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1040x Amended Tax Form

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1040x Amended Tax Form

1040x amended tax form 3. 1040x amended tax form   Lifetime Learning Credit Table of Contents Introduction Can You Claim the CreditWho Can Claim the Credit Who Cannot Claim the Credit What Expenses QualifyQualified Education Expenses No Double Benefit Allowed Expenses That Do Not Qualify Who Is an Eligible Student Who Can Claim a Dependent's Expenses Figuring the CreditEffect of the Amount of Your Income on the Amount of Your Credit Claiming the Credit Introduction For 2013, there are two tax credits available to help you offset the costs of higher education by reducing the amount of your income tax. 1040x amended tax form They are the American opportunity credit and the lifetime learning credit. 1040x amended tax form This chapter discusses the lifetime learning credit. 1040x amended tax form The American opportunity credit is discussed in chapter 2, The American Opportunity Credit . 1040x amended tax form This chapter explains: Who can claim the lifetime learning credit, What expenses qualify for the credit, Who is an eligible student, Who can claim a dependent's expenses, How to figure the credit, How to claim the credit, and When the credit must be repaid. 1040x amended tax form What is the tax benefit of the lifetime learning credit. 1040x amended tax form   For the tax year, you may be able to claim a lifetime learning credit of up to $2,000 for qualified education expenses paid for all eligible students. 1040x amended tax form There is no limit on the number of years the lifetime learning credit can be claimed for each student. 1040x amended tax form   A tax credit reduces the amount of income tax you may have to pay. 1040x amended tax form Unlike a deduction, which reduces the amount of income subject to tax, a credit directly reduces the tax itself. 1040x amended tax form The lifetime learning credit is a nonrefundable credit. 1040x amended tax form This means that it can reduce your tax to zero, but if the credit is more than your tax the excess will not be refunded to you. 1040x amended tax form   Your allowable lifetime learning credit may be limited by the amount of your income and the amount of your tax. 1040x amended tax form Can you claim more than one education credit this year. 1040x amended tax form   For each student, you can elect for any year only one of the credits. 1040x amended tax form For example, if you elect to take the lifetime learning credit for a child on your 2013 tax return, you cannot, for that same child, also claim the American opportunity credit for 2013. 1040x amended tax form   If you are eligible to claim the lifetime learning credit and you are also eligible to claim the American opportunity credit for the same student in the same year, you can choose to claim either credit, but not both. 1040x amended tax form   If you pay qualified education expenses for more than one student in the same year, you can choose to take certain credits on a per-student, per-year basis. 1040x amended tax form This means that, for example, you can claim the American opportunity credit for one student and the lifetime learning credit for another student in the same year. 1040x amended tax form Differences between the American opportunity and lifetime learning credits. 1040x amended tax form   There are several differences between these two credits. 1040x amended tax form For example, you can claim the American opportunity credit for the same student for no more than 4 tax years, but any year in which the Hope Scholarship Credit was claimed counts toward the 4 years. 1040x amended tax form However, there is no limit on the number of years for which you can claim a lifetime learning credit based on the same student's expenses. 1040x amended tax form The differences between these credits are shown in Appendix B, Highlights of Education Tax Benefits for Tax Year 2013 near the end of this publication. 1040x amended tax form Overview of the lifetime learning credit. 1040x amended tax form   See Table 3-1, Overview of the Lifetime Learning Credit for the basics of the lifetime learning credit. 1040x amended tax form The details are discussed in this chapter. 1040x amended tax form Can You Claim the Credit The following rules will help you determine if you are eligible to claim the lifetime learning credit on your tax return. 1040x amended tax form Who Can Claim the Credit Generally, you can claim the lifetime learning credit if all three of the following requirements are met. 1040x amended tax form You pay qualified education expenses of higher education. 1040x amended tax form You pay the education expenses for an eligible student. 1040x amended tax form The eligible student is either yourself, your spouse, or a dependent for whom you claim an exemption on your tax return. 1040x amended tax form Table 3-1. 1040x amended tax form Overview of the Lifetime Learning Credit Maximum credit Up to $2,000 credit per return Limit on modified adjusted gross income (MAGI) $127,000 if married filling jointly;  $63,000 if single, head of household, or qualifying widow(er) Refundable or nonrefundable Nonrefundable—credit limited to the amount of tax you must pay on your taxable income Number of years of postsecondary education Available for all years of postsecondary education and for courses to acquire or improve job skills Number of tax years credit available Available for an unlimited number of years Type of program required Student does not need to be pursuing a program leading to a degree or other recognized education credential Number of courses Available for one or more courses Felony drug conviction Felony drug convictions do not make the student ineligible Qualified expenses Tuition and fees required for enrollment or attendance (including amounts required to be paid to the institution for course-related books, supplies, and equipment) Payments for academic periods Payments made in 2013 for academic periods beginning in 2013 or beginning in the first 3 months of 2014 Note. 1040x amended tax form Qualified education expenses paid by a dependent for whom you claim an exemption, or by a third party for that dependent, are considered paid by you. 1040x amended tax form “Qualified education expenses” are defined later under Qualified Education Expenses . 1040x amended tax form “Eligible students” are defined later under Who Is an Eligible Student . 1040x amended tax form A dependent for whom you claim an exemption is defined later under Who Can Claim a Dependent's Expenses . 1040x amended tax form You may find Figure 3-1, Can You Claim the Lifetime Learning Credit for 2013 , later, helpful in determining if you can claim a lifetime learning credit on your tax return. 1040x amended tax form Who Cannot Claim the Credit You cannot claim the lifetime learning credit for 2013 if any of the following apply. 1040x amended tax form Your filing status is married filing separately. 1040x amended tax form You are listed as a dependent on another person's tax return (such as your parents'). 1040x amended tax form See Who Can Claim a Dependent's Expenses , later. 1040x amended tax form Your modified adjusted gross income (MAGI) is $63,000 or more ($127,000 or more in the case of a joint return). 1040x amended tax form MAGI is explained later under Effect of the Amount of Your Income on the Amount of Your Credit . 1040x amended tax form You (or your spouse) were a nonresident alien for any part of 2013 and the nonresident alien did not elect to be treated as a resident alien for tax purposes. 1040x amended tax form More information on nonresident aliens can be found in Publication 519. 1040x amended tax form You claim the American Opportunity Credit (see chapter 2) or a Tuition and Fees Deduction (see chapter 6) for the same student in 2013. 1040x amended tax form What Expenses Qualify The lifetime learning credit is based on qualified education expenses you pay for yourself, your spouse, or a dependent for whom you claim an exemption on your tax return. 1040x amended tax form Generally, the credit is allowed for qualified education expenses paid in 2013 for an academic period beginning in 2013 or in the first 3 months of 2014. 1040x amended tax form For example, if you paid $1,500 in December 2013 for qualified tuition for the spring 2014 semester beginning in January 2014, you may be able to use that $1,500 in figuring your 2013 credit. 1040x amended tax form Academic period. 1040x amended tax form   An academic period includes a semester, trimester, quarter, or other period of study (such as a summer school session) as reasonably determined by an educational institution. 1040x amended tax form In the case of an educational institution that uses credit hours or clock hours and does not have academic terms, each payment period can be treated as an academic period. 1040x amended tax form Paid with borrowed funds. 1040x amended tax form   You can claim a lifetime learning credit for qualified education expenses paid with the proceeds of a loan. 1040x amended tax form You use the expenses to figure the lifetime learning credit for the year in which the expenses are paid, not the year in which the loan is repaid. 1040x amended tax form Treat loan disbursements sent directly to the educational institution as paid on the date the institution credits the student's account. 1040x amended tax form Student withdraws from class(es). 1040x amended tax form   You can claim a lifetime learning credit for qualified education expenses not refunded when a student withdraws. 1040x amended tax form Qualified Education Expenses For purposes of the lifetime learning credit, qualified education expenses are tuition and certain related expenses required for enrollment in a course at an eligible educational institution. 1040x amended tax form The course must be either part of a postsecondary degree program or taken by the student to acquire or improve job skills. 1040x amended tax form Eligible educational institution. 1040x amended tax form   An eligible educational institution is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U. 1040x amended tax form S. 1040x amended tax form Department of Education. 1040x amended tax form It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. 1040x amended tax form The educational institution should be able to tell you if it is an eligible educational institution. 1040x amended tax form   Certain educational institutions located outside the United States also participate in the U. 1040x amended tax form S. 1040x amended tax form Department of Education's Federal Student Aid (FSA) programs. 1040x amended tax form Related expenses. 1040x amended tax form   Student-activity fees and expenses for course-related books, supplies, and equipment are included in qualified education expenses only if the fees and expenses must be paid to the institution for enrollment or attendance. 1040x amended tax form Prepaid expenses. 1040x amended tax form   Qualified education expenses paid in 2013 for an academic period that begins in the first three months of 2014 can be used in figuring an education credit for 2013 only. 1040x amended tax form See Academic period , earlier. 1040x amended tax form For example, you pay $2,000 in December 2013 for qualified tuition for the 2014 winter quarter that begins in January 2014, you can use that $2,000 in figuring an education credit for 2013 only (if you meet all the other requirements). 1040x amended tax form You cannot use any amount you paid in 2012 or 2014 to figure the qualified education expenses you use to figure your 2013 education credit(s). 1040x amended tax form In the following examples, assume that each student is an eligible student at an eligible educational institution. 1040x amended tax form Example 1. 1040x amended tax form   Jackson is a sophomore in University V's degree program in dentistry. 1040x amended tax form This year, in addition to tuition, he is required to pay a fee to the university for the rental of the dental equipment he will use in this program. 1040x amended tax form Because the equipment rental fee must be paid to University V for enrollment and attendance, Jackson's equipment rental fee is a qualified expense. 1040x amended tax form Example 2. 1040x amended tax form   Donna and Charles, both first-year students at College W, are required to have certain books and other reading materials to use in their mandatory first-year classes. 1040x amended tax form The college has no policy about how students should obtain these materials, but any student who purchases them from College W's bookstore will receive a bill directly from the college. 1040x amended tax form Charles bought his books from a friend, so what he paid for them is not a qualified education expense. 1040x amended tax form Donna bought hers at College W's bookstore. 1040x amended tax form Although Donna paid College W directly for her first-year books and materials, her payment is not a qualified expense because the books and materials are not required to be purchased from College W for enrollment or attendance at the institution. 1040x amended tax form Example 3. 1040x amended tax form   When Marci enrolled at College X for her freshman year, she had to pay a separate student activity fee in addition to her tuition. 1040x amended tax form This activity fee is required of all students, and is used solely to fund on-campus organizations and activities run by students, such as the student newspaper and student government. 1040x amended tax form No portion of the fee covers personal expenses. 1040x amended tax form Although labeled as a student activity fee, the fee is required for Marci's enrollment and attendance at College X. 1040x amended tax form Therefore, it is a qualified expense. 1040x amended tax form No Double Benefit Allowed You cannot do any of the following: Deduct higher education expenses on your income tax return (as, for example, a business expense) and also claim a lifetime learning credit based on those same expenses. 1040x amended tax form Claim a lifetime learning credit in the same year that you are claiming a tuition and fees deduction for the same student. 1040x amended tax form Claim a lifetime learning credit and an American opportunity credit based on the same qualified education expenses. 1040x amended tax form Claim a lifetime learning credit based on the same expenses used to figure the tax-free portion of a distribution from a Coverdell education savings account (ESA) or qualified tuition program (QTP). 1040x amended tax form See Coordination With American Opportunity and Lifetime Learning Credits in chapter 7, Coverdell Education Savings Account, and Coordination With American Opportunity and Lifetime Learning Credits in chapter 8, Qualified Tuition Program. 1040x amended tax form Claim a credit based on qualified education expenses paid with tax-free educational assistance, such as a scholarship, grant, or assistance provided by an employer. 1040x amended tax form See Adjustments to Qualified Education Expenses, next. 1040x amended tax form This image is too large to be displayed in the current screen. 1040x amended tax form Please click the link to view the image. 1040x amended tax form Figure 3-1 Adjustments to Qualified Education Expenses For each student, reduce the qualified education expenses paid by or on behalf of that student under the following rules. 1040x amended tax form The result is the amount of adjusted qualified education expenses for each student. 1040x amended tax form Tax-free educational assistance. 1040x amended tax form   For tax-free educational assistance received in 2013, reduce the qualified educational expenses for each academic period by the amount of tax-free educational assistance allocable to that academic period. 1040x amended tax form See Academic period , earlier. 1040x amended tax form   Some tax-free educational assistance received after 2013 may be treated as a refund of qualified education expenses paid in 2013. 1040x amended tax form This tax-free educational assistance is any tax-free educational assistance received by you or anyone else after 2013 for qualified education expenses paid on behalf of a student in 2013 (or attributable to enrollment at an eligible educational institution during 2013). 1040x amended tax form   If this tax-free educational assistance is received after 2013 but before you file your 2013 income tax return, see Refunds received after 2013 but before your income tax return is filed , later. 1040x amended tax form If this tax-free educational assistance is received after 2013 and after you file your 2013 income tax return, see Refunds received after 2013 and after your income tax return is filed , later. 1040x amended tax form   Tax-free educational assistance includes: The tax-free part of scholarships and fellowships (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Pell grants (see Pell Grants and Other Title IV Need-Based Education Grants in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Employer-provided educational assistance (see chapter 11, Employer-Provided Educational Assistance ), Veterans' educational assistance (see Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. 1040x amended tax form Generally, any scholarship or fellowship is treated as tax free. 1040x amended tax form However, a scholarship or fellowship is not treated as tax free to the extent the student includes it in gross income (if the student is required to file a tax return for the year the scholarship or fellowship is received) and either of the following is true. 1040x amended tax form The scholarship or fellowship (or any part of it) must be applied (by its terms) to expenses (such as room and board) other than qualified education expenses as defined in Qualified education expenses in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. 1040x amended tax form The scholarship or fellowship (or any part of it) may be applied (by its terms) to expenses (such as room and board) other than qualified education expenses as defined in Qualified education expenses in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. 1040x amended tax form You may be able to increase the combined value of an education credit and certain educational assistance if the student includes some or all of the educational assistance in income in the year it is received. 1040x amended tax form For examples, see Coordination with Pell grants and other scholarships, later. 1040x amended tax form Refunds. 1040x amended tax form   A refund of qualified education expenses may reduce adjusted qualified education expenses for the tax year or require repayment (recapture) of a credit claimed in an earlier year. 1040x amended tax form Some tax-free educational assistance received after 2013 may be treated as a refund. 1040x amended tax form See Tax-free educational assistance , earlier. 1040x amended tax form Refunds received in 2013. 1040x amended tax form   For each student, figure the adjusted qualified education expenses for 2013 by adding all the qualified education expenses for 2013 and subtracting any refunds of those expenses received from the eligible educational institution during 2013. 1040x amended tax form Refunds received after 2013 but before your income tax return is filed. 1040x amended tax form   If anyone receives a refund after 2013 of qualified education expenses paid on behalf of a student in 2013 and the refund is paid before you file an income tax return for 2013, the amount of qualified education expenses for 2013 is reduced by the amount of the refund. 1040x amended tax form Refunds received after 2013 and after your income tax return is filed. 1040x amended tax form   If anyone receives a refund after 2013 of qualified education expenses paid on behalf of a student in 2013 and the refund is paid after you file an income tax return for 2013, you may need to repay some or all of the credit. 1040x amended tax form See Credit recapture, next. 1040x amended tax form Credit recapture. 1040x amended tax form    If any tax-free educational assistance for the qualified education expenses paid in 2013 or any refund of your qualified education expenses paid in 2013 is received after you file your 2013 income tax return, you must recapture (repay) any excess credit. 1040x amended tax form You do this by refiguring the amount of your adjusted qualified education expenses for 2013 by reducing the expenses by the amount of the refund or tax-free educational assistance. 1040x amended tax form You then refigure your education credit(s) for 2013 and figure the amount by which your 2013 tax liability would have increased if you had claimed the refigured credit(s). 1040x amended tax form Include that amount as an additional tax for the year the refund or tax-free assistance was received. 1040x amended tax form Example. 1040x amended tax form   You pay $9,300 in tuition and fees in December 2013, and your child began college in January 2014. 1040x amended tax form You filed your 2013 tax return on February 14, 2014, and claimed a lifetime learning credit of $1,860. 1040x amended tax form You claimed no other tax credits. 1040x amended tax form After you filed your return, your child withdrew from two courses and you received a refund of $2,900. 1040x amended tax form You must refigure your 2013 lifetime learning credit using $6,400 of qualified education expenses instead of $9,300. 1040x amended tax form The refigured credit is $1,280 and your tax liability increased by $580. 1040x amended tax form See instructions for your 2014 income tax return to determine where to include this tax. 1040x amended tax form If you pay qualified education expenses in 2014 for an academic period that begins in the first 3 months of 2014 and you receive tax-free educational assistance, or a refund, as described above, you may choose to reduce your qualified education expenses for 2014 instead of reducing your expenses for 2013. 1040x amended tax form Amounts that do not reduce qualified education expenses. 1040x amended tax form   Do not reduce qualified education expenses by amounts paid with funds the student receives as: Payment for services, such as wages, A loan, A gift, An inheritance, or A withdrawal from the student's personal savings. 1040x amended tax form   Do not reduce the qualified education expenses by any scholarship or fellowship reported as income on the student's tax return in the following situations. 1040x amended tax form The use of the money is restricted, by the terms of the scholarship or fellowship, to costs of attendance (such as room and board) other than qualified education expenses, as defined in Qualified education expenses in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. 1040x amended tax form The use of the money is not restricted. 1040x amended tax form For examples, see Adjustments to Qualified Education Expenses in chapter 2, American Opportunity Credit. 1040x amended tax form Coordination with Pell grants and other scholarships. 1040x amended tax form   In some cases, you may be able to reduce your tax liability by including scholarships in income. 1040x amended tax form If you are claiming an education credit for a claimed dependent who received a scholarship, you may be able to reduce your tax liability if the student includes the scholarship in income. 1040x amended tax form The scholarship must be one that may (by its terms) be applied to expenses (such as room and board) other than qualified education expenses. 1040x amended tax form Example 1—No scholarship. 1040x amended tax form Judy Green, who is unmarried, is taking courses at a public community college to be recertified to teach in public schools. 1040x amended tax form Her AGI and her MAGI, for purposes of the credit, are $27,000. 1040x amended tax form Judy takes the standard deduction of $5,950 and personal exemption of $3,800, reducing her AGI to taxable income of $17,250 and her tax before credits is $2,156. 1040x amended tax form She claims no credits other than the lifetime learning credit. 1040x amended tax form In July 2013 she paid $700 for the summer 2013 semester; in August 2013 she paid $1,900 for the fall 2013 semester; and in December 2013 she paid another $1,900 for the spring semester beginning in January 2014. 1040x amended tax form Judy and the college meet all requirements for the lifetime learning tax credit. 1040x amended tax form She can use all of the $4,500 tuition she paid in 2013 when figuring her 2013 lifetime learning credit. 1040x amended tax form She claims a $900 lifetime learning credit and her tax after credits is $1,256. 1040x amended tax form Example 2—Scholarship excluded from income. 1040x amended tax form The facts are the same as in Example 1—No scholarship, except that Judy was awarded a $1,500 scholarship. 1040x amended tax form Under the terms of her scholarship, it may be used to pay any educational expenses, including room and board. 1040x amended tax form If Judy excludes the scholarship from income, she will be deemed (for purposes of computing her education credit) as having used the scholarship to pay for tuition, required fees, and course materials. 1040x amended tax form Only $3,000 of the $4,500 tuition she paid in 2013 could be used when figuring her 2013 lifetime learning credit. 1040x amended tax form Her lifetime learning credit would be reduced to $600 and her tax after credits would be $1,556. 1040x amended tax form Example 3—Scholarship included in income. 1040x amended tax form The facts are the same as in Example 2—Scholarship excluded from income. 1040x amended tax form If, unlike Example 2, Judy includes the $1,500 scholarship in income, she will be deemed to have used the entire scholarship to pay for room and board. 1040x amended tax form Judy's AGI will increase to $28,500, her taxable income would be $18,750, and her tax before credits would be $2,381. 1040x amended tax form She would be able to use the $4,500 of adjusted qualified education expenses to figure her credit. 1040x amended tax form Judy could claim a $900 lifetime learning credit and her tax after credits would be $1,481. 1040x amended tax form Expenses That Do Not Qualify Qualified education expenses do not include amounts paid for: Insurance, Medical expenses (including student health fees), Room and board, Transportation, or Similar personal, living, or family expenses. 1040x amended tax form This is true even if the amount must be paid to the institution as a condition of enrollment or attendance. 1040x amended tax form Sports, games, hobbies, and noncredit courses. 1040x amended tax form   Qualified education expenses generally do not include expenses that relate to any course of instruction or other education that involves sports, games or hobbies, or any noncredit course. 1040x amended tax form However, if the course of instruction or other education is part of the student's degree program or is taken by the student to acquire or improve job skills, these expenses can qualify. 1040x amended tax form Comprehensive or bundled fees. 1040x amended tax form   Some eligible educational institutions combine all of their fees for an academic period into one amount. 1040x amended tax form If you do not receive or do not have access to an allocation showing how much you paid for qualified education expenses and how much you paid for personal expenses, such as those listed above, contact the institution. 1040x amended tax form The institution is required to make this allocation and provide you with the amount you paid (or were billed) for qualified education expenses on Form 1098-T. 1040x amended tax form See Figuring the Credit , later, for more information about Form 1098-T. 1040x amended tax form Who Is an Eligible Student For purposes of the lifetime learning credit, an eligible student is a student who is enrolled in one or more courses at an eligible educational institution (as defined under Qualified Education Expenses , earlier). 1040x amended tax form Who Can Claim a Dependent's Expenses If there are qualified education expenses for your dependent during a tax year, either you or your dependent, but not both of you, can claim a lifetime learning credit for your dependent's expenses for that year. 1040x amended tax form For you to claim a lifetime learning credit for your dependent's expenses, you must also claim an exemption for your dependent. 1040x amended tax form You do this by listing your dependent's name and other required information on Form 1040 (or Form 1040A), line 6c. 1040x amended tax form IF you. 1040x amended tax form . 1040x amended tax form . 1040x amended tax form THEN only. 1040x amended tax form . 1040x amended tax form . 1040x amended tax form claim an exemption on your tax return for a dependent who is an eligible student you can claim the lifetime learning credit based on that dependent's expenses. 1040x amended tax form The dependent cannot claim the credit. 1040x amended tax form do not claim an exemption on your tax return for a dependent who is an eligible student (even if entitled to the exemption) the dependent can claim the lifetime learning credit. 1040x amended tax form You cannot claim the credit based on this dependent's expenses. 1040x amended tax form Expenses paid by dependent. 1040x amended tax form   If you claim an exemption on your tax return for an eligible student who is your dependent, treat any expenses paid (or deemed paid) by your dependent as if you had paid them. 1040x amended tax form Include these expenses when figuring the amount of your lifetime learning credit. 1040x amended tax form    Qualified education expenses paid directly to an eligible educational institution for your dependent under a court-approved divorce decree are treated as paid by your dependent. 1040x amended tax form Expenses paid by you. 1040x amended tax form   If you claim an exemption for a dependent who is an eligible student, only you can include any expenses you paid when figuring the amount of the lifetime learning credit. 1040x amended tax form If neither you nor anyone else claims an exemption for the dependent, only the dependent can include any expenses you paid when figuring the lifetime learning credit. 1040x amended tax form Expenses paid by others. 1040x amended tax form   Someone other than you, your spouse, or your dependent (such as a relative or former spouse) may make a payment directly to an eligible educational institution to pay for an eligible student's qualified education expenses. 1040x amended tax form In this case, the student is treated as receiving the payment from the other person and, in turn, paying the institution. 1040x amended tax form If you claim an exemption on your tax return for the student, you are considered to have paid the expenses. 1040x amended tax form Example. 1040x amended tax form In 2013, Ms. 1040x amended tax form Allen makes a payment directly to an eligible educational institution for her grandson Todd's qualified education expenses. 1040x amended tax form For purposes of claiming a lifetime learning credit, Todd is treated as receiving the money from his grandmother and, in turn, paying his qualified education expenses himself. 1040x amended tax form Unless an exemption for Todd is claimed on someone else's 2013 tax return, only Todd can use the payment to claim a lifetime learning credit. 1040x amended tax form If anyone, such as Todd's parents, claims an exemption for Todd on his or her 2013 tax return, whoever claims the exemption may be able to use the expenses to claim a lifetime learning credit. 1040x amended tax form If anyone else claims an exemption for Todd, Todd cannot claim a lifetime learning credit. 1040x amended tax form Tuition reduction. 1040x amended tax form   When an eligible educational institution provides a reduction in tuition to an employee of the institution (or spouse or dependent child of an employee), the amount of the reduction may or may not be taxable. 1040x amended tax form If it is taxable, the employee is treated as receiving a payment of that amount and, in turn, paying it to the educational institution on behalf of the student. 1040x amended tax form For more information on tuition reductions, see Qualified Tuition Reduction in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. 1040x amended tax form Figuring the Credit The amount of the lifetime learning credit is 20% of the first $10,000 of qualified education expenses you paid for all eligible students. 1040x amended tax form The maximum amount of lifetime learning credit you can claim for 2013 is $2,000 (20% × $10,000). 1040x amended tax form However, that amount may be reduced based on your MAGI. 1040x amended tax form See Effect of the Amount of Your Income on the Amount of Your Credit , later. 1040x amended tax form Example. 1040x amended tax form Bruce and Toni Harper are married and file a joint tax return. 1040x amended tax form For 2013, their MAGI is $75,000. 1040x amended tax form Toni is attending a local college (an eligible educational institution) to earn credits toward a degree in nursing. 1040x amended tax form She already has a bachelor's degree in history and wants to become a nurse. 1040x amended tax form In August 2013, Toni paid $5,000 of qualified education expenses for her fall 2013 semester. 1040x amended tax form Bruce and Toni can claim a $1,000 (20% × $5,000) lifetime learning credit on their 2013 joint tax return. 1040x amended tax form Form 1098-T. 1040x amended tax form   To help you figure your lifetime learning credit, the student should receive Form 1098-T. 1040x amended tax form Generally, an eligible educational institution (such as a college or university) must send Form 1098-T (or acceptable substitute) to each enrolled student by January 31, 2014. 1040x amended tax form An institution may choose to report either payments received (box 1), or amounts billed (box 2), for qualified education expenses. 1040x amended tax form However, the amounts in boxes 1 and 2 of Form 1098-T might be different from what you paid. 1040x amended tax form When figuring the credit, use only the amounts you paid or are deemed to have paid in 2013 for qualified education expenses. 1040x amended tax form   In addition, Form 1098-T should give other information for that institution, such as adjustments made for prior years, the amount of scholarships or grants, reimbursements or refunds, and whether the student was enrolled at least half-time or was a graduate student. 1040x amended tax form    The eligible educational institution may ask for a completed Form W-9S, or similar statement to obtain the student's name, address, and taxpayer identification number. 1040x amended tax form Effect of the Amount of Your Income on the Amount of Your Credit The amount of your lifetime learning credit is phased out (gradually reduced) if your MAGI is between $53,000 and $63,000 ($107,000 and $127,000 if you file a joint return). 1040x amended tax form You cannot claim a lifetime learning credit if your MAGI is $63,000 or more ($127,000 or more if you file a joint return). 1040x amended tax form Modified adjusted gross income (MAGI). 1040x amended tax form   For most taxpayers, MAGI is adjusted gross income (AGI) as figured on their federal income tax return. 1040x amended tax form MAGI when using Form 1040A. 1040x amended tax form   If you file Form 1040A, your MAGI is the AGI on line 22 of that form. 1040x amended tax form MAGI when using Form 1040. 1040x amended tax form   If you file Form 1040, your MAGI is the AGI on line 38 of that form, modified by adding back any: Foreign earned income exclusion, Foreign housing exclusion, Foreign housing deduction, Exclusion of income by bona fide residents of American Samoa, and Exclusion of income by bona fide residents of Puerto Rico. 1040x amended tax form You can use Worksheet 3-1 to figure your MAGI. 1040x amended tax form Worksheet 3-1. 1040x amended tax form MAGI for the Lifetime Learning Credit 1. 1040x amended tax form Enter your adjusted gross income  (Form 1040, line 38)   1. 1040x amended tax form   2. 1040x amended tax form Enter your foreign earned income exclusion and/or housing exclusion (Form 2555, line 45, or Form 2555-EZ, line 18)   2. 1040x amended tax form       3. 1040x amended tax form Enter your foreign housing deduction (Form 2555, line 50)   3. 1040x amended tax form       4. 1040x amended tax form Enter the amount of income from Puerto Rico you are excluding   4. 1040x amended tax form       5. 1040x amended tax form Enter the amount of income from American Samoa you are excluding (Form 4563, line 15)   5. 1040x amended tax form       6. 1040x amended tax form Add the amounts on lines 2, 3, 4, and 5   6. 1040x amended tax form   7. 1040x amended tax form Add the amounts on lines 1 and 6. 1040x amended tax form  This is your modified adjusted  gross income. 1040x amended tax form Enter this amount  on Form 8863, line 14   7. 1040x amended tax form   Phaseout. 1040x amended tax form   If your MAGI is within the range of incomes where the credit must be reduced, you will figure your reduced credit using lines 10-18 of Form 8863. 1040x amended tax form The same method is shown in the following example. 1040x amended tax form Example. 1040x amended tax form You are filing a joint return with a MAGI of $112,000. 1040x amended tax form In 2013, you paid $6,600 of qualified education expenses. 1040x amended tax form You figure the tentative lifetime learning credit (20% of the first $10,000 of qualified education expenses you paid for all eligible students). 1040x amended tax form The result is a $1,320 (20% x $6,600) tentative credit. 1040x amended tax form Because your MAGI is within the range of incomes where the credit must be reduced, you must multiply your tentative credit ($1,320) by a fraction. 1040x amended tax form The numerator of the fraction is $127,000 (the upper limit for those filing a joint return) minus your MAGI. 1040x amended tax form The denominator is $20,000, the range of incomes for the phaseout ($107,000 to $127,000). 1040x amended tax form The result is the amount of your phased out (reduced) lifetime learning credit ($990). 1040x amended tax form   $1,320 × $127,000 − $112,000  $20,000 = $990   Claiming the Credit You claim the lifetime learning credit by completing Form 8863 and submitting it with your Form 1040 or 1040A. 1040x amended tax form Enter the credit on Form 1040, line 49, or Form 1040A, line 31. 1040x amended tax form Note. 1040x amended tax form In Appendix A, Illustrated Example of Education Credits at the end of this publication, there is an example illustrating the use of Form 8863 when both the American opportunity credit and the lifetime learning credit are claimed on the same tax return. 1040x amended tax form Prev  Up  Next   Home   More Online Publications
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Understanding Your CP75C Notice

You were banned from claiming the Earned Income Credit (EIC) in a prior tax year due to your intentional disregard of the rules or a fraudulent claim. Since your ban is still in effect, we disallowed the EIC for your current tax year.


What you need to do

  • You don’t need to take further action.

You may want to

  • Review this notice with your tax preparer.
  • Review the rules for claiming EIC
  • Call us for assistance at the toll-free telephone number listed in the top right corner of your notice

Answers to Common Questions

What do I need to send?
If you believe we incorrectly applied the ban, you must provide documentation to show that you didn't intentionally disregard the EIC rules for the year we imposed the ban.

Can I file my tax return while I am being audited?
Yes, you should continue to file all required tax returns before the due date to avoid additional penalties and interest.


Tips for next year

If you are banned from claiming the EIC, you won’t be allowed to claim the credit until the year stated on your notice.

Page Last Reviewed or Updated: 07-Mar-2014

How to get help

  • Call the 1-800 number listed on the top right corner of your notice.
  • Authorize someone (e.g., accountant) to contact the IRS on your behalf using Form 2848.
  • See if you qualify for help from a Low Income Taxpayer Clinic.
     

The 1040x Amended Tax Form

1040x amended tax form Listed Property Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Listed Property DefinedPassenger Automobile Defined Dwelling Unit Other Property Used for Transportation Computers and Related Peripheral Equipment Predominant Use TestMeeting the Predominant Use Test Qualified Business Use Method of Allocating Use Applying the Predominant Use Test Deductions After Recovery Period Leased PropertyLessor Lessee What Records Must Be KeptAdequate Records Reporting Information on Form 4562 Deductions in Later Years Appendix Topics - This chapter discusses: Listed property defined The predominant use test What records must be kept Useful Items - You may want to see: Publication 463 Travel, Entertainment, and Gift Expenses 587 Business Use of Your Home (Including Use by Day-Care Providers) 917 Business Use of a Car 946 How To Depreciate Property Form (and Instructions) 2106–EZ Unreimbursed Employee Business Expenses 2106 Employee Business Expenses 4255 Recapture of Investment Credit 4562 Depreciation and Amortization This chapter discusses some special rules and recordkeeping requirements for listed property. 1040x amended tax form For complete coverage of the rules, including the rules concerning passenger automobiles, see Publication 946. 1040x amended tax form If listed property is not used predominantly (more than 50%) in a qualified business use as discussed inPredominant Use Test, later, the section 179 deduction is not allowable and the property must be depreciated using the straight line method. 1040x amended tax form Listed Property Defined Listed property is any of the following: Any passenger automobile (defined later), Any other property used for transportation, Any property of a type generally used for entertainment, recreation, or amusement (including photographic, phonographic, communication, and video recording equipment), Any computer and related peripheral equipment, defined later, unless it is used only at a regular business establishment and owned or leased by the person operating the establishment. 1040x amended tax form A regular business establishment includes a portion of a dwelling unit (defined later), if, and only if, that portion is used both regularly and exclusively for business as discussed in Publication 587. 1040x amended tax form Any cellular telephone (or similar telecommunication equipment) placed in service or leased in a tax year beginning after 1989. 1040x amended tax form Passenger Automobile Defined A passenger automobile is any four-wheeled vehicle made primarily for use on public streets, roads, and highways and rated at 6,000 pounds or less of unloaded gross vehicle weight (at 6,000 pounds or less of gross vehicle weight for trucks and vans). 1040x amended tax form It includes any part, component, or other item physically attached to the automobile or usually included in the purchase price of an automobile. 1040x amended tax form A passenger automobile does not include: An ambulance, hearse, or combination ambulance-hearse used directly in a trade or business, and A vehicle used directly in the trade or business of transporting persons or property for compensation or hire. 1040x amended tax form Dwelling Unit A dwelling unit is a house or apartment used to provide living accommodations in a building or structure. 1040x amended tax form It does not include a unit in a hotel, motel, inn, or other establishment where more than half the units are used on a transient basis. 1040x amended tax form Other Property Used for Transportation Other property used for transportation includes trucks, buses, boats, airplanes, motorcycles, and any other vehicles for transporting persons or goods. 1040x amended tax form Listed property does not include: Any vehicle which, by reason of its design, is not likely to be used more than a minimal amount for personal purposes, such as clearly marked police and fire vehicles, ambulances, or hearses used for those purposes, Any vehicle that is designed to carry cargo and that has a loaded gross vehicle weight over 14,000 pounds, bucket trucks (cherry pickers), cement mixers, combines, cranes and derricks, delivery trucks with seating only for the driver (or only for the driver plus a folding jump seat), dump trucks (including garbage trucks), flatbed trucks, forklifts, qualified moving vans, qualified specialized utility repair trucks, and refrigerated trucks, Any passenger bus used for that purpose with a capacity of at least 20 passengers and school buses, Any tractor or other special purpose farm vehicle, and unmarked vehicles used by law enforcement officers if the use is officially authorized, and Any vehicle, such as a taxicab, if substantially all its use is in the trade or business of providing services to transport persons or property for compensation or hire by unrelated persons. 1040x amended tax form Computers and Related Peripheral Equipment A computer is a programmable electronically activated device that: Is capable of accepting information, applying prescribed processes to the information, and supplying the results of those processes with or without human intervention, and Consists of a central processing unit with extensive storage, logic, arithmetic, and control capabilities. 1040x amended tax form Related peripheral equipment is any auxiliary machine which is designed to be controlled by the central processing unit of a computer. 1040x amended tax form Computer or peripheral equipment does not include: Any equipment which is an integral part of property which is not a computer, Typewriters, calculators, adding and accounting machines, copiers, duplicating equipment, and similar equipment, and Equipment of a kind, used primarily for the user's amusement or entertainment, such as video games. 1040x amended tax form Predominant Use Test If “listed property,” defined earlier, placed in service after June 18, 1984, is not used predominantly (more than 50%) in a qualified business use during any tax year: The section 179 deduction on the property is not allowable, and You must depreciate the property using the straight line method. 1040x amended tax form Listed property placed in service before 1987. 1040x amended tax form   For listed property placed in service before 1987, depreciate the property over the following period: Class of Property Listed Property Recovery Period 3-year property 5 years 5-year property 12 years 10-year property 25 years 18-year real property 40 years 19-year real property 40 years If you must use the above recovery periods for listed property not used predominantly in a trade or business, use the percentages from Table 16 titled Listed Property Not Used Predominantly (Other Than 18- or 19-year Real Property), and Table 17 for 18- or 19-year real property, near the end of this publication in the Appendix. 1040x amended tax form Listed property placed in service after 1986. 1040x amended tax form   For information on listed property placed in service after 1986, see Publication 946. 1040x amended tax form Meeting the Predominant Use Test Listed property meets the predominant use test for any tax year if its business use is more than 50% of its total use. 1040x amended tax form You must allocate the use of any item of listed property used for more than one purpose during the tax year among its various uses. 1040x amended tax form The percentage of investment use of listed property cannot be used as part of the percentage of qualified business use to meet the predominant use test. 1040x amended tax form However, the combined total of business and investment use is taken into account to figure your depreciation deduction for the property. 1040x amended tax form Note: Property does not stop being predominantly used in a qualified business use because of a transfer at death. 1040x amended tax form Example. 1040x amended tax form Sarah Bradley uses a home computer 50% of the time to manage her investments. 1040x amended tax form She also uses the computer 40% of the time in her part-time consumer research business. 1040x amended tax form Sarah's home computer is listed property because it is not used at a regular business establishment. 1040x amended tax form Because her business use of the computer does not exceed 50%, the computer is not predominantly used in a qualified business use for the tax year. 1040x amended tax form Because she does not meet the predominant use test, she cannot elect a section 179 deduction for this property. 1040x amended tax form Her combined rate of business/investment use for determining her depreciation deduction is 90%. 1040x amended tax form Qualified Business Use A qualified business use is any use in your trade or business. 1040x amended tax form However, it does not include: The use of property held merely to produce income (investment use), The leasing of property to any 5% owner or related person (to the point that the property is used by a 5% owner or person related to the owner or lessee of the property), The use of property as compensation for the performance of services by a 5% owner or related person, or The use of property as compensation for the performance of services by any person (other than a5% owner or related person) unless the value of the use is included in that person's gross income for the use of the property and income tax is withheld on that amount where required. 1040x amended tax form See Employees, later. 1040x amended tax form 5% owner. 1040x amended tax form   A 5% owner of a business, other than a corporation, is any person who owns more than 5% of the capital or profits interest in the business. 1040x amended tax form   A 5% owner of a corporation is any person who owns, or is considered to own: More than 5% of the outstanding stock of the corporation, or Stock possessing more than 5% of the total combined voting power of all stock in the corporation. 1040x amended tax form Related person. 1040x amended tax form   A related person is anyone related to a taxpayer as discussed under Related persons, in chapter 2 under Nonqualifying Property in Publication 946. 1040x amended tax form Entertainment Use The use of listed property for entertainment, recreation, or amusement purposes is treated as a qualified business use only to the extent that expenses (other than interest and property tax expenses) for its use are deductible as ordinary and necessary business expenses. 1040x amended tax form See Publication 463. 1040x amended tax form Leasing or Compensatory Use of Aircraft If at least 25% of the total use of any aircraft during the tax year is for a qualified business use, the leasing or compensatory use of the aircraft by a 5% owner or related person is treated as a qualified business use. 1040x amended tax form Commuting The use of a vehicle for commuting is not business use, regardless of whether work is performed during the trip. 1040x amended tax form Use of Your Passenger Automobile by Another Person If someone else uses your automobile, that use is not business use unless: That use is directly connected with your business, The value of the use is property reported by you as income to the other person and tax is withheld on the income where required, or The value of the use results in a payment of fair market rent. 1040x amended tax form Any payment to you for the use of the automobile is treated as a rent payment for 3). 1040x amended tax form Employees Any use by an employee of his or her own listed property (or listed property rented by an employee) in performing services as an employee is not business use unless: The use is for the employer's convenience, and The use is required as a condition of employment. 1040x amended tax form Use for the employer's convenience. 1040x amended tax form   Whether the use of listed property is for the employer's convenience must be determined from all the facts. 1040x amended tax form The use is for the employer's convenience if it is for a substantial business reason of the employer. 1040x amended tax form The use of listed property during the employee's regular working hours to carry on the employer's business is generally for the employer's convenience. 1040x amended tax form Use required as a condition of employment. 1040x amended tax form   Whether the use of listed property is a condition of employment depends on all the facts and circumstances. 1040x amended tax form The use of property must be required for the employee to perform duties properly. 1040x amended tax form The employer need not explicitly require the employee to use the property. 1040x amended tax form A mere statement by the employer that the use of the property is a condition of employment is not sufficient. 1040x amended tax form Example 1. 1040x amended tax form Virginia Sycamore is employed as a courier with We Deliver which provides local courier services. 1040x amended tax form She owns and uses a motorcycle to deliver packages to downtown offices. 1040x amended tax form We Deliver explicitly requires all delivery persons to own a small car or motorcycle for use in their employment. 1040x amended tax form The company reimburses delivery persons for their costs. 1040x amended tax form Virginia's use of the motorcycle is for the convenience of We Deliver and is required as a condition of employment. 1040x amended tax form Example 2. 1040x amended tax form Bill Nelson is an inspector for Uplift, a construction company with many sites in the local area. 1040x amended tax form He must travel to these sites on a regular basis. 1040x amended tax form Uplift does not furnish an automobile or explicitly require him to use his own automobile. 1040x amended tax form However, it reimburses him for any costs he incurs in traveling to the various sites. 1040x amended tax form The use of his own automobile or a rental automobile is for the convenience of Uplift and is required as a condition of employment. 1040x amended tax form Method of Allocating Use For passenger automobiles and other means of transportation, allocate the property's use on the basis of mileage. 1040x amended tax form You determine the percentage of qualified business use by dividing the number of miles the vehicle is driven for business purposes during the year by the total number of miles the vehicle is driven for all purposes (including business miles) during the year. 1040x amended tax form For other items of listed property, allocate the property's use on the basis of the most appropriate unit of time. 1040x amended tax form For example, you can determine the percentage of business use of a computer by dividing the number of hours the computer is used for business purposes during the year by the total number of hours the computer is used for all purposes (including business hours) during the year. 1040x amended tax form Applying the Predominant Use Test You must apply the predominant use test for an item of listed property each year of the recovery period. 1040x amended tax form First Recovery Year If any item of listed property is not used predominantly in a qualified business use in the year it is placed in service: The property is not eligible for a section 179 deduction, and The depreciation deduction must be figured using the straight line method. 1040x amended tax form Note: The required use of the straight line method for an item of listed property that does not meet the predominant use test is not the same as electing the straight line method. 1040x amended tax form It does not mean that you have to use the straight line method for other property in the same class as the item of listed property. 1040x amended tax form Years After the First Recovery Year If you use listed property predominantly (more than 50%) in a qualified business use in the tax year you place it in service, but not in a subsequent tax year during the recovery period, the following rules apply: Figure depreciation using the straight line method. 1040x amended tax form Do this for each year, beginning with the year you no longer use the property predominantly in a qualified business use, and Figure any excess depreciation on the property and add it to: Your gross income, and The adjusted basis of your property. 1040x amended tax form See Recapture of excess depreciation, next. 1040x amended tax form Recapture of excess depreciation. 1040x amended tax form   You must include any excess depreciation in your gross income for the first tax year the property is not predominantly used in a qualified business use. 1040x amended tax form Any excess depreciation must also be added to the adjusted basis of your property. 1040x amended tax form Excess depreciation is the excess (if any) of: The amount of depreciation allowable for the property (including any section 179 deduction claimed) for tax years before the first tax year the property was not predominantly used in a qualified business use, over The amount of depreciation that would have been allowable for those years if the property were not used predominantly in a qualified business use for the year it was placed in service. 1040x amended tax form This means you figure your depreciation using the percentages fromTable 16 or 17. 1040x amended tax form For information on investment credit recapture, see the instructions for Form 4255. 1040x amended tax form Deductions After Recovery Period When listed property (other than passenger automobiles) is used for business, investment, and personal purposes, no deduction is ever allowable for the personal use. 1040x amended tax form In tax years after the recovery period, you must determine if there is any unrecovered basis remaining before you compute the depreciation deduction for that tax year. 1040x amended tax form To make this determination, figure the depreciation for earlier tax years as if your property were used 100% for business or investment purposes, beginning with the first tax year in which some or all use is for business or investment. 1040x amended tax form See Car Used 50% or Less for Business in Publication 917. 1040x amended tax form Leased Property The limitations on cost recovery deductions apply to the rental of listed property. 1040x amended tax form The following discussion covers the rules that apply to the lessor (the owner of the property) and the lessee (the person who rents the property from the owner). 1040x amended tax form SeeLeasing a Car in Publication 917 for a discussion of leased passenger automobiles. 1040x amended tax form Lessor The limitations on cost recovery generally do not apply to any listed property leased or held for leasing by anyone regularly engaged in the business of leasing listed property. 1040x amended tax form A person is considered regularly engaged in the business of leasing listed property only if contracts for leasing of listed property are entered into with some frequency over a continuous period of time. 1040x amended tax form This determination is made on the basis of the facts and circumstances in each case and takes into account the nature of the person's business in its entirety. 1040x amended tax form Occasional or incidental leasing activity is insufficient. 1040x amended tax form For example, a person leasing only one passenger automobile during a tax year is not regularly engaged in the business of leasing automobiles. 1040x amended tax form An employer who allows an employee to use the employer's property for personal purposes and charges the employee for the use is not regularly engaged in the business of leasing the property used by the employee. 1040x amended tax form Lessee A lessee of listed property (other than passenger automobiles), must include an amount in gross income called the inclusion amount for the first tax year the property is not used predominantly in a qualified business use. 1040x amended tax form Inclusion amount for property leased before 1987. 1040x amended tax form   You determine the inclusion amount for property leased after June 18, 1984 and before 1987 by multiplying the fair market value of the property by both the average business/investment use percentage and the applicable percentage. 1040x amended tax form You can find the applicable percentages for listed property that is 5- or 10-year recovery property in Tables 19 or 20 in Appendix A of Publication 946. 1040x amended tax form   The lease term for listed property other than 18- or 19-year real property, and residential rental or nonresidential real property, includes options to renew. 1040x amended tax form For 18- or 19-year real property and residential rental or nonresidential real property that is listed property, the period of the lease does not include any option to renew at fair market value, determined at the time of renewal. 1040x amended tax form You treat two or more successive leases that are part of the same transaction (or a series of related transactions) for the same or substantially similar property as one lease. 1040x amended tax form Special rules. 1040x amended tax form   The lessee adds the inclusion amount to gross income in the next tax year if: The lease term begins within 9 months before the close of the lessee's tax year, The lessee does not use the property predominantly in a qualified business use during that portion of the tax year, and The lease term continues into the lessee's next tax year. 1040x amended tax form The lessee determines the inclusion amount by taking into account the average of the business/investment use for both tax years and the applicable percentage for the tax year the lease term begins. 1040x amended tax form   If the lease term is less than one year, the amount included in gross income is the amount that bears the same ratio to the additional inclusion amount as the number of days in the lease term bears to 365. 1040x amended tax form Maximum inclusion amount. 1040x amended tax form   The inclusion amount cannot be more than the sum of the deductible amounts of rent allocable to the lessee's tax year in which the amount must be included in gross income. 1040x amended tax form What Records Must Be Kept You cannot take any depreciation or section 179 deduction for the use of listed property (including passenger automobiles) unless you can prove business/investment use with adequate records or sufficient evidence to support your own statements. 1040x amended tax form How long to keep records. 1040x amended tax form   For listed property, records must be kept for as long as any excess depreciation can be recaptured (included in income). 1040x amended tax form Adequate Records To meet the adequate records requirement, you must maintain an account book, diary, log, statement of expense, trip sheet, or similar record or other documentary evidence that, together with the receipt, is sufficient to establish each element of an expenditure or use. 1040x amended tax form It is not necessary to record information in an account book, diary, or similar record if the information is already shown on the receipt. 1040x amended tax form However, your records should back up your receipts in an orderly manner. 1040x amended tax form Elements of Expenditure or Use The records or other documentary evidence must support: The amount of each separate expenditure, such as the cost of acquiring the item, maintenance and repair costs, capital improvement costs, lease payments, and any other expenses, The amount of each business and investment use (based on an appropriate measure, such as mileage for vehicles and time for other listed property), and the total use of the property for the tax year, The date of the expenditure or use, and The business or investment purpose for the expenditure or use. 1040x amended tax form Written documents of your expenditure or use are generally better evidence than oral statements alone. 1040x amended tax form A written record prepared at or near the time of the expenditure or use has greater value as proof of the expenditure or use. 1040x amended tax form A daily log is not required. 1040x amended tax form However, some type of record containing the elements of an expenditure or the business or investment use of listed property made at or near the time and backed up by other documents is preferable to a statement prepared later. 1040x amended tax form Timeliness The elements of an expenditure or use must be recorded at the time you have full knowledge of the elements. 1040x amended tax form An expense account statement made from an account book, diary, or similar record prepared or maintained at or near the time of the expenditure or use is generally considered a timely record if in the regular course of business: The statement is submitted by an employee to the employer, or The statement is submitted by an independent contractor to the client or customer. 1040x amended tax form For example, a log maintained on a weekly basis, which accounts for use during the week, will be considered a record made at or near the time of use. 1040x amended tax form Business Purpose Supported An adequate record of business purpose must generally be in the form of a written statement. 1040x amended tax form However, the amount of backup necessary to establish a business purpose depends on the facts and circumstances of each case. 1040x amended tax form A written explanation of the business purpose will not be required if the purpose can be determined from the surrounding facts and circumstances. 1040x amended tax form For example, a salesperson visiting customers on an established sales route will not normally need a written explanation of the business purpose of his or her travel. 1040x amended tax form Business Use Supported An adequate record contains enough information on each element of every business or investment use. 1040x amended tax form The amount of detail required to support the use depends on the facts and circumstances. 1040x amended tax form For example, a taxpayer whose only business use of a truck is to make customer deliveries on an established route can satisfy the requirement by recording the length of the route, including the total number of miles driven during the tax year and the date of each trip at or near the time of the trips. 1040x amended tax form Although an adequate record generally must be written, a record of the business use of listed property, such as a computer or automobile, can be prepared in a computer memory device using a logging program. 1040x amended tax form Separate or Combined Expenditures or Uses Each use by you is normally considered a separate use. 1040x amended tax form However, repeated uses can be combined as a single item. 1040x amended tax form Each expenditure is recorded as a separate item and not combined with other expenditures. 1040x amended tax form If you choose, however, amounts spent for the use of listed property during a tax year, such as for gasoline or automobile repairs, can be combined. 1040x amended tax form If these expenses are combined, you do not need to support the business purpose of each expense. 1040x amended tax form Instead, you can divide the expenses based on the total business use of the listed property. 1040x amended tax form Uses which can be considered part of a single use, such as a round trip or uninterrupted business use, can be accounted for by a single record. 1040x amended tax form For example, use of a truck to make deliveries at several locations which begin and end at the business premises and can include a stop at the business in between deliveries can be accounted for by a single record of miles driven. 1040x amended tax form Use of a passenger automobile by a salesperson for a business trip away from home over a period of time can be accounted for by a single record of miles traveled. 1040x amended tax form Minimal personal use (such as a stop for lunch between two business stops) is not an interruption of business use. 1040x amended tax form Confidential Information If any of the information on the elements of an expenditure or use is confidential, it does not need to be in the account book or similar record if it is recorded at or near the time of the expenditure or use. 1040x amended tax form It must be kept elsewhere and made available as support to the district director on request. 1040x amended tax form Substantial Compliance If you have not fully supported a particular element of an expenditure or use, but have complied with the adequate records requirement for the expenditure or use to the district director's satisfaction, you can establish this element by any evidence the district director deems adequate. 1040x amended tax form If you fail to establish that you have substantially complied with the adequate records requirement for an element of an expenditure or use to the district director's satisfaction, you must establish the element: By your own oral or written statement containing detailed information as to the element, and By other evidence sufficient to establish the element. 1040x amended tax form If the element is the cost or amount, time, place, or date of an expenditure or use, its supporting evidence must be direct, such as oral testimony by witnesses or a written statement setting forth detailed information about the element or the documentary evidence. 1040x amended tax form If the element is the business purpose of an expenditure, its supporting evidence can be circumstantial evidence. 1040x amended tax form Sampling You can maintain an adequate record for portions of a tax year and use that record to support your business and investment use for the entire tax year if it can be shown by other evidence that the periods for which an adequate record is maintained are representative of use throughout the year. 1040x amended tax form Loss of Records When you establish that failure to produce adequate records is due to loss of the records through circumstances beyond your control, such as through fire, flood, earthquake, or other casualty, you have the right to support a deduction by reasonable reconstruction of your expenditures and use. 1040x amended tax form Reporting Information on Form 4562 If you claim a deduction for any listed property, you must provide the requested information on page 2, Section B of Form 4562. 1040x amended tax form If you claim a deduction for any vehicle, you must answer certain questions onpage 2 of Form 4562 to provide information about the vehicle use. 1040x amended tax form Employees. 1040x amended tax form   Employees claiming the standard mileage rate or actual expenses (including depreciation) must use Form 2106 instead of Part V of Form 4562. 1040x amended tax form Employees claiming the standard mileage rate may be able to use Form 2106–EZ. 1040x amended tax form Employer who provides vehicles to employees. 1040x amended tax form   An employer who provides vehicles to employees must obtain enough information from those employees to provide the requested information onForm 4562. 1040x amended tax form   An employer who provides more than five vehicles to employees need not include any information on his or her tax return. 1040x amended tax form Instead, the employer must obtain the information from his or her employees and indicate on his or her return that the information was obtained and is being retained. 1040x amended tax form   You do not need to provide the information requested on page 2 of Form 4562 if, as an employer: You can satisfy the requirements of a written policy statement for vehicles either not used for personal purposes, or not used for personal purposes other than commuting, or You treat all vehicle use by employees as personal use. 1040x amended tax form See the instructions for Form 4562. 1040x amended tax form Deductions in Later Years When listed property is used for business, investment, and personal purposes, no deduction is allowable for its personal use either in the current year or any later tax year. 1040x amended tax form In later years, you must determine if there is any remaining unadjusted or unrecovered basis before you compute the depreciation deduction for that tax year. 1040x amended tax form In making this determination, figure the depreciation deductions for earlier tax years as if the listed property were used 100% for business or investment purposes in those years, beginning with the first tax year in which some or all of the property use is for business or investment. 1040x amended tax form For more information about deductions after the recovery period for automobiles, see Publication 917. 1040x amended tax form Appendix The following tables are for use in figuring depreciation deductions under the ACRS system. 1040x amended tax form Table 1. 1040x amended tax form 15-Year Real Property* (Other Than Low-Inclome Housing) Table 3. 1040x amended tax form Low-Income Housing* Table 6 - Table 9 Table 6 - Table 9 Table 10 - Table 13 Table 14 - Table 17 Prev  Up  Next   Home   More Online Publications