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1040x Form Instructions

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1040x Form Instructions

1040x form instructions 9. 1040x form instructions   Rental Income and Expenses Table of Contents Introduction Useful Items - You may want to see: Rental Income Rental ExpensesVacant while listed for sale. 1040x form instructions Repairs and Improvements Other Expenses Property Changed to Rental Use Renting Part of Property Not Rented for Profit Personal Use of Dwelling Unit (Including Vacation Home)Example. 1040x form instructions Dividing Expenses Dwelling Unit Used as a Home Reporting Income and Deductions DepreciationChanging your accounting method to deduct unclaimed depreciation. 1040x form instructions Limits on Rental LossesAt-Risk Rules Passive Activity Limits How To Report Rental Income and ExpensesSchedule E (Form 1040) Introduction This chapter discusses rental income and expenses. 1040x form instructions It also covers the following topics. 1040x form instructions Personal use of dwelling unit (including vacation home). 1040x form instructions Depreciation. 1040x form instructions Limits on rental losses. 1040x form instructions How to report your rental income and expenses. 1040x form instructions If you sell or otherwise dispose of your rental property, see Publication 544, Sales and Other Dispositions of Assets. 1040x form instructions If you have a loss from damage to, or theft of, rental property, see Publication 547, Casualties, Disasters, and Thefts. 1040x form instructions If you rent a condominium or a cooperative apartment, some special rules apply to you even though you receive the same tax treatment as other owners of rental property. 1040x form instructions See Publication 527, Residential Rental Property, for more information. 1040x form instructions Useful Items - You may want to see: Publication 527 Residential Rental Property 534 Depreciating Property Placed in Service Before 1987 535 Business Expenses 925 Passive Activity and At-Risk Rules 946 How To Depreciate Property Form (and Instructions) 4562 Depreciation and Amortization 6251 Alternative Minimum Tax—Individuals 8582 Passive Activity Loss Limitations Schedule E (Form 1040) Supplemental Income and Loss Rental Income In most cases, you must include in your gross income all amounts you receive as rent. 1040x form instructions Rental income is any payment you receive for the use or occupation of property. 1040x form instructions In addition to amounts you receive as normal rent payments, there are other amounts that may be rental income. 1040x form instructions When to report. 1040x form instructions   If you are a cash-basis taxpayer, you report rental income on your return for the year you actually or constructively receive it. 1040x form instructions You are a cash-basis taxpayer if you report income in the year you receive it, regardless of when it was earned. 1040x form instructions You constructively receive income when it is made available to you, for example, by being credited to your bank account. 1040x form instructions   For more information about when you constructively receive income, see Accounting Methods in chapter 1. 1040x form instructions Advance rent. 1040x form instructions   Advance rent is any amount you receive before the period that it covers. 1040x form instructions Include advance rent in your rental income in the year you receive it regardless of the period covered or the method of accounting you use. 1040x form instructions Example. 1040x form instructions You sign a 10-year lease to rent your property. 1040x form instructions In the first year, you receive $5,000 for the first year's rent and $5,000 as rent for the last year of the lease. 1040x form instructions You must include $10,000 in your income in the first year. 1040x form instructions Canceling a lease. 1040x form instructions   If your tenant pays you to cancel a lease, the amount you receive is rent. 1040x form instructions Include the payment in your income in the year you receive it regardless of your method of accounting. 1040x form instructions Expenses paid by tenant. 1040x form instructions   If your tenant pays any of your expenses, the payments are rental income. 1040x form instructions Because you must include this amount in income, you can deduct the expenses if they are deductible rental expenses. 1040x form instructions See Rental Expenses , later, for more information. 1040x form instructions Property or services. 1040x form instructions   If you receive property or services, instead of money, as rent, include the fair market value of the property or services in your rental income. 1040x form instructions   If the services are provided at an agreed upon or specified price, that price is the fair market value unless there is evidence to the contrary. 1040x form instructions Security deposits. 1040x form instructions   Do not include a security deposit in your income when you receive it if you plan to return it to your tenant at the end of the lease. 1040x form instructions But if you keep part or all of the security deposit during any year because your tenant does not live up to the terms of the lease, include the amount you keep in your income in that year. 1040x form instructions   If an amount called a security deposit is to be used as a final payment of rent, it is advance rent. 1040x form instructions Include it in your income when you receive it. 1040x form instructions Part interest. 1040x form instructions   If you own a part interest in rental property, you must report your part of the rental income from the property. 1040x form instructions Rental of property also used as your home. 1040x form instructions   If you rent property that you also use as your home and you rent it less than 15 days during the tax year, do not include the rent you receive in your income and do not deduct rental expenses. 1040x form instructions However, you can deduct on Schedule A (Form 1040) the interest, taxes, and casualty and theft losses that are allowed for nonrental property. 1040x form instructions See Personal Use of Dwelling Unit (Including Vacation Home) , later. 1040x form instructions Rental Expenses This part discusses expenses of renting property that you ordinarily can deduct from your rental income. 1040x form instructions It includes information on the expenses you can deduct if you rent part of your property, or if you change your property to rental use. 1040x form instructions Depreciation , which you can also deduct from your rental income, is discussed later. 1040x form instructions Personal use of rental property. 1040x form instructions   If you sometimes use your rental property for personal purposes, you must divide your expenses between rental and personal use. 1040x form instructions Also, your rental expense deductions may be limited. 1040x form instructions See Personal Use of Dwelling Unit (Including Vacation Home) , later. 1040x form instructions Part interest. 1040x form instructions   If you own a part interest in rental property, you can deduct expenses that you paid according to your percentage of ownership. 1040x form instructions When to deduct. 1040x form instructions   If you are a cash-basis taxpayer, you generally deduct your rental expenses in the year you pay them. 1040x form instructions Depreciation. 1040x form instructions   You can begin to depreciate rental property when it is ready and available for rent. 1040x form instructions See Placed-in-Service under When Does Depreciation Begin and End in chapter 2 of Publication 527. 1040x form instructions Pre-rental expenses. 1040x form instructions   You can deduct your ordinary and necessary expenses for managing, conserving, or maintaining rental property from the time you make it available for rent. 1040x form instructions Uncollected rent. 1040x form instructions   If you are a cash-basis taxpayer, do not deduct uncollected rent. 1040x form instructions Because you have not included it in your income, it is not deductible. 1040x form instructions Vacant rental property. 1040x form instructions   If you hold property for rental purposes, you may be able to deduct your ordinary and necessary expenses (including depreciation) for managing, conserving, or maintaining the property while the property is vacant. 1040x form instructions However, you cannot deduct any loss of rental income for the period the property is vacant. 1040x form instructions Vacant while listed for sale. 1040x form instructions   If you sell property you held for rental purposes, you can deduct the ordinary and necessary expenses for managing, conserving, or maintaining the property until it is sold. 1040x form instructions If the property is not held out and available for rent while listed for sale, the expenses are not deductible rental expenses. 1040x form instructions Repairs and Improvements Generally, an expense for repairing or maintaining your rental property may be deducted if you are not required to capitalize the expense. 1040x form instructions Improvements. 1040x form instructions   You must capitalize any expense you pay to improve your rental property. 1040x form instructions An expense is for an improvement if it results in a betterment to your property, restores your property, or adapts your property to a new or different use. 1040x form instructions Betterments. 1040x form instructions   Expenses that may result in a betterment to your property include expenses for fixing a pre-existing defect or condition, enlarging or expanding your property, or increasing the capacity, strength, or quality of your property. 1040x form instructions Restoration. 1040x form instructions   Expenses that may be for restoration include expenses for replacing a substantial structural part of your property, repairing damage to your property after you properly adjusted the basis of your property as a result of a casualty loss, or rebuilding your property to a like-new condition. 1040x form instructions Adaptation. 1040x form instructions   Expenses that may be for adaptation include expenses for altering your property to a use that is not consistent with the intended ordinary use of your property when you began renting the property. 1040x form instructions Separate the costs of repairs and improvements, and keep accurate records. 1040x form instructions You will need to know the cost of improvements when you sell or depreciate your property. 1040x form instructions The expenses you capitalize for improving your property can generally be depreciated as if the improvement were separate property. 1040x form instructions Other Expenses Other expenses you can deduct from your rental income include advertising, cleaning and maintenance, utilities, fire and liability insurance, taxes, interest, commissions for the collection of rent, ordinary and necessary travel and transportation, and other expenses, discussed next. 1040x form instructions Insurance premiums paid in advance. 1040x form instructions   If you pay an insurance premium for more than one year in advance, for each year of coverage you can deduct the part of the premium payment that will apply to that year. 1040x form instructions You cannot deduct the total premium in the year you pay it. 1040x form instructions Legal and other professional fees. 1040x form instructions   You can deduct, as a rental expense, legal and other professional expenses, such as tax return preparation fees you paid to prepare Schedule E (Form 1040), Part I. 1040x form instructions For example, on your 2013 Schedule E, you can deduct fees paid in 2013 to prepare your 2012 Schedule E, Part I. 1040x form instructions You can also deduct, as a rental expense, any expense (other than federal taxes and penalties) you paid to resolve a tax underpayment related to your rental activities. 1040x form instructions Local benefit taxes. 1040x form instructions   In most cases, you cannot deduct charges for local benefits that increase the value of your property, such as charges for putting in streets, sidewalks, or water and sewer systems. 1040x form instructions These charges are nondepreciable capital expenditures, and must be added to the basis of your property. 1040x form instructions However, you can deduct local benefit taxes that are for maintaining, repairing, or paying interest charges for the benefits. 1040x form instructions Local transportation expenses. 1040x form instructions    You may be able to deduct your ordinary and necessary local transportation expenses if you incur them to collect rental income or to manage, conserve, or maintain your rental property. 1040x form instructions However, transportation expenses incurred to travel between your home and a rental property generally constitute nondeductible commuting costs unless you use your home as your principal place of business. 1040x form instructions See Publication 587, Business Use of Your Home, for information on determining if your home office qualifies as a principal place of business. 1040x form instructions   Generally, if you use your personal car, pickup truck, or light van for rental activities, you can deduct the expenses using one of two methods: actual expenses or the standard mileage rate. 1040x form instructions For 2013, the standard mileage rate for business use is 56. 1040x form instructions 5 cents per mile. 1040x form instructions For more information, see chapter 26. 1040x form instructions    To deduct car expenses under either method, you must keep records that follow the rules in chapter 26. 1040x form instructions In addition, you must complete Form 4562, Part V, and attach it to your tax return. 1040x form instructions Rental of equipment. 1040x form instructions   You can deduct the rent you pay for equipment that you use for rental purposes. 1040x form instructions However, in some cases, lease contracts are actually purchase contracts. 1040x form instructions If so, you cannot deduct these payments. 1040x form instructions You can recover the cost of purchased equipment through depreciation. 1040x form instructions Rental of property. 1040x form instructions   You can deduct the rent you pay for property that you use for rental purposes. 1040x form instructions If you buy a leasehold for rental purposes, you can deduct an equal part of the cost each year over the term of the lease. 1040x form instructions Travel expenses. 1040x form instructions   You can deduct the ordinary and necessary expenses of traveling away from home if the primary purpose of the trip is to collect rental income or to manage, conserve, or maintain your rental property. 1040x form instructions You must properly allocate your expenses between rental and nonrental activities. 1040x form instructions You cannot deduct the cost of traveling away from home if the primary purpose of the trip was to improve your property. 1040x form instructions You recover the cost of improvements by taking depreciation. 1040x form instructions For information on travel expenses, see chapter 26. 1040x form instructions    To deduct travel expenses, you must keep records that follow the rules in chapter 26. 1040x form instructions   See Rental Expenses in Publication 527 for more information. 1040x form instructions Property Changed to Rental Use If you change your home or other property (or a part of it) to rental use at any time other than the beginning of your tax year, you must divide yearly expenses, such as taxes and insurance, between rental use and personal use. 1040x form instructions You can deduct as rental expenses only the part of the expense that is for the part of the year the property was used or held for rental purposes. 1040x form instructions You cannot deduct depreciation or insurance for the part of the year the property was held for personal use. 1040x form instructions However, you can include the home mortgage interest, qualified mortgage insurance premiums, and real estate tax expenses for the part of the year the property was held for personal use as an itemized deduction on Schedule A (Form 1040). 1040x form instructions Example. 1040x form instructions Your tax year is the calendar year. 1040x form instructions You moved from your home in May and started renting it out on June 1. 1040x form instructions You can deduct as rental expenses seven-twelfths of your yearly expenses, such as taxes and insurance. 1040x form instructions Starting with June, you can deduct as rental expenses the amounts you pay for items generally billed monthly, such as utilities. 1040x form instructions Renting Part of Property If you rent part of your property, you must divide certain expenses between the part of the property used for rental purposes and the part of the property used for personal purposes, as though you actually had two separate pieces of property. 1040x form instructions You can deduct the expenses related to the part of the property used for rental purposes, such as home mortgage interest, qualified mortgage insurance premiums, and real estate taxes, as rental expenses on Schedule E (Form 1040). 1040x form instructions You can also deduct as rental expenses a portion of other expenses that normally are nondeductible personal expenses, such as expenses for electricity or painting the outside of your house. 1040x form instructions There is no change in the types of expenses deductible for the personal-use part of your property. 1040x form instructions Generally, these expenses may be deducted only if you itemize your deductions on Schedule A (Form 1040). 1040x form instructions You cannot deduct any part of the cost of the first phone line even if your tenants have unlimited use of it. 1040x form instructions You do not have to divide the expenses that belong only to the rental part of your property. 1040x form instructions For example, if you paint a room that you rent, or if you pay premiums for liability insurance in connection with renting a room in your home, your entire cost is a rental expense. 1040x form instructions If you install a second phone line strictly for your tenants' use, all of the cost of the second line is deductible as a rental expense. 1040x form instructions You can deduct depreciation, discussed later, on the part of the house used for rental purposes as well as on the furniture and equipment you use for rental purposes. 1040x form instructions How to divide expenses. 1040x form instructions   If an expense is for both rental use and personal use, such as mortgage interest or heat for the entire house, you must divide the expense between the rental use and the personal use. 1040x form instructions You can use any reasonable method for dividing the expense. 1040x form instructions It may be reasonable to divide the cost of some items (for example, water) based on the number of people using them. 1040x form instructions The two most common methods for dividing an expense are based on (1) the number of rooms in your home, and (2) the square footage of your home. 1040x form instructions Not Rented for Profit If you do not rent your property to make a profit, you can deduct your rental expenses only up to the amount of your rental income. 1040x form instructions You cannot deduct a loss or carry forward to the next year any rental expenses that are more than your rental income for the year. 1040x form instructions For more information about the rules for an activity not engaged in for profit, see Not-for-Profit Activities in chapter 1 of Publication 535. 1040x form instructions Where to report. 1040x form instructions   Report your not-for-profit rental income on Form 1040, line 21. 1040x form instructions For example, you can include your mortgage interest and any qualified mortgage insurance premiums (if you use the property as your main home or second home), real estate taxes, and casualty losses on the appropriate lines of Schedule A (Form 1040) if you itemize your deductions. 1040x form instructions   If you itemize your deductions, claim your other rental expenses, subject to the rules explained in chapter 1 of Publication 535, as miscellaneous itemized deductions on Form 1040, Schedule A, line 23. 1040x form instructions You can deduct these expenses only if they, together with certain other miscellaneous itemized deductions, total more than 2% of your adjusted gross income. 1040x form instructions Personal Use of Dwelling Unit (Including Vacation Home) If you have any personal use of a dwelling unit (including a vacation home) that you rent, you must divide your expenses between rental use and personal use. 1040x form instructions In general, your rental expenses will be no more than your total expenses multiplied by a fraction; the denominator of which is the total number of days the dwelling unit is used and the numerator of which is the total number of days actually rented at a fair rental price. 1040x form instructions Only your rental expenses may be deducted on Schedule E (Form 1040). 1040x form instructions Some of your personal expenses may be deductible if you itemize your deductions on Schedule A (Form 1040). 1040x form instructions You must also determine if the dwelling unit is considered a home. 1040x form instructions The amount of rental expenses that you can deduct may be limited if the dwelling unit is considered a home. 1040x form instructions Whether a dwelling unit is considered a home depends on how many days during the year are considered to be days of personal use. 1040x form instructions There is a special rule if you used the dwelling unit as a home and you rented it for less than 15 days during the year. 1040x form instructions Dwelling unit. 1040x form instructions   A dwelling unit includes a house, apartment, condominium, mobile home, boat, vacation home, or similar property. 1040x form instructions It also includes all structures or other property belonging to the dwelling unit. 1040x form instructions A dwelling unit has basic living accommodations, such as sleeping space, a toilet, and cooking facilities. 1040x form instructions   A dwelling unit does not include property used solely as a hotel, motel, inn, or similar establishment. 1040x form instructions Property is used solely as a hotel, motel, inn, or similar establishment if it is regularly available for occupancy by paying customers and is not used by an owner as a home during the year. 1040x form instructions Example. 1040x form instructions   You rent a room in your home that is always available for short-term occupancy by paying customers. 1040x form instructions You do not use the room yourself, and you allow only paying customers to use the room. 1040x form instructions The room is used solely as a hotel, motel, inn, or similar establishment and is not a dwelling unit. 1040x form instructions Dividing Expenses If you use a dwelling unit for both rental and personal purposes, divide your expenses between the rental use and the personal use based on the number of days used for each purpose. 1040x form instructions When dividing your expenses, follow these rules. 1040x form instructions Any day that the unit is rented at a fair rental price is a day of rental use even if you used the unit for personal purposes that day. 1040x form instructions This rule does not apply when determining whether you used the unit as a home. 1040x form instructions Any day that the unit is available for rent but not actually rented is not a day of rental use. 1040x form instructions Example. 1040x form instructions Your beach cottage was available for rent from June 1 through August 31 (92 days). 1040x form instructions During that time, except for the first week in August (7 days) when you were unable to find a renter, you rented the cottage at a fair rental price. 1040x form instructions The person who rented the cottage for July allowed you to use it over the weekend (2 days) without any reduction in or refund of rent. 1040x form instructions Your family also used the cottage during the last 2 weeks of May (14 days). 1040x form instructions The cottage was not used at all before May 17 or after August 31. 1040x form instructions You figure the part of the cottage expenses to treat as rental expenses as follows. 1040x form instructions The cottage was used for rental a total of 85 days (92 − 7). 1040x form instructions The days it was available for rent but not rented (7 days) are not days of rental use. 1040x form instructions The July weekend (2 days) you used it is rental use because you received a fair rental price for the weekend. 1040x form instructions You used the cottage for personal purposes for 14 days (the last 2 weeks in May). 1040x form instructions The total use of the cottage was 99 days (14 days personal use + 85 days rental use). 1040x form instructions Your rental expenses are 85/99 (86%) of the cottage expenses. 1040x form instructions Note. 1040x form instructions When determining whether you used the cottage as a home, the July weekend (2 days) you used it is considered personal use even though you received a fair rental price for the weekend. 1040x form instructions Therefore, you had 16 days of personal use and 83 days of rental use for this purpose. 1040x form instructions Because you used the cottage for personal purposes more than 14 days and more than 10% of the days of rental use (8 days), you used it as a home. 1040x form instructions If you have a net loss, you may not be able to deduct all of the rental expenses. 1040x form instructions See Dwelling Unit Used as a Home, next. 1040x form instructions Dwelling Unit Used as a Home If you use a dwelling unit for both rental and personal purposes, the tax treatment of the rental expenses you figured earlier under Dividing Expenses and rental income depends on whether you are considered to be using the dwelling unit as a home. 1040x form instructions You use a dwelling unit as a home during the tax year if you use it for personal purposes more than the greater of: 14 days, or 10% of the total days it is rented to others at a fair rental price. 1040x form instructions See What is a day of personal use , later. 1040x form instructions Fair rental price. 1040x form instructions   A fair rental price for your property generally is the amount of rent that a person who is not related to you would be willing to pay. 1040x form instructions The rent you charge is not a fair rental price if it is substantially less than the rents charged for other properties that are similar to your property in your area. 1040x form instructions   If a dwelling unit is used for personal purposes on a day it is rented at a fair rental price, do not count that day as a day of rental use in applying (2) above. 1040x form instructions Instead, count it as a day of personal use in applying both (1) and (2) above. 1040x form instructions What is a day of personal use?   A day of personal use of a dwelling unit is any day that the unit is used by any of the following persons. 1040x form instructions You or any other person who has an interest in the unit, unless you rent it to another owner as his or her main home under a shared equity financing agreement (defined later). 1040x form instructions However, see Days used as a main home before or after renting , later. 1040x form instructions A member of your family or a member of the family of any other person who owns an interest in the unit, unless the family member uses the dwelling unit as his or her main home and pays a fair rental price. 1040x form instructions Family includes only your spouse, brothers and sisters, half-brothers and half-sisters, ancestors (parents, grandparents, etc. 1040x form instructions ), and lineal descendants (children, grandchildren, etc. 1040x form instructions ). 1040x form instructions Anyone under an arrangement that lets you use some other dwelling unit. 1040x form instructions Anyone at less than a fair rental price. 1040x form instructions Main home. 1040x form instructions   If the other person or member of the family in (1) or (2) above has more than one home, his or her main home is ordinarily the one he or she lived in most of the time. 1040x form instructions Shared equity financing agreement. 1040x form instructions   This is an agreement under which two or more persons acquire undivided interests for more than 50 years in an entire dwelling unit, including the land, and one or more of the co-owners is entitled to occupy the unit as his or her main home upon payment of rent to the other co-owner or owners. 1040x form instructions Donation of use of property. 1040x form instructions   You use a dwelling unit for personal purposes if: You donate the use of the unit to a charitable organization, The organization sells the use of the unit at a fund-raising event, and The “purchaser” uses the unit. 1040x form instructions Examples. 1040x form instructions   The following examples show how to determine days of personal use. 1040x form instructions Example 1. 1040x form instructions You and your neighbor are co-owners of a condominium at the beach. 1040x form instructions Last year, you rented the unit to vacationers whenever possible. 1040x form instructions The unit was not used as a main home by anyone. 1040x form instructions Your neighbor used the unit for 2 weeks last year; you did not use it at all. 1040x form instructions Because your neighbor has an interest in the unit, both of you are considered to have used the unit for personal purposes during those 2 weeks. 1040x form instructions Example 2. 1040x form instructions You and your neighbors are co-owners of a house under a shared equity financing agreement. 1040x form instructions Your neighbors live in the house and pay you a fair rental price. 1040x form instructions Even though your neighbors have an interest in the house, the days your neighbors live there are not counted as days of personal use by you. 1040x form instructions This is because your neighbors rent the house as their main home under a shared equity financing agreement. 1040x form instructions Example 3. 1040x form instructions You own a rental property that you rent to your son. 1040x form instructions Your son does not own any interest in this property. 1040x form instructions He uses it as his main home and pays you a fair rental price. 1040x form instructions Your son's use of the property is not personal use by you because your son is using it as his main home, he owns no interest in the property, and he is paying you a fair rental price. 1040x form instructions Example 4. 1040x form instructions You rent your beach house to Joshua. 1040x form instructions Joshua rents his cabin in the mountains to you. 1040x form instructions You each pay a fair rental price. 1040x form instructions You are using your house for personal purposes on the days that Joshua uses it because your house is used by Joshua under an arrangement that allows you to use his house. 1040x form instructions Days used for repairs and maintenance. 1040x form instructions   Any day that you spend working substantially full time repairing and maintaining (not improving) your property is not counted as a day of personal use. 1040x form instructions Do not count such a day as a day of personal use even if family members use the property for recreational purposes on the same day. 1040x form instructions Days used as a main home before or after renting. 1040x form instructions   For purposes of determining whether a dwelling unit was used as a home, you may not have to count days you used the property as your main home before or after renting it or offering it for rent as days of personal use. 1040x form instructions Do not count them as days of personal use if: You rented or tried to rent the property for 12 or more consecutive months. 1040x form instructions You rented or tried to rent the property for a period of less than 12 consecutive months and the period ended because you sold or exchanged the property. 1040x form instructions However, this special rule does not apply when dividing expenses between rental and personal use. 1040x form instructions Examples. 1040x form instructions   The following examples show how to determine whether you used your rental property as a home. 1040x form instructions Example 1. 1040x form instructions You converted the basement of your home into an apartment with a bedroom, a bathroom, and a small kitchen. 1040x form instructions You rented the basement apartment at a fair rental price to college students during the regular school year. 1040x form instructions You rented to them on a 9-month lease (273 days). 1040x form instructions You figured 10% of the total days rented to others at a fair rental price is 27 days. 1040x form instructions During June (30 days), your brothers stayed with you and lived in the basement apartment rent free. 1040x form instructions Your basement apartment was used as a home because you used it for personal purposes for 30 days. 1040x form instructions Rent-free use by your brothers is considered personal use. 1040x form instructions Your personal use (30 days) is more than the greater of 14 days or 10% of the total days it was rented (27 days). 1040x form instructions Example 2. 1040x form instructions You rented the guest bedroom in your home at a fair rental price during the local college's homecoming, commencement, and football weekends (a total of 27 days). 1040x form instructions Your sister-in-law stayed in the room, rent free, for the last 3 weeks (21 days) in July. 1040x form instructions You figured 10% of the total days rented to others at a fair rental price is 3 days. 1040x form instructions The room was used as a home because you used it for personal purposes for 21 days. 1040x form instructions That is more than the greater of 14 days or 10% of the 27 days it was rented (3 days). 1040x form instructions Example 3. 1040x form instructions You own a condominium apartment in a resort area. 1040x form instructions You rented it at a fair rental price for a total of 170 days during the year. 1040x form instructions For 12 of those days, the tenant was not able to use the apartment and allowed you to use it even though you did not refund any of the rent. 1040x form instructions Your family actually used the apartment for 10 of those days. 1040x form instructions Therefore, the apartment is treated as having been rented for 160 (170 − 10) days. 1040x form instructions You figured 10% of the total days rented to others at a fair rental price is 16 days. 1040x form instructions Your family also used the apartment for 7 other days during the year. 1040x form instructions You used the apartment as a home because you used it for personal purposes for 17 days. 1040x form instructions That is more than the greater of 14 days or 10% of the 160 days it was rented (16 days). 1040x form instructions Minimal rental use. 1040x form instructions   If you use the dwelling unit as a home and you rent it less than 15 days during the year, that period is not treated as rental activity. 1040x form instructions See Used as a home but rented less than 15 days , later, for more information. 1040x form instructions Limit on deductions. 1040x form instructions   Renting a dwelling unit that is considered a home is not a passive activity. 1040x form instructions Instead, if your rental expenses are more than your rental income, some or all of the excess expenses cannot be used to offset income from other sources. 1040x form instructions The excess expenses that cannot be used to offset income from other sources are carried forward to the next year and treated as rental expenses for the same property. 1040x form instructions Any expenses carried forward to the next year will be subject to any limits that apply for that year. 1040x form instructions This limitation will apply to expenses carried forward to another year even if you do not use the property as your home for that subsequent year. 1040x form instructions   To figure your deductible rental expenses for this year and any carryover to next year, use Worksheet 9-1. 1040x form instructions Reporting Income and Deductions Property not used for personal purposes. 1040x form instructions   If you do not use a dwelling unit for personal purposes, see How To Report Rental Income and Expenses , later, for how to report your rental income and expenses. 1040x form instructions Property used for personal purposes. 1040x form instructions   If you do use a dwelling unit for personal purposes, then how you report your rental income and expenses depends on whether you used the dwelling unit as a home. 1040x form instructions Not used as a home. 1040x form instructions   If you use a dwelling unit for personal purposes, but not as a home, report all the rental income in your income. 1040x form instructions Since you used the dwelling unit for personal purposes, you must divide your expenses between the rental use and the personal use as described earlier in Dividing Expenses . 1040x form instructions The expenses for personal use are not deductible as rental expenses. 1040x form instructions   Your deductible rental expenses can be more than your gross rental income; however, see Limits on Rental Losses , later. 1040x form instructions Used as a home but rented less than 15 days. 1040x form instructions   If you use a dwelling unit as a home and you rent it less than 15 days during the year, its primary function is not considered to be rental and it should not be reported on Schedule E (Form 1040). 1040x form instructions You are not required to report the rental income and rental expenses from this activity. 1040x form instructions The expenses, including qualified mortgage interest, property taxes, and any qualified casualty loss will be reported as normally allowed on Schedule A (Form 1040). 1040x form instructions See the Instructions for Schedule A (Form 1040) for more information on deducting these expenses. 1040x form instructions Used as a home and rented 15 days or more. 1040x form instructions   If you use a dwelling unit as a home and rent it 15 days or more during the year, include all your rental income in your income. 1040x form instructions Since you used the dwelling unit for personal purposes, you must divide your expenses between the rental use and the personal use as described earlier in Dividing Expenses . 1040x form instructions The expenses for personal use are not deductible as rental expenses. 1040x form instructions   If you had a net profit from renting the dwelling unit for the year (that is, if your rental income is more than the total of your rental expenses, including depreciation), deduct all of your rental expenses. 1040x form instructions You do not need to use Worksheet 9-1. 1040x form instructions   However, if you had a net loss from renting the dwelling unit for the year, your deduction for certain rental expenses is limited. 1040x form instructions To figure your deductible rental expenses and any carryover to next year, use Worksheet 9-1. 1040x form instructions Depreciation You recover the cost of income-producing property through yearly tax deductions. 1040x form instructions You do this by depreciating the property; that is, by deducting some of the cost each year on your tax return. 1040x form instructions Three factors determine how much depreciation you can deduct each year: (1) your basis in the property, (2) the recovery period for the property, and (3) the depreciation method used. 1040x form instructions You cannot simply deduct your mortgage or principal payments, or the cost of furniture, fixtures, and equipment, as an expense. 1040x form instructions You can deduct depreciation only on the part of your property used for rental purposes. 1040x form instructions Depreciation reduces your basis for figuring gain or loss on a later sale or exchange. 1040x form instructions You may have to use Form 4562 to figure and report your depreciation. 1040x form instructions See How To Report Rental Income and Expenses , later. 1040x form instructions Alternative minimum tax (AMT). 1040x form instructions    If you use accelerated depreciation, you may be subject to the AMT. 1040x form instructions Accelerated depreciation allows you to deduct more depreciation earlier in the recovery period than you could deduct using a straight line method (same deduction each year). 1040x form instructions Claiming the correct amount of depreciation. 1040x form instructions   You should claim the correct amount of depreciation each tax year. 1040x form instructions If you did not claim all the depreciation you were entitled to deduct, you must still reduce your basis in the property by the full amount of depreciation that you could have deducted. 1040x form instructions   If you deducted an incorrect amount of depreciation for property in any year, you may be able to make a correction by filing Form 1040X, Amended U. 1040x form instructions S Individual Income Tax Return. 1040x form instructions If you are not allowed to make the correction on an amended return, you can change your accounting method to claim the correct amount of depreciation. 1040x form instructions See Claiming the correct amount of depreciation in chapter 2 of Publication 527 for more information. 1040x form instructions Changing your accounting method to deduct unclaimed depreciation. 1040x form instructions   To change your accounting method, you generally must file Form 3115, Application for Change in Accounting Method, to get the consent of the IRS. 1040x form instructions In some instances, that consent is automatic. 1040x form instructions For more information, see chapter 1 of Publication 946. 1040x form instructions Land. 1040x form instructions   You cannot depreciate the cost of land because land generally does not wear out, become obsolete, or get used up. 1040x form instructions The costs of clearing, grading, planting, and landscaping are usually all part of the cost of land and cannot be depreciated. 1040x form instructions More information. 1040x form instructions   See Publication 527 for more information about depreciating rental property and see Publication 946 for more information about depreciation. 1040x form instructions Limits on Rental Losses If you have a loss from your rental real estate activity, two sets of rules may limit the amount of loss you can deduct. 1040x form instructions You must consider these rules in the order shown below. 1040x form instructions At-risk rules. 1040x form instructions These rules are applied first if there is investment in your rental real estate activity for which you are not at risk. 1040x form instructions This applies only if the real property was placed in service after 1986. 1040x form instructions Passive activity limits. 1040x form instructions Generally, rental real estate activities are considered passive activities and losses are not deductible unless you have income from other passive activities to offset them. 1040x form instructions However, there are exceptions. 1040x form instructions At-Risk Rules You may be subject to the at-risk rules if you have: A loss from an activity carried on as a trade or business or for the production of income, and Amounts invested in the activity for which you are not fully at risk. 1040x form instructions Losses from holding real property (other than mineral property) placed in service before 1987 are not subject to the at-risk rules. 1040x form instructions In most cases, any loss from an activity subject to the at-risk rules is allowed only to the extent of the total amount you have at risk in the activity at the end of the tax year. 1040x form instructions You are considered at risk in an activity to the extent of cash and the adjusted basis of other property you contributed to the activity and certain amounts borrowed for use in the activity. 1040x form instructions See Publication 925 for more information. 1040x form instructions Passive Activity Limits In most cases, all rental real estate activities (except those of certain real estate professionals, discussed later) are passive activities. 1040x form instructions For this purpose, a rental activity is an activity from which you receive income mainly for the use of tangible property, rather than for services. 1040x form instructions Limits on passive activity deductions and credits. 1040x form instructions    Deductions or losses from passive activities are limited. 1040x form instructions You generally cannot offset income, other than passive income, with losses from passive activities. 1040x form instructions Nor can you offset taxes on income, other than passive income, with credits resulting from passive activities. 1040x form instructions Any excess loss or credit is carried forward to the next tax year. 1040x form instructions   For a detailed discussion of these rules, see Publication 925. 1040x form instructions    You may have to complete Form 8582 to figure the amount of any passive activity loss for the current tax year for all activities and the amount of the passive activity loss allowed on your tax return. 1040x form instructions Real estate professionals. 1040x form instructions   Rental activities in which you materially participated during the year are not passive activities if, for that year, you were a real estate professional. 1040x form instructions For a detailed discussion of the requirements, see Publication 527. 1040x form instructions For a detailed discussion of material participation, see Publication 925. 1040x form instructions Exception for Personal Use of Dwelling Unit If you used the rental property as a home during the year, any income, deductions, gain, or loss allocable to such use shall not be taken into account for purposes of the passive activity loss limitation. 1040x form instructions Instead, follow the rules explained in Personal Use of Dwelling Unit (Including Vacation Home), earlier. 1040x form instructions Exception for Rental Real Estate Activities With Active Participation If you or your spouse actively participated in a passive rental real estate activity, you may be able to deduct up to $25,000 of loss from the activity from your nonpassive income. 1040x form instructions This special allowance is an exception to the general rule disallowing losses in excess of income from passive activities. 1040x form instructions Similarly, you may be able to offset credits from the activity against the tax on up to $25,000 of nonpassive income after taking into account any losses allowed under this exception. 1040x form instructions Active participation. 1040x form instructions   You actively participated in a rental real estate activity if you (and your spouse) owned at least 10% of the rental property and you made management decisions or arranged for others to provide services (such as repairs) in a significant and bona fide sense. 1040x form instructions Management decisions that may count as active participation include approving new tenants, deciding on rental terms, approving expenditures, and similar decisions. 1040x form instructions Maximum special allowance. 1040x form instructions   The maximum special allowance is: $25,000 for single individuals and married individuals filing a joint return for the tax year, $12,500 for married individuals who file separate returns for the tax year and lived apart from their spouses at all times during the tax year, and $25,000 for a qualifying estate reduced by the special allowance for which the surviving spouse qualified. 1040x form instructions   If your modified adjusted gross income (MAGI) is $100,000 or less ($50,000 or less if married filing separately), you can deduct your loss up to the amount specified above. 1040x form instructions If your MAGI is more than $100,000 (more than $50,000 if married filing separately), your special allowance is limited to 50% of the difference between $150,000 ($75,000 if married filing separately) and your MAGI. 1040x form instructions   Generally, if your MAGI is $150,000 or more ($75,000 or more if you are married filing separately), there is no special allowance. 1040x form instructions More information. 1040x form instructions   See Publication 925 for more information on the passive loss limits, including information on the treatment of unused disallowed passive losses and credits and the treatment of gains and losses realized on the disposition of a passive activity. 1040x form instructions How To Report Rental Income and Expenses The basic form for reporting residential rental income and expenses is Schedule E (Form 1040). 1040x form instructions However, do not use that schedule to report a not-for-profit activity. 1040x form instructions See Not Rented for Profit, earlier. 1040x form instructions Providing substantial services. 1040x form instructions   If you provide substantial services that are primarily for your tenant's convenience, such as regular cleaning, changing linen, or maid service, report your rental income and expenses on Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business (Sole Proprietorship). 1040x form instructions Substantial services do not include the furnishing of heat and light, cleaning of public areas, trash collection, etc. 1040x form instructions For information, see Publication 334, Tax Guide for Small Business. 1040x form instructions You also may have to pay self-employment tax on your rental income using Schedule SE (Form 1040), Self-Employment Tax. 1040x form instructions   Use Form 1065, U. 1040x form instructions S. 1040x form instructions Return of Partnership Income, if your rental activity is a partnership (including a partnership with your spouse unless it is a qualified joint venture). 1040x form instructions Qualified joint venture. 1040x form instructions   If you and your spouse each materially participate as the only members of a jointly owned and operated real estate business, and you file a joint return for the tax year, you can make a joint election to be treated as a qualified joint venture instead of a partnership. 1040x form instructions This election, in most cases, will not increase the total tax owed on the joint return, but it does give each of you credit for social security earnings on which retirement benefits are based and for Medicare coverage if your rental income is subject to self-employment tax. 1040x form instructions For more information, see Publication 527. 1040x form instructions Form 1098, Mortgage Interest Statement. 1040x form instructions    If you paid $600 or more of mortgage interest on your rental property to any one person, you should receive a Form 1098, or similar statement showing the interest you paid for the year. 1040x form instructions If you and at least one other person (other than your spouse if you file a joint return) were liable for, and paid interest on the mortgage, and the other person received the Form 1098, report your share of the interest on Schedule E (Form 1040), line 13. 1040x form instructions Attach a statement to your return showing the name and address of the other person. 1040x form instructions In the left margin of Schedule E, next to line 13, enter “See attached. 1040x form instructions ” Schedule E (Form 1040) If you rent buildings, rooms, or apartments, and provide basic services such as heat and light, trash collection, etc. 1040x form instructions , you normally report your rental income and expenses on Schedule E, Part I. 1040x form instructions List your total income, expenses, and depreciation for each rental property. 1040x form instructions Be sure to enter the number of fair rental and personal use days on line 2. 1040x form instructions If you have more than three rental or royalty properties, complete and attach as many Schedules E as are needed to list the properties. 1040x form instructions Complete lines 1 and 2 for each property. 1040x form instructions However, fill in lines 23a through 26 on only one Schedule E. 1040x form instructions On Schedule E, page 1, line 18, enter the depreciation you are claiming for each property. 1040x form instructions To find out if you need to attach Form 4562, see Form 4562, in chapter 3 of Publication 527. 1040x form instructions If you have a loss from your rental real estate activity, you also may need to complete one or both of the following forms. 1040x form instructions Form 6198, At-Risk Limitations. 1040x form instructions See At-Risk Rules , earlier. 1040x form instructions Also see Publication 925. 1040x form instructions Form 8582, Passive Activity Loss Limitations. 1040x form instructions See Passive Activity Limits , earlier. 1040x form instructions Page 2 of Schedule E is used to report income or loss from partnerships, S corporations, estates, trusts, and real estate mortgage investment conduits. 1040x form instructions If you need to use page 2 of Schedule E, be sure to use page 2 of the same Schedule E you used to enter your rental activity on page 1. 1040x form instructions Also, include the amount from line 26 (Part I) in the “Total income or (loss)” on line 41 (Part V). 1040x form instructions Worksheet 9-1. 1040x form instructions Worksheet for Figuring Rental Deductions for a Dwelling Unit Used as a Home Use this worksheet only if you answer “yes” to all of the following questions. 1040x form instructions Did you use the dwelling unit as a home this year? (See Dwelling Unit Used as a Home . 1040x form instructions ) Did you rent the dwelling unit at a fair rental price 15 days or more this year? Is the total of your rental expenses and depreciation more than your rental income? PART I. 1040x form instructions Rental Use Percentage A. 1040x form instructions Total days available for rent at fair rental price A. 1040x form instructions       B. 1040x form instructions Total days available for rent (line A) but not rented B. 1040x form instructions       C. 1040x form instructions Total days of rental use. 1040x form instructions Subtract line B from line A C. 1040x form instructions       D. 1040x form instructions Total days of personal use (including days rented at less than fair rental price) D. 1040x form instructions       E. 1040x form instructions Total days of rental and personal use. 1040x form instructions Add lines C and D E. 1040x form instructions       F. 1040x form instructions Percentage of expenses allowed for rental. 1040x form instructions Divide line C by line E     F. 1040x form instructions   PART II. 1040x form instructions Allowable Rental Expenses 1. 1040x form instructions Enter rents received 1. 1040x form instructions   2a. 1040x form instructions Enter the rental portion of deductible home mortgage interest and qualified mortgage insurance premiums (see instructions) 2a. 1040x form instructions       b. 1040x form instructions Enter the rental portion of real estate taxes b. 1040x form instructions       c. 1040x form instructions Enter the rental portion of deductible casualty and theft losses (see instructions) c. 1040x form instructions       d. 1040x form instructions Enter direct rental expenses (see instructions) d. 1040x form instructions       e. 1040x form instructions Fully deductible rental expenses. 1040x form instructions Add lines 2a–2d. 1040x form instructions Enter here and  on the appropriate lines on Schedule E (see instructions) 2e. 1040x form instructions   3. 1040x form instructions Subtract line 2e from line 1. 1040x form instructions If zero or less, enter -0- 3. 1040x form instructions   4a. 1040x form instructions Enter the rental portion of expenses directly related to operating or maintaining  the dwelling unit (such as repairs, insurance, and utilities) 4a. 1040x form instructions       b. 1040x form instructions Enter the rental portion of excess mortgage interest and qualified mortgage insurance premiums (see instructions) b. 1040x form instructions       c. 1040x form instructions Carryover of operating expenses from 2012 worksheet c. 1040x form instructions       d. 1040x form instructions Add lines 4a–4c d. 1040x form instructions       e. 1040x form instructions Allowable expenses. 1040x form instructions Enter the smaller of line 3 or line 4d (see instructions) 4e. 1040x form instructions   5. 1040x form instructions Subtract line 4e from line 3. 1040x form instructions If zero or less, enter -0- 5. 1040x form instructions   6a. 1040x form instructions Enter the rental portion of excess casualty and theft losses (see instructions) 6a. 1040x form instructions       b. 1040x form instructions Enter the rental portion of depreciation of the dwelling unit b. 1040x form instructions       c. 1040x form instructions Carryover of excess casualty losses and depreciation from 2012 worksheet c. 1040x form instructions       d. 1040x form instructions Add lines 6a–6c d. 1040x form instructions       e. 1040x form instructions Allowable excess casualty and theft losses and depreciation. 1040x form instructions Enter the smaller of  line 5 or line 6d (see instructions) 6e. 1040x form instructions   PART III. 1040x form instructions Carryover of Unallowed Expenses to Next Year 7a. 1040x form instructions Operating expenses to be carried over to next year. 1040x form instructions Subtract line 4e from line 4d 7a. 1040x form instructions   b. 1040x form instructions Excess casualty and theft losses and depreciation to be carried over to next year. 1040x form instructions  Subtract line 6e from line 6d b. 1040x form instructions   Worksheet 9-1 Instructions. 1040x form instructions Worksheet for Figuring Rental Deductions for a Dwelling Unit Used as a Home Caution. 1040x form instructions Use the percentage determined in Part I, line F, to figure the rental portions to enter on lines 2a–2c, 4a–4b, and 6a–6b of  Part II. 1040x form instructions Line 2a. 1040x form instructions Figure the mortgage interest on the dwelling unit that you could deduct on Schedule A as if you had not rented the unit. 1040x form instructions Do not include interest on a loan that did not benefit the dwelling unit. 1040x form instructions For example, do not include interest on a home equity loan used to pay off credit cards or other personal loans, buy a car, or pay college tuition. 1040x form instructions Include interest on a loan used to buy, build, or improve the dwelling unit, or to refinance such a loan. 1040x form instructions Include the rental portion of this interest in the total you enter on line 2a of the worksheet. 1040x form instructions   Figure the qualified mortgage insurance premiums on the dwelling unit that you could deduct on line 13 of Schedule A as if you had not rented the unit. 1040x form instructions See the Schedule A instructions. 1040x form instructions However, figure your adjusted gross income (Form 1040, line 38) without your rental income and expenses from the dwelling unit. 1040x form instructions See Line 4b to deduct the part of the qualified mortgage insurance premiums not allowed because of the adjusted gross income limit. 1040x form instructions Include the rental portion of the amount from Schedule A, line 13, in the total you enter on line 2a of the worksheet. 1040x form instructions   Note. 1040x form instructions Do not file this Schedule A or use it to figure the amount to deduct on line 13 of that schedule. 1040x form instructions Instead, figure the personal portion on a separate Schedule A. 1040x form instructions If you have deducted mortgage interest or qualified mortgage insurance premiums on the dwelling unit on other forms, such as Schedule C or F, remember to reduce your Schedule A deduction by that amount. 1040x form instructions           Line 2c. 1040x form instructions Figure the casualty and theft losses related to the dwelling unit that you could deduct on Schedule A as if you had not rented the dwelling unit. 1040x form instructions To do this, complete Section A of Form 4684, Casualties and Thefts, treating the losses as personal losses. 1040x form instructions If any of the loss is due to a federally declared disaster, see the Instructions for Form 4684. 1040x form instructions On Form 4684, line 17, enter 10% of your adjusted gross income figured without your rental income and expenses from the dwelling unit. 1040x form instructions Enter the rental portion of the result from Form 4684, line 18, on line 2c of this worksheet. 1040x form instructions   Note. 1040x form instructions Do not file this Form 4684 or use it to figure your personal losses on Schedule A. 1040x form instructions Instead, figure the personal portion on a separate Form 4684. 1040x form instructions           Line 2d. 1040x form instructions Enter the total of your rental expenses that are directly related only to the rental activity. 1040x form instructions These include interest on loans used for rental activities other than to buy, build, or improve the dwelling unit. 1040x form instructions Also include rental agency fees, advertising, office supplies, and depreciation on office equipment used in your rental activity. 1040x form instructions           Line 2e. 1040x form instructions You can deduct the amounts on lines 2a, 2b, 2c, and 2d as rental expenses on Schedule E even if your rental expenses are more than your rental income. 1040x form instructions Enter the amounts on lines 2a, 2b, 2c, and 2d on the appropriate lines of Schedule E. 1040x form instructions           Line 4b. 1040x form instructions On line 2a, you entered the rental portion of the mortgage interest and qualified mortgage insurance premiums you could deduct on Schedule A if you had not rented the dwelling unit. 1040x form instructions If you had additional mortgage interest and qualified mortgage insurance premiums that would not be deductible on Schedule A because of limits imposed on them, enter on line 4b of this worksheet the rental portion of those excess amounts. 1040x form instructions Do not include interest on a loan that did not benefit the dwelling unit (as explained in the line 2a instructions). 1040x form instructions           Line 4e. 1040x form instructions You can deduct the amounts on lines 4a, 4b, and 4c as rental expenses on Schedule E only to the extent they are not more than the amount on line 4e. 1040x form instructions *           Line 6a. 1040x form instructions To find the rental portion of excess casualty and theft losses, use the Form 4684 you prepared for line 2c of this worksheet. 1040x form instructions   A. 1040x form instructions Enter the amount from Form 4684, line 10       B. 1040x form instructions Enter the rental portion of line A       C. 1040x form instructions Enter the amount from line 2c of this worksheet       D. 1040x form instructions Subtract line C from line B. 1040x form instructions Enter the result here and on line 6a of this worksheet               Line 6e. 1040x form instructions You can deduct the amounts on lines 6a, 6b, and 6c as rental expenses on Schedule E only to the extent they are not more than the amount on line 6e. 1040x form instructions * *Allocating the limited deduction. 1040x form instructions If you cannot deduct all of the amount on line 4d or 6d this year, you can allocate the allowable deduction in any way you wish among the expenses included on line 4d or 6d. 1040x form instructions Enter the amount you allocate to each expense on the appropriate line of Schedule E, Part I. 1040x form instructions Prev  Up  Next   Home   More Online Publications
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Understanding your CP22A Notice

We made the change(s) you requested to your tax return for the tax year specified on the notice. You owe money on your taxes as a result of the change(s).

Printable samples of this notice (PDF)

Tax publications you may find useful

How to get help

Calling the toll free number listed on the top right corner of your notice is the fastest way to get your questions answered.

You can also authorize someone (such as an accountant) to contact the IRS on your behalf using this Power of Attorney and Declaration of Representative (Form 2848).

Or you may qualify for help from a Low Income Taxpayer Clinic.
 


What you need to do

  • Read your notice carefully ― it will explain why you owe money on your taxes.
  • Pay the amount owed by the date on the notice's payment coupon.
  • Make payment arrangements if you can't pay the full amount you owe.
  • Contact us if you disagree with the change(s) we made.
  • Correct the copy of your tax return that you kept for your records.

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Answers to Common Questions

The notice says "Based on the information you provided, we changed your 200X Form 1040 to correct your:..." but I don't remember sending any change to IRS. How can I find out what IRS received to initiate this change?
Please contact us at the number listed on the top right corner of your notice for specific information about your tax return.

What do I say when I call the IRS?
Mention that you got a CP22A notice with a balance due and you need to review your account with a customer service representative. Be sure to have a copy of your notice and your tax return before you call.

What should I do if I disagree with the changes you made?
If you disagree, contact us at the toll-free number listed on the top right corner of your notice.

What happens if I can't pay the full amount I owe?
You can arrange to make a payment plan with us if you can't pay the full amount you owe.

Am I charged interest on the money I owe?
If you don't full pay the amount you owe by the date on the payment coupon, interest will accrue on the unpaid balance after that date.

Will I receive a penalty if I can't pay the full amount?
Yes, you'll receive a late payment penalty. You can contact us at the number listed on your notice if you’re unable to pay the full amount shown in your specific notice because of circumstances beyond your control. Contact us by the due date of your payment and, depending on your situation, we may be able to remove the penalty.

Can I set up a payment plan?
Yes. Call the toll-free number listed on the top right corner of your notice to discuss payment options or check out more information on payment options and how to make a payment arrangement.

There are other options, such as paying by credit card. Note: There may be a fee to pay by credit card.

What if I need to make another correction to my account?
You'll need to file Form 1040X, Amended U.S. Individual Income Tax Return.

What if I have tried to get answers and after contacting IRS several times have not been successful?
Call Taxpayer Advocate at 1-877-777-4778 or for TTY/TDD 1-800-829-4059.

What if I think I’m a victim of identity theft?
Please contact us at the number listed on the top right corner of your notice. Refer to the IRS Identity Theft resource page for more information.


Tips for next year

Consider filing your taxes electronically. Filing online can help you avoid mistakes and find credits and deductions that you may qualify for. In many cases you can file for free. Learn more about e-file.

Page Last Reviewed or Updated: 03-Mar-2014

The 1040x Form Instructions

1040x form instructions Internal Revenue Bulletin:  2011-12  March 21, 2011  Rev. 1040x form instructions Proc. 1040x form instructions 2011-21 Table of Contents SECTION 1. 1040x form instructions PURPOSE SECTION 2. 1040x form instructions BACKGROUND SECTION 3. 1040x form instructions SCOPE SECTION 4. 1040x form instructions APPLICATION SECTION 5. 1040x form instructions EFFECTIVE DATE SECTION 6. 1040x form instructions EFFECT ON OTHER DOCUMENTS SECTION 7. 1040x form instructions DRAFTING INFORMATION SECTION 1. 1040x form instructions PURPOSE This revenue procedure provides: (1) limitations on depreciation deductions for owners of passenger automobiles first placed in service by the taxpayer during calendar year 2011, including separate tables of limitations on depreciation deductions for trucks and vans; (2) the amounts that must be included in income by lessees of passenger automobiles first leased by the taxpayer during calendar year 2011, including a separate table of inclusion amounts for lessees of trucks and vans; and (3) revised tables of depreciation limitations and lessee inclusion amounts for passenger automobiles that were first placed in service or first leased by the taxpayer, respectively, during 2010 and to which the 50 percent additional first year depreciation deduction under § 168(k)(1)(A) of the Internal Revenue Code or the 100 percent additional first year depreciation deduction under § 168(k)(5) applies. 1040x form instructions The tables detailing these depreciation limitations and lessee inclusion amounts reflect the automobile price inflation adjustments required by § 280F(d)(7). 1040x form instructions SECTION 2. 1040x form instructions BACKGROUND . 1040x form instructions 01 For owners of passenger automobiles, § 280F(a) imposes dollar limitations on the depreciation deduction for the year the taxpayer places the passenger automobile in service and for each succeeding year. 1040x form instructions For passenger automobiles placed in service after 1988, § 280F(d)(7) requires the Internal Revenue Service to increase the amounts allowable as depreciation deductions by a price inflation adjustment amount. 1040x form instructions The method of calculating this price inflation amount for trucks and vans placed in service in or after calendar year 2003 uses a different CPI “automobile component” (the “new trucks” component) than that used in the price inflation amount calculation for other passenger automobiles (the “new cars” component), resulting in somewhat higher depreciation deductions for trucks and vans. 1040x form instructions This change reflects the higher rate of price inflation for trucks and vans since 1988. 1040x form instructions . 1040x form instructions 02 Section 2022(a) of the Small Business Jobs Act of 2010, Pub. 1040x form instructions L. 1040x form instructions No. 1040x form instructions 111-240, 124 Stat. 1040x form instructions 2504 (September 27, 2010), extended the 50 percent additional first year depreciation deduction under § 168(k) to qualified property (as defined in § 168(k)(2)) acquired by the taxpayer after December 31, 2007, and before January 1, 2011, if no written binding contract for the acquisition of the property existed before January 1, 2008, and if the taxpayer places the property in service generally before January 1, 2011. 1040x form instructions Section 401(a) of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, Pub. 1040x form instructions L. 1040x form instructions No. 1040x form instructions 111-312, 124 Stat. 1040x form instructions 3296 (Dec. 1040x form instructions 17, 2010) (the “Act”) further extended the 50 percent additional first year depreciation deduction under § 168(k) to qualified property acquired by the taxpayer after December 31, 2007, and before January 1, 2013, if no written binding contract for the acquisition of the property existed before January 1, 2008, and if the taxpayer places the property in service generally before January 1, 2013. 1040x form instructions Section 401(b) of the Act further amended § 168(k) by adding § 168(k)(5). 1040x form instructions It allows a 100 percent additional first year depreciation deduction for qualified property acquired by a taxpayer after September 8, 2010, and before January 1, 2012, if the taxpayer places the property in service generally before January 1, 2012. 1040x form instructions Section 168(k)(2)(F)(i) increases the first year depreciation allowed under § 280F(a)(1)(A)(i) by $8,000 for passenger automobiles to which the additional first year depreciation deduction under § 168(k) (hereinafter, referred to as “§ 168(k) additional first year depreciation deduction”) applies. 1040x form instructions . 1040x form instructions 03 Section 168(k)(2)(D)(i) provides that the § 168(k) additional first year depreciation deduction does not apply to any property required to be depreciated under the alternative depreciation system of § 168(g), including property described in § 280F(b)(1). 1040x form instructions Section 168(k)(2)(D)(iii) permits a taxpayer to elect out of the § 168(k) additional first year depreciation deduction for any class of property. 1040x form instructions Section 168(k)(4), as amended by the Act, permits a corporation to elect to increase the alternative minimum tax (“AMT”) credit limitation under § 53(c), instead of claiming the § 168(k) additional first year depreciation deduction for all eligible qualified property placed in service after December 31, 2010, that is round 2 extension property (as defined in § 168(k)(4)(I)(iv). 1040x form instructions Accordingly, this revenue procedure provides tables for passenger automobiles for which the § 168(k) additional first year depreciation deduction applies. 1040x form instructions This revenue procedure also provides tables for passenger automobiles for which the § 168(k) additional first year depreciation deduction does not apply, either because taxpayer (1) purchased the passenger automobile used; (2) did not use the passenger automobile during 2011 more than 50 percent for business purposes; (3) elected out of the § 168(k) additional first year depreciation deduction pursuant to § 168(k)(2)(D)(iii); or (4) elected to increase the § 53 AMT credit limitation in lieu of claiming § 168(k) additional first year depreciation. 1040x form instructions . 1040x form instructions 04 Section 280F(c) requires a reduction in the deduction allowed to the lessee of a leased passenger automobile. 1040x form instructions The reduction must be substantially equivalent to the limitations on the depreciation deductions imposed on owners of passenger automobiles. 1040x form instructions Under § 1. 1040x form instructions 280F-7(a) of the Income Tax Regulations, this reduction requires a lessee to include in gross income an amount determined by applying a formula to the amount obtained from a table. 1040x form instructions One table applies to lessees of trucks and vans and another table applies to all other passenger automobiles. 1040x form instructions Each table shows inclusion amounts for a range of fair market values for each taxable year after the passenger automobile is first leased. 1040x form instructions SECTION 3. 1040x form instructions SCOPE . 1040x form instructions 01 The limitations on depreciation deductions in section 4. 1040x form instructions 01(2) of this revenue procedure apply to passenger automobiles (other than leased passenger automobiles) that are placed in service by the taxpayer in calendar year 2011, and continue to apply for each taxable year that the passenger automobile remains in service. 1040x form instructions . 1040x form instructions 02 The tables in section 4. 1040x form instructions 02 of this revenue procedure apply to leased passenger automobiles for which the lease term begins during calendar year 2011. 1040x form instructions Lessees of these passenger automobiles must use these tables to determine the inclusion amount for each taxable year during which the passenger automobile is leased. 1040x form instructions See Rev. 1040x form instructions Proc. 1040x form instructions 2006-18, 2006-1 C. 1040x form instructions B. 1040x form instructions 645, for passenger automobiles first leased during calendar year 2006; Rev. 1040x form instructions Proc. 1040x form instructions 2007-30, 2007-1 C. 1040x form instructions B. 1040x form instructions 1104, for passenger automobiles first leased during calendar year 2007; Rev. 1040x form instructions Proc. 1040x form instructions 2008-22, 2008-1 C. 1040x form instructions B. 1040x form instructions 658, for passenger automobiles first leased during calendar year 2008; Rev. 1040x form instructions Proc. 1040x form instructions 2009-24, 2009-1 C. 1040x form instructions B. 1040x form instructions 885, for passenger automobiles first leased during calendar year 2009; and Rev. 1040x form instructions Proc. 1040x form instructions 2010-18, 2010-1 C. 1040x form instructions B. 1040x form instructions 427, as amplified and modified by section 4. 1040x form instructions 03 of this revenue procedure, for passenger automobiles first leased during calendar year 2010. 1040x form instructions SECTION 4. 1040x form instructions APPLICATION . 1040x form instructions 01 Limitations on Depreciation Deductions for Certain Automobiles. 1040x form instructions (1) Amount of the inflation adjustment. 1040x form instructions (a) Passenger automobiles (other than trucks or vans). 1040x form instructions Under § 280F(d)(7)(B)(i), the automobile price inflation adjustment for any calendar year is the percentage (if any) by which the CPI automobile component for October of the preceding calendar year exceeds the CPI automobile component for October 1987. 1040x form instructions Section 280F(d)(7)(B)(ii) defines the term “CPI automobile component” as the automobile component of the Consumer Price Index for all Urban Consumers published by the Department of Labor. 1040x form instructions The new car component of the CPI was 115. 1040x form instructions 2 for October 1987 and 137. 1040x form instructions 880 for October 2010. 1040x form instructions The October 2010 index exceeded the October 1987 index by 22. 1040x form instructions 680. 1040x form instructions Therefore, the automobile price inflation adjustment for 2011 for passenger automobiles (other than trucks and vans) is 19. 1040x form instructions 69 percent (22. 1040x form instructions 680/115. 1040x form instructions 2 x 100%). 1040x form instructions The dollar limitations in § 280F(a) are multiplied by a factor of 0. 1040x form instructions 1969, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations applicable to passenger automobiles (other than trucks and vans) for calendar year 2011. 1040x form instructions This adjustment applies to all passenger automobiles (other than trucks and vans) that are first placed in service in calendar year 2011. 1040x form instructions (b) Trucks and vans. 1040x form instructions To determine the dollar limitations for trucks and vans first placed in service during calendar year 2011, the Service uses the new truck component of the CPI instead of the new car component. 1040x form instructions The new truck component of the CPI was 112. 1040x form instructions 4 for October 1987 and 142. 1040x form instructions 556 for October 2010. 1040x form instructions The October 2010 index exceeded the October 1987 index by 30. 1040x form instructions 156. 1040x form instructions Therefore, the automobile price inflation adjustment for 2011 for trucks and vans is 26. 1040x form instructions 83 percent (30. 1040x form instructions 156/112. 1040x form instructions 4 x 100%). 1040x form instructions The dollar limitations in § 280F(a) are multiplied by a factor of 0. 1040x form instructions 2683, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations for trucks and vans. 1040x form instructions This adjustment applies to all trucks and vans that are first placed in service in calendar year 2011. 1040x form instructions (2) Amount of the limitation. 1040x form instructions Tables 1 through 4 contain the dollar amount of the depreciation limitation for each taxable year for passenger automobiles a taxpayer places in service in calendar year 2011. 1040x form instructions Use Table 1 for a passenger automobile (other than a truck or van), and Table 2 for a truck or van, placed in service in calendar year 2011 for which the § 168(k) additional first year depreciation deduction applies. 1040x form instructions Use Table 3 for a passenger automobile (other than a truck or van), and Table 4 for a truck or van, placed in service in calendar year 2011 for which the § 168(k) additional first year depreciation deduction does not apply. 1040x form instructions The Service intends to issue additional guidance addressing the interaction between the 100 percent additional first year depreciation deduction and § 280F(a) for the taxable years subsequent to the first taxable year. 1040x form instructions REV. 1040x form instructions PROC. 1040x form instructions 2011-21 TABLE 1 DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) PLACED IN SERVICE IN CALENDAR YEAR 2011 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION APPLIES Tax Year Amount 1st Tax Year $11,060 2nd Tax Year $4,900 3rd Tax Year $2,950 Each Succeeding Year $1,775 REV. 1040x form instructions PROC. 1040x form instructions 2011-21 TABLE 2 DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE IN CALENDAR YEAR 2011 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION APPLIES Tax Year Amount 1st Tax Year $11,260 2nd Tax Year $5,200 3rd Tax Year $3,150 Each Succeeding Year $1,875 REV. 1040x form instructions PROC. 1040x form instructions 2011-21 TABLE 3 DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) PLACED IN SERVICE IN CALENDAR YEAR 2011 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION DOES NOT APPLY Tax Year Amount 1st Tax Year $3,060 2nd Tax Year $4,900 3rd Tax Year $2,950 Each Succeeding Year $1,775 REV. 1040x form instructions PROC. 1040x form instructions 2011-21 TABLE 4 DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE IN CALENDAR YEAR 2011 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION DOES NOT APPLY Tax Year Amount 1st Tax Year $3,260 2nd Tax Year $5,200 3rd Tax Year $3,150 Each Succeeding Year $1,875 . 1040x form instructions 02 Inclusions in Income of Lessees of Passenger Automobiles. 1040x form instructions A taxpayer must follow the procedures in § 1. 1040x form instructions 280F-7(a) for determining the inclusion amounts for passenger automobiles first leased in calendar year 2011. 1040x form instructions In applying these procedures, lessees of passenger automobiles other than trucks and vans should use Table 5 of this revenue procedure, while lessees of trucks and vans should use Table 6 of this revenue procedure. 1040x form instructions REV. 1040x form instructions PROC. 1040x form instructions 2011-21 TABLE 5 DOLLAR AMOUNTS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2011 Fair Market Value of Passenger Automobile Tax Year During Lease Over Not Over 1st 2nd 3rd 4th 5th & later $18,500 $19,000 3 8 11 13 16 19,000 19,500 4 9 13 15 18 19,500 20,000 4 10 15 17 20 20,000 20,500 5 11 16 19 23 20,500 21,000 5 12 18 21 25 21,000 21,500 6 13 19 24 26 21,500 22,000 6 14 21 26 29 22,000 23,000 7 16 23 29 32 23,000 24,000 8 18 27 32 37 24,000 25,000 9 20 30 36 42 25,000 26,000 10 23 33 40 46 26,000 27,000 11 25 36 44 51 27,000 28,000 12 27 40 48 55 28,000 29,000 13 29 43 52 60 29,000 30,000 14 31 47 55 65 30,000 31,000 15 34 49 60 69 31,000 32,000 16 36 53 63 73 32,000 33,000 17 38 56 68 77 33,000 34,000 18 40 60 71 82 34,000 35,000 19 42 63 75 87 35,000 36,000 20 45 66 79 91 36,000 37,000 21 47 69 83 96 37,000 38,000 22 49 73 87 100 38,000 39,000 23 51 76 91 105 39,000 40,000 24 53 80 94 110 40,000 41,000 25 56 82 99 114 41,000 42,000 26 58 86 102 119 42,000 43,000 27 60 89 107 123 43,000 44,000 28 62 93 110 128 44,000 45,000 29 64 96 114 133 45,000 46,000 30 67 98 119 137 46,000 47,000 31 69 102 122 141 47,000 48,000 32 71 105 127 145 48,000 49,000 33 73 109 130 150 49,000 50,000 34 76 111 134 155 50,000 51,000 35 78 115 138 159 51,000 52,000 36 80 118 142 164 52,000 53,000 37 82 122 146 168 53,000 54,000 38 84 125 150 173 54,000 55,000 39 87 128 153 178 55,000 56,000 40 89 131 158 182 56,000 57,000 41 91 135 161 187 57,000 58,000 42 93 138 166 191 58,000 59,000 43 95 142 169 196 59,000 60,000 44 98 144 174 200 60,000 62,000 46 101 149 179 207 62,000 64,000 48 105 156 187 216 64,000 66,000 50 109 163 195 225 66,000 68,000 52 114 169 203 234 68,000 70,000 54 118 176 211 243 70,000 72,000 56 123 182 218 253 72,000 74,000 58 127 189 226 262 74,000 76,000 60 132 195 234 270 76,000 78,000 62 136 202 242 279 78,000 80,000 64 140 209 250 288 80,000 85,000 67 148 220 264 304 85,000 90,000 72 159 237 283 327 90,000 95,000 77 170 253 303 350 95,000 100,000 82 181 269 323 372 100,000 110,000 90 198 293 352 406 110,000 120,000 100 220 326 391 452 120,000 130,000 110 242 359 430 497 130,000 140,000 120 264 392 469 543 140,000 150,000 130 286 424 509 588 150,000 160,000 140 308 457 548 633 160,000 170,000 150 330 490 587 679 170,000 180,000 160 352 523 626 724 180,000 190,000 170 374 555 666 769 190,000 200,000 180 396 588 705 815 200,000 210,000 190 418 621 744 860 210,000 220,000 200 440 654 784 904 220,000 230,000 210 462 687 823 950 230,000 240,000 220 484 719 863 995 240,000 And up 230 506 752 902 1,040 REV. 1040x form instructions PROC. 1040x form instructions 2011-21 TABLE 6 DOLLAR AMOUNTS FOR TRUCKS AND VANS WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2011 Fair Market Value of Truck or Van Tax Year During Lease Over Not Over 1st 2nd 3rd 4th 5th & later $19,000 $19,500 3 7 9 12 13 19,500 20,000 3 8 11 14 15 20,000 20,500 4 9 13 15 18 20,500 21,000 4 10 15 17 20 21,000 21,500 5 11 16 20 22 21,500 22,000 5 12 18 22 24 22,000 23,000 6 14 20 24 29 23,000 24,000 7 16 24 28 32 24,000 25,000 8 18 27 32 37 25,000 26,000 9 20 31 36 41 26,000 27,000 10 23 33 40 46 27,000 28,000 11 25 37 43 51 28,000 29,000 12 27 40 48 55 29,000 30,000 13 29 43 52 60 30,000 31,000 14 31 47 56 64 31,000 32,000 15 34 49 60 69 32,000 33,000 16 36 53 63 74 33,000 34,000 17 38 56 68 78 34,000 35,000 18 40 60 71 83 35,000 36,000 19 43 62 76 87 36,000 37,000 20 45 66 79 92 37,000 38,000 21 47 69 83 97 38,000 39,000 22 49 73 87 101 39,000 40,000 23 51 76 91 105 40,000 41,000 24 54 79 95 109 41,000 42,000 25 56 82 99 114 42,000 43,000 26 58 86 103 118 43,000 44,000 27 60 89 107 123 44,000 45,000 28 62 93 110 128 45,000 46,000 29 65 95 115 132 46,000 47,000 30 67 99 118 137 47,000 48,000 31 69 102 123 141 48,000 49,000 32 71 106 126 146 49,000 50,000 33 73 109 130 151 50,000 51,000 34 76 112 134 155 51,000 52,000 35 78 115 138 160 52,000 53,000 36 80 118 143 164 53,000 54,000 37 82 122 146 169 54,000 55,000 38 84 125 150 173 55,000 56,000 39 87 128 154 177 56,000 57,000 40 89 131 158 182 57,000 58,000 41 91 135 162 186 58,000 59,000 42 93 138 166 191 59,000 60,000 43 95 142 169 196 60,000 62,000 45 99 146 175 203 62,000 64,000 47 103 153 183 212 64,000 66,000 49 107 160 191 221 66,000 68,000 51 112 166 199 229 68,000 70,000 53 116 173 206 239 70,000 72,000 55 121 179 214 248 72,000 74,000 57 125 186 222 257 74,000 76,000 59 129 192 231 266 76,000 78,000 61 134 198 239 275 78,000 80,000 63 138 205 246 285 80,000 85,000 66 146 217 260 300 85,000 90,000 71 157 233 280 322 90,000 95,000 76 168 250 299 345 95,000 100,000 81 179 266 319 368 100,000 110,000 89 196 290 348 402 110,000 120,000 99 218 323 387 447 120,000 130,000 109 240 355 427 493 130,000 140,000 119 262 388 466 538 140,000 150,000 129 284 421 505 583 150,000 160,000 139 306 454 544 629 160,000 170,000 149 328 487 583 674 170,000 180,000 159 350 519 623 719 180,000 190,000 169 372 552 662 765 190,000 200,000 179 394 585 701 810 200,000 210,000 189 416 618 740 856 210,000 220,000 199 438 651 779 901 220,000 230,000 209 460 683 819 946 230,000 240,000 219 482 716 858 992 240,000 And up 229 504 749 897 1,037 . 1040x form instructions 03 Revised Amounts for Passenger Automobiles Placed in Service During 2010. 1040x form instructions (1) Calculation of the Revised Amount. 1040x form instructions The revised depreciation limits provided in this section 4. 1040x form instructions 03 were calculated by increasing the existing limitations on the first year allowance in Rev. 1040x form instructions Proc. 1040x form instructions 2010-18 by $8,000 as provided in § 168(k)(2)(F)(i). 1040x form instructions (2) Amount of the Revised Limitation. 1040x form instructions For passenger automobiles (that are not trucks or vans) placed in service by the taxpayer in calendar year 2010 for which the § 168(k) additional first year depreciation deduction applies, Table 7 of this revenue procedure contains the revised dollar amount of the depreciation limitations for each taxable year. 1040x form instructions For trucks or vans placed in service by the taxpayer in calendar year 2010 for which the § 168(k) additional first year depreciation deduction applies, Table 8 of this revenue procedure contains the revised dollar amount of the depreciation limitations for each taxable year. 1040x form instructions If the § 168(k) additional first year depreciation deduction does not apply to a passenger automobile placed in service by the taxpayer in calendar year 2010, the depreciation limitations for each taxable year in Tables 1 and 2 of Rev. 1040x form instructions Proc. 1040x form instructions 2010-18 apply. 1040x form instructions REV. 1040x form instructions PROC. 1040x form instructions 2011-21 TABLE 7 DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) PLACED IN SERVICE IN CALENDAR YEAR 2010 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION APPLIES Tax Year Amount 1st Tax Year $11,060 2nd Tax Year $4,900 3rd Tax Year $2,950 Each Succeeding Year $1,775 REV. 1040x form instructions PROC. 1040x form instructions 2011-21 TABLE 8 DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE IN CALENDAR YEAR 2010 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION APPLIES Tax Year Amount 1st Tax Year $11,160 2nd Tax Year $5,100 3rd Tax Year $3,050 Each Succeeding Year $1,875 (3) Modification to lease inclusion amounts for 2010. 1040x form instructions The lease inclusion amounts in Tables 3 and 4 of Rev. 1040x form instructions Proc. 1040x form instructions 2010-18 are modified by striking the first four lines of the inclusion amounts in each table. 1040x form instructions Consequently, Table 3 of Rev. 1040x form instructions Proc. 1040x form instructions 2010-18 applies to passenger automobiles (other than trucks and vans) that are first leased by the taxpayer in calendar year 2010 with a fair market value over $18,500, and Table 4 of Rev. 1040x form instructions Proc. 1040x form instructions 2010-18 applies to trucks and vans that are first leased by the taxpayer in calendar year 2010 with a fair market value over $19,000. 1040x form instructions SECTION 5. 1040x form instructions EFFECTIVE DATE This revenue procedure, with the exception of section 4. 1040x form instructions 03, applies to passenger automobiles that a taxpayer first places in service or first leases during calendar year 2011. 1040x form instructions Section 4. 1040x form instructions 03 of this revenue procedure applies to passenger automobiles that a taxpayer first places in service or first leases during calendar year 2010. 1040x form instructions SECTION 6. 1040x form instructions EFFECT ON OTHER DOCUMENTS Rev. 1040x form instructions Proc. 1040x form instructions 2010-18 is amplified and modified. 1040x form instructions SECTION 7. 1040x form instructions DRAFTING INFORMATION The principal author of this revenue procedure is Bernard P. 1040x form instructions Harvey of the Office of Associate Chief Counsel (Income Tax & Accounting). 1040x form instructions For further information regarding this revenue procedure, contact Mr. 1040x form instructions Harvey at (202) 622-4930 (not a toll-free call). 1040x form instructions Prev  Up  Next   Home   More Internal Revenue Bulletins