local benefits and improvements that increase the value of the property. 1040ex form See Taxes for local benefits , later. 1040ex form If you use an accrual method, you generally cannot accrue real estate taxes until you pay them to the government authority. 1040ex form However, you can elect to ratably accrue the taxes during the year. 1040ex form See Electing to ratably accrue , later. 1040ex form Taxes for local benefits. 1040ex form   Generally, you cannot deduct taxes charged for local benefits and improvements that tend to increase the value of your property. 1040ex form These include assessments for streets, sidewalks, water mains, sewer lines, and public parking facilities. 1040ex form You should increase the basis of your property by the amount of the assessment. 1040ex form   You can deduct taxes for these local benefits only if the taxes are for maintenance, repairs, or interest charges related to those benefits. 1040ex form If part of the tax is for maintenance, repairs, or interest, you must be able to show how much of the tax is for these expenses to claim a deduction for that part of the tax. 1040ex form Example. 1040ex form To improve downtown commercial business, Waterfront City converted a downtown business area street into an enclosed pedestrian mall. 1040ex form The city assessed the full cost of construction, financed with 10-year bonds, against the affected properties. 1040ex form The city is paying the principal and interest with the annual payments made by the property owners. 1040ex form The assessments for construction costs are not deductible as taxes or as business expenses, but are depreciable capital expenses. 1040ex form The part of the payments used to pay the interest charges on the bonds is deductible as taxes. 1040ex form Charges for services. 1040ex form   Water bills, sewerage, and other service charges assessed against your business property are not real estate taxes, but are deductible as business expenses. 1040ex form Purchase or sale of real estate. 1040ex form   If real estate is sold, the real estate taxes must be allocated between the buyer and the seller. 1040ex form   The buyer and seller must allocate the real estate taxes according to the number of days in the real property tax year (the period to which the tax imposed relates) that each owned the property. 1040ex form Treat the seller as paying the taxes up to but not including the date of sale. 1040ex form Treat the buyer as paying the taxes beginning with the date of sale. 1040ex form You can usually find this information on the settlement statement you received at closing. 1040ex form   If you (the seller) use an accrual method and have not elected to ratably accrue real estate taxes, you are considered to have accrued your part of the tax on the date you sell the property. 1040ex form Example. 1040ex form Alberto Verde, a calendar year accrual method taxpayer, owns real estate in Olmo County. 1040ex form He has not elected to ratably accrue property taxes. 1040ex form November 30 of each year is the assessment and lien date for the current real property tax year, which is the calendar year. 1040ex form He sold the property on June 30, 2013. 1040ex form Under his accounting method he would not be able to claim a deduction for the taxes because the sale occurred before November 30. 1040ex form He is treated as having accrued his part of the tax, 181/366  (January 1–June 29), on June 30, and he can deduct it for 2013. 1040ex form Electing to ratably accrue. 1040ex form   If you use an accrual method, you can elect to accrue real estate tax related to a definite period ratably over that period. 1040ex form Example. 1040ex form Juan Sanchez is a calendar year taxpayer who uses an accrual method. 1040ex form His real estate taxes for the real property tax year, July 1, 2013, to June 30, 2014, are $1,200. 1040ex form July 1 is the assessment and lien date. 1040ex form If Juan elects to ratably accrue the taxes, $600 will accrue in 2013 ($1,200 × 6/12, July 1–December 31) and the balance will accrue in 2014. 1040ex form Separate elections. 1040ex form   You can elect to ratably accrue the taxes for each separate trade or business and for nonbusiness activities if you account for them separately. 1040ex form Once you elect to ratably accrue real estate taxes, you must use that method unless you get permission from the IRS to change. 1040ex form See Form 3115 , later. 1040ex form Making the election. 1040ex form   If you elect to ratably accrue the taxes for the first year in which you incur real estate taxes, attach a statement to your income tax return for that year. 1040ex form The statement should show all the following items. 1040ex form The trades or businesses to which the election applies and the accounting method or methods used. 1040ex form The period to which the taxes relate. 1040ex form The computation of the real estate tax deduction for that first year. 1040ex form   Generally, you must file your return by the due date (including extensions). 1040ex form However, if you timely filed your return for the year without electing to ratably accrue, you can still make the election by filing an amended return within 6 months after the due date of the return (excluding extensions). 1040ex form Attach the statement to the amended return and write “Filed pursuant to section 301. 1040ex form 9100-2” on the statement. 1040ex form File the amended return at the same address where you filed the original return. 1040ex form Form 3115. 1040ex form    If you elect to ratably accrue real estate taxes for a year after the first year in which you incur real estate taxes, or if you want to revoke your election to ratably accrue real estate taxes, file Form 3115. 1040ex form For more information, including applicable time frames for filing, see the Instructions for Form 3115. 1040ex form Note. 1040ex form If you are filing an application for a change in accounting method filed after January 9, 2011, for a year of change ending after April 29, 2010, see Revenue Procedure 2011-14, 2011-4 I. 1040ex form R. 1040ex form B. 1040ex form 330, as modified and clarified by Revenue Procedure 2012-19, 2012-14 I. 1040ex form R. 1040ex form B. 1040ex form 689, and Revenue Procedure 2012-20, 2012-14 I. 1040ex form R. 1040ex form B. 1040ex form 700, or any successor. 1040ex form Revenue Procedure 2011-14 is available at  www. 1040ex form irs. 1040ex form gov/irb/2011-04IRB/ar08. 1040ex form html. 1040ex form Income Taxes This section discusses federal, state, local, and foreign income taxes. 1040ex form Federal income taxes. 1040ex form   You cannot deduct federal income taxes. 1040ex form State and local income taxes. 1040ex form   A corporation or partnership can deduct state and local income taxes imposed on the corporation or partnership as business expenses. 1040ex form An individual can deduct state and local income taxes only as an itemized deduction on Schedule A (Form 1040). 1040ex form   However, an individual can deduct a state tax on gross income (as distinguished from net income) directly attributable to a trade or business as a business expense. 1040ex form Accrual of contested income taxes. 1040ex form   If you use an accrual method, and you contest a state or local income tax liability, you must accrue and deduct any contested amount in the tax year in which the liability is finally determined. 1040ex form   If additional state or local income taxes for a prior year are assessed in a later year, you can deduct the taxes in the year in which they were originally imposed (the prior year) if the tax liability is not contested. 1040ex form You cannot deduct them in the year in which the liability is finally determined. 1040ex form    The filing of an income tax return is not considered a contest and, in the absence of an overt act of protest, you can deduct the tax in the prior year. 1040ex form Also, you can deduct any additional taxes in the prior year if you do not show some affirmative evidence of denial of the liability. 1040ex form   However, if you consistently deduct additional assessments in the year they are paid or finally determined (including those for which there was no contest), you must continue to do so. 1040ex form You cannot take a deduction in the earlier year unless you receive permission to change your method of accounting. 1040ex form For more information on accounting methods, see When Can I Deduct an Expense in chapter 1. 1040ex form Foreign income taxes. 1040ex form   Generally, you can take either a deduction or a credit for income taxes imposed on you by a foreign country or a U. 1040ex form S. 1040ex form possession. 1040ex form However, an individual cannot take a deduction or credit for foreign income taxes paid on income that is exempt from U. 1040ex form S. 1040ex form tax under the foreign earned income exclusion or the foreign housing exclusion. 1040ex form For information on these exclusions, see Publication 54, Tax Guide for U. 1040ex form S. 1040ex form Citizens and Resident Aliens Abroad. 1040ex form For information on the foreign tax credit, see Publication 514, Foreign Tax Credit for Individuals. 1040ex form Employment Taxes If you have employees, you must withhold various taxes from your employees' pay. 1040ex form Most employers must withhold their employees' share of social security, Medicare taxes, and Additional Medicare Tax (if applicable) along with state and federal income taxes. 1040ex form You may also need to pay certain employment taxes from your own funds. 1040ex form These include your share of social security and Medicare taxes as an employer, along with unemployment taxes. 1040ex form Note. 1040ex form Additional Medicare Tax is only imposed on the employee. 1040ex form There is no employer share of Additional Medicare Tax. 1040ex form Your deduction for wages paid is not reduced by the social security and Medicare taxes, Additional Medicare Tax, and income taxes you withhold from your employees. 1040ex form You can deduct the employment taxes you must pay from your own funds as taxes. 1040ex form Example. 1040ex form You pay your employee $18,000 a year. 1040ex form However, after you withhold various taxes, your employee receives $14,500. 1040ex form You also pay an additional $1,500 in employment taxes. 1040ex form You should deduct the full $18,000 as wages. 1040ex form You can deduct the $1,500 you pay from your own funds as taxes. 1040ex form For more information on employment taxes, see Publication 15 (Circular E). 1040ex form Unemployment fund taxes. 1040ex form   As an employer, you may have to make payments to a state unemployment compensation fund or to a state disability benefit fund. 1040ex form Deduct these payments as taxes. 1040ex form Other Taxes The following are other taxes you can deduct if you incur them in the ordinary course of your trade or business. 1040ex form Excise taxes. 1040ex form   Generally, you can deduct as a business expense all excise taxes that are ordinary and necessary expenses of carrying on your trade or business. 1040ex form However, see Fuel taxes , later. 1040ex form   For more information on excise taxes, see Publication 510. 1040ex form Franchise taxes. 1040ex form   You can deduct corporate franchise taxes as a business expense. 1040ex form Fuel taxes. 1040ex form   Generally, taxes on gasoline, diesel fuel, and other motor fuels that you use in your business are included as part of the cost of the fuel. 1040ex form Do not deduct these taxes as a separate item. 1040ex form   You may be entitled to a credit or refund for federal excise tax you paid on fuels used for certain purposes. 1040ex form For more information, see Publication 510. 1040ex form Occupational taxes. 1040ex form   You can deduct as a business expense an occupational tax charged at a flat rate by a locality for the privilege of working or conducting a business in the locality. 1040ex form Personal property tax. 1040ex form   You can deduct any tax imposed by a state or local government on personal property used in your trade or business. 1040ex form Sales tax. 1040ex form   Treat any sales tax you pay on a service or on the purchase or use of property as part of the cost of the service or property. 1040ex form If the service or the cost or use of the property is a deductible business expense, you can deduct the tax as part of that service or cost. 1040ex form If the property is merchandise bought for resale, the sales tax is part of the cost of the merchandise. 1040ex form If the property is depreciable, add the sales tax to the basis for depreciation. 1040ex form For more information on basis, see Publication 551. 1040ex form    Do not deduct state and local sales taxes imposed on the buyer that you must collect and pay over to the state or local government. 1040ex form Also, do not include these taxes in gross receipts or sales. 1040ex form Self-employment tax. 1040ex form   You can deduct part of your self-employment tax as a business expense in figuring your adjusted gross income. 1040ex form This deduction only affects your income tax. 1040ex form It does not affect your net earnings from self-employment or your self-employment tax. 1040ex form   To deduct the tax, enter on Form 1040, line 27, the amount shown on the Deduction for one-half of self-employment tax line of Schedule SE (Form 1040). 1040ex form   For more information on self-employment tax, see Publication 334. 1040ex form Additional Medicare Tax. 1040ex form   Beginning in 2013, you may be required to pay Additional Medicare Tax on self-employment income. 1040ex form See Form 8959 and the Instructions for Form 8959 for more information on the Additional Medicare Tax. 1040ex form Prev  Up  Next   Home   More Online Publications