Filing Your Taxes Online is Fast, Easy and Secure.
Start now and receive your tax refund in as little as 7 days.

1. Get Answers

Your online questions are customized to your unique tax situation.

2. Maximize your Refund

Find tax credits for everything from school tuition to buying a hybri

3. E-File for FREE

E-file free with direct deposit to get your refund in as few as 7 days.

Filing your taxes with paper mail can be difficult and it could take weeks for your refund to arrive. IRS e-file is easy, fast and secure. There is no paperwork going to the IRS so tax refunds can be processed in as little as 7 days with direct deposit. As you prepare your taxes online, you can see your tax refund in real time.

FREE audit support and representation from an enrolled agent – NEW and only from H&R Block

2012 Irs Tax Forms 1040

Amending 2009 Tax ReturnWhere To File Federal Tax Return 2012Efile FreeHrblock FreefileI Need To File My 2006 Taxes For FreeFree Downloadable Irs Tax FormsCan I File 2011 Taxes OnlineFile A Amended Tax Return OnlineTurbotax Premier Federal E File State 2010 Download Old VersionFile My State Taxes FreeFiling Income Tax ReturnFree H&r BlockFiling Self Employment TaxesH&r Block Free Tax For MilitaryTaxes Supplemental Security Income SsiFile State Tax ReturnsIrs Amended ReturnWww.1040xAmended Tax Return FormIrs Free EfileFiling Tax AmendmentFree Tax Filing For 20111040ez Instructions 2012Filing Free State Taxes OnlineUtahtaxhelp Org2013 Amended 10402013 1040ez Form InstructionsOnline 1040 EzTurbotax Military EditionTurbotax 1040x FormFree E File Tax Return1041x1040ez RefundH&r BlocksH&r Block Online Tax ReturnIncome Tax Form 1040ez2013 1040ez InstructionsHow To File 2012 State TaxesCan I File My 2012 Taxes In 2014H And R Block Free Online

2012 Irs Tax Forms 1040

2012 irs tax forms 1040 7. 2012 irs tax forms 1040   Depreciation, Depletion, and Amortization Table of Contents What's New for 2013 Introduction Topics - This chapter discusses: Useful Items - You may want to see: Overview of DepreciationWhat Property Can Be Depreciated? What Property Cannot Be Depreciated? When Does Depreciation Begin and End? Can You Use MACRS To Depreciate Your Property? What Is the Basis of Your Depreciable Property? How Do You Treat Repairs and Improvements? Do You Have To File Form 4562? How Do You Correct Depreciation Deductions? Section 179 Expense DeductionWhat Property Qualifies? What Property Does Not Qualify? How Much Can You Deduct? How Do You Elect the Deduction? When Must You Recapture the Deduction? Claiming the Special Depreciation AllowanceWhat is Qualified Property? How Can You Elect Not To Claim the Allowance? When Must You Recapture an Allowance Figuring Depreciation Under MACRSWhich Depreciation System (GDS or ADS) Applies? Which Property Class Applies Under GDS? What Is the Placed-in-Service Date? What Is the Basis for Depreciation? Which Recovery Period Applies? Which Convention Applies? Which Depreciation Method Applies? How Is the Depreciation Deduction Figured? How Do You Use General Asset Accounts? When Do You Recapture MACRS Depreciation? Additional Rules for Listed PropertyWhat Is Listed Property? What Is the Business-Use Requirement? Do the Passenger Automobile Limits Apply? Depletion Who Can Claim Depletion? Figuring Depletion AmortizationBusiness Start-Up Costs Reforestation Costs Section 197 Intangibles What's New for 2013 Increased section 179 expense deduction dollar limits. 2012 irs tax forms 1040  The maximum amount you can elect to deduct for most section 179 property you placed in service in 2013 is $500,000. 2012 irs tax forms 1040 This limit is reduced by the amount by which the cost of the property placed in service during the tax year exceeds $2 million. 2012 irs tax forms 1040 See Dollar Limits under Section 179 Expense Deduction , later. 2012 irs tax forms 1040 Extension of special depreciation allowance for certain qualified property acquired after December 31, 2007. 2012 irs tax forms 1040 . 2012 irs tax forms 1040  You may be able to take a 50% special depreciation allowance for certain qualified property acquired after December 31, 2007, and placed in service before January 1, 2014. 2012 irs tax forms 1040 See Claiming the Special Depreciation Allowance , later. 2012 irs tax forms 1040 Expiration of the 3- year recovery period for certain race horses. 2012 irs tax forms 1040  The 3-year recovery period for race horses two years old or younger will expire for such horses placed in service after December 31, 2013. 2012 irs tax forms 1040 Introduction If you buy or make improvements to farm property such as machinery, equipment, livestock, or a structure with a useful life of more than a year, you generally cannot deduct its entire cost in one year. 2012 irs tax forms 1040 Instead, you must spread the cost over the time you use the property and deduct part of it each year. 2012 irs tax forms 1040 For most types of property, this is called depreciation. 2012 irs tax forms 1040 This chapter gives information on depreciation methods that generally apply to property placed in service after 1986. 2012 irs tax forms 1040 For information on depreciating pre-1987 property, see Publication 534, Depreciating Property Placed in Service Before 1987. 2012 irs tax forms 1040 Topics - This chapter discusses: Overview of depreciation Section 179 expense deduction Special depreciation allowance Modified Accelerated Cost Recovery System (MACRS) Listed property Basic information on cost depletion (including timber depletion) and percentage depletion Amortization of the costs of going into business, reforestation costs, the costs of pollution control facilities, and the costs of section 197 intangibles Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 534 Depreciating Property Placed in Service Before 1987 535 Business Expenses 544 Sales and Other Dispositions of Assets 551 Basis of Assets 946 How To Depreciate Property Form (and Instructions) T (Timber), Forest Activities Schedule 3115 Application for Change in Accounting Method 4562 Depreciation and Amortization 4797 Sales of Business Property See chapter 16 for information about getting publications and forms. 2012 irs tax forms 1040 It is important to keep good records for property you depreciate. 2012 irs tax forms 1040 Do not file these records with your return. 2012 irs tax forms 1040 Instead, you should keep them as part of the permanent records of the depreciated property. 2012 irs tax forms 1040 They will help you verify the accuracy of the depreciation of assets placed in service in the current and previous tax years. 2012 irs tax forms 1040 For general information on recordkeeping, see Publication 583, Starting a Business and Keeping Records. 2012 irs tax forms 1040 For specific information on keeping records for section 179 property and listed property, see Publication 946, How To Depreciate Property. 2012 irs tax forms 1040 Overview of Depreciation This overview discusses basic information on the following. 2012 irs tax forms 1040 What property can be depreciated. 2012 irs tax forms 1040 What property cannot be depreciated. 2012 irs tax forms 1040 When depreciation begins and ends. 2012 irs tax forms 1040 Whether MACRS can be used to figure depreciation. 2012 irs tax forms 1040 What is the basis of your depreciable property. 2012 irs tax forms 1040 How to treat repairs and improvements. 2012 irs tax forms 1040 When you must file Form 4562. 2012 irs tax forms 1040 How you can correct depreciation claimed incorrectly. 2012 irs tax forms 1040 What Property Can Be Depreciated? You can depreciate most types of tangible property (except land), such as buildings, machinery, equipment, vehicles, certain livestock, and furniture. 2012 irs tax forms 1040 You can also depreciate certain intangible property, such as copyrights, patents, and computer software. 2012 irs tax forms 1040 To be depreciable, the property must meet all the following requirements. 2012 irs tax forms 1040 It must be property you own. 2012 irs tax forms 1040 It must be used in your business or income-producing activity. 2012 irs tax forms 1040 It must have a determinable useful life. 2012 irs tax forms 1040 It must have a useful life that extends substantially beyond the year you place it in service. 2012 irs tax forms 1040 Property You Own To claim depreciation, you usually must be the owner of the property. 2012 irs tax forms 1040 You are considered as owning property even if it is subject to a debt. 2012 irs tax forms 1040 Leased property. 2012 irs tax forms 1040   You can depreciate leased property only if you retain the incidents of ownership in the property. 2012 irs tax forms 1040 This means you bear the burden of exhaustion of the capital investment in the property. 2012 irs tax forms 1040 Therefore, if you lease property from someone to use in your trade or business or for the production of income, you generally cannot depreciate its cost because you do not retain the incidents of ownership. 2012 irs tax forms 1040 You can, however, depreciate any capital improvements you make to the leased property. 2012 irs tax forms 1040 See Additions and Improvements under Which Recovery Period Applies in chapter 4 of Publication 946. 2012 irs tax forms 1040   If you lease property to someone, you generally can depreciate its cost even if the lessee (the person leasing from you) has agreed to preserve, replace, renew, and maintain the property. 2012 irs tax forms 1040 However, you cannot depreciate the cost of the property if the lease provides that the lessee is to maintain the property and return to you the same property or its equivalent in value at the expiration of the lease in as good condition and value as when leased. 2012 irs tax forms 1040 Life tenant. 2012 irs tax forms 1040   Generally, if you hold business or investment property as a life tenant, you can depreciate it as if you were the absolute owner of the property. 2012 irs tax forms 1040 See Certain term interests in property , later, for an exception. 2012 irs tax forms 1040 Property Used in Your Business or Income-Producing Activity To claim depreciation on property, you must use it in your business or income-producing activity. 2012 irs tax forms 1040 If you use property to produce income (investment use), the income must be taxable. 2012 irs tax forms 1040 You cannot depreciate property that you use solely for personal activities. 2012 irs tax forms 1040 However, if you use property for business or investment purposes and for personal purposes, you can deduct depreciation based only on the percentage of business or investment use. 2012 irs tax forms 1040 Example 1. 2012 irs tax forms 1040   If you use your car for farm business, you can deduct depreciation based on its percentage of use in farming. 2012 irs tax forms 1040 If you also use it for investment purposes, you can depreciate it based on its percentage of investment use. 2012 irs tax forms 1040 Example 2. 2012 irs tax forms 1040   If you use part of your home for business, you may be able to deduct depreciation on that part based on its business use. 2012 irs tax forms 1040 For more information, see Business Use of Your Home in chapter 4. 2012 irs tax forms 1040 Inventory. 2012 irs tax forms 1040   You can never depreciate inventory because it is not held for use in your business. 2012 irs tax forms 1040 Inventory is any property you hold primarily for sale to customers in the ordinary course of your business. 2012 irs tax forms 1040 Livestock. 2012 irs tax forms 1040   Livestock purchased for draft, breeding, or dairy purposes can be depreciated only if they are not kept in an inventory account. 2012 irs tax forms 1040 Livestock you raise usually has no depreciable basis because the costs of raising them are deducted and not added to their basis. 2012 irs tax forms 1040 However, see Immature livestock under When Does Depreciation Begin and End , later, for a special rule. 2012 irs tax forms 1040 Property Having a Determinable Useful Life To be depreciable, your property must have a determinable useful life. 2012 irs tax forms 1040 This means it must be something that wears out, decays, gets used up, becomes obsolete, or loses its value from natural causes. 2012 irs tax forms 1040 Irrigation systems and water wells. 2012 irs tax forms 1040   Irrigation systems and wells used in a trade or business can be depreciated if their useful life can be determined. 2012 irs tax forms 1040 You can depreciate irrigation systems and wells composed of masonry, concrete, tile, metal, or wood. 2012 irs tax forms 1040 In addition, you can depreciate costs for moving dirt to construct irrigation systems and water wells composed of these materials. 2012 irs tax forms 1040 However, land preparation costs for center pivot irrigation systems are not depreciable. 2012 irs tax forms 1040 Dams, ponds, and terraces. 2012 irs tax forms 1040   In general, you cannot depreciate earthen dams, ponds, and terraces unless the structures have a determinable useful life. 2012 irs tax forms 1040 What Property Cannot Be Depreciated? Certain property cannot be depreciated, even if the requirements explained earlier are met. 2012 irs tax forms 1040 This includes the following. 2012 irs tax forms 1040 Land. 2012 irs tax forms 1040 You can never depreciate the cost of land because land does not wear out, become obsolete, or get used up. 2012 irs tax forms 1040 The cost of land generally includes the cost of clearing, grading, planting, and landscaping. 2012 irs tax forms 1040 Although you cannot depreciate land, you can depreciate certain costs incurred in preparing land for business use. 2012 irs tax forms 1040 See chapter 1 of Publication 946. 2012 irs tax forms 1040 Property placed in service and disposed of in the same year. 2012 irs tax forms 1040 Determining when property is placed in service is explained later. 2012 irs tax forms 1040 Equipment used to build capital improvements. 2012 irs tax forms 1040 You must add otherwise allowable depreciation on the equipment during the period of construction to the basis of your improvements. 2012 irs tax forms 1040 Intangible property such as section 197 intangibles. 2012 irs tax forms 1040 This property does not have a determinable useful life and generally cannot be depreciated. 2012 irs tax forms 1040 However, see Amortization , later. 2012 irs tax forms 1040 Special rules apply to computer software (discussed below). 2012 irs tax forms 1040 Certain term interests (discussed below). 2012 irs tax forms 1040 Computer software. 2012 irs tax forms 1040   Computer software is generally not a section 197 intangible even if acquired in connection with the acquisition of a business, if it meets all of the following tests. 2012 irs tax forms 1040 It is readily available for purchase by the general public. 2012 irs tax forms 1040 It is subject to a nonexclusive license. 2012 irs tax forms 1040 It has not been substantially modified. 2012 irs tax forms 1040   If the software meets the tests above, it can be depreciated and may qualify for the section 179 expense deduction and the special depreciation allowance (if applicable), discussed later. 2012 irs tax forms 1040 Certain term interests in property. 2012 irs tax forms 1040   You cannot depreciate a term interest in property created or acquired after July 27, 1989, for any period during which the remainder interest is held, directly or indirectly, by a person related to you. 2012 irs tax forms 1040 This rule does not apply to the holder of a term interest in property acquired by gift, bequest, or inheritance. 2012 irs tax forms 1040 For more information, see chapter 1 of Publication 946. 2012 irs tax forms 1040 When Does Depreciation Begin and End? You begin to depreciate your property when you place it in service for use in your trade or business or for the production of income. 2012 irs tax forms 1040 You stop depreciating property either when you have fully recovered your cost or other basis or when you retire it from service, whichever happens first. 2012 irs tax forms 1040 Placed in Service Property is placed in service when it is ready and available for a specific use, whether in a business activity, an income-producing activity, a tax-exempt activity, or a personal activity. 2012 irs tax forms 1040 Even if you are not using the property, it is in service when it is ready and available for its specific use. 2012 irs tax forms 1040 Example. 2012 irs tax forms 1040 You bought a planter for use in your farm business. 2012 irs tax forms 1040 The planter was delivered in December 2012 after harvest was over. 2012 irs tax forms 1040 You begin to depreciate the planter for 2012 because it was ready and available for its specific use in 2012, even though it will not be used until the spring of 2013. 2012 irs tax forms 1040 If your planter comes unassembled in December 2012 and is put together in February 2013, it is not placed in service until 2013. 2012 irs tax forms 1040 You begin to depreciate it in 2013. 2012 irs tax forms 1040 If your planter was delivered and assembled in February 2013 but not used until April 2013, it is placed in service in February 2013, because this is when the planter was ready for its specified use. 2012 irs tax forms 1040 You begin to depreciate it in 2013. 2012 irs tax forms 1040 Fruit or nut trees and vines. 2012 irs tax forms 1040   If you acquire an orchard, grove, or vineyard before the trees or vines have reached the income-producing stage, and they have a preproductive period of more than 2 years, you must capitalize the preproductive-period costs under the uniform capitalization rules (unless you elect not to use these rules). 2012 irs tax forms 1040 See chapter 6 for information about the uniform capitalization rules. 2012 irs tax forms 1040 Your depreciation begins when the trees and vines reach the income-producing stage (that is, when they bear fruit, nuts, or grapes in quantities sufficient to commercially warrant harvesting). 2012 irs tax forms 1040 Immature livestock. 2012 irs tax forms 1040   Depreciation for livestock begins when the livestock reaches the age of maturity. 2012 irs tax forms 1040 If you bought immature livestock for drafting purposes, depreciation begins when they can be worked. 2012 irs tax forms 1040 If you bought immature livestock for dairy purposes, depreciation begins when they can be milked. 2012 irs tax forms 1040 If you bought immature livestock for breeding purposes, depreciation begins when they can be bred. 2012 irs tax forms 1040 Your basis for depreciation is your initial cost for the immature livestock. 2012 irs tax forms 1040 Idle Property Continue to claim a deduction for depreciation on property used in your business or for the production of income even if it is temporarily idle. 2012 irs tax forms 1040 For example, if you stop using a machine because there is a temporary lack of a market for a product made with that machine, continue to deduct depreciation on the machine. 2012 irs tax forms 1040 Cost or Other Basis Fully Recovered You stop depreciating property when you have fully recovered your cost or other basis. 2012 irs tax forms 1040 This happens when your section 179 and allowed or allowable depreciation deductions equal your cost or investment in the property. 2012 irs tax forms 1040 Retired From Service You stop depreciating property when you retire it from service, even if you have not fully recovered its cost or other basis. 2012 irs tax forms 1040 You retire property from service when you permanently withdraw it from use in a trade or business or from use in the production of income because of any of the following events. 2012 irs tax forms 1040 You sell or exchange the property. 2012 irs tax forms 1040 You convert the property to personal use. 2012 irs tax forms 1040 You abandon the property. 2012 irs tax forms 1040 You transfer the property to a supplies or scrap account. 2012 irs tax forms 1040 The property is destroyed. 2012 irs tax forms 1040 For information on abandonment of property, see chapter 8. 2012 irs tax forms 1040 For information on destroyed property, see chapter 11 and Publication 547, Casualties, Disasters, and Thefts. 2012 irs tax forms 1040 Can You Use MACRS To Depreciate Your Property? You must use the Modified Accelerated Cost Recovery System (MACRS) to depreciate most business and investment property placed in service after 1986. 2012 irs tax forms 1040 MACRS is explained later under Figuring Depreciation Under MACRS . 2012 irs tax forms 1040 You cannot use MACRS to depreciate the following property. 2012 irs tax forms 1040 Property you placed in service before 1987. 2012 irs tax forms 1040 Use the methods discussed in Publication 534. 2012 irs tax forms 1040 Certain property owned or used in 1986. 2012 irs tax forms 1040 See chapter 1 of Publication 946. 2012 irs tax forms 1040 Intangible property. 2012 irs tax forms 1040 Films, video tapes, and recordings. 2012 irs tax forms 1040 Certain corporate or partnership property acquired in a nontaxable transfer. 2012 irs tax forms 1040 Property you elected to exclude from MACRS. 2012 irs tax forms 1040 For more information, see chapter 1 of Publication 946. 2012 irs tax forms 1040 What Is the Basis of Your Depreciable Property? To figure your depreciation deduction, you must determine the basis of your property. 2012 irs tax forms 1040 To determine basis, you need to know the cost or other basis of your property. 2012 irs tax forms 1040 Cost or other basis. 2012 irs tax forms 1040   The basis of property you buy is usually its cost plus amounts you paid for items such as sales tax, freight charges, and installation and testing fees. 2012 irs tax forms 1040 The cost includes the amount you pay in cash, debt obligations, other property, or services. 2012 irs tax forms 1040   There are times when you cannot use cost as basis. 2012 irs tax forms 1040 In these situations, the fair market value (FMV) or the adjusted basis of the property may be used. 2012 irs tax forms 1040 Adjusted basis. 2012 irs tax forms 1040   To find your property's basis for depreciation, you may have to make certain adjustments (increases and decreases) to the basis of the property for events occurring between the time you acquired the property and the time you placed it in service. 2012 irs tax forms 1040 Basis adjustment for depreciation allowed or allowable. 2012 irs tax forms 1040   After you place your property in service, you must reduce the basis of the property by the depreciation allowed or allowable, whichever is greater. 2012 irs tax forms 1040 Depreciation allowed is depreciation you actually deducted (from which you received a tax benefit). 2012 irs tax forms 1040 Depreciation allowable is depreciation you are entitled to deduct. 2012 irs tax forms 1040   If you do not claim depreciation you are entitled to deduct, you must still reduce the basis of the property by the full amount of depreciation allowable. 2012 irs tax forms 1040   If you deduct more depreciation than you should, you must reduce your basis by any amount deducted from which you received a tax benefit (the depreciation allowed). 2012 irs tax forms 1040   For more information, see chapter 6. 2012 irs tax forms 1040 How Do You Treat Repairs and Improvements? You generally deduct the cost of repairing business property in the same way as any other business expense. 2012 irs tax forms 1040 However, if a repair or replacement increases the value of your property, makes it more useful, or lengthens its life, you must treat it as an improvement and depreciate it. 2012 irs tax forms 1040 Treat improvements as separate depreciable property. 2012 irs tax forms 1040 See chapter 1 of Publication 946 for more information. 2012 irs tax forms 1040 Example. 2012 irs tax forms 1040 You repair a small section on a corner of the roof of a barn that you rent to others. 2012 irs tax forms 1040 You deduct the cost of the repair as a business expense. 2012 irs tax forms 1040 However, if you replace the entire roof, the new roof is considered to be an improvement because it increases the value and lengthens the life for the property. 2012 irs tax forms 1040 You depreciate the cost of the new roof. 2012 irs tax forms 1040 Improvements to rented property. 2012 irs tax forms 1040   You can depreciate permanent improvements you make to business property you rent from someone else. 2012 irs tax forms 1040 Do You Have To File Form 4562? Use Form 4562 to claim your deduction for depreciation and amortization. 2012 irs tax forms 1040 You must complete and attach Form 4562 to your tax return if you are claiming any of the following. 2012 irs tax forms 1040 A section 179 expense deduction for the current year or a section 179 carryover from a prior year. 2012 irs tax forms 1040 Depreciation for property placed in service during the current year. 2012 irs tax forms 1040 Depreciation on any vehicle or other listed property, regardless of when it was placed in service. 2012 irs tax forms 1040 Amortization of costs that began in the current year. 2012 irs tax forms 1040 For more information, see the Instructions for Form 4562. 2012 irs tax forms 1040 How Do You Correct Depreciation Deductions? If you deducted an incorrect amount of depreciation in any year, you may be able to make a correction by filing an amended return for that year. 2012 irs tax forms 1040 You can file an amended return to correct the amount of depreciation claimed for any property in any of the following situations. 2012 irs tax forms 1040 You claimed the incorrect amount because of a mathematical error made in any year. 2012 irs tax forms 1040 You claimed the incorrect amount because of a posting error made in any year, for example, omitting an asset from the depreciation schedule. 2012 irs tax forms 1040 You have not adopted a method of accounting for the property placed in service by you in tax years ending after December 29, 2003. 2012 irs tax forms 1040 You claimed the incorrect amount on property placed in service by you in tax years ending before December 30, 2003. 2012 irs tax forms 1040 Note. 2012 irs tax forms 1040 You have adopted a method of accounting if you used the same incorrect method of depreciation for two or more consecutively filed returns. 2012 irs tax forms 1040 If you are not allowed to make the correction on an amended return, you may be able to change your accounting method to claim the correct amount of depreciation. 2012 irs tax forms 1040 See the Instructions for Form 3115. 2012 irs tax forms 1040 Section 179 Expense Deduction You can elect to recover all or part of the cost of certain qualifying property, up to a limit, by deducting it in the year you place the property in service. 2012 irs tax forms 1040 This is the section 179 expense deduction. 2012 irs tax forms 1040 You can elect the section 179 expense deduction instead of recovering the cost by taking depreciation deductions. 2012 irs tax forms 1040 This part of the chapter explains the rules for the section 179 expense deduction. 2012 irs tax forms 1040 It explains what property qualifies for the deduction, what property does not qualify for the deduction, the limits that may apply, how to elect the deduction, and when you may have to recapture the deduction. 2012 irs tax forms 1040 For more information, see chapter 2 of Publication 946. 2012 irs tax forms 1040 What Property Qualifies? To qualify for the section 179 expense deduction, your property must meet all the following requirements. 2012 irs tax forms 1040 It must be eligible property. 2012 irs tax forms 1040 It must be acquired for business use. 2012 irs tax forms 1040 It must have been acquired by purchase. 2012 irs tax forms 1040 Eligible Property To qualify for the section 179 expense deduction, your property must be one of the following types of depreciable property. 2012 irs tax forms 1040 Tangible personal property. 2012 irs tax forms 1040 Qualified real property. 2012 irs tax forms 1040 (Special rules apply to qualified real property that you elect to treat as qualified section 179 real property. 2012 irs tax forms 1040 For more information, see chapter 2 of Publication 946 and section 179(f) of the Internal Revenue Code. 2012 irs tax forms 1040 ) Other tangible property (except buildings and their structural components) used as: An integral part of manufacturing, production, or extraction or of furnishing transportation, communications, electricity, gas, water, or sewage disposal services; A research facility used in connection with any of the activities in (a) above; or A facility used in connection with any of the activities in (a) for the bulk storage of fungible commodities. 2012 irs tax forms 1040 Single purpose agricultural (livestock) or horticultural structures. 2012 irs tax forms 1040 Storage facilities (except buildings and their structural components) used in connection with distributing petroleum or any primary product of petroleum. 2012 irs tax forms 1040 Off-the-shelf computer software that is readily available for purchase by the general public, is subject to a nonexclusive lease, and has not been substantially modified. 2012 irs tax forms 1040 Tangible personal property. 2012 irs tax forms 1040   Tangible personal property is any tangible property that is not real property. 2012 irs tax forms 1040 It includes the following property. 2012 irs tax forms 1040 Machinery and equipment. 2012 irs tax forms 1040 Property contained in or attached to a building (other than structural components), such as milk tanks, automatic feeders, barn cleaners, and office equipment. 2012 irs tax forms 1040 Gasoline storage tanks and pumps at retail service stations. 2012 irs tax forms 1040 Livestock, including horses, cattle, hogs, sheep, goats, and mink and other fur-bearing animals. 2012 irs tax forms 1040 Facility used for the bulk storage of fungible commodities. 2012 irs tax forms 1040   A facility used for the bulk storage of fungible commodities is qualifying property for purposes of the section 179 expense deduction if it is used in connection with any of the activities listed earlier in item (3)(a). 2012 irs tax forms 1040 Bulk storage means the storage of a commodity in a large mass before it is used. 2012 irs tax forms 1040 Grain bins. 2012 irs tax forms 1040   A grain bin is an example of a storage facility that is qualifying section 179 property. 2012 irs tax forms 1040 It is a facility used in connection with the production of grain or livestock for the bulk storage of fungible commodities. 2012 irs tax forms 1040 Single purpose agricultural or horticultural structures. 2012 irs tax forms 1040   A single purpose agricultural (livestock) or horticultural structure is qualifying property for purposes of the section 179 expense deduction. 2012 irs tax forms 1040 Agricultural structure. 2012 irs tax forms 1040   A single purpose agricultural (livestock) structure is any building or enclosure specifically designed, constructed, and used for both the following reasons. 2012 irs tax forms 1040 To house, raise, and feed a particular type of livestock and its produce. 2012 irs tax forms 1040 To house the equipment, including any replacements, needed to house, raise, or feed the livestock. 2012 irs tax forms 1040 For this purpose, livestock includes poultry. 2012 irs tax forms 1040   Single purpose structures are qualifying property if used, for example, to breed chickens or hogs, produce milk from dairy cattle, or produce feeder cattle or pigs, broiler chickens, or eggs. 2012 irs tax forms 1040 The facility must include, as an integral part of the structure or enclosure, equipment necessary to house, raise, and feed the livestock. 2012 irs tax forms 1040 Horticultural structure. 2012 irs tax forms 1040   A single purpose horticultural structure is either of the following. 2012 irs tax forms 1040 A greenhouse specifically designed, constructed, and used for the commercial production of plants. 2012 irs tax forms 1040 A structure specifically designed, constructed, and used for the commercial production of mushrooms. 2012 irs tax forms 1040 Use of structure. 2012 irs tax forms 1040   A structure must be used only for the purpose that qualified it. 2012 irs tax forms 1040 For example, a hog barn will not be qualifying property if you use it to house poultry. 2012 irs tax forms 1040 Similarly, using part of your greenhouse to sell plants will make the greenhouse nonqualifying property. 2012 irs tax forms 1040   If a structure includes work space, the work space can be used only for the following activities. 2012 irs tax forms 1040 Stocking, caring for, or collecting livestock or plants or their produce. 2012 irs tax forms 1040 Maintaining the enclosure or structure. 2012 irs tax forms 1040 Maintaining or replacing the equipment or stock enclosed or housed in the structure. 2012 irs tax forms 1040 Property Acquired by Purchase To qualify for the section 179 expense deduction, your property must have been acquired by purchase. 2012 irs tax forms 1040 For example, property acquired by gift or inheritance does not qualify. 2012 irs tax forms 1040 Property acquired from a related person (that is, your spouse, ancestors, or lineal descendants) is not considered acquired by purchase. 2012 irs tax forms 1040 Example. 2012 irs tax forms 1040 Ken is a farmer. 2012 irs tax forms 1040 He purchased two tractors, one from his brother and one from his father. 2012 irs tax forms 1040 He placed both tractors in service in the same year he bought them. 2012 irs tax forms 1040 The tractor purchased from his father does not qualify for the section 179 expense deduction because he is a related person (as defined above). 2012 irs tax forms 1040 The tractor purchased from his brother does qualify for the deduction because Ken is not a related person (as defined above). 2012 irs tax forms 1040 What Property Does Not Qualify? Land and improvements. 2012 irs tax forms 1040   Land and land improvements, do not qualify as section 179 property. 2012 irs tax forms 1040 Land improvements include nonagricultural fences, swimming pools, paved parking areas, wharves, docks, bridges, and fences. 2012 irs tax forms 1040 However, agricultural fences do qualify as section 179 property. 2012 irs tax forms 1040 Similarly, field drainage tile also qualifies as section 179 property. 2012 irs tax forms 1040 Excepted property. 2012 irs tax forms 1040   Even if the requirements explained in the preceding discussions are met, farmers cannot elect the section 179 expense deduction for the following property. 2012 irs tax forms 1040 Certain property you lease to others (if you are a noncorporate lessor). 2012 irs tax forms 1040 Certain property used predominantly to furnish lodging or in connection with the furnishing of lodging. 2012 irs tax forms 1040 Property used by a tax-exempt organization (other than a tax-exempt farmers' cooperative) unless the property is used mainly in a taxable unrelated trade or business. 2012 irs tax forms 1040 Property used by governmental units or foreign persons or entities (except property used under a lease with a term of less than 6 months). 2012 irs tax forms 1040 How Much Can You Deduct? Your section 179 expense deduction is generally the cost of the qualifying property. 2012 irs tax forms 1040 However, the total amount you can elect to deduct under section 179 is subject to a dollar limit and a business income limit. 2012 irs tax forms 1040 These limits apply to each taxpayer, not to each business. 2012 irs tax forms 1040 However, see Married individuals under Dollar Limits , later. 2012 irs tax forms 1040 See also the special rules for applying the limits for partnerships and S corporations under Partnerships and S Corporations , later. 2012 irs tax forms 1040 If you deduct only part of the cost of qualifying property as a section 179 expense deduction, you can generally depreciate the cost you do not deduct. 2012 irs tax forms 1040 Use Part I of Form 4562 to figure your section 179 expense deduction. 2012 irs tax forms 1040 Partial business use. 2012 irs tax forms 1040   When you use property for business and nonbusiness purposes, you can elect the section 179 expense deduction only if you use it more than 50% for business in the year you place it in service. 2012 irs tax forms 1040 If you used the property more than 50% for business, multiply the cost of the property by the percentage of business use. 2012 irs tax forms 1040 Use the resulting business cost to figure your section 179 expense deduction. 2012 irs tax forms 1040 Trade-in of other property. 2012 irs tax forms 1040   If you buy qualifying property with cash and a trade-in, its cost for purposes of the section 179 expense deduction includes only the cash you paid. 2012 irs tax forms 1040 For example, if you buy (for cash and a trade-in) a new tractor for use in your business, your cost for the section 179 expense deduction is the cash you paid. 2012 irs tax forms 1040 It does not include the adjusted basis of the old tractor you trade for the new tractor. 2012 irs tax forms 1040 Example. 2012 irs tax forms 1040 J-Bar Farms traded two cultivators having a total adjusted basis of $6,800 for a new cultivator costing $13,200. 2012 irs tax forms 1040 They received an $8,000 trade-in allowance for the old cultivators and paid $5,200 cash for the new cultivator. 2012 irs tax forms 1040 J-Bar also traded a used pickup truck with an adjusted basis of $8,000 for a new pickup truck costing $35,000. 2012 irs tax forms 1040 They received a $5,000 trade-in allowance and paid $30,000 cash for the new pickup truck. 2012 irs tax forms 1040 Only the cash paid by J-Bar qualifies for the section 179 expense deduction. 2012 irs tax forms 1040 J-Bar's business costs that qualify for a section 179 expense deduction are $35,200 ($5,200 + $30,000). 2012 irs tax forms 1040 Dollar Limits The total amount you can elect to deduct under section 179 for most property placed in service in 2013 is $500,000. 2012 irs tax forms 1040 If you acquire and place in service more than one item of qualifying property during the year, you can allocate the section 179 expense deduction among the items in any way, as long as the total deduction is not more than $500,000. 2012 irs tax forms 1040 Qualified real property that you elect to treat as section 179 property is limited to $250,000 of the maximum section 179 deduction of $500,000 for 2013. 2012 irs tax forms 1040 You do not have to claim the full $500,000. 2012 irs tax forms 1040 For specific information on the section 179 dollar limits, see chapter 2 of Publication 946. 2012 irs tax forms 1040 Reduced dollar limit for cost exceeding $2 million. 2012 irs tax forms 1040   If the cost of your qualifying section 179 property placed in service in 2013 is over $2 million, you must reduce the dollar limit (but not below zero) by the amount of cost over $2 million. 2012 irs tax forms 1040 If the cost of your section 179 property placed in service during 2013 is $2,500,000 or more, you cannot take a section 179 expense deduction and you cannot carry over the cost that is more than $2,500,000. 2012 irs tax forms 1040 Example. 2012 irs tax forms 1040 This year, James Smith placed in service machinery costing $2,050,000. 2012 irs tax forms 1040 Because this cost is $50,000 more than $2 million, he must reduce his dollar limit to $450,000 ($500,000 − $50,000). 2012 irs tax forms 1040 Limits for sport utility vehicles. 2012 irs tax forms 1040   The total amount you can elect to deduct for certain sport utility vehicles and certain other vehicles placed in service in 2013 is $25,000. 2012 irs tax forms 1040 This rule applies to any 4-wheeled vehicle primarily designed or used to carry passengers over public streets, roads, and highways that is rated at more than 6,000 pounds gross vehicle weight and not more than 14,000 pounds gross vehicle weight. 2012 irs tax forms 1040   For more information, see chapter 2 of Publication 946. 2012 irs tax forms 1040 Limits for passenger automobiles. 2012 irs tax forms 1040   For a passenger automobile that is placed in service in 2013, the total section 179 and depreciation deduction is limited. 2012 irs tax forms 1040 See Do the Passenger Automobile Limits Apply , later. 2012 irs tax forms 1040 Married individuals. 2012 irs tax forms 1040   If you are married, how you figure your section 179 expense deduction depends on whether you file jointly or separately. 2012 irs tax forms 1040 If you file a joint return, you and your spouse are treated as one taxpayer in determining any reduction to the dollar limit, regardless of which of you purchased the property or placed it in service. 2012 irs tax forms 1040 If you and your spouse file separate returns, you are treated as one taxpayer for the dollar limit, including the reduction for costs over $2 million. 2012 irs tax forms 1040 You must allocate the dollar limit (after any reduction) equally between you, unless you both elect a different allocation. 2012 irs tax forms 1040 If the percentages elected by each of you do not total 100%, 50% will be allocated to each of you. 2012 irs tax forms 1040 Joint return after separate returns. 2012 irs tax forms 1040   If you and your spouse elect to amend your separate returns by filing a joint return after the due date for filing your return, the dollar limit on the joint return is the lesser of the following amounts. 2012 irs tax forms 1040 The dollar limit (after reduction for any cost of section 179 property over $2 million). 2012 irs tax forms 1040 The total cost of section 179 property you and your spouse elected to expense on your separate returns. 2012 irs tax forms 1040 Business Income Limit The total cost you can deduct each year after you apply the dollar limit is limited to the taxable income from the active conduct of any trade or business during the year. 2012 irs tax forms 1040 Generally, you are considered to actively conduct a trade or business if you meaningfully participate in the management or operations of the trade or business. 2012 irs tax forms 1040 Any cost not deductible in one year under section 179 because of this limit can be carried to the next year. 2012 irs tax forms 1040 See Carryover of disallowed deduction , later. 2012 irs tax forms 1040 Taxable income. 2012 irs tax forms 1040   In general, figure taxable income for this purpose by totaling the net income and losses from all trades and businesses you actively conducted during the year. 2012 irs tax forms 1040 In addition to net income or loss from a sole proprietorship, partnership, or S corporation, net income or loss derived from a trade or business also includes the following items. 2012 irs tax forms 1040 Section 1231 gains (or losses) as discussed in chapter 9. 2012 irs tax forms 1040 Interest from working capital of your trade or business. 2012 irs tax forms 1040 Wages, salaries, tips, or other pay earned by you (or your spouse if you file a joint return) as an employee of any employer. 2012 irs tax forms 1040   In addition, figure taxable income without regard to any of the following. 2012 irs tax forms 1040 The section 179 expense deduction. 2012 irs tax forms 1040 The self-employment tax deduction. 2012 irs tax forms 1040 Any net operating loss carryback or carryforward. 2012 irs tax forms 1040 Any unreimbursed employee business expenses. 2012 irs tax forms 1040 Two different taxable income limits. 2012 irs tax forms 1040   In addition to the business income limit for your section 179 expense deduction, you may have a taxable income limit for some other deduction (for example, charitable contributions). 2012 irs tax forms 1040 You may have to figure the limit for this other deduction taking into account the section 179 expense deduction. 2012 irs tax forms 1040 If so, complete the following steps. 2012 irs tax forms 1040 Step Action 1 Figure taxable income without the section 179 expense deduction or the other deduction. 2012 irs tax forms 1040 2 Figure a hypothetical section 179 expense deduction using the taxable income figured in Step 1. 2012 irs tax forms 1040 3 Subtract the hypothetical section 179 expense deduction figured in Step 2 from the taxable income figured in Step 1. 2012 irs tax forms 1040 4 Figure a hypothetical amount for the other deduction using the amount figured in Step 3 as taxable income. 2012 irs tax forms 1040 5 Subtract the hypothetical other deduction figured in Step 4 from the taxable income figured in  Step 1. 2012 irs tax forms 1040 6 Figure your actual section 179 expense deduction using the taxable income figured in Step 5. 2012 irs tax forms 1040 7 Subtract your actual section 179 expense deduction figured in Step 6 from the taxable income figured in Step 1. 2012 irs tax forms 1040 8 Figure your actual other deduction using the taxable income figured in Step 7. 2012 irs tax forms 1040 Example. 2012 irs tax forms 1040 On February 1, 2013, the XYZ farm corporation purchased and placed in service qualifying section 179 property that cost $500,000. 2012 irs tax forms 1040 It elects to expense the entire $500,000 cost under section 179. 2012 irs tax forms 1040 In June, the corporation gave a charitable contribution of $10,000. 2012 irs tax forms 1040 A corporation's limit on charitable contributions is figured after subtracting any section 179 expense deduction. 2012 irs tax forms 1040 The business income limit for the section 179 expense deduction is figured after subtracting any allowable charitable contributions. 2012 irs tax forms 1040 XYZ's taxable income figured without the section 179 expense deduction or the deduction for charitable contributions is $520,000. 2012 irs tax forms 1040 XYZ figures its section 179 expense deduction and its deduction for charitable contributions as follows. 2012 irs tax forms 1040 Step 1. 2012 irs tax forms 1040 Taxable income figured without either deduction is $520,000. 2012 irs tax forms 1040 Step 2. 2012 irs tax forms 1040 Using $520,000 as taxable income, XYZ's hypothetical section 179 expense deduction is $500,000. 2012 irs tax forms 1040 Step 3. 2012 irs tax forms 1040 $20,000 ($520,000 − $500,000). 2012 irs tax forms 1040 Step 4. 2012 irs tax forms 1040 Using $20,000 (from Step 3) as taxable income, XYZ's hypothetical charitable contribution (limited to 10% of taxable income) is $2,000. 2012 irs tax forms 1040 Step 5. 2012 irs tax forms 1040 $518,000 ($520,000 − $2,000). 2012 irs tax forms 1040 Step 6. 2012 irs tax forms 1040 Using $518,000 (from Step 5) as taxable income, XYZ figures the actual section 179 expense deduction. 2012 irs tax forms 1040 Because the taxable income is at least $500,000, XYZ can take a $500,000 section 179 expense deduction. 2012 irs tax forms 1040 Step 7. 2012 irs tax forms 1040 $20,000 ($520,000 − $500,000). 2012 irs tax forms 1040 Step 8. 2012 irs tax forms 1040 Using $20,000 (from Step 7) as taxable income, XYZ's actual charitable contribution (limited to 10% of taxable income) is $2,000. 2012 irs tax forms 1040 Carryover of disallowed deduction. 2012 irs tax forms 1040   You can carry over for an unlimited number of years the cost of any section 179 property you elected to expense but were unable to because of the business income limit. 2012 irs tax forms 1040   The amount you carry over is used in determining your section 179 expense deduction in the next year. 2012 irs tax forms 1040 However, it is subject to the limits in that year. 2012 irs tax forms 1040 If you place more than one property in service in a year, you can select the properties for which all or a part of the cost will be carried forward. 2012 irs tax forms 1040 Your selections must be shown in your books and records. 2012 irs tax forms 1040 Example. 2012 irs tax forms 1040 Last year, Joyce Jones placed in service a machine that cost $8,000 and elected to deduct all $8,000 under section 179. 2012 irs tax forms 1040 The taxable income from her business (determined without regard to both a section 179 expense deduction for the cost of the machine and the self-employment tax deduction) was $6,000. 2012 irs tax forms 1040 Her section 179 expense deduction was limited to $6,000. 2012 irs tax forms 1040 The $2,000 cost that was not allowed as a section 179 expense deduction (because of the business income limit) is carried to this year. 2012 irs tax forms 1040 This year, Joyce placed another machine in service that cost $9,000. 2012 irs tax forms 1040 Her taxable income from business (determined without regard to both a section 179 expense deduction for the cost of the machine and the self-employment tax deduction) is $10,000. 2012 irs tax forms 1040 Joyce can deduct the full cost of the machine ($9,000) but only $1,000 of the carryover from last year because of the business income limit. 2012 irs tax forms 1040 She can carry over the balance of $1,000 to next year. 2012 irs tax forms 1040 Partnerships and S Corporations The section 179 expense deduction limits apply both to the partnership or S corporation and to each partner or shareholder. 2012 irs tax forms 1040 The partnership or S corporation determines its section 179 expense deduction subject to the limits. 2012 irs tax forms 1040 It then allocates the deduction among its partners or shareholders. 2012 irs tax forms 1040 If you are a partner in a partnership or shareholder of an S corporation, you add the amount allocated from the partnership or S corporation to any section 179 costs not related to the partnership or S corporation and then apply the dollar limit to this total. 2012 irs tax forms 1040 To determine any reduction in the dollar limit for costs over $560,000, you do not include any of the cost of section 179 property placed in service by the partnership or S corporation. 2012 irs tax forms 1040 After you apply the dollar limit, you apply the business income limit to any remaining section 179 costs. 2012 irs tax forms 1040 For more information, see chapter 2 of Publication 946. 2012 irs tax forms 1040 Example. 2012 irs tax forms 1040 In 2013, Partnership P placed in service section 179 property with a total cost of $2,160,000. 2012 irs tax forms 1040 P must reduce its dollar limit by $160,000 ($2,160,000 − $2,000,000). 2012 irs tax forms 1040 Its maximum section 179 expense deduction is $340,000 ($500,000 − $160,000), and it elects to expense that amount. 2012 irs tax forms 1040 Because P's taxable income from the active conduct of all its trades or businesses for the year was $400,000, it can deduct the full $340,000. 2012 irs tax forms 1040 P allocates $100,000 of its section 179 expense deduction and $110,000 of its taxable income to John, one of its partners. 2012 irs tax forms 1040 John also conducts a business as a sole proprietor and in 2013, placed in service in that business, section 179 property costing $28,000. 2012 irs tax forms 1040 John's taxable income from that business was $10,000. 2012 irs tax forms 1040 In addition to the $100,000 allocated from P, he elects to expense the $28,000 of his sole proprietorship's section 179 costs. 2012 irs tax forms 1040 However, John's deduction is limited to his business taxable income of $120,000 ($110,000 from P plus $10,000 from his sole proprietorship). 2012 irs tax forms 1040 He carries over $8,000 ($128,000 − $120,000) of the elected section 179 costs to 2014. 2012 irs tax forms 1040 How Do You Elect the Deduction? You elect to take the section 179 expense deduction by completing Part I of Form 4562. 2012 irs tax forms 1040 If you elect the deduction for listed property, complete Part V of  Form 4562 before completing Part I. 2012 irs tax forms 1040   File Form 4562 with either of the following: Your original tax return (whether or not you filed it timely), or An amended return filed within the time prescribed by law. 2012 irs tax forms 1040 An election made on an amended return must specify the item of section 179 property to which the election applies and the part of the cost of each such item to be taken into account. 2012 irs tax forms 1040 The amended return must also include any resulting adjustments to taxable income. 2012 irs tax forms 1040 Revoking an election. 2012 irs tax forms 1040   An election (or any specification made in the election) to take a section 179 expense deduction for 2013 can be revoked without IRS approval by filing an amended return. 2012 irs tax forms 1040 The amended return must be filed within the time prescribed by law. 2012 irs tax forms 1040 The amended return must also include any resulting adjustments to taxable income (for example, allowable depreciation in that tax year for the item of section 179 property for which the election pertains. 2012 irs tax forms 1040 ) Once made, the revocation is irrevocable. 2012 irs tax forms 1040 When Must You Recapture the Deduction? You may have to recapture the section 179 expense deduction if, in any year during the property's recovery period, the percentage of business use drops to 50% or less. 2012 irs tax forms 1040 In the year the business use drops to 50% or less, you include the recapture amount as ordinary income. 2012 irs tax forms 1040 You also increase the basis of the property by the recapture amount. 2012 irs tax forms 1040 Recovery periods for property are discussed later. 2012 irs tax forms 1040 If you sell, exchange, or otherwise dispose of the property, do not figure the recapture amount under the rules explained in this discussion. 2012 irs tax forms 1040 Instead, use the rules for recapturing depreciation explained in  chapter 9 under Section 1245 Property. 2012 irs tax forms 1040   If the property is listed property, do not figure the recapture amount under the rules explained in this discussion when the percentage of business use drops to 50% or less. 2012 irs tax forms 1040 Instead, use the rules for recapturing depreciation explained in chapter 5 of Publication 946 under Recapture of Excess Depreciation. 2012 irs tax forms 1040 Figuring the recapture amount. 2012 irs tax forms 1040   To figure the amount to recapture, take the following steps. 2012 irs tax forms 1040 Figure the allowable depreciation for the section 179 expense deduction you claimed. 2012 irs tax forms 1040 Begin with the year you placed the property in service and include the year of recapture. 2012 irs tax forms 1040 Subtract the depreciation figured in (1) from the section 179 expense deduction you actually claimed. 2012 irs tax forms 1040 The result is the amount you must recapture. 2012 irs tax forms 1040 Example. 2012 irs tax forms 1040 In January 2011, Paul Lamb, a calendar year taxpayer, bought and placed in service section 179 property costing $10,000. 2012 irs tax forms 1040 The property is not listed property. 2012 irs tax forms 1040 He elected a $5,000 section 179 expense deduction for the property and also elected not to claim a special depreciation allowance. 2012 irs tax forms 1040 He used the property only for business in 2011 and 2012. 2012 irs tax forms 1040 During 2013, he used the property 40% for business and 60% for personal use. 2012 irs tax forms 1040 He figures his recapture amount as follows. 2012 irs tax forms 1040 Section 179 expense deduction claimed (2011) $5,000 Minus: Allowable depreciation (instead of section 179 expense deduction):   2011 $1,250   2012 1,875   2013 ($1,250 × 40% (business)) 500 3,625 2013 — Recapture amount $1,375     Paul must include $1,375 in income for 2013. 2012 irs tax forms 1040 Where to report recapture. 2012 irs tax forms 1040   Report any recapture of the section 179 expense deduction as ordinary income in Part IV of Form 4797 and include it in income on Schedule F (Form 1040). 2012 irs tax forms 1040 Recapture for qualified section 179 GO Zone property. 2012 irs tax forms 1040   If any qualified section 179 GO Zone property ceases to be used in the GO Zone in a later year, you must recapture the benefit of the increased section 179 expense deduction as “other income. 2012 irs tax forms 1040 ” Claiming the Special Depreciation Allowance For qualified property (defined below) placed in service in 2013, you can take an additional 50% special depreciation allowance. 2012 irs tax forms 1040 The allowance is an additional deduction you can take after any section 179 expense deduction and before you figure regular depreciation under MACRS. 2012 irs tax forms 1040 Figure the special depreciation allowance by multiplying the depreciable basis of the qualified property by 50%. 2012 irs tax forms 1040 What is Qualified Property? For farmers, qualified property generally is certain qualified property acquired after December 31, 2007, and placed in service before January 1, 2014. 2012 irs tax forms 1040 Certain qualified property acquired after December 31, 2007, and placed in service before January 1, 2014. 2012 irs tax forms 1040   Certain qualified property (defined below) acquired after December 31, 2007, and before January 1, 2014, is eligible for a 50% special depreciation allowance. 2012 irs tax forms 1040   Qualified property includes the following: Tangible property depreciated under the Modified Accelerated Cost Recovery System (MACRS) with a recovery period of 20 years or less. 2012 irs tax forms 1040 Water utility property. 2012 irs tax forms 1040 Off-the-shelf computer software. 2012 irs tax forms 1040 Qualified leasehold improvement property. 2012 irs tax forms 1040   Qualified property must also meet all of the following tests: You must have acquired qualified property by purchase after December 31, 2007. 2012 irs tax forms 1040 If a binding contract to acquire the property existed before January 1, 2008, the property does not qualify. 2012 irs tax forms 1040 Qualified property must be placed in service after December 31, 2007 and placed in service before January 1, 2014 (before January 1, 2015 for certain property with a long production period and for certain aircraft). 2012 irs tax forms 1040 The original use of the property must begin with you after December 31, 2007. 2012 irs tax forms 1040 For more information, see chapter 3 of Publication 946. 2012 irs tax forms 1040 How Can You Elect Not To Claim the Allowance? You can elect, for any class of property, not to deduct the special depreciation allowance for all property in such class placed in service during the tax year. 2012 irs tax forms 1040 To make the election, attach a statement to your return indicating the class of property for which you are making the election. 2012 irs tax forms 1040 Generally, you must make the election on a timely filed tax return (including extensions) for the year in which you place the property in service. 2012 irs tax forms 1040 However, if you timely filed your return for the year without making the election, you still can make the election by filing an amended return within 6 months of the due date of the original return (not including extensions). 2012 irs tax forms 1040 Attach the election statement to the amended return. 2012 irs tax forms 1040 On the amended return, write “Filed pursuant to section 301. 2012 irs tax forms 1040 9100-2. 2012 irs tax forms 1040 ” Once made, the election may not be revoked without IRS consent. 2012 irs tax forms 1040 If you elect not to have the special depreciation allowance apply, the property may be subject to an alternative minimum tax adjustment for depreciation. 2012 irs tax forms 1040 When Must You Recapture an Allowance When you dispose of property for which you claimed a special depreciation allowance, any gain on the disposition is generally recaptured (included in income) as ordinary income up to the amount of the special depreciation allowance previously allowed or allowable. 2012 irs tax forms 1040 For more information, see chapter 3 of Publication 946. 2012 irs tax forms 1040 Figuring Depreciation Under MACRS The Modified Accelerated Cost Recovery System (MACRS) is used to recover the basis of most business and investment property placed in service after 1986. 2012 irs tax forms 1040 MACRS consists of two depreciation systems, the General Depreciation System (GDS) and the Alternative Depreciation System (ADS). 2012 irs tax forms 1040 Generally, these systems provide different methods and recovery periods to use in figuring depreciation deductions. 2012 irs tax forms 1040 To be sure you can use MACRS to figure depreciation for your property, see Can You Use MACRS To Depreciate Your Property, earlier. 2012 irs tax forms 1040 This part explains how to determine which MACRS depreciation system applies to your property. 2012 irs tax forms 1040 It also discusses the following information that you need to know before you can figure depreciation under MACRS. 2012 irs tax forms 1040 Property's recovery class. 2012 irs tax forms 1040 Placed-in-service date. 2012 irs tax forms 1040 Basis for depreciation. 2012 irs tax forms 1040 Recovery period. 2012 irs tax forms 1040 Convention. 2012 irs tax forms 1040 Depreciation method. 2012 irs tax forms 1040 Finally, this part explains how to use this information to figure your depreciation deduction. 2012 irs tax forms 1040 Which Depreciation System (GDS or ADS) Applies? Your use of either the General Depreciation System (GDS) or the Alternative Depreciation System (ADS) to depreciate property under MACRS determines what depreciation method and recovery period you use. 2012 irs tax forms 1040 You generally must use GDS unless you are specifically required by law to use ADS or you elect to use ADS. 2012 irs tax forms 1040 Required use of ADS. 2012 irs tax forms 1040   You must use ADS for the following property. 2012 irs tax forms 1040 All property used predominantly in a farming business and placed in service in any tax year during which an election not to apply the uniform capitalization rules to certain farming costs is in effect. 2012 irs tax forms 1040 Listed property used 50% or less in a qualified business use. 2012 irs tax forms 1040 See Additional Rules for Listed Property , later. 2012 irs tax forms 1040 Any tax-exempt use property. 2012 irs tax forms 1040 Any tax-exempt bond-financed property. 2012 irs tax forms 1040 Any property imported from a foreign country for which an Executive Order is in effect because the country maintains trade restrictions or engages in other discriminatory acts. 2012 irs tax forms 1040 Any tangible property used predominantly outside the United States during the year. 2012 irs tax forms 1040 If you are required to use ADS to depreciate your property, you cannot claim the special depreciation allowance. 2012 irs tax forms 1040 Electing ADS. 2012 irs tax forms 1040   Although your property may qualify for GDS, you can elect to use ADS. 2012 irs tax forms 1040 The election generally must cover all property in the same property class you placed in service during the year. 2012 irs tax forms 1040 However, the election for residential rental property and nonresidential real property can be made on a property-by-property basis. 2012 irs tax forms 1040 Once you make this election, you can never revoke it. 2012 irs tax forms 1040   You make the election by completing line 20 in Part III of Form 4562. 2012 irs tax forms 1040 Which Property Class Applies Under GDS? The following is a list of the nine property classes under GDS. 2012 irs tax forms 1040 3-year property. 2012 irs tax forms 1040 5-year property. 2012 irs tax forms 1040 7-year property. 2012 irs tax forms 1040 10-year property. 2012 irs tax forms 1040 15-year property. 2012 irs tax forms 1040 20-year property. 2012 irs tax forms 1040 25-year property. 2012 irs tax forms 1040 Residential rental property. 2012 irs tax forms 1040 Nonresidential real property. 2012 irs tax forms 1040 See Which Property Class Applies Under GDS in chapter 4 of Publication 946 for examples of the types of property included in each class. 2012 irs tax forms 1040 What Is the Placed-in-Service Date? You begin to claim depreciation when your property is placed in service for use either in a trade or business or for the production of income. 2012 irs tax forms 1040 The placed-in-service date for your property is the date the property is ready and available for a specific use. 2012 irs tax forms 1040 It is therefore not necessarily the date it is first used. 2012 irs tax forms 1040 If you converted property held for personal use to use in a trade or business or for the production of income, treat the property as being placed in service on the conversion date. 2012 irs tax forms 1040 See Placed in Service under When Does Depreciation Begin and End , earlier, for examples illustrating when property is placed in service. 2012 irs tax forms 1040 What Is the Basis for Depreciation? The basis for depreciation of MACRS property is the property's cost or other basis multiplied by the percentage of business/investment use. 2012 irs tax forms 1040 Reduce that amount by any credits and deductions allocable to the property. 2012 irs tax forms 1040 The following are examples of some of the credits and deductions that reduce basis. 2012 irs tax forms 1040 Any deduction for section 179 property. 2012 irs tax forms 1040 Any deduction for removal of barriers to the disabled and the elderly. 2012 irs tax forms 1040 Any disabled access credit, enhanced oil recovery credit, and credit for employer-provided childcare facilities and services. 2012 irs tax forms 1040 Any special depreciation allowance. 2012 irs tax forms 1040 Basis adjustment for investment credit property under section 50(c) of the Internal Revenue Code. 2012 irs tax forms 1040 For information about how to determine the cost or other basis of property, see What Is the Basis of Your Depreciable Property , earlier. 2012 irs tax forms 1040 Also, see chapter 6. 2012 irs tax forms 1040 For additional credits and deductions that affect basis, see section 1016 of the Internal Revenue Code. 2012 irs tax forms 1040 Which Recovery Period Applies? The recovery period of property is the number of years over which you recover its cost or other basis. 2012 irs tax forms 1040 It is determined based on the depreciation system (GDS or ADS) used. 2012 irs tax forms 1040 See Table 7-1 for recovery periods under both GDS and ADS for some commonly used assets. 2012 irs tax forms 1040 For a complete list of recovery periods, see the Table of Class Lives and Recovery Periods in Appendix B of Publication 946. 2012 irs tax forms 1040 House trailers for farm laborers. 2012 irs tax forms 1040   To depreciate a house trailer you supply as housing for those who work on your farm, use one of the following recovery periods if the house trailer is mobile (it has wheels and a history of movement). 2012 irs tax forms 1040 A 7-year recovery period under GDS. 2012 irs tax forms 1040 A 10-year recovery period under ADS. 2012 irs tax forms 1040   However, if the house trailer is not mobile (its wheels have been removed and permanent utilities and pipes attached to it), use one of the following recovery periods. 2012 irs tax forms 1040 A 20-year recovery period under GDS. 2012 irs tax forms 1040 A 25-year recovery period under ADS. 2012 irs tax forms 1040 Water wells. 2012 irs tax forms 1040   Water wells used to provide water for raising poultry and livestock are land improvements. 2012 irs tax forms 1040 If they are depreciable, use one of the following recovery periods. 2012 irs tax forms 1040 A 15-year recovery period under GDS. 2012 irs tax forms 1040 A 20-year recovery period under ADS. 2012 irs tax forms 1040   The types of water wells that can be depreciated were discussed earlier in Irrigation systems and water wells under Property Having a Determinable Useful Life . 2012 irs tax forms 1040 Table 7-1. 2012 irs tax forms 1040 Farm Property Recovery Periods   Recovery Period in Years Assets GDS ADS Agricultural structures (single purpose) 10 15 Automobiles 5 5 Calculators and copiers 5 6 Cattle (dairy or breeding) 5 7 Communication equipment1 7 10 Computer and peripheral equipment 5 5 Drainage facilities 15 20 Farm buildings2 20 25 Farm machinery and equipment 7 10 Fences (agricultural) 7 10 Goats and sheep (breeding) 5 5 Grain bin 7 10 Hogs (breeding) 3 3 Horses (age when placed in service)     Breeding and working (12 years or less) 7 10 Breeding and working (more than 12 years) 3 10 Racing horses 3 12 Horticultural structures (single purpose) 10 15 Logging machinery and equipment3 5 6 Nonresidential real property 394 40 Office furniture, fixtures, and equipment (not calculators, copiers, or typewriters) 7 10 Paved lots 15 20 Residential rental property 27. 2012 irs tax forms 1040 5 40 Tractor units (over-the-road) 3 4 Trees or vines bearing fruit or nuts 10 20 Truck (heavy duty, unloaded weight 13,000 lbs. 2012 irs tax forms 1040 or more) 5 6 Truck (actual weight less than 13,000 lbs) 5 5 Water wells 15 20 1 Not including communication equipment listed in other classes. 2012 irs tax forms 1040 2 Not including single purpose agricultural or horticultural structures. 2012 irs tax forms 1040 3 Used by logging and sawmill operators for cutting of timber. 2012 irs tax forms 1040 4 For property placed in service after May 12, 1993; for property placed in service before May 13, 1993,  the recovery period is 31. 2012 irs tax forms 1040 5 years. 2012 irs tax forms 1040 Which Convention Applies? Under MACRS, averaging conventions establish when the recovery period begins and ends. 2012 irs tax forms 1040 The convention you use determines the number of months for which you can claim depreciation in the year you place property in service and in the year you dispose of the property. 2012 irs tax forms 1040 Use one of the following conventions. 2012 irs tax forms 1040 The half-year convention. 2012 irs tax forms 1040 The mid-month convention. 2012 irs tax forms 1040 The mid-quarter convention. 2012 irs tax forms 1040 For a detailed explanation of each convention, see Which Convention Applies in chapter 4 of Publication 946. 2012 irs tax forms 1040 Also, see the Instructions for Form 4562. 2012 irs tax forms 1040 Which Depreciation Method Applies? MACRS provides three depreciation methods under GDS and one depreciation method under ADS. 2012 irs tax forms 1040 The 200% declining balance method over a GDS recovery period. 2012 irs tax forms 1040 The 150% declining balance method over a GDS recovery period. 2012 irs tax forms 1040 The straight line method over a GDS recovery period. 2012 irs tax forms 1040 The straight line method over an ADS recovery period. 2012 irs tax forms 1040 Depreciation Table. 2012 irs tax forms 1040   The following table lists the types of property you can depreciate under each method. 2012 irs tax forms 1040 The declining balance method is abbreviated as DB and the straight line method is abbreviated as SL. 2012 irs tax forms 1040 Depreciation Table System/Method   Type of Property GDS using  150% DB • All property used in a farming business (except real property)   • All 15- and 20-year property   • Nonfarm 3-, 5-, 7-, and 10-year property1 GDS using SL • Nonresidential real property   • Residential rental property   • Trees or vines bearing fruit or nuts   • All 3-, 5-, 7-, 10-, 15-, and 20-year property1 ADS using SL • Property used predomi- nantly outside the United States   • Farm property used when an election not to apply the uniform capitalization rules is in effect   • Tax-exempt property   • Tax-exempt bond-financed property   • Imported property2   • Any property for which you elect to use this method1 GDS using  200% DB • Nonfarm 3-, 5-, 7-, and 10-year property 1Elective method 2See section 168(g)(6) of the Internal Revenue  Code Property used in farming business. 2012 irs tax forms 1040   For personal property placed in service after 1988 in a farming business, you must use the 150% declining balance method over a GDS recovery period or you can elect one of the following methods. 2012 irs tax forms 1040 The straight line method over a GDS recovery period. 2012 irs tax forms 1040 The straight line method over an ADS recovery period. 2012 irs tax forms 1040 For property placed in service before 1999, you could have elected to use the 150% declining balance method using the ADS recovery periods for certain property classes. 2012 irs tax forms 1040 If you made this election, continue to use the same method and recovery period for that property. 2012 irs tax forms 1040 Real property. 2012 irs tax forms 1040   You can depreciate real property using the straight line method under either GDS or ADS. 2012 irs tax forms 1040 Switching to straight line. 2012 irs tax forms 1040   If you use a declining balance method, you switch to the straight line method in the year it provides an equal or greater deduction. 2012 irs tax forms 1040 If you use the MACRS percentage tables, discussed later under How Is the Depreciation Deduction Figured , you do not need to determine in which year your deduction is greater using the straight line method. 2012 irs tax forms 1040 The tables have the switch to the straight line method built into their rates. 2012 irs tax forms 1040 Fruit or nut trees and vines. 2012 irs tax forms 1040   Depreciate trees and vines bearing fruit or nuts under GDS using the straight line method over a 10-year recovery period. 2012 irs tax forms 1040 ADS required for some farmers. 2012 irs tax forms 1040   If you elect not to apply the uniform capitalization rules to any plant shown in Table 6-1 of chapter 6 and produced in your farming business, you must use ADS for all property you place in service in any year the election is in effect. 2012 irs tax forms 1040 See chapter 6 for a discussion of the application of the uniform capitalization rules to farm property. 2012 irs tax forms 1040 Electing a different method. 2012 irs tax forms 1040   As shown in the Depreciation Table , you can elect a different method for depreciation for certain types of property. 2012 irs tax forms 1040 You must make the election by the due date of the return (including extensions) for the year you placed the property in service. 2012 irs tax forms 1040 However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of your return (excluding extensions). 2012 irs tax forms 1040 Attach the election to the amended return and write “Filed pursuant to section 301. 2012 irs tax forms 1040 9100-2” on the election statement. 2012 irs tax forms 1040 File the amended return at the same address you filed the original return. 2012 irs tax forms 1040 Once you make the election, you cannot change it. 2012 irs tax forms 1040    If you elect to use a different method for one item in a property class, you must apply the same method to all property in that class placed in service during the year of the election. 2012 irs tax forms 1040 However, you can make the election on a property-by-property basis for residential rental and nonresidential real property. 2012 irs tax forms 1040 Straight line election. 2012 irs tax forms 1040   Instead of using the declining balance method, you can elect to use the straight line method over the GDS recovery period. 2012 irs tax forms 1040 Make the election by entering “S/L” under column (f) in Part III of Form 4562. 2012 irs tax forms 1040 ADS election. 2012 irs tax forms 1040   As explained earlier under Which Depreciation System (GDS or ADS) Applies , you can elect to use ADS even though your property may come under GDS. 2012 irs tax forms 1040 ADS uses the straight line method of depreciation over the ADS recovery periods, which are generally longer than the GDS recovery periods. 2012 irs tax forms 1040 The ADS recovery periods for many assets used in the business of farming are listed in Table 7–1. 2012 irs tax forms 1040 Additional ADS recovery periods for other classes of property may be found in the Table of Class Lives and Recovery Periods in Appendix B of Publication 946. 2012 irs tax forms 1040 How Is the Depreciation Deduction Figured? To figure your depreciation deduction under MACRS, you first determine the depreciation system, property class, placed-in-service date, basis amount, recovery period, convention, and depreciation method that applies to your property. 2012 irs tax forms 1040 Then you are ready to figure your depreciation deduction. 2012 irs tax forms 1040 You can figure it in one of two ways. 2012 irs tax forms 1040 You can use the percentage tables provided by the IRS. 2012 irs tax forms 1040 You can figure your own deduction without using the tables. 2012 irs tax forms 1040 Figuring your own MACRS deduction will generally result in a slightly different amount than using the tables. 2012 irs tax forms 1040 Using the MACRS Percentage Tables To help you figure your deduction under MACRS, the IRS has established percentage tables that incorporate the applicable convention and depreciation method. 2012 irs tax forms 1040 These percentage tables are in Appendix A of Publication 946. 2012 irs tax forms 1040 Rules for using the tables. 2012 irs tax forms 1040   The following rules cover the use of the percentage tables. 2012 irs tax forms 1040 You must apply the rates in the percentage tables to your property's unadjusted basis. 2012 irs tax forms 1040 Unadjusted basis is the same basis amount you would use to figure gain on a sale but figured without reducing your original basis by any MACRS depreciation taken in earlier years. 2012 irs tax forms 1040 You cannot use the percentage tables for a short tax year. 2012 irs tax forms 1040 See chapter 4 of Publication 946 for information on how to figure the deduction for a short tax year. 2012 irs tax forms 1040 You generally must continue to use them for the entire recovery period of the property. 2012 irs tax forms 1040 You must stop using the tables if you adjust the basis of the property for any reason other than— Depreciation allowed or allowable, or An addition or improvement to the property, which is depreciated as a separate property. 2012 irs tax forms 1040 Basis adjustment due to casualty loss. 2012 irs tax forms 1040   If you reduce the basis of your property because of a casualty, you cannot continue to use the percentage tables. 2012 irs tax forms 1040 For the year of the adjustment and the remaining recovery period, you must figure the depreciation yourself using the property's adjusted basis at the end of the year. 2012 irs tax forms 1040 See Figuring the Deduction Without Using the Tables in chapter 4 of Publication 946. 2012 irs tax forms 1040 Figuring depreciation using the 150% DB method and half-year convention. 2012 irs tax forms 1040    Table 7-2 has the percentages for 3-, 5-, 7-, and 20-year property. 2012 irs tax forms 1040 The percentages are based on the 150% declining balance method with a change to the straight line method. 2012 irs tax forms 1040 This table covers only the half-year convention and the first 8 years for 20-year property. 2012 irs tax forms 1040 See Appendix A in Publication 946 for complete MACRS tables, including tables for the mid-quarter and mid-month convention. 2012 irs tax forms 1040   The following examples show how to figure depreciation under MACRS using the percentages in Table 7-2 . 2012 irs tax forms 1040 Example 1. 2012 irs tax forms 1040 During the year, you bought an item of 7-year property for $10,000 and placed it in service. 2012 irs tax forms 1040 You do not elect a section 179 expense deduction for this property. 2012 irs tax forms 1040 In addition, the property is not qualified property for purposes of the special depreciation allowance. 2012 irs tax forms 1040 The unadjusted basis of the property is $10,000. 2012 irs tax forms 1040 You use the percentages in Table 7-2 to figure your deduction. 2012 irs tax forms 1040 Since this is 7-year property, you multiply $10,000 by 10. 2012 irs tax forms 1040 71% to get this year's depreciation of $1,071. 2012 irs tax forms 1040 For next year, your depreciation will be $1,913 ($10,000 × 19. 2012 irs tax forms 1040 13%). 2012 irs tax forms 1040 Example 2. 2012 irs tax forms 1040 You had a barn constructed on your farm at a cost of $20,000. 2012 irs tax forms 1040 You placed the barn in service this year. 2012 irs tax forms 1040 You elect not to claim the special depreciation allowance. 2012 irs tax forms 1040 The barn is 20-year property and you use the table percentages to figure your deduction. 2012 irs tax forms 1040 You figure this year's depreciation by multiplying $20,000 (unadjusted basis) by 3. 2012 irs tax forms 1040 75% to get $750. 2012 irs tax forms 1040 For next year, your depreciation will be $1,443. 2012 irs tax forms 1040 80 ($20,000 × 7. 2012 irs tax forms 1040 219%). 2012 irs tax forms 1040 Table 7-2. 2012 irs tax forms 1040 150% Declining Balance Method (Half-Year Convention) Year 3-Year 5-Year 7-Year 20-Year 1 25. 2012 irs tax forms 1040 0 % 15. 2012 irs tax forms 1040 00 % 10. 2012 irs tax forms 1040 71 % 3. 2012 irs tax forms 1040 750 % 2 37. 2012 irs tax forms 1040 5   25. 2012 irs tax forms 1040 50   19. 2012 irs tax forms 1040 13   7. 2012 irs tax forms 1040 219   3 25. 2012 irs tax forms 1040 0   17. 2012 irs tax forms 1040 85   15. 2012 irs tax forms 1040 03   6. 2012 irs tax forms 1040 677   4 12. 2012 irs tax forms 1040 5   16. 2012 irs tax forms 1040 66   12. 2012 irs tax forms 1040 25   6. 2012 irs tax forms 1040 177   5     16. 2012 irs tax forms 1040 66   12. 2012 irs tax forms 1040 25   5. 2012 irs tax forms 1040 713   6     8. 2012 irs tax forms 1040 33   12. 2012 irs tax forms 1040 25   5. 2012 irs tax forms 1040 285   7         12. 2012 irs tax forms 1040 25   4. 2012 irs tax forms 1040 888   8         6. 2012 irs tax forms 1040 13   4. 2012 irs tax forms 1040 522   Figuring depreciation using the straight line method and half-year convention. 2012 irs tax forms 1040   The following table has the straight line percentages for 3-, 5-, 7-, and 20-year property using the half-year convention. 2012 irs tax forms 1040 The table covers only the first 8 years for 20-year property. 2012 irs tax forms 1040 See Appendix A in Publication 946 for complete MACRS tables, including tables for the mid-quarter and mid-month convention. 2012 irs tax forms 1040 Table 7-3. 2012 irs tax forms 1040 Straight Line Method (Half-Year Convention) Year 3-Year 5-Year 7-Year 20-Year 1 16. 2012 irs tax forms 1040 67 % 10 % 7. 2012 irs tax forms 1040 14 % 2. 2012 irs tax forms 1040 5 % 2 33. 2012 irs tax forms 1040 33   20   14. 2012 irs tax forms 1040 29   5. 2012 irs tax forms 1040 0   3 33. 2012 irs tax forms 1040 33   20   14. 2012 irs tax forms 1040 29   5. 2012 irs tax forms 1040 0   4 16. 2012 irs tax forms 1040 67   20   14. 2012 irs tax forms 1040 28   5. 2012 irs tax forms 1040 0   5     20   14. 2012 irs tax forms 1040 29   5. 2012 irs tax forms 1040 0   6     10   14. 2012 irs tax forms 1040 28   5. 2012 irs tax forms 1040 0   7         14. 2012 irs tax forms 1040 29   5. 2012 irs tax forms 1040 0   8         7. 2012 irs tax forms 1040 14   5. 2012 irs tax forms 1040 0    
Print - Click this link to Print this page

Tax Information for Government Entities

Tax Information for Federal, State, & Local Governments
Federal, State and Local Governments facilitates cooperation through partnerships with federal, state, and local government agencies for the purpose of meeting their federal tax responsibilities, with a focus on customer service and fairness to all.

Tax Information for Indian Tribal Governments
Indian Tribal Governments (ITG) uses partnership opportunities with Indian tribal governments, tribal associations and other federal agencies to respectfully and cooperatively meet the needs of both governments.

Information for the Tax Exempt Bond Community
Tax Exempt Bonds (TEB) provides specialized information and services to the municipal finance community, including tailored educational programs which focus on bond industry segments; pro-active education and outreach products which address non-compliance trends; and compliance programs devised to foster voluntary resolution of tax law infractions.

Partnering Opportunities for Federal, State & Local Governments
The Office of Governmental Liaison (GL) is responsible for developing and implementing cooperative tax administration initiatives between the IRS and federal, state, and local governments. Each state has an assigned GL to serve as the primary liaison for the GL program.

Page Last Reviewed or Updated: 19-Mar-2014

The 2012 Irs Tax Forms 1040

2012 irs tax forms 1040 Tax Changes for Individuals Table of Contents 2001 ChangesNew 5-Year Carryback Rule for Net Operating Losses (NOLs) Wash Sale Rules Do Not Apply to Section 1256 Contracts Other 2001 Changes 2002 ChangesDeduction for Educator Expenses Personal Credits Still Allowed Against Alternative Minimum Tax Later ChangeChild and Dependent Care Expenses 2001 Changes New 5-Year Carryback Rule for Net Operating Losses (NOLs) If you have an NOL from a tax year ending during 2001 or 2002, you must generally carry back the entire amount of the NOL to the 5 tax years before the NOL year (the carryback period). 2012 irs tax forms 1040 However, you can still choose to use the previous carryback period. 2012 irs tax forms 1040 You also can choose not to carry back an NOL and only carry it forward. 2012 irs tax forms 1040 Individuals, estates, and trusts can file Form 1045, Application for Tentative Refund. 2012 irs tax forms 1040 The instructions for this form will be revised to reflect the new law. 2012 irs tax forms 1040 Wash Sale Rules Do Not Apply to Section 1256 Contracts The wash sale rules that generally apply to losses from the sale of stock or securities, do not apply to any loss arising from a section 1256 contract. 2012 irs tax forms 1040 A section 1256 contract is any: Regulated futures contract, Foreign currency contract, Nonequity option, Dealer equity option, or Dealer securities futures contract. 2012 irs tax forms 1040 Wash sales and section 1256 contracts are explained in detail in Publication 550, Investment Income and Expenses. 2012 irs tax forms 1040 Other 2001 Changes Other changes are discussed in the following chapters. 2012 irs tax forms 1040 Chapter 4 Car Expenses Chapter 5 Depreciation 2002 Changes Deduction for Educator Expenses If you are an eligible educator, you can deduct as an adjustment to income up to $250 in qualified expenses. 2012 irs tax forms 1040 You can deduct these expenses even if you do not itemize deductions on Schedule A (Form 1040). 2012 irs tax forms 1040 This adjustment to income is for expenses paid or incurred in tax years beginning during 2002 or 2003. 2012 irs tax forms 1040 Previously, these expenses were deductible only as a miscellaneous itemized deduction subject to the 2% of adjusted gross income limit. 2012 irs tax forms 1040 Eligible educator. 2012 irs tax forms 1040   You are an eligible educator if, for the tax year, you meet the following requirements. 2012 irs tax forms 1040 You are a kindergarten through grade 12: Teacher, Instructor, Counselor, Principal, or Aide. 2012 irs tax forms 1040 You work at least 900 hours during a school year in a school that provides elementary or secondary education, as determined under state law. 2012 irs tax forms 1040 Qualified expenses. 2012 irs tax forms 1040   These are unreimbursed expenses you paid or incurred for books, supplies, computer equipment (including related software and services), other equipment, and supplementary materials that you use in the classroom. 2012 irs tax forms 1040 For courses in health and physical education, expenses for supplies are qualified expenses only if they are related to athletics. 2012 irs tax forms 1040   To be deductible as an adjustment to income, the qualified expenses must be more than the following amounts for the tax year. 2012 irs tax forms 1040 The interest on qualified U. 2012 irs tax forms 1040 S. 2012 irs tax forms 1040 savings bonds that you excluded from income because you paid qualified higher education expenses, Any distribution from a qualified tuition program that you excluded from income, or Any tax-free withdrawals from your Coverdell education savings account. 2012 irs tax forms 1040 Personal Credits Still Allowed Against Alternative Minimum Tax The provision that allowed certain nonrefundable personal credits to reduce both your regular tax and any alternative minimum tax (AMT) has been extended and will be in effect for 2002 and 2003. 2012 irs tax forms 1040 This provision, as it applies to the AMT, was originally scheduled to expire after 2001. 2012 irs tax forms 1040 Without the extension, these credits could not have been used to reduce any AMT in 2002 or 2003. 2012 irs tax forms 1040 Later Change Child and Dependent Care Expenses For the purpose of figuring the child and dependent care credit, your spouse is treated as having at least a minimum amount of earned income for any month that he or she is a full-time student or not able to care for himself or herself. 2012 irs tax forms 1040 Beginning in 2003, this amount is increased to $250 a month if there is one qualifying person and to $500 a month if there are two or more qualifying persons. 2012 irs tax forms 1040 Before 2003, the amounts were $200 and $400. 2012 irs tax forms 1040 The same rule applies for the exclusion of employer-provided dependent care benefits. 2012 irs tax forms 1040 For more information about the credit and exclusion, see Publication 503, Child and Dependent Care Expenses. 2012 irs tax forms 1040 Prev  Up  Next   Home   More Online Publications