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1040ez 2011 Tax Form

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1040ez 2011 Tax Form

1040ez 2011 tax form Accelerated Cost Recovery System (ACRS) Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: ACRS Defined What Can and Cannot Be Depreciated Under ACRSRecovery Property Nonrecovery Property How To Figure the DeductionUnadjusted Basis Classes of Recovery Property Recovery Periods Alternate ACRS Method (Modified Straight Line Method) ACRS Deduction in Short Tax Year DispositionsEarly dispositions of ACRS property other than 15-, 18-, or 19-year real property. 1040ez 2011 tax form Dispositions — mass asset accounts. 1040ez 2011 tax form Early dispositions — 15-year real property. 1040ez 2011 tax form Early dispositions — 18- and 19-year real property. 1040ez 2011 tax form Depreciation Recapture Topics - This chapter discusses: The definition of ACRS What can and cannot be depreciated under ACRS How to figure the deduction Dispositions Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets 551 Basis of Assets 583 Starting a Business and Keeping Records Form (and Instructions) 3115 Application for Change in Accounting Method 4562 Depreciation and Amortization The Accelerated Cost Recovery System (ACRS) applies to property first used before 1987. 1040ez 2011 tax form It is the name given to tax rules for getting back (recovering) through depreciation deductions the cost of property used in a trade or business or to produce income. 1040ez 2011 tax form These rules are mandatory and generally apply to tangible property placed in service after 1980 and before 1987. 1040ez 2011 tax form If you placed property in service during this period, you must continue to figure your depreciation under ACRS. 1040ez 2011 tax form If you used listed property placed in service after June 18, 1984, less than 50% for business in 1995, see Predominant Use Test in chapter 3. 1040ez 2011 tax form Listed property includes cars, other means of transportation, and certain computers. 1040ez 2011 tax form Any additions or improvements placed in service after 1986, including any components of a building (such as plumbing, wiring, storm windows, etc. 1040ez 2011 tax form ), are depreciated using MACRS, discussed in chapter 3 of Publication 946. 1040ez 2011 tax form It does not matter that the underlying property is depreciated under ACRS or one of the other methods. 1040ez 2011 tax form ACRS Defined ACRS consists of accelerated depreciation methods and an alternate ACRS method that could have been elected. 1040ez 2011 tax form The alternate ACRS method used a recovery percentage based on a modified straight line method. 1040ez 2011 tax form The law prescribes fixed percentages to be uses for each class of property. 1040ez 2011 tax form Property depreciable under ACRS is called recovery property. 1040ez 2011 tax form The recovery class of property determines the recovery period. 1040ez 2011 tax form Generally, the class life of property places it in a 3-year, 5-year, 10-year, 15-year, 18-year, or 19-year recovery class. 1040ez 2011 tax form Under ACRS, the prescribed percentages are used to recover the unadjusted basis of recovery property. 1040ez 2011 tax form To figure a depreciation deduction, you multiply the prescribed percentage for the recovery class by the unadjusted basis of the recovery property. 1040ez 2011 tax form You must continue to figure your depreciation under ACRS for property placed in service after 1980 and before 1987. 1040ez 2011 tax form For property you placed in service after 1986, you must use MACRS, discussed in chapter 3 of Publication 946. 1040ez 2011 tax form What Can and Cannot Be Depreciated Under ACRS ACRS applies to most depreciable tangible property placed in service after 1980 and before 1987. 1040ez 2011 tax form It includes new or used and real or personal property. 1040ez 2011 tax form The property must be for use in a trade or business or for the production of income. 1040ez 2011 tax form Property you acquired before 1981 or after 1986 is not ACRS recovery property. 1040ez 2011 tax form For information on depreciating property acquired before 1981, see chapter 2. 1040ez 2011 tax form For information on depreciating property acquired after 1986, see chapter 3 of Publication 946. 1040ez 2011 tax form Recovery Property Recovery property under ACRS is tangible depreciable property placed in service after 1980 and before 1987. 1040ez 2011 tax form It generally includes new or used property that you acquired after 1980 and before 1987 for use in your trade or business or for the production of income. 1040ez 2011 tax form Nonrecovery Property You cannot use ACRS for property you placed in service before 1981 or after 1986. 1040ez 2011 tax form Nonrecovery property also includes: Intangible property, Property you elected to exclude from ACRS that is properly depreciated under a method of depreciation that is not based on a term of years, Certain public utility property, and Certain property acquired and excluded from ACRS because of the antichurning rules. 1040ez 2011 tax form Intangible property. 1040ez 2011 tax form   Intangible property is not depreciated under ACRS. 1040ez 2011 tax form Property depreciated under methods not expressed in a term of years. 1040ez 2011 tax form   Certain property depreciated under a method not expressed in a term of years is not depreciated under ACRS. 1040ez 2011 tax form This included any property: If you made an irrevocable election to exclude such property, and In the first year that you could have claimed depreciation, you properly used the unit-of-production method or any method of depreciation not expressed in a term of years (not including the retirement-replacement-betterment method). 1040ez 2011 tax form Public utility property. 1040ez 2011 tax form   Public utility property for which the taxpayer does not use a normalization method of accounting is excluded from ACRS and is subject to depreciation under a special rule. 1040ez 2011 tax form Additions or improvements to ACRS property after 1986. 1040ez 2011 tax form   Any additions or improvements placed in service after 1986, including any components of a building (plumbing, wiring, storm windows, etc. 1040ez 2011 tax form ) are depreciated using MACRS, discussed in chapter 3 of Publication 946. 1040ez 2011 tax form It does not matter that the underlying property is depreciated under ACRS or one of the other methods. 1040ez 2011 tax form How To Figure the Deduction After you determine that your property can be depreciated under ACRS, you are ready to figure your deduction. 1040ez 2011 tax form Because the conventions are built into the percentage table rates, you only need to know the following: The unadjusted basis of your recovery property, The classes of recovery property, The recovery periods, and Whether to use the prescribed percentages based on accelerated methods or percentages based on using the alternate ACRS method. 1040ez 2011 tax form Unadjusted Basis To figure your ACRS deduction, you multiply the unadjusted basis in your recovery property by its applicable percentage for the year. 1040ez 2011 tax form Unadjusted basis is the same amount you would use to figure gain on a sale, but it is figured without taking into account any depreciation taken in earlier years. 1040ez 2011 tax form However, reduce your original basis by the amount of amortization taken on the property and by any section 179 deduction claimed as discussed in chapter 2 of Publication 946. 1040ez 2011 tax form If you buy property, your unadjusted basis is usually its cost minus any amortized amount and minus any section 179 deduction elected. 1040ez 2011 tax form If you acquire property in some other way, such as by inheriting it, getting it as a gift, or building it yourself, you figure your unadjusted basis under other rules. 1040ez 2011 tax form See Publication 551. 1040ez 2011 tax form Classes of Recovery Property All recovery property under ACRS is in one of the following classes. 1040ez 2011 tax form The class for your property was determined when you began to depreciate it. 1040ez 2011 tax form 3-Year Property 3-year property includes automobiles, light-duty trucks (actual unloaded weight less than 13,000 pounds), and tractor units for use over-the-road. 1040ez 2011 tax form Race horses over 2 years old when placed in service are 3-year property. 1040ez 2011 tax form Any other horses over 12 years old when you placed them in service are also included in the 3-year property class. 1040ez 2011 tax form The ACRS percentages for 3-year recovery property are: Recovery Period Percentage 1st year 25% 2nd year 38% 3rd year 37% If you used the percentages above to depreciate your 3-year recovery property, your property, except for certain passenger automobiles, is fully depreciated. 1040ez 2011 tax form You cannot claim depreciation for this property after 1988. 1040ez 2011 tax form 5-Year Property 5-year property includes computers, copiers, and equipment, such as office furniture and fixtures. 1040ez 2011 tax form It also includes single purpose agricultural or horticultural structures and petroleum storage facilities (other than buildings and their structural components). 1040ez 2011 tax form The ACRS percentages for 5-year recovery property are: Recovery period Percentage 1st year 15% 2nd year 22% 3rd through 5th year 21% If you used the percentages above to depreciate your 5-year recovery property, it is fully depreciated. 1040ez 2011 tax form You cannot claim depreciation for this property after 1990. 1040ez 2011 tax form 10-Year Property 10-year property includes certain real property such as theme-park structures and certain public utility property. 1040ez 2011 tax form Manufactured homes (including mobile homes) and railroad tank cars are also 10-year property. 1040ez 2011 tax form You do not treat a building, and its structural components, as 10-year property by reason of a change in use after you placed the property in service. 1040ez 2011 tax form For example, a building (15-year real property) that was placed in service in 1981 and was converted to a theme-park structure in 1986 remains 15-year real property. 1040ez 2011 tax form The ACRS percentages for 10-year recovery property are: Recovery Period Percentage 1st year 8% 2nd year 14% 3rd year 12% 4th through 6th year 10% 7th through 10th year 9% If you used the percentages above, you cannot claim depreciation for this property after 1995. 1040ez 2011 tax form Example. 1040ez 2011 tax form On April 21, 1986, you bought and placed in service a new mobile home for $26,000 to be used as rental property. 1040ez 2011 tax form You paid $10,000 cash and signed a note for $16,000 giving you an unadjusted basis of $26,000. 1040ez 2011 tax form On June 8, 1986, you bought and placed in service a used mobile home for use as rental property at a total cost of $11,500. 1040ez 2011 tax form The total unadjusted basis of your 10-year recovery property placed in service in 1986 was $37,500 ($26,000 + $11,500). 1040ez 2011 tax form Your ACRS deduction was $3,000 (8% × $37,500). 1040ez 2011 tax form In 1987, your ACRS deduction was $5,250 (14% × $37,500). 1040ez 2011 tax form In 1988, your ACRS deduction was $4,500 (12% × $37,500). 1040ez 2011 tax form In 1989, 1990, and 1991, your ACRS deduction was $3,750 (10% × $37,500). 1040ez 2011 tax form In 1992, 1993, 1994, and 1995 your deduction for each year is $3,375 (9% × $37,500). 1040ez 2011 tax form 15-Year Real Property 15-year real property is real property that is recovery property placed in service before March 16, 1984. 1040ez 2011 tax form It includes all real property, such as buildings, other than that designated as 5-year or 10-year property. 1040ez 2011 tax form Unlike the 3-, 5-, or 10-year classes of property, the percentages for 15-year real property depend on when you placed the property in service during your tax year. 1040ez 2011 tax form You could group 15-year real property by month and year placed in service. 1040ez 2011 tax form In Table 1, at the end of this publication in the Appendix, find the month in your tax year that you placed the property in service in your trade or business or for the production of income. 1040ez 2011 tax form You use the percentages listed under that month for each year of the recovery period to determine your depreciation deduction each year. 1040ez 2011 tax form Example. 1040ez 2011 tax form On March 5, 1984, you placed an apartment building in service in your business. 1040ez 2011 tax form It is 15-year real property. 1040ez 2011 tax form After subtracting the value of the land, your unadjusted basis in the building is $250,000. 1040ez 2011 tax form You use the calendar year as your tax year. 1040ez 2011 tax form March is the third month of your tax year. 1040ez 2011 tax form Your ACRS deduction for 1984 was $25,000 (10% × $250,000). 1040ez 2011 tax form For 1985, the percentage for the third month of the second year of the recovery period is 11%. 1040ez 2011 tax form Your deduction was $27,500 (11% × $250,000). 1040ez 2011 tax form For the third, fourth, and fifth years of the recovery period (1986, 1987, and 1988), the percentages are 9%, 8%, and 7%. 1040ez 2011 tax form For 1989 through 1992, the percentage for the third month is 6%. 1040ez 2011 tax form Your deduction each year is $15,000 (6% × $250,000). 1040ez 2011 tax form For 1993, 1994, and 1995, the percentage for the third month is 5%. 1040ez 2011 tax form Your depreciation deduction is $12,500 (5% × $250,000) for 1993, 1994, and 1995. 1040ez 2011 tax form Low-Income Housing Low-income housing that was assigned a 15-year recovery period under ACRS includes the following types of property: Federally assisted housing projects where the mortgage is insured under section 221(d)(3) or 236 of the National Housing Act, or housing financed or assisted by direct loan or tax abatement under similar provisions of state or local laws. 1040ez 2011 tax form Low-income rental housing for which a depreciation deduction for rehabilitation expenditures is allowed. 1040ez 2011 tax form Low-income rental housing held for occupancy by families or individuals eligible to receive subsidies under section 8 of the United States Housing Act of 1937, as amended, or under the provisions of state or local laws that authorize similar subsidies for low-income families. 1040ez 2011 tax form Housing financed or assisted by direct loan or insured under Title V of the Housing Act of 1949. 1040ez 2011 tax form The ACRS percentages for low-income housing real property, like the regular 15-year real property percentages, depend on when you placed the property in service. 1040ez 2011 tax form Find the month in your tax year in Table 2 or 3 at the end of this publication in the Appendix that you first placed the property in service as rental housing. 1040ez 2011 tax form Use the percentages listed under that month for each year of the recovery period. 1040ez 2011 tax form Table 2 shows percentages for low-income housing placed in service before May 9, 1985. 1040ez 2011 tax form Table 3 shows percentages for low-income housing placed in service after May 8, 1985, and before 1987. 1040ez 2011 tax form Example. 1040ez 2011 tax form In May 1986, you acquired and placed in service a house that qualified as low-income rental housing under item 3) of the above listing. 1040ez 2011 tax form You use the calendar year as your tax year. 1040ez 2011 tax form You use Table C–3 because the property was placed in service after May 8, 1985. 1040ez 2011 tax form Your unadjusted basis for the property, not including the land, was $59,000. 1040ez 2011 tax form Your deduction for 1986 through 2001 is shown in the following table. 1040ez 2011 tax form Year Rate Deduction 1986 8. 1040ez 2011 tax form 9% $5,251 1987 12. 1040ez 2011 tax form 1% 7,139 1988 10. 1040ez 2011 tax form 5% 6,195 1989 9. 1040ez 2011 tax form 1% 5,369 1990 7. 1040ez 2011 tax form 9% 4,661 1991 6. 1040ez 2011 tax form 9% 4,071 1992 5. 1040ez 2011 tax form 9% 3,481 1993 5. 1040ez 2011 tax form 2% 3,068 1994 4. 1040ez 2011 tax form 6% 2,714 1995 4. 1040ez 2011 tax form 6% 2,714 1996 4. 1040ez 2011 tax form 6% 2,714 1997 4. 1040ez 2011 tax form 6% 2,714 1998 4. 1040ez 2011 tax form 6% 2,714 1999 4. 1040ez 2011 tax form 5% 2,655 2000 4. 1040ez 2011 tax form 5% 2,655 2001 1. 1040ez 2011 tax form 5% 885 18-Year Real Property 18-year real property is real property that is recovery property placed in service after March 15, 1984, and before May 9, 1985. 1040ez 2011 tax form It includes real property, such as buildings, other than that designated as 5-year, 10-year, 15-year real property, or low-income housing. 1040ez 2011 tax form The ACRS percentages for 18-year real property depend on when you placed the property in service in your trade or business or for the production of income during your tax year. 1040ez 2011 tax form There are also tables for 18-year real property in the Appendix. 1040ez 2011 tax form Table 4 shows the percentages for 18-year real property you placed in service after June 22, 1984, and before May 9, 1985. 1040ez 2011 tax form Table 5 is for 18-year real property placed in service after March 15, 1984, and before June 23, 1984. 1040ez 2011 tax form Find the month in your tax year that you placed the property in service in a trade or business or for the production of income. 1040ez 2011 tax form Use the percentages listed under that month for each year of the recovery period. 1040ez 2011 tax form Example. 1040ez 2011 tax form On April 28, 1985, you bought and placed in service a rental house. 1040ez 2011 tax form The house, not including the land, cost $95,000. 1040ez 2011 tax form This is your unadjusted basis for the house. 1040ez 2011 tax form You use the calendar year as your tax year. 1040ez 2011 tax form Because the house was placed in service after June 22, 1984, and before May 9, 1985, it is 18-year real property. 1040ez 2011 tax form You use Table 4 to figure your deduction for the house. 1040ez 2011 tax form April is the fourth month of your tax year. 1040ez 2011 tax form Your deduction for 1985 through 2003 is shown in the following table. 1040ez 2011 tax form Year Rate Deduction 1985 7. 1040ez 2011 tax form 0% $6,650 1986 9. 1040ez 2011 tax form 0% 8,550 1987 8. 1040ez 2011 tax form 0% 7,600 1988 7. 1040ez 2011 tax form 0% 6,650 1989 7. 1040ez 2011 tax form 0% 6,650 1990 6. 1040ez 2011 tax form 0% 5,700 1991 5. 1040ez 2011 tax form 0% 4,750 1992 5. 1040ez 2011 tax form 0% 4,750 1993 5. 1040ez 2011 tax form 0% 4,750 1994 5. 1040ez 2011 tax form 0% 4,750 1995 5. 1040ez 2011 tax form 0% 4,750 1996 5. 1040ez 2011 tax form 0% 4,750 1997 5. 1040ez 2011 tax form 0% 4,750 1998 4. 1040ez 2011 tax form 0% 3,800 1999 4. 1040ez 2011 tax form 0% 3,800 2000 4. 1040ez 2011 tax form 0% 3,800 2001 4. 1040ez 2011 tax form 0% 3,800 2002 4. 1040ez 2011 tax form 0% 3,800 2003 1. 1040ez 2011 tax form 0% 950 19-Year Real Property 19-year real property is real property that is recovery property placed in service after May 8, 1985, and before 1987. 1040ez 2011 tax form It includes all real property, other than that designated as 5-year, 10-year, 15-year, or 18-year real property, or low-income housing. 1040ez 2011 tax form The ACRS percentages for 19-year real property depend on when you placed the property in service in a trade or business or for the production of income during your tax year. 1040ez 2011 tax form Table 6 shows the percentages for 19-year real property. 1040ez 2011 tax form You find the month in your tax year that you placed the property in service. 1040ez 2011 tax form You use the percentages listed under that month for each year of the recovery period. 1040ez 2011 tax form Recovery Periods Each item of recovery property is assigned to a class of property. 1040ez 2011 tax form The classes of recovery property establish the recovery periods over which the unadjusted basis of items in a class is recovered. 1040ez 2011 tax form The classes of property are: 3-Year property 5-Year property 10-Year property 15-Year real property Low-income housing 18-Year real property 19-Year real property Alternate ACRS Method (Modified Straight Line Method) ACRS provides an alternate ACRS method that could be elected. 1040ez 2011 tax form This alternate ACRS method uses a recovery percentage based on a modified straight line method. 1040ez 2011 tax form This alternate ACRS method generally uses percentages other than those from the tables. 1040ez 2011 tax form If you elected the alternate ACRS method, you determine the recovery period by using the following schedule. 1040ez 2011 tax form This schedule is for other than 18- and 19-year real property and low-income housing: In the case of: You could have elected a recovery period of: 3-year property 3, 5, or 12 years 5-year property 5, 12, or 25 years 15-year real property 15, 35, or 45 years Percentages. 1040ez 2011 tax form   The straight-line percentages for the alternate ACRS method are: Recovery Period Percentage 5 years 20. 1040ez 2011 tax form 00% 10 years 10. 1040ez 2011 tax form 00% 12 years 8. 1040ez 2011 tax form 333% 15 years 6. 1040ez 2011 tax form 667% 25 years 4. 1040ez 2011 tax form 00% 35 years 2. 1040ez 2011 tax form 857%   You apply the percentage to the unadjusted basis(defined earlier) of the property to figure your ACRS deduction. 1040ez 2011 tax form There are tables for 18- and 19-year real property later in this publication in the Appendix. 1040ez 2011 tax form For 15-year real property, see 15-year real property, later. 1040ez 2011 tax form 3-, 5-, and 10-year property. 1040ez 2011 tax form   If you elected to use an alternate recovery percentage, you have to use the same recovery percentage for all property in that class that you placed in service in that tax year. 1040ez 2011 tax form This applies throughout the recovery period you selected. 1040ez 2011 tax form Half-year convention. 1040ez 2011 tax form   If you elected the alternate method, only a half-year of depreciation was deducted for the year you placed the property in service. 1040ez 2011 tax form This applied regardless of when in the tax year you placed the property in service. 1040ez 2011 tax form For each of the remaining years in the recovery period, you take a full year's deduction. 1040ez 2011 tax form If you hold the property for the entire recovery period, a half-year of depreciation is allowable for the year following the end of the recovery period. 1040ez 2011 tax form Example. 1040ez 2011 tax form You operate a small upholstery business. 1040ez 2011 tax form On March 19, 1986, you bought and placed in service a $13,000 light-duty panel truck to be used in your business and a $500 electric saw. 1040ez 2011 tax form You elected to use the alternate ACRS method. 1040ez 2011 tax form You did not elect to take a section 179 deduction. 1040ez 2011 tax form You decided to recover the cost of the truck, which is 3-year recovery property, over 5 years. 1040ez 2011 tax form The saw is 5-year property, but you decided to recover its cost over 12 years. 1040ez 2011 tax form For 1986, your ACRS deduction reflected the half-year convention. 1040ez 2011 tax form In the first year, you deducted half of the amount determined for a full year. 1040ez 2011 tax form Your ACRS deduction for 1986 is as follows: Light-duty truck   5 years straight line = 20% 20% ÷ $13,000 = $2,600 Half-year convention -½ of $2,600= $1,300. 1040ez 2011 tax form 00     Electric saw   12 years straight line = 8. 1040ez 2011 tax form 333% 8. 1040ez 2011 tax form 333% ÷ $500 = $41. 1040ez 2011 tax form 67 Half-year convention -½ of $41. 1040ez 2011 tax form 67= 20. 1040ez 2011 tax form 84 Total ACRS deduction for 1986 $1,320. 1040ez 2011 tax form 84       You take a full year of depreciation for both the truck and the saw for the years 1987 through 1990. 1040ez 2011 tax form Your ACRS deduction for each of those years is as follows: Light-duty truck   5 years straight line = 20% 20% ÷ $13,000 = $2,600     Electric saw     12 years straight line = 8. 1040ez 2011 tax form 333% 8. 1040ez 2011 tax form 333% ÷ $500 = $41. 1040ez 2011 tax form 67 Total annual ACRS deduction for 1987 through 1990 $2,641. 1040ez 2011 tax form 67       In 1991, you take a half-year of depreciation for the truck and a full year of depreciation for the saw. 1040ez 2011 tax form Your ACRS deduction for 1991 is as follows: Light-duty truck   5 years straight line = 20% 20% ÷ $13,000 = $2,600 Half-year convention -½ of $2,600= $1,300. 1040ez 2011 tax form 00     Electric saw   12 years straight line = 8. 1040ez 2011 tax form 333% 8. 1040ez 2011 tax form 333% ÷ $500 = $41. 1040ez 2011 tax form 67 Total ACRS deduction for 1991 $1,341. 1040ez 2011 tax form 67       The truck is fully depreciated after 1991. 1040ez 2011 tax form You take a full year of depreciation for the saw for the years 1992 through 1997. 1040ez 2011 tax form Your ACRS deduction for each of those years is as follows: Electric saw     12 years straight line = 8. 1040ez 2011 tax form 333% 8. 1040ez 2011 tax form 333% ÷ $500 = $41. 1040ez 2011 tax form 67 Total annual ACRS deduction for 1992 through 1997 $41. 1040ez 2011 tax form 67       You take a half-year of depreciation for the saw for 1998. 1040ez 2011 tax form Your ACRS deduction for 1998 is as follows: Electric saw   12 years straight line = 8. 1040ez 2011 tax form 333% 8. 1040ez 2011 tax form 333% ÷ $500 = $41. 1040ez 2011 tax form 67 Half-year convention -½ of $41. 1040ez 2011 tax form 67= 20. 1040ez 2011 tax form 84 Total ACRS deduction for 1998 $20. 1040ez 2011 tax form 84       The saw is fully depreciated after 1998. 1040ez 2011 tax form 15-year real property. 1040ez 2011 tax form   Under ACRS, you could also elect to use the alternate ACRS method for 15-year real property. 1040ez 2011 tax form The alternate ACRS method allows you to depreciate your 15-year real property using the straight line ACRS method over the alternate recovery periods of 15, 35, or 45 years. 1040ez 2011 tax form If you selected a 15-year recovery period, you use the percentage (6. 1040ez 2011 tax form 667%) from the schedule above. 1040ez 2011 tax form You prorate this percentage for the number of months the property was in service in the first year. 1040ez 2011 tax form If you selected a 35- or 45-year recovery period, you use either Table 11 or 15. 1040ez 2011 tax form Alternate periods for 18-year real property. 1040ez 2011 tax form   For 18-year real property, the alternate recovery periods are 18, 35, or 45 years. 1040ez 2011 tax form The percentages for 18-year real property under the alternate method are in Tables 7, 8, 10, 11, 14, and 15 in the Appendix. 1040ez 2011 tax form There are two tables for each alternate recovery period. 1040ez 2011 tax form One table shows the percentage for property placed in service after June 22, 1984. 1040ez 2011 tax form The other table has the percentages for property placed in service after March 15, 1984, and before June 23, 1984. 1040ez 2011 tax form Alternate periods for 19-year real property. 1040ez 2011 tax form   For 19-year real property, the alternate recovery periods are 19, 35, or 45 years. 1040ez 2011 tax form If you selected a 19-year recovery period, use Table 9 to determine your deduction. 1040ez 2011 tax form If you select a 35- or 45-year recovery period, use either Table 13 or 14. 1040ez 2011 tax form Example. 1040ez 2011 tax form You placed in service an apartment building on August 3, 1986. 1040ez 2011 tax form The building is 19-year real property. 1040ez 2011 tax form The sales contract allocated $300,000 to the building and $100,000 to the land. 1040ez 2011 tax form You use the calendar year as your tax year. 1040ez 2011 tax form You chose the alternate ACRS method over a recovery period of 35 years. 1040ez 2011 tax form For 1986, you figure your ACRS deduction usingTable 13. 1040ez 2011 tax form August is the eighth month of your tax year. 1040ez 2011 tax form The percentage from Table 13 for the eighth month is 1. 1040ez 2011 tax form 1%. 1040ez 2011 tax form Your deduction was $3,300 ($300,000 ÷ 1. 1040ez 2011 tax form 1%). 1040ez 2011 tax form The deduction rate from ACRS Table 13 for years 2 through 20 is 2. 1040ez 2011 tax form 9% so that your deduction in 1987 through 2005 is $8,700 ($300,000 ÷ 2. 1040ez 2011 tax form 9%). 1040ez 2011 tax form Alternate periods for low-income housing. 1040ez 2011 tax form   For low-income housing, the alternate recovery periods are 15, 35, or 45 years. 1040ez 2011 tax form If you selected a 15-year period for this property, use 6. 1040ez 2011 tax form 667% as the percentage. 1040ez 2011 tax form If you selected a 35- or 45-year period, use either Table 11, 12, or 15. 1040ez 2011 tax form Election. 1040ez 2011 tax form   You had to make the election to use the alternate ACRS method by the return due date (including extensions) for the tax year you placed the property in service. 1040ez 2011 tax form Revocation of election. 1040ez 2011 tax form   Your election to use an alternate ACRS method, once made, can be changed only with the consent of the Commissioner. 1040ez 2011 tax form The Commissioner grants consent only in extraordinary circumstances. 1040ez 2011 tax form Any request for a revocation will be considered a request for a ruling. 1040ez 2011 tax form ACRS Deduction in Short Tax Year For a tax year that is less than 12 months, the ACRS deduction is prorated on a 12-month basis. 1040ez 2011 tax form Figure the amount of the ACRS deduction for a short tax year as follows: First, you figure the ACRS deduction for a full year. 1040ez 2011 tax form You figure this by multiplying the unadjusted basis by the recovery percentage. 1040ez 2011 tax form You then multiply the ACRS deduction determined for a full tax year by a fraction. 1040ez 2011 tax form The numerator (top number) of the fraction is the number of months in the short tax year and the denominator (bottom number) is 12. 1040ez 2011 tax form For example, a corporation placed in service in June 1986 an item of 3-year property with an unadjusted basis of $10,000. 1040ez 2011 tax form The corporation files a tax return, because of a change in its accounting period, for the 6-month short tax year ending June 30, 1986. 1040ez 2011 tax form The full year's ACRS deduction for this item is $2,500 ($10,000 ÷ 25%), the first year percentage from the 3-year table. 1040ez 2011 tax form The ACRS deduction for the short tax year is $1,250 ($2,500 ÷ 6/12). 1040ez 2011 tax form You use the full ACRS percentages during the remaining years of the recovery period. 1040ez 2011 tax form For the first tax year after the recovery period, the unrecovered basis will be deductible. 1040ez 2011 tax form Exception. 1040ez 2011 tax form   For the tax year in which you placed 15-, 18-, or 19-year real property in service or in the tax year you dispose of it, you compute the ACRS deduction for the number of months that the property is in service during that tax year. 1040ez 2011 tax form You compute the number of months using either a full month or mid-month convention. 1040ez 2011 tax form This is true regardless of the number of months in the tax year and the recovery period and method used. 1040ez 2011 tax form Dispositions A disposition is the permanent withdrawal of property from use in your trade or business or in the production of income. 1040ez 2011 tax form You can make a withdrawal by sale, exchange, retirement, abandonment, or destruction. 1040ez 2011 tax form You generally recognize gain or loss on the disposition of an asset by sale. 1040ez 2011 tax form However, nonrecognition rules can allow you to postpone some gain. 1040ez 2011 tax form See Publication 544. 1040ez 2011 tax form If you physically abandon property, you can deduct as a loss the adjusted basis of the asset at the time of its abandonment. 1040ez 2011 tax form Your intent must be to discard the asset so that you will not use it again or retrieve it for sale, exchange, or other disposition. 1040ez 2011 tax form Early dispositions. 1040ez 2011 tax form   The disposal of an asset before the end of its specified recovery period, is referred to as an early disposition. 1040ez 2011 tax form When an early disposition occurs, the depreciation deduction in the year of disposition depends on the class of property involved. 1040ez 2011 tax form Early dispositions of ACRS property other than 15-, 18-, or 19-year real property. 1040ez 2011 tax form   Generally, you get no ACRS deduction for the tax year in which you dispose of or retire recovery property, except for 15-, 18-, and 19-year real property. 1040ez 2011 tax form This means there is no depreciation deduction under ACRS in the year you dispose of or retire any of your 3-, 5-, or 10-year recovery property. 1040ez 2011 tax form Dispositions — mass asset accounts. 1040ez 2011 tax form   The law provides a special rule to avoid the calculation of gain on the disposition of assets from mass asset accounts. 1040ez 2011 tax form A mass asset account includes items usually minor in value in relation to the group, numerous in quantity, impractical to separately identify, and not usually accounted for on a separate basis, but on a total dollar value. 1040ez 2011 tax form Examples of mass assets include minor items of office, plant, and store furniture and fixtures. 1040ez 2011 tax form   Under the special rule, if you elected to use a mass asset account, you recognize gain to the extent of the proceeds from the disposition of the asset. 1040ez 2011 tax form You leave the unadjusted basis of the property in the account until recovered in future years. 1040ez 2011 tax form If you did this, include the total proceeds realized from the disposition in income on the tax return for the year of disposition. 1040ez 2011 tax form Early dispositions — 15-year real property. 1040ez 2011 tax form   If you dispose of 15-year real property, you base your ACRS deduction for the year of disposition on the number of months in use. 1040ez 2011 tax form You use a full-month convention. 1040ez 2011 tax form For a disposition at any time during a particular month before the end of the recovery period, no deduction is allowed for the month of disposition. 1040ez 2011 tax form This applies whether you use the regular ACRS method or elected the alternate ACRS method. 1040ez 2011 tax form Example. 1040ez 2011 tax form You purchased and placed in service a rental house on March 2, 1984, for $98,000 (not including the cost of land). 1040ez 2011 tax form You file your return based on a calendar year. 1040ez 2011 tax form Your rate from Table 1 for the third month is 10%. 1040ez 2011 tax form Your ACRS deduction for 1984 was $9,800 ($98. 1040ez 2011 tax form 000 ÷ 10%). 1040ez 2011 tax form For 1985 through 1988, you figured your ACRS deductions using 11%, 9%, 8%, and 7% ÷ $98,000. 1040ez 2011 tax form For 1989 through 1992, you figured your ACRS deductions using 6% for each year. 1040ez 2011 tax form The deduction each year was $98,000 ÷ 6%. 1040ez 2011 tax form For 1993 and 1994, the ACRS deduction is ($98,000 ÷ 5%) $4,900 for each year. 1040ez 2011 tax form You sell the house on June 1, 1995. 1040ez 2011 tax form You figure your ACRS deduction for 1995 for the full year and then prorate that amount for the months of use. 1040ez 2011 tax form The full ACRS deduction for 1995 is $4,900 ($98,000 ÷ 5%). 1040ez 2011 tax form You then prorate this amount to the 5 months in 1995 during which it was rented. 1040ez 2011 tax form Your ACRS deduction for 1995 is $2,042 ($4,900 ÷ 5/12). 1040ez 2011 tax form Early dispositions — 18- and 19-year real property. 1040ez 2011 tax form   If you dispose of 18- or 19-year real property, you base your ACRS deduction for the year of disposition on the number of months in use. 1040ez 2011 tax form For 18-year property placed in service before June 23, 1984, use a full-month convention on a disposition. 1040ez 2011 tax form For 18-year property placed in service after June 22, 1984, and for 19-year property, determine the number of months in use by using the mid-month convention. 1040ez 2011 tax form Under the mid-month convention,treat real property disposed of any time during a month as disposed of in the middle of that month. 1040ez 2011 tax form Count the month of disposition as half a month of use. 1040ez 2011 tax form Example. 1040ez 2011 tax form You purchased and placed in service a rental house on July 2, 1984, for $100,000 (not including the cost of land). 1040ez 2011 tax form You file your return based on a calendar year. 1040ez 2011 tax form Your rate from Table 4 for the seventh month is 4%. 1040ez 2011 tax form You figured your ACRS deduction for 1984 was $4,000 ($100,000 ÷ 4%). 1040ez 2011 tax form In 1985 through 1994, your ACRS deductions were 9%, 8%, 8%, 7%, 6%, 6%, 5%, 5%, and 5% ÷ $100,000. 1040ez 2011 tax form You sell the house on September 24, 1995. 1040ez 2011 tax form Figure your ACRS deduction for 1995 for the months of use. 1040ez 2011 tax form The full ACRS deduction for 1995 is $5,000 ($100,000 ÷ 5%). 1040ez 2011 tax form Prorate this amount for the 8. 1040ez 2011 tax form 5 months in 1995 that you held the property. 1040ez 2011 tax form Under the mid-month convention, you count September as half a month. 1040ez 2011 tax form Your ACRS deduction for 1995 is $3,542 ($5,000 ÷ 8. 1040ez 2011 tax form 5/12). 1040ez 2011 tax form Depreciation Recapture If you dispose of property depreciated under ACRS that is section 1245 recovery property, you will generally recognize gain or loss. 1040ez 2011 tax form Gain recognized on a disposition is ordinary income to the extent of prior depreciation deductions taken. 1040ez 2011 tax form This recapture rule applies to all personal property in the 3-year, 5-year, and 10-year classes. 1040ez 2011 tax form You recapture gain on manufactured homes and theme park structures in the 10-year class as section 1245 property. 1040ez 2011 tax form Section 1245 property generally includes all personal property. 1040ez 2011 tax form See Section 1245 property in chapter 4 of Publication 544 for more information. 1040ez 2011 tax form You treat dispositions of section 1250 real property on which you have a gain as section 1245 recovery property. 1040ez 2011 tax form You recognize gain on this property as ordinary income to the extent of prior depreciation deductions taken. 1040ez 2011 tax form Section 1250 property includes most real property. 1040ez 2011 tax form See Section 1250 property in chapter 4 of Publication 544 for more information. 1040ez 2011 tax form This rule applies to all section 1250 real property except the following property: Any 15-, 18-, or 19-year real property that is residential rental property. 1040ez 2011 tax form Any 15-, 18-, or 19-year real property that you elected to depreciate using the alternate ACRS method. 1040ez 2011 tax form Any 15-, 18-, or 19-year real property that is subsidized low-income housing. 1040ez 2011 tax form For these recapture rules, you treat the section 179 deduction and 50% of the investment credit that reduced your basis as depreciation. 1040ez 2011 tax form See Publication 544 for further discussion of dispositions of section 1245 and 1250 property. 1040ez 2011 tax form Prev  Up  Next   Home   More Online Publications
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National Taxpayer Advocate Reports to Congress and Research

By law, the National Taxpayer Advocate must submit two reports to Congress each year.

National Taxpayer Advocate's Objectives Report


The first report (Objectives Report), delivered each June, contains the goals and activities planned by the Taxpayer Advocate for the coming year.

National Taxpayer Advocate's Reports to Congress


The second report (Annual Report), delivered at the end of December, includes: A summary of the 20 most serious problems encountered by taxpayers; recommendations for solving those problems; and other IRS efforts to improve customer service and reduce taxpayer burden.

 NTA Objectives Reports

 

 NTA Annual Reports to Congress

 


Annual Report to Congress Report Cards

These documents list the recommendations proposed by the National Taxpayer Advocate in each Annual Report to Congress, along with the IRS response to each recommendation and TAS's assessment of the IRS's actions.

Congressional District Statistics


TAS produces taxpayer statistics summaries annually for each Congressional District. Each state is listed on a separate sheet containing state totals followed by a breakdown for each congressional district. The totals are stratified by income levels listed at the top of each sheet.

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Page Last Reviewed or Updated: 10-Mar-2014

The 1040ez 2011 Tax Form

1040ez 2011 tax form 5. 1040ez 2011 tax form   Soil and Water Conservation Expenses Table of Contents Introduction Topics - This chapter discusses: Business of Farming Plan Certification Conservation ExpensesWater well. 1040ez 2011 tax form Assessment by Conservation DistrictAssessment for Depreciable Property 25% Limit on DeductionNet operating loss. 1040ez 2011 tax form When to Deduct or Capitalize Sale of a Farm Introduction If you are in the business of farming, you can choose to deduct certain expenses for: Soil or water conservation, Prevention of erosion of land used in farming, or Endangered species recovery. 1040ez 2011 tax form Otherwise, these are capital expenses that must be added to the basis of the land. 1040ez 2011 tax form (See chapter 6 for information on determining basis. 1040ez 2011 tax form ) Conservation expenses for land in a foreign country do not qualify for this special treatment. 1040ez 2011 tax form The deduction for conservation expenses cannot be more than 25% of your gross income from farming. 1040ez 2011 tax form See 25% Limit on Deduction , later. 1040ez 2011 tax form Although some expenses are not deductible as soil and water conservation expenses, they may be deductible as ordinary and necessary farm expenses. 1040ez 2011 tax form These include interest and taxes, the cost of periodically clearing brush from productive land, the regular removal of sediment from a drainage ditch, and expenses paid or incurred primarily to produce an agricultural crop that may also conserve soil. 1040ez 2011 tax form You must include in income most government payments for approved conservation practices. 1040ez 2011 tax form However, you can exclude some payments you receive under certain cost-sharing conservation programs. 1040ez 2011 tax form For more information, see Agricultural Program Payments in chapter 3. 1040ez 2011 tax form To get the full deduction to which you are entitled, you should maintain your records to clearly distinguish between your ordinary and necessary farm business expenses and your soil and water conservation expenses. 1040ez 2011 tax form Topics - This chapter discusses: Business of farming Plan certification Conservation expenses Assessment by conservation district 25% limit on deduction When to deduct or capitalize Sale of a farm Business of Farming For purposes of soil and water conservation expenses, you are in the business of farming if you cultivate, operate, or manage a farm for profit, either as an owner or a tenant. 1040ez 2011 tax form You are not in the business of farming if you cultivate or operate a farm for recreation or pleasure, rather than for profit. 1040ez 2011 tax form You are not farming if you are engaged only in forestry or the growing of timber. 1040ez 2011 tax form Farm defined. 1040ez 2011 tax form   A farm includes livestock, dairy, poultry, fish, fruit, and truck farms. 1040ez 2011 tax form It also includes plantations, ranches, ranges, and orchards. 1040ez 2011 tax form A fish farm is an area where fish and other marine animals are grown or raised and artificially fed, protected, etc. 1040ez 2011 tax form It does not include an area where they are merely caught or harvested. 1040ez 2011 tax form A plant nursery is a farm for purposes of deducting soil and water conservation expenses. 1040ez 2011 tax form Farm rental. 1040ez 2011 tax form   If you own a farm and receive farm rental payments based on farm production, either in cash or crop shares, you are in the business of farming. 1040ez 2011 tax form If you get cash rental for a farm you own that is not used in farm production, you cannot deduct soil and water conservation expenses for that farm. 1040ez 2011 tax form   If you receive a fixed rental payment that is not based on farm production, you are in the business of farming only if you materially participate in operating or managing the farm. 1040ez 2011 tax form Example. 1040ez 2011 tax form You own a farm in Iowa and live in California. 1040ez 2011 tax form You rent the farm for $175 in cash per acre and do not materially participate in producing or managing production of the crops grown on the farm. 1040ez 2011 tax form You cannot deduct your soil conservation expenses for this farm. 1040ez 2011 tax form You must capitalize the expenses and add them to the basis of the land. 1040ez 2011 tax form     For more information, see Material participation for landlords under Landlord Participation in Farming in chapter 12. 1040ez 2011 tax form Plan Certification You can deduct soil and water conservation expenses only if they are consistent with a plan approved by the Natural Resources Conservation Service (NRCS) of the Department of Agriculture. 1040ez 2011 tax form If no such plan exists, the expenses must be consistent with a soil conservation plan of a comparable state agency. 1040ez 2011 tax form Keep a copy of the plan with your books and records to support your deductions. 1040ez 2011 tax form Conservation plan. 1040ez 2011 tax form   A conservation plan includes the farming conservation practices approved for the area where your farmland is located. 1040ez 2011 tax form There are three types of approved plans. 1040ez 2011 tax form NRCS individual site plans. 1040ez 2011 tax form These plans are issued individually to farmers who request assistance from NRCS to develop a conservation plan designed specifically for their farmland. 1040ez 2011 tax form NRCS county plans. 1040ez 2011 tax form These plans include a listing of farm conservation practices approved for the county where the farmland is located. 1040ez 2011 tax form You can deduct expenses for conservation practices not included on the NRCS county plans only if the practice is a part of an individual site plan. 1040ez 2011 tax form Comparable state agency plans. 1040ez 2011 tax form These plans are approved by state agencies and can be approved individual site plans or county plans. 1040ez 2011 tax form   A list of NRCS conservation programs is available at www. 1040ez 2011 tax form nrcs. 1040ez 2011 tax form usda. 1040ez 2011 tax form gov/programs. 1040ez 2011 tax form Individual site plans can be obtained from NRCS offices and the comparable state agencies. 1040ez 2011 tax form Conservation Expenses You can deduct conservation expenses only for land you or your tenant are using, or have used in the past, for farming. 1040ez 2011 tax form These expenses include, but are not limited to, the following. 1040ez 2011 tax form The treatment or movement of earth, such as: Leveling, Conditioning, Grading, Terracing, Contour furrowing, and Restoration of soil fertility. 1040ez 2011 tax form The construction, control, and protection of: Diversion channels, Drainage ditches, Irrigation ditches, Earthen dams, and Watercourses, outlets, and ponds. 1040ez 2011 tax form The eradication of brush. 1040ez 2011 tax form The planting of windbreaks. 1040ez 2011 tax form You cannot deduct expenses to drain or fill wetlands, or to prepare land for center pivot irrigation systems, as soil and water conservation expenses. 1040ez 2011 tax form These expenses are added to the basis of the land. 1040ez 2011 tax form If you choose to deduct soil and water conservation expenses, you cannot exclude from gross income any cost-sharing payments you receive for those expenses. 1040ez 2011 tax form See chapter 3 for information about payments eligible for the cost-sharing exclusion. 1040ez 2011 tax form New farm or farmland. 1040ez 2011 tax form   If you acquire a new farm or new farmland from someone who was using it in farming immediately before you acquired the land, soil and water conservation expenses you incur on it will be treated as made on land used in farming at the time the expenses were paid or incurred. 1040ez 2011 tax form You can deduct soil and water conservation expenses for this land if your use of it is substantially a continuation of its use in farming. 1040ez 2011 tax form The new farming activity does not have to be the same as the old farming activity. 1040ez 2011 tax form For example, if you buy land that was used for grazing cattle and then prepare it for use as an apple orchard, you can deduct your conservation expenses. 1040ez 2011 tax form Land not used for farming. 1040ez 2011 tax form   If your conservation expenses benefit both land that does not qualify as land used for farming and land that does qualify, you must allocate the expenses between the two types of land. 1040ez 2011 tax form For example, if the expenses benefit 200 acres of your land, but only 120 acres of this land are used for farming, then you can deduct 60% (120 ÷ 200) of the expenses. 1040ez 2011 tax form You can use another method to allocate these expenses if you can clearly show that your method is more reasonable. 1040ez 2011 tax form Depreciable conservation assets. 1040ez 2011 tax form   You generally cannot deduct your expenses for depreciable conservation assets. 1040ez 2011 tax form However, you can deduct certain amounts you pay or incur for an assessment for depreciable property that a soil and water conservation or drainage district levies against your farm. 1040ez 2011 tax form See Assessment for Depreciable Property , later. 1040ez 2011 tax form   You must capitalize expenses to buy, build, install, or improve depreciable structures or facilities. 1040ez 2011 tax form These expenses include those for materials, supplies, wages, fuel, hauling, and moving dirt when making structures such as tanks, reservoirs, pipes, culverts, canals, dams, wells, or pumps composed of masonry, concrete, tile, metal, or wood. 1040ez 2011 tax form You recover your capital investment through annual allowances for depreciation. 1040ez 2011 tax form   You can deduct soil and water conservation expenses for nondepreciable earthen items. 1040ez 2011 tax form Nondepreciable earthen items include certain dams, ponds, and terraces described under Property Having a Determinable Useful Life in chapter 7. 1040ez 2011 tax form Water well. 1040ez 2011 tax form   You cannot deduct the cost of drilling a water well for irrigation and other agricultural purposes as a soil and water conservation expense. 1040ez 2011 tax form It is a capital expense. 1040ez 2011 tax form You recover your cost through depreciation. 1040ez 2011 tax form You also must capitalize your cost for drilling a test hole. 1040ez 2011 tax form If the test hole produces no water and you continue drilling, the cost of the test hole is added to the cost of the producing well. 1040ez 2011 tax form You can recover the total cost through depreciation deductions. 1040ez 2011 tax form   If a test hole, dry hole, or dried-up well (resulting from prolonged lack of rain, for instance) is abandoned, you can deduct your unrecovered cost in the year of abandonment. 1040ez 2011 tax form Abandonment means that all economic benefits from the well are terminated. 1040ez 2011 tax form For example, filling or sealing a well excavation or casing so that all economic benefits from the well are terminated constitutes an abandonment. 1040ez 2011 tax form Endangered species recovery expenses. 1040ez 2011 tax form   If you are in the business of farming and meet other specific requirements, you can choose to deduct the conservation expenses discussed earlier as endangered species recovery expenses. 1040ez 2011 tax form Otherwise, these are capital expenses that must be added to the basis of the land. 1040ez 2011 tax form   The expenses must be paid or incurred for the purpose of achieving site-specific management actions recommended in a recovery plan approved under section 4(f) of the Endangered Species Act of 1973. 1040ez 2011 tax form See Internal Revenue Code section 175 for more information. 1040ez 2011 tax form Assessment by Conservation District In some localities, a soil or water conservation or drainage district incurs expenses for soil or water conservation and levies an assessment against the farmers who benefit from the expenses. 1040ez 2011 tax form You can deduct as a conservation expense amounts you pay or incur for the part of an assessment that: Covers expenses you could deduct if you had paid them directly, or Covers expenses for depreciable property used in the district's business. 1040ez 2011 tax form Assessment for Depreciable Property You generally can deduct as a conservation expense amounts you pay or incur for the part of a conservation or drainage district assessment that covers expenses for depreciable property. 1040ez 2011 tax form This includes items such as pumps, locks, concrete structures (including dams and weir gates), draglines, and similar equipment. 1040ez 2011 tax form The depreciable property must be used in the district's soil and water conservation activities. 1040ez 2011 tax form However, the following limits apply to these assessments. 1040ez 2011 tax form The total assessment limit. 1040ez 2011 tax form The yearly assessment limit. 1040ez 2011 tax form After you apply these limits, the amount you can deduct is added to your other conservation expenses for the year. 1040ez 2011 tax form The total for these expenses is then subject to the 25% of gross income from farming limit on the deduction, discussed later. 1040ez 2011 tax form See Table 5-1 for a brief summary of these limits. 1040ez 2011 tax form Table 5-1. 1040ez 2011 tax form Limits on Deducting an Assessment by a Conservation District for Depreciable Property Total Limit on Deduction for Assessment for Depreciable Property Yearly Limit on Deduction for Assessment for Depreciable Property Yearly Limit for All Conservation Expenses 10% of: $500 + 10% of: 25% of: Total assessment against all members of the district for the property. 1040ez 2011 tax form Your deductible share of the cost to the district for the property. 1040ez 2011 tax form Your gross income from farming. 1040ez 2011 tax form No one taxpayer can deduct more than 10% of the total assessment. 1040ez 2011 tax form Any amount over 10% is a capital expense and is added to the basis of your land. 1040ez 2011 tax form If an assessment is paid in installments, each payment must be prorated between the conservation expense and the capital expense. 1040ez 2011 tax form If the amount you pay or incur for any year is more than the limit, you can deduct for that year only 10% of your deductible share of the cost. 1040ez 2011 tax form You can deduct the remainder in equal amounts over the next 9 tax years. 1040ez 2011 tax form Limit for all conservation expenses, including assessments for depreciable property. 1040ez 2011 tax form Amounts greater than 25% can be carried to the following year and added to that year's expenses. 1040ez 2011 tax form The total is then subject to the 25% of gross income from farming limit in that year. 1040ez 2011 tax form To ensure your deduction is within the deduction limits, keep records to show the following. 1040ez 2011 tax form The total assessment against all members of the district for the depreciable property. 1040ez 2011 tax form Your deductible share of the cost to the district for the depreciable property. 1040ez 2011 tax form Your gross income from farming. 1040ez 2011 tax form Total assessment limit. 1040ez 2011 tax form   You cannot deduct more than 10% of the total amount assessed to all members of the conservation or drainage district for the depreciable property. 1040ez 2011 tax form This applies whether you pay the assessment in one payment or in installments. 1040ez 2011 tax form If your assessment is more than 10% of the total amount assessed, both the following rules apply. 1040ez 2011 tax form The amount over 10% is a capital expense and is added to the basis of your land. 1040ez 2011 tax form If the assessment is paid in installments, each payment must be prorated between the conservation expense and the capital expense. 1040ez 2011 tax form Yearly assessment limit. 1040ez 2011 tax form   The maximum amount you can deduct in any one year is the total of 10% of your deductible share of the cost as explained earlier, plus $500. 1040ez 2011 tax form If the amount you pay or incur is equal to or less than the maximum amount, you can deduct it in the year it is paid or incurred. 1040ez 2011 tax form If the amount you pay or incur is more, you can deduct in that year only 10% of your deductible share of the cost. 1040ez 2011 tax form You can deduct the remainder in equal amounts over the next 9 tax years. 1040ez 2011 tax form Your total conservation expense deduction for each year is also subject to the 25% of gross income from farming limit on the deduction, discussed later. 1040ez 2011 tax form Example 1. 1040ez 2011 tax form This year, the soil conservation district levies and you pay an assessment of $2,400 against your farm. 1040ez 2011 tax form Of the assessment, $1,500 is for digging drainage ditches. 1040ez 2011 tax form You can deduct this part as a soil or conservation expense as if you had paid it directly. 1040ez 2011 tax form The remaining $900 is for depreciable equipment to be used in the district's irrigation activities. 1040ez 2011 tax form The total amount assessed by the district against all its members for the depreciable equipment is $7,000. 1040ez 2011 tax form The total amount you can deduct for the depreciable equipment is limited to 10% of the total amount assessed by the district against all its members for depreciable equipment, or $700. 1040ez 2011 tax form The $200 excess ($900 − $700) is a capital expense you must add to the basis of your farm. 1040ez 2011 tax form To figure the maximum amount you can deduct for the depreciable equipment this year, multiply your deductible share of the total assessment ($700) by 10%. 1040ez 2011 tax form Add $500 to the result for a total of $570. 1040ez 2011 tax form Your deductible share, $700, is greater than the maximum amount deductible in one year, so you can deduct only $70 of the amount you paid or incurred for depreciable property this year (10% of $700). 1040ez 2011 tax form You can deduct the balance at the rate of $70 a year over the next 9 years. 1040ez 2011 tax form You add $70 to the $1,500 portion of the assessment for drainage ditches. 1040ez 2011 tax form You can deduct $1,570 of the $2,400 assessment as a soil and water conservation expense this year, subject to the 25% of gross income from farming limit on the deduction, discussed later. 1040ez 2011 tax form Example 2. 1040ez 2011 tax form Assume the same facts in Example 1 except that $1,850 of the $2,400 assessment is for digging drainage ditches and $550 is for depreciable equipment. 1040ez 2011 tax form The total amount assessed by the district against all its members for depreciable equipment is $5,500. 1040ez 2011 tax form The total amount you can deduct for the depreciable equipment is limited to 10% of this amount, or $550. 1040ez 2011 tax form The maximum amount you can deduct this year for the depreciable equipment is $555 (10% of your deductible share of the total assessment, $55, plus $500). 1040ez 2011 tax form Since your deductible share is less than the maximum amount deductible in one year, you can deduct the entire $550 this year. 1040ez 2011 tax form You can deduct the entire assessment, $2,400, as a soil and water conservation expense this year, subject to the 25% of gross income from farming limit on the deduction, discussed below. 1040ez 2011 tax form Sale or other disposal of land during 9-year period. 1040ez 2011 tax form   If you dispose of the land during the 9-year period for deducting conservation expenses subject to the yearly limit, any amounts you have not yet deducted because of this limit are added to the basis of the property. 1040ez 2011 tax form Death of farmer during 9-year period. 1040ez 2011 tax form   If a farmer dies during the 9-year period, any remaining amounts not yet deducted are deducted in the year of death. 1040ez 2011 tax form 25% Limit on Deduction The total deduction for conservation expenses in any tax year is limited to 25% of your gross income from farming for the year. 1040ez 2011 tax form Gross income from farming. 1040ez 2011 tax form   Gross income from farming is the income you derive in the business of farming from the production of crops, fish, fruits, other agricultural products, or livestock. 1040ez 2011 tax form Gains from sales of draft, breeding, or dairy livestock are included. 1040ez 2011 tax form Gains from sales of assets such as farm machinery, or from the disposition of land, are not included. 1040ez 2011 tax form Carryover of deduction. 1040ez 2011 tax form   If your deductible conservation expenses in any year are more than 25% of your gross income from farming for that year, you can carry the unused deduction over to later years. 1040ez 2011 tax form However, the deduction in any later year is limited to 25% of the gross income from farming for that year as well. 1040ez 2011 tax form Example. 1040ez 2011 tax form In 2012, you have gross income of $32,000 from two farms. 1040ez 2011 tax form During the year, you incurred $10,000 of deductible soil and water conservation expenses for one of the farms. 1040ez 2011 tax form However, your deduction is limited to 25% of $32,000, or $8,000. 1040ez 2011 tax form The $2,000 excess ($10,000 − $8,000) is carried over to 2013 and added to deductible soil and water conservation expenses made in that year. 1040ez 2011 tax form The total of the 2012 carryover plus 2013 expenses is deductible in 2013, subject to the limit of 25% of your gross income from farming in 2013. 1040ez 2011 tax form Any expenses over the limit in that year are carried to 2014 and later years. 1040ez 2011 tax form Net operating loss. 1040ez 2011 tax form   The deduction for soil and water conservation expenses, after applying the 25% limit, is included when figuring a net operating loss (NOL) for the year. 1040ez 2011 tax form If the NOL is carried to another year, the soil and water conservation deduction included in the NOL is not subject to the 25% limit in the year to which it is carried. 1040ez 2011 tax form When to Deduct or Capitalize If you choose to deduct soil and water conservation expenses, you must deduct the total allowable amount on your tax return for the first year you pay or incur these expenses. 1040ez 2011 tax form If you do not choose to deduct the expenses, you must capitalize them. 1040ez 2011 tax form Change of method. 1040ez 2011 tax form   If you want to change your method for the treatment of soil and water conservation expenses, or you want to treat the expenses for a particular project or a single farm in a different manner, you must get the approval of the IRS. 1040ez 2011 tax form To get this approval, submit a written request by the due date of your return for the first tax year you want the new method to apply. 1040ez 2011 tax form You or your authorized representative must sign the request. 1040ez 2011 tax form   The request must include the following information. 1040ez 2011 tax form Your name and address. 1040ez 2011 tax form The first tax year the method or change of method is to apply. 1040ez 2011 tax form Whether the method or change of method applies to all your soil and water conservation expenses or only to those for a particular project or farm. 1040ez 2011 tax form If the method or change of method does not apply to all your expenses, identify the project or farm to which the expenses apply. 1040ez 2011 tax form The total expenses you paid or incurred in the first tax year the method or change of method is to apply. 1040ez 2011 tax form A statement that you will account separately in your books for the expenses to which this method or change of method relates. 1040ez 2011 tax form Send your request to the following  address. 1040ez 2011 tax form  Department of the Treasury Internal Revenue Service Center Cincinnati, OH 45999  For more information, see Change in  Accounting Method in chapter 2. 1040ez 2011 tax form Sale of a Farm If you sell your farm, you cannot adjust the basis of the land at the time of the sale for any unused carryover of soil and water conservation expenses (except for deductions of assessments for depreciable property, discussed earlier). 1040ez 2011 tax form However, if you acquire another farm and return to the business of farming, you can start taking deductions again for the unused carryovers. 1040ez 2011 tax form Gain on sale of farmland. 1040ez 2011 tax form   If you held the land 5 years or less before you sold it, gain on the sale of the land is treated as ordinary income up to the amount you previously deducted for soil and water conservation expenses. 1040ez 2011 tax form If you held the land less than 10 but more than 5 years, the gain is treated as ordinary income up to a specified percentage of the previous deductions. 1040ez 2011 tax form See Section 1252 property under Other Gains in chapter 9. 1040ez 2011 tax form Prev  Up  Next   Home   More Online 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