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Amend Tax Form

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Amend Tax Form

Amend tax form Publication 925 - Introductory Material Table of Contents Future Developments Reminders IntroductionOrdering forms and publications. Amend tax form Tax questions. Amend tax form Useful Items - You may want to see: Future Developments For the latest developments related to Publication 925, such as legislation enacted after it was published, go to www. Amend tax form irs. Amend tax form gov/pub925. Amend tax form Reminders At-risk amounts. Amend tax form  The following rules apply to amounts borrowed after May 3, 2004. Amend tax form You must file Form 6198, At-Risk Limitations, if you are engaged in an activity included in (6) under Activities Covered by the At-Risk Rules and you have borrowed certain amounts described in Certain borrowed amounts excluded under At-Risk Amounts in this publication. Amend tax form You may be considered at risk for certain amounts described in Certain borrowed amounts excluded under At-Risk Amounts secured by real property used in the activity of holding real property (other than mineral property) that, if nonrecourse, would be qualified nonrecourse financing. Amend tax form Photographs of missing children. Amend tax form  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Amend tax form Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Amend tax form You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Amend tax form Introduction This publication discusses two sets of rules that may limit the amount of your deductible loss from a trade, business, rental, or other income-producing activity. Amend tax form The first part of the publication discusses the passive activity rules. Amend tax form The second part discusses the at-risk rules. Amend tax form However, when you figure your allowable losses from any activity, you must apply the at-risk rules before the passive activity rules. Amend tax form Comments and suggestions. Amend tax form   We welcome your comments about this publication and your suggestions for future editions. Amend tax form   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Amend tax form NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Amend tax form Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Amend tax form   You can send your comments from www. Amend tax form irs. Amend tax form gov/formspubs/. Amend tax form Click on “More Information” and then on “Comment on Tax Forms and Publications. Amend tax form ”   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Amend tax form Ordering forms and publications. Amend tax form   Visit www. Amend tax form irs. Amend tax form gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. Amend tax form Internal Revenue Service 1201 N. Amend tax form Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Amend tax form   If you have a tax question, check the information available on IRS. Amend tax form gov or call 1-800-829-1040. Amend tax form We cannot answer tax questions sent to either of the above addresses. Amend tax form Useful Items - You may want to see: Publication 527 Residential Rental Property (Including Rental of Vacation Homes) 541 Partnerships Form (and Instructions) 4952 Investment Interest Expense Deduction 6198 At-Risk Limitations 8582 Passive Activity Loss Limitations 8582-CR Passive Activity Credit Limitations 8810 Corporate Passive Activity Loss and Credit Limitations 8949 Sales and Other Dispositions of Capital Assets See How To Get Tax Help near the end of this publication for information about getting these publications and forms. Amend tax form Prev  Up  Next   Home   More Online Publications
 
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Page Last Reviewed or Updated: 19-Mar-2014

The Amend Tax Form

Amend tax form 4. Amend tax form   Transportation Table of Contents Parking fees. Amend tax form Advertising display on car. Amend tax form Car pools. Amend tax form Hauling tools or instruments. Amend tax form Union members' trips from a union hall. Amend tax form Car ExpensesStandard Mileage Rate Actual Car Expenses Leasing a Car Disposition of a Car This chapter discusses expenses you can deduct for business transportation when you are not traveling away from home as defined in chapter 1. Amend tax form These expenses include the cost of transportation by air, rail, bus, taxi, etc. Amend tax form , and the cost of driving and maintaining your car. Amend tax form Transportation expenses include the ordinary and necessary costs of all of the following. Amend tax form Getting from one workplace to another in the course of your business or profession when you are traveling within the city or general area that is your tax home. Amend tax form Tax home is defined in chapter 1. Amend tax form Visiting clients or customers. Amend tax form Going to a business meeting away from your regular workplace. Amend tax form Getting from your home to a temporary workplace when you have one or more regular places of work. Amend tax form These temporary workplaces can be either within the area of your tax home or outside that area. Amend tax form Transportation expenses do not include expenses you have while traveling away from home overnight. Amend tax form Those expenses are travel expenses discussed in chapter 1 . Amend tax form However, if you use your car while traveling away from home overnight, use the rules in this chapter to figure your car expense deduction. Amend tax form See Car Expenses , later. Amend tax form Daily transportation expenses you incur while traveling from home to one or more regular places of business are generally nondeductible commuting expenses. Amend tax form However, there may be exceptions to this general rule. Amend tax form You can deduct daily transportation expenses incurred going between your residence and a temporary work station outside the metropolitan area where you live. Amend tax form Also, daily transportation expenses can be deducted if: (1) you have one or more regular work locations away from your residence or (2) your residence is your principal place of business and you incur expenses going between the residence and another work location in the same trade or business, regardless of whether the work is temporary or permanent and regardless of the distance. Amend tax form Illustration of transportation expenses. Amend tax form    Figure B , earlier, illustrates the rules that apply for deducting transportation expenses when you have a regular or main job away from your home. Amend tax form You may want to refer to it when deciding whether you can deduct your transportation expenses. Amend tax form Temporary work location. Amend tax form   If you have one or more regular work locations away from your home and you commute to a temporary work location in the same trade or business, you can deduct the expenses of the daily round-trip transportation between your home and the temporary location, regardless of distance. Amend tax form   If your employment at a work location is realistically expected to last (and does in fact last) for 1 year or less, the employment is temporary unless there are facts and circumstances that would indicate otherwise. Amend tax form   If your employment at a work location is realistically expected to last for more than 1 year or if there is no realistic expectation that the employment will last for 1 year or less, the employment is not temporary, regardless of whether it actually lasts for more than 1 year. Amend tax form   If employment at a work location initially is realistically expected to last for 1 year or less, but at some later date the employment is realistically expected to last more than 1 year, that employment will be treated as temporary (unless there are facts and circumstances that would indicate otherwise) until your expectation changes. Amend tax form It will not be treated as temporary after the date you determine it will last more than 1 year. Amend tax form   If the temporary work location is beyond the general area of your regular place of work and you stay overnight, you are traveling away from home. Amend tax form You may have deductible travel expenses as discussed in chapter 1 . Amend tax form No regular place of work. Amend tax form   If you have no regular place of work but ordinarily work in the metropolitan area where you live, you can deduct daily transportation costs between home and a temporary work site outside that metropolitan area. Amend tax form   Generally, a metropolitan area includes the area within the city limits and the suburbs that are considered part of that metropolitan area. Amend tax form   You cannot deduct daily transportation costs between your home and temporary work sites within your metropolitan area. Amend tax form These are nondeductible commuting expenses. Amend tax form Two places of work. Amend tax form   If you work at two places in one day, whether or not for the same employer, you can deduct the expense of getting from one workplace to the other. Amend tax form However, if for some personal reason you do not go directly from one location to the other, you cannot deduct more than the amount it would have cost you to go directly from the first location to the second. Amend tax form   Transportation expenses you have in going between home and a part-time job on a day off from your main job are commuting expenses. Amend tax form You cannot deduct them. Amend tax form Armed Forces reservists. Amend tax form   A meeting of an Armed Forces reserve unit is a second place of business if the meeting is held on a day on which you work at your regular job. Amend tax form You can deduct the expense of getting from one workplace to the other as just discussed under Two places of work . Amend tax form   You usually cannot deduct the expense if the reserve meeting is held on a day on which you do not work at your regular job. Amend tax form In this case, your transportation generally is a nondeductible commuting expense. Amend tax form However, you can deduct your transportation expenses if the location of the meeting is temporary and you have one or more regular places of work. Amend tax form   If you ordinarily work in a particular metropolitan area but not at any specific location and the reserve meeting is held at a temporary location outside that metropolitan area, you can deduct your transportation expenses. Amend tax form   If you travel away from home overnight to attend a guard or reserve meeting, you can deduct your travel expenses. Amend tax form These expenses are discussed in chapter 1 . Amend tax form   If you travel more than 100 miles away from home in connection with your performance of services as a member of the reserves, you may be able to deduct some of your reserve-related travel costs as an adjustment to gross income rather than as an itemized deduction. Amend tax form For more information, see Armed Forces Reservists Traveling More Than 100 Miles From Home under Special Rules, in chapter 6. Amend tax form Commuting expenses. Amend tax form   You cannot deduct the costs of taking a bus, trolley, subway, or taxi, or of driving a car between your home and your main or regular place of work. Amend tax form These costs are personal commuting expenses. Amend tax form You cannot deduct commuting expenses no matter how far your home is from your regular place of work. Amend tax form You cannot deduct commuting expenses even if you work during the commuting trip. Amend tax form Example. Amend tax form You sometimes use your cell phone to make business calls while commuting to and from work. Amend tax form Sometimes business associates ride with you to and from work, and you have a business discussion in the car. Amend tax form These activities do not change the trip from personal to business. Amend tax form You cannot deduct your commuting expenses. Amend tax form Parking fees. Amend tax form    Fees you pay to park your car at your place of business are nondeductible commuting expenses. Amend tax form You can, however, deduct business-related parking fees when visiting a customer or client. Amend tax form Advertising display on car. Amend tax form   Putting display material that advertises your business on your car does not change the use of your car from personal use to business use. Amend tax form If you use this car for commuting or other personal uses, you still cannot deduct your expenses for those uses. Amend tax form Car pools. Amend tax form   You cannot deduct the cost of using your car in a nonprofit car pool. Amend tax form Do not include payments you receive from the passengers in your income. Amend tax form These payments are considered reimbursements of your expenses. Amend tax form However, if you operate a car pool for a profit, you must include payments from passengers in your income. Amend tax form You can then deduct your car expenses (using the rules in this publication). Amend tax form Hauling tools or instruments. Amend tax form   Hauling tools or instruments in your car while commuting to and from work does not make your car expenses deductible. Amend tax form However, you can deduct any additional costs you have for hauling tools or instruments (such as for renting a trailer you tow with your car). Amend tax form Union members' trips from a union hall. Amend tax form   If you get your work assignments at a union hall and then go to your place of work, the costs of getting from the union hall to your place of work are nondeductible commuting expenses. Amend tax form Although you need the union to get your work assignments, you are employed where you work, not where the union hall is located. Amend tax form Office in the home. Amend tax form   If you have an office in your home that qualifies as a principal place of business, you can deduct your daily transportation costs between your home and another work location in the same trade or business. Amend tax form (See Publication 587, Business Use of Your Home, for information on determining if your home office qualifies as a principal place of business. Amend tax form ) Examples of deductible transportation. Amend tax form   The following examples show when you can deduct transportation expenses based on the location of your work and your home. Amend tax form Example 1. Amend tax form You regularly work in an office in the city where you live. Amend tax form Your employer sends you to a 1-week training session at a different office in the same city. Amend tax form You travel directly from your home to the training location and return each day. Amend tax form You can deduct the cost of your daily round-trip transportation between your home and the training location. Amend tax form Example 2. Amend tax form Your principal place of business is in your home. Amend tax form You can deduct the cost of round-trip transportation between your qualifying home office and your client's or customer's place of business. Amend tax form Example 3. Amend tax form You have no regular office, and you do not have an office in your home. Amend tax form In this case, the location of your first business contact inside the metropolitan area is considered your office. Amend tax form Transportation expenses between your home and this first contact are nondeductible commuting expenses. Amend tax form Transportation expenses between your last business contact and your home are also nondeductible commuting expenses. Amend tax form While you cannot deduct the costs of these trips, you can deduct the costs of going from one client or customer to another. Amend tax form Car Expenses If you use your car for business purposes, you ordinarily can deduct car expenses. Amend tax form You generally can use one of the two following methods to figure your deductible expenses. Amend tax form Standard mileage rate. Amend tax form Actual car expenses. Amend tax form If you use actual expenses to figure your deduction for a car you lease, there are rules that affect the amount of your lease payments you can deduct. Amend tax form See Leasing a Car , later. Amend tax form In this publication, “car” includes a van, pickup, or panel truck. Amend tax form For the definition of “car” for depreciation purposes, see Car defined under Actual Car Expenses, later. Amend tax form Rural mail carriers. Amend tax form   If you are a rural mail carrier, you may be able to treat the qualified reimbursement you received as your allowable expense. Amend tax form Because the qualified reimbursement is treated as paid under an accountable plan, your employer should not include the reimbursement in your income. Amend tax form   If your vehicle expenses are more than the amount of your reimbursement, you can deduct the unreimbursed expenses as an itemized deduction on Schedule A (Form 1040). Amend tax form You must complete Form 2106 and attach it to your Form 1040, U. Amend tax form S. Amend tax form Individual Income Tax Return. Amend tax form   A “qualified reimbursement” is the reimbursement you receive that meets both of the following conditions. Amend tax form It is given as an equipment maintenance allowance (EMA) to employees of the U. Amend tax form S. Amend tax form Postal Service. Amend tax form It is at the rate contained in the 1991 collective bargaining agreement. Amend tax form Any later agreement cannot increase the qualified reimbursement amount by more than the rate of inflation. Amend tax form See your employer for information on your reimbursement. Amend tax form    If you are a rural mail carrier and received a qualified reimbursement, you cannot use the standard mileage rate. Amend tax form Standard Mileage Rate You may be able to use the standard mileage rate to figure the deductible costs of operating your car for business purposes. Amend tax form For 2013, the standard mileage rate for the cost of operating your car for business use is 56½ cents per mile. Amend tax form If you use the standard mileage rate for a year, you cannot deduct your actual car expenses for that year. Amend tax form You cannot deduct depreciation, lease payments, maintenance and repairs, gasoline (including gasoline taxes), oil, insurance, or vehicle registration fees. Amend tax form See Choosing the standard mileage rate and Standard mileage rate not allowed, later. Amend tax form You generally can use the standard mileage rate whether or not you are reimbursed and whether or not any reimbursement is more or less than the amount figured using the standard mileage rate. Amend tax form See chapter 6 for more information on reimbursements . Amend tax form Choosing the standard mileage rate. Amend tax form   If you want to use the standard mileage rate for a car you own, you must choose to use it in the first year the car is available for use in your business. Amend tax form Then, in later years, you can choose to use either the standard mileage rate or actual expenses. Amend tax form   If you want to use the standard mileage rate for a car you lease, you must use it for the entire lease period. Amend tax form For leases that began on or before December 31, 1997, the standard mileage rate must be used for the entire portion of the lease period (including renewals) that is after 1997. Amend tax form   You must make the choice to use the standard mileage rate by the due date (including extensions) of your return. Amend tax form You cannot revoke the choice. Amend tax form However, in later years, you can switch from the standard mileage rate to the actual expenses method. Amend tax form If you change to the actual expenses method in a later year, but before your car is fully depreciated, you have to estimate the remaining useful life of the car and use straight line depreciation. Amend tax form Example. Amend tax form Larry is an employee who occasionally uses his own car for business purposes. Amend tax form He purchased the car in 2011, but he did not claim any unreimbursed employee expenses on his 2011 tax return. Amend tax form Because Larry did not use the standard mileage rate the first year the car was available for business use, he cannot use the standard mileage rate in 2013 to claim unreimbursed employee business expenses. Amend tax form   For more information about depreciation included in the standard mileage rate, see Exception under Methods of depreciation, later. Amend tax form Standard mileage rate not allowed. Amend tax form   You cannot use the standard mileage rate if you: Use five or more cars at the same time (such as in fleet operations), Claimed a depreciation deduction for the car using any method other than straight line, for example, MACRS (as discussed later under Depreciation Deduction), Claimed a section 179 deduction (discussed later) on the car, Claimed the special depreciation allowance on the car, Claimed actual car expenses after 1997 for a car you leased, or Are a rural mail carrier who received a qualified reimbursement. Amend tax form (See Rural mail carriers , earlier. Amend tax form ) Note. Amend tax form You can elect to use the standard mileage rate if you used a car for hire (such as a taxi) unless the standard mileage rate is otherwise not allowed, as discussed above. Amend tax form Five or more cars. Amend tax form   If you own or lease five or more cars that are used for business at the same time, you cannot use the standard mileage rate for the business use of any car. Amend tax form However, you may be able to deduct your actual expenses for operating each of the cars in your business. Amend tax form See Actual Car Expenses , later, for information on how to figure your deduction. Amend tax form   You are not using five or more cars for business at the same time if you alternate using (use at different times) the cars for business. Amend tax form   The following examples illustrate the rules for when you can and cannot use the standard mileage rate for five or more cars. Amend tax form Example 1. Amend tax form Marcia, a salesperson, owns three cars and two vans that she alternates using for calling on her customers. Amend tax form She can use the standard mileage rate for the business mileage of the three cars and the two vans because she does not use them at the same time. Amend tax form Example 2. Amend tax form Tony and his employees use his four pickup trucks in his landscaping business. Amend tax form During the year, he traded in two of his old trucks for two newer ones. Amend tax form Tony can use the standard mileage rate for the business mileage of all six of the trucks he owned during the year. Amend tax form Example 3. Amend tax form Chris owns a repair shop and an insurance business. Amend tax form He and his employees use his two pickup trucks and van for the repair shop. Amend tax form Chris alternates using his two cars for the insurance business. Amend tax form No one else uses the cars for business purposes. Amend tax form Chris can use the standard mileage rate for the business use of the pickup trucks, van, and the cars because he never has more than four vehicles used for business at the same time. Amend tax form Example 4. Amend tax form Maureen owns a car and four vans that are used in her housecleaning business. Amend tax form Her employees use the vans, and she uses the car to travel to various customers. Amend tax form Maureen cannot use the standard mileage rate for the car or the vans. Amend tax form This is because all five vehicles are used in Maureen's business at the same time. Amend tax form She must use actual expenses for all vehicles. Amend tax form Interest. Amend tax form   If you are an employee, you cannot deduct any interest paid on a car loan. Amend tax form This applies even if you use the car 100% for business as an employee. Amend tax form   However, if you are self-employed and use your car in your business, you can deduct that part of the interest expense that represents your business use of the car. Amend tax form For example, if you use your car 60% for business, you can deduct 60% of the interest on Schedule C (Form 1040). Amend tax form You cannot deduct the part of the interest expense that represents your personal use of the car. Amend tax form    If you use a home equity loan to purchase your car, you may be able to deduct the interest. Amend tax form See Publication 936, Home Mortgage Interest Deduction, for more information. Amend tax form Personal property taxes. Amend tax form   If you itemize your deductions on Schedule A (Form 1040), you can deduct on line 7 state and local personal property taxes on motor vehicles. Amend tax form You can take this deduction even if you use the standard mileage rate or if you do not use the car for business. Amend tax form   If you are self-employed and use your car in your business, you can deduct the business part of state and local personal property taxes on motor vehicles on Schedule C (Form 1040), Schedule C-EZ (Form 1040), or Schedule F (Form 1040). Amend tax form If you itemize your deductions, you can include the remainder of your state and local personal property taxes on the car on Schedule A (Form 1040). Amend tax form Parking fees and tolls. Amend tax form   In addition to using the standard mileage rate, you can deduct any business-related parking fees and tolls. Amend tax form (Parking fees you pay to park your car at your place of work are nondeductible commuting expenses. Amend tax form ) Sale, trade-in, or other disposition. Amend tax form   If you sell, trade in, or otherwise dispose of your car, you may have a gain or loss on the transaction or an adjustment to the basis of your new car. Amend tax form See Disposition of a Car , later. Amend tax form Actual Car Expenses If you do not use the standard mileage rate, you may be able to deduct your actual car expenses. Amend tax form If you qualify to use both methods, you may want to figure your deduction both ways to see which gives you a larger deduction. Amend tax form Actual car expenses include: Depreciation Licenses Lease  payments Registration  fees Gas Insurance Repairs Oil Garage rent Tires Tolls Parking fees   If you have fully depreciated a car that you still use in your business, you can continue to claim your other actual car expenses. Amend tax form Continue to keep records, as explained later in chapter 5 . Amend tax form Business and personal use. Amend tax form   If you use your car for both business and personal purposes, you must divide your expenses between business and personal use. Amend tax form You can divide your expense based on the miles driven for each purpose. Amend tax form Example. Amend tax form You are a sales representative for a clothing firm and drive your car 20,000 miles during the year: 12,000 miles for business and 8,000 miles for personal use. Amend tax form You can claim only 60% (12,000 ÷ 20,000) of the cost of operating your car as a business expense. Amend tax form Employer-provided vehicle. Amend tax form   If you use a vehicle provided by your employer for business purposes, you can deduct your actual unreimbursed car expenses. Amend tax form You cannot use the standard mileage rate. Amend tax form See Vehicle Provided by Your Employer in chapter 6. Amend tax form Interest on car loans. Amend tax form   If you are an employee, you cannot deduct any interest paid on a car loan. Amend tax form This interest is treated as personal interest and is not deductible. Amend tax form If you are self-employed and use your car in that business, see Interest , earlier, under Standard Mileage Rate. Amend tax form Taxes paid on your car. Amend tax form   If you are an employee, you can deduct personal property taxes paid on your car if you itemize deductions. Amend tax form Enter the amount paid on line 7 of Schedule A (Form 1040). Amend tax form Sales taxes. Amend tax form   Generally, sales taxes on your car are part of your car's basis and are recovered through depreciation, discussed later. Amend tax form Fines and collateral. Amend tax form   You cannot deduct fines you pay or collateral you forfeit for traffic violations. Amend tax form Casualty and theft losses. Amend tax form   If your car is damaged, destroyed, or stolen, you may be able to deduct part of the loss not covered by insurance. Amend tax form See Publication 547, Casualties, Disasters, and Thefts, for information on deducting a loss on your car. Amend tax form Depreciation and section 179 deductions. Amend tax form   Generally, the cost of a car, plus sales tax and improvements, is a capital expense. Amend tax form Because the benefits last longer than 1 year, you generally cannot deduct a capital expense. Amend tax form However, you can recover this cost through the section 179 deduction (the deduction allowed by section 179 of the Internal Revenue Code), special depreciation allowance, and depreciation deductions. Amend tax form Depreciation allows you to recover the cost over more than 1 year by deducting part of it each year. Amend tax form The section 179 deduction , special depreciation allowance , and depreciation deductions are discussed later. Amend tax form   Generally, there are limits on these deductions. Amend tax form Special rules apply if you use your car 50% or less in your work or business. Amend tax form   You can claim a section 179 deduction and use a depreciation method other than straight line only if you do not use the standard mileage rate to figure your business-related car expenses in the year you first place a car in service. Amend tax form   If, in the year you first place a car in service, you claim either a section 179 deduction or use a depreciation method other than straight line for its estimated useful life, you cannot use the standard mileage rate on that car in any future year. Amend tax form Car defined. Amend tax form   For depreciation purposes, a car is any four-wheeled vehicle (including a truck or van) made primarily for use on public streets, roads, and highways. Amend tax form Its unloaded gross vehicle weight must not be more than 6,000 pounds. Amend tax form A car includes any part, component, or other item physically attached to it or usually included in the purchase price. Amend tax form   A car does not include: An ambulance, hearse, or combination ambulance-hearse used directly in a business, A vehicle used directly in the business of transporting persons or property for pay or hire, or A truck or van that is a qualified nonpersonal use vehicle. Amend tax form Qualified nonpersonal use vehicles. Amend tax form   These are vehicles that by their nature are not likely to be used more than a minimal amount for personal purposes. Amend tax form They include trucks and vans that have been specially modified so that they are not likely to be used more than a minimal amount for personal purposes, such as by installation of permanent shelving and painting the vehicle to display advertising or the company's name. Amend tax form Delivery trucks with seating only for the driver, or only for the driver plus a folding jump seat, are qualified nonpersonal use vehicles. Amend tax form More information. Amend tax form   See Depreciation Deduction , later, for more information on how to depreciate your vehicle. Amend tax form Section 179 Deduction The section 179 deduction allows you to treat a portion or all of the cost of a car as a current expense. Amend tax form If you choose to deduct all or part of the cost as a current expense, you must reduce your depreciable basis in the car by the amount of the section 179 deduction. Amend tax form There is a limit on the total section 179 deduction, special depreciation allowance, and depreciation deduction for cars, trucks, and vans that may reduce or eliminate any benefit from claiming the section 179 deduction. Amend tax form See Depreciation Limits, later. Amend tax form You can claim the section 179 deduction only in the year you place the car in service. Amend tax form For this purpose, a car is placed in service when it is ready and available for a specifically assigned use, whether in a trade or business, a tax-exempt activity, a personal activity, or for the production of income. Amend tax form Even if you are not using the property, it is in service when it is ready and available for its specifically assigned use. Amend tax form A car first used for personal purposes cannot qualify for the deduction in a later year when its use changes to business. Amend tax form Example. Amend tax form In 2012, you bought a new car and used it for personal purposes. Amend tax form In 2013, you began to use it for business. Amend tax form Changing its use to business use does not qualify the cost of your car for a section 179 deduction in 2013. Amend tax form However, you can claim a depreciation deduction for the business use of the car starting in 2013. Amend tax form See Depreciation Deduction , later. Amend tax form More than 50% business use requirement. Amend tax form   You must use the property more than 50% for business to claim any section 179 deduction. Amend tax form If you used the property more than 50% for business, multiply the cost of the property by the percentage of business use. Amend tax form The result is the cost of the property that can qualify for the section 179 deduction. Amend tax form Example. Amend tax form Peter purchased a car in April 2013 for $24,500 and used it 60% for business. Amend tax form Based on his business usage, the total cost of Peter's car that qualifies for the section 179 deduction is $14,700 ($24,500 cost × 60% business use). Amend tax form But see Limit on total section 179, special depreciation allowance, and depreciation deduction , discussed later. Amend tax form Limits. Amend tax form   There are limits on: The amount of the section 179 deduction, The section 179 deduction for sport utility and certain other vehicles, and The total amount of the section 179 deduction, special depreciation allowance, and depreciation deduction (discussed later ) you can claim for a qualified property. Amend tax form Limit on the amount of the section 179 deduction. Amend tax form   For 2013, the total amount you can choose to deduct under section 179 generally cannot be more than $500,000. Amend tax form   If the cost of your section 179 property placed in service in 2013 is over $2,000,000, you must reduce the $500,000 dollar limit (but not below zero) by the amount of cost over $2,000,000. Amend tax form 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 deduction. Amend tax form   The total amount you can deduct under section 179 each year after you apply the limits listed above cannot be more than the taxable income from the active conduct of any trade or business during the year. Amend tax form   If you are married and 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. Amend tax form   If you and your spouse file separate returns, you are treated as one taxpayer for the dollar limit. Amend tax form You must allocate the dollar limit (after any reduction) between you. Amend tax form   For more information on the above section 179 deduction limits, see Publication 946. Amend tax form Limit for sport utility and certain other vehicles. Amend tax form   For sport utility and certain other vehicles placed in service in 2013, the portion of the vehicle's cost taken into account in figuring your section 179 deduction is limited to $25,000. Amend tax form This rule applies to any four-wheeled vehicle primarily designed or used to carry passengers over public streets, roads, or highways, that is not subject to any of the passenger automobile limits explained under Depreciation Limits , later, and that is rated at no more than 14,000 pounds gross vehicle weight. Amend tax form However, the $25,000 limit does not apply to any vehicle: Designed to have a seating capacity of more than nine persons behind the driver's seat, Equipped with a cargo area of at least 6 feet in interior length that is an open area or is designed for use as an open area but is enclosed by a cap and is not readily accessible directly from the passenger compartment, or That has an integral enclosure, fully enclosing the driver compartment and load carrying device, does not have seating rearward of the driver's seat, and has no body section protruding more than 30 inches ahead of the leading edge of the windshield. Amend tax form    Limit on total section 179, special depreciation allowance, and depreciation deduction. Amend tax form   Generally, the total amount of section 179, special depreciation allowance, and depreciation deduction you can claim for a car that is qualified property and that you placed in service in 2013 is $11,160. Amend tax form The limit is reduced if your business use of the car is less than 100%. Amend tax form See Depreciation Limits , later, for more information. Amend tax form Example. Amend tax form In the earlier example under More than 50% business use requirement, Peter had a car with a cost (for purposes of the section 179 deduction) of $14,700. Amend tax form However, based on Peter's business usage of his car, the total of his section 179, special depreciation allowance, and depreciation deductions is limited to $6,696 ($11,160 limit x 60% business use). Amend tax form Cost of car. Amend tax form   For purposes of the section 179 deduction, the cost of the car does not include any amount figured by reference to any other property held by you at any time. Amend tax form For example, if you buy (for cash and a trade-in) a new car to use in your business, your cost for purposes of the section 179 deduction does not include your adjusted basis in the car you trade in for the new car. Amend tax form Your cost includes only the cash you paid. Amend tax form Basis of car for depreciation. Amend tax form   The amount of the section 179 deduction reduces your basis in your car. Amend tax form If you choose the section 179 deduction, you must subtract the amount of the deduction from the cost of your car. Amend tax form The resulting amount is the basis in your car you use to figure your depreciation deduction. Amend tax form When to choose. Amend tax form   If you want to take the section 179 deduction, you must make the choice in the tax year you place the car in service for business or work. Amend tax form How to choose. Amend tax form    Employees use Form 2106 to make this choice and report the section 179 deduction. Amend tax form All others use Form 4562. Amend tax form   File the appropriate form with either of the following. Amend tax form Your original tax return filed for the year the property was placed in service (whether or not you file it timely). Amend tax form An amended return filed within the time prescribed by law. Amend tax form 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. Amend tax form The amended return must also include any resulting adjustments to taxable income. Amend tax form    You must keep records that show the specific identification of each piece of qualifying section 179 property. Amend tax form These records must show how you acquired the property, the person you acquired it from, and when you placed it in service. Amend tax form Revoking an election. Amend tax form   An election (or any specification made in the election) to take a section 179 deduction for 2013 can only be revoked with the Commissioner's approval. Amend tax form Recapture of section 179 deduction. Amend tax form   To be eligible to claim the section 179 deduction, you must use your car more than 50% for business or work in the year you acquired it. Amend tax form If your business use of the car is 50% or less in a later tax year during the recovery period, you have to recapture (include in income) in that later year any excess depreciation. Amend tax form Any section 179 deduction claimed on the car is included in calculating the excess depreciation. Amend tax form For information on this calculation, see Excess depreciation , later in this chapter under Car Used 50% or Less for Business. Amend tax form Dispositions. Amend tax form   If you dispose of a car on which you had claimed the section 179 deduction, the amount of that deduction is treated as a depreciation deduction for recapture purposes. Amend tax form You treat any gain on the disposition of the property as ordinary income up to the amount of the section 179 deduction and any allowable depreciation (unless you establish the amount actually allowed). Amend tax form For information on the disposition of a car, see Disposition of a Car , later. Amend tax form Special Depreciation Allowance You may be able to claim the special depreciation allowance for your car, truck, or van, if it is qualified property and was placed in service in 2013. Amend tax form The allowance is an additional depreciation deduction of 50% of the car's depreciable basis (after any section 179 deduction, but before figuring your regular depreciation deduction under MACRS). Amend tax form The special depreciation allowance applies only for the first year the car is placed in service. Amend tax form To qualify for the allowance more than 50% of the use of the car must be in a qualified business use (as defined under Depreciation Deduction, later). Amend tax form Combined depreciation. Amend tax form   Your combined section 179 deduction, special depreciation allowance, and regular MACRS depreciation deduction is limited to the maximum allowable depreciation deduction for cars of $11,160 ($3,160 if you elect not to claim the special depreciation allowance). Amend tax form For trucks and vans, the first-year limit remains at $11,360 ($3,360 if you elect not to claim the special depreciation allowance). Amend tax form See Depreciation Limits , later in this chapter. Amend tax form Qualified car. Amend tax form   To be a qualified car (including trucks and vans), the car must meet all of the following tests. Amend tax form You purchased the car new on or after January 1, 2008, but only if no binding written contract to acquire the car existed before January 1, 2008, You placed the car in service in your trade or business before January 1, 2014, You used the car more than 50% in a qualified business use. Amend tax form Election not to claim the special depreciation allowance. Amend tax form   You can elect not to claim the special depreciation allowance for your car, truck, or van, that is qualified property. Amend tax form If you make this election, it applies to all 5-year property placed in service during the year. Amend tax form   To make the election, attach a statement to your timely filed return (including extensions) indicating the class of property (5-year for cars) for which you are making the election and that you are electing not to claim the special depreciation allowance for qualified property acquired on or after January 1, 2008. Amend tax form    Unless you elect not to claim the special depreciation allowance, you must reduce the car's adjusted basis by the amount of the allowance, even if the allowance was not claimed. Amend tax form Depreciation Deduction If you use actual car expenses to figure your deduction for a car you own and use in your business, you can claim a depreciation deduction. Amend tax form This means you can deduct a certain amount each year as a recovery of your cost or other basis in your car. Amend tax form You generally need to know the following things about the car you intend to depreciate. Amend tax form Your basis in the car. Amend tax form The date you place the car in service. Amend tax form The method of depreciation and recovery period you will use. Amend tax form Basis. Amend tax form   Your basis in a car for figuring depreciation is generally its cost. Amend tax form This includes any amount you borrow or pay in cash, other property, or services. Amend tax form   Generally, you figure depreciation on your car, truck, or van using your unadjusted basis (see Unadjusted basis , later). Amend tax form However, in some situations you will use your adjusted basis (your basis reduced by depreciation allowed or allowable in earlier years). Amend tax form For one of these situations see Exception under Methods of depreciation, later. Amend tax form   If you change the use of a car from personal to business, your basis for depreciation is the lesser of the fair market value or your adjusted basis in the car on the date of conversion. Amend tax form Additional rules concerning basis are discussed later in this chapter under Unadjusted basis . Amend tax form Placed in service. Amend tax form   You generally place a car in service when it is available for use in your work or business, in an income-producing activity, or in a personal activity. Amend tax form Depreciation begins when the car is placed in service for use in your work or business or for the production of income. Amend tax form   For purposes of computing depreciation, if you first start using the car only for personal use and later convert it to business use, you place the car in service on the date of conversion. Amend tax form Car placed in service and disposed of in the same year. Amend tax form   If you place a car in service and dispose of it in the same tax year, you cannot claim any depreciation deduction for that car. Amend tax form Methods of depreciation. Amend tax form   Generally, you figure depreciation on cars using the Modified Accelerated Cost Recovery System (MACRS). Amend tax form MACRS is discussed later in this chapter. Amend tax form Exception. Amend tax form   If you used the standard mileage rate in the first year of business use and change to the actual expenses method in a later year, you cannot depreciate your car under the MACRS rules. Amend tax form You must use straight line depreciation over the estimated remaining useful life of the car. Amend tax form   To figure depreciation under the straight line method, you must reduce your basis in the car (but not below zero) by a set rate per mile for all miles for which you used the standard mileage rate. Amend tax form The rate per mile varies depending on the year(s) you used the standard mileage rate. Amend tax form For the rate(s) to use, see Depreciation adjustment when you used the standard mileage rate under Disposition of a Car, later. Amend tax form   This reduction of basis is in addition to those basis adjustments described later under Unadjusted basis . Amend tax form You must use your adjusted basis in your car to figure your depreciation deduction. Amend tax form For additional information on the straight line method of depreciation, see Publication 946. Amend tax form More-than-50%-use test. Amend tax form   Generally, you must use your car more than 50% for qualified business use (defined next) during the year to use MACRS. Amend tax form You must meet this more-than-50%-use test each year of the recovery period (6 years under MACRS) for your car. Amend tax form   If your business use is 50% or less, you must use the straight line method to depreciate your car. Amend tax form This is explained later under Car Used 50% or Less for Business . Amend tax form Qualified business use. Amend tax form   A qualified business use is any use in your trade or business. Amend tax form It does not include use for the production of income (investment use). Amend tax form However, you do combine your business and investment use to compute your depreciation deduction for the tax year. Amend tax form Use of your car by another person. Amend tax form   Do not treat any use of your car by another person as use in your trade or business unless that use meets one of the following conditions. Amend tax form It is directly connected with your business. Amend tax form It is properly reported by you as income to the other person (and, if you have to, you withhold tax on the income). Amend tax form It results in a payment of fair market rent. Amend tax form This includes any payment to you for the use of your car. Amend tax form Business use changes. Amend tax form   If you used your car more than 50% in qualified business use in the year you placed it in service, but 50% or less in a later year (including the year of disposition), you have to change to the straight line method of depreciation. Amend tax form See Qualified business use 50% or less in a later year under Car Used 50% or Less for Business, later. Amend tax form    Property does not cease to be used more than 50% in qualified business use by reason of a transfer at death. Amend tax form Use for more than one purpose. Amend tax form   If you use your car for more than one purpose during the tax year, you must allocate the use to the various purposes. Amend tax form You do this on the basis of mileage. Amend tax form Figure the percentage of qualified business use by dividing the number of miles you drive your car for business purposes during the year by the total number of miles you drive the car during the year for any purpose. Amend tax form Change from personal to business use. Amend tax form   If you change the use of a car from 100% personal use to business use during the tax year, you may not have mileage records for the time before the change to business use. Amend tax form In this case, you figure the percentage of business use for the year as follows. Amend tax form Determine the percentage of business use for the period following the change. Amend tax form Do this by dividing business miles by total miles driven during that period. Amend tax form Multiply the percentage in (1) by a fraction. Amend tax form The numerator (top number) is the number of months the car is used for business and the denominator (bottom number) is 12. Amend tax form Example. Amend tax form You use a car only for personal purposes during the first 6 months of the year. Amend tax form During the last 6 months of the year, you drive the car a total of 15,000 miles of which 12,000 miles are for business. Amend tax form This gives you a business use percentage of 80% (12,000 ÷ 15,000) for that period. Amend tax form Your business use for the year is 40% (80% × 6/12). Amend tax form Limits. Amend tax form   The amount you can claim for section 179, special depreciation allowance, and depreciation deductions may be limited. Amend tax form The maximum amount you can claim depends on the year in which you placed your car in service. Amend tax form You have to reduce the maximum amount if you did not use the car exclusively for business. Amend tax form See Depreciation Limits , later. Amend tax form Unadjusted basis. Amend tax form   You use your unadjusted basis (often referred to as your basis or your basis for depreciation) to figure your depreciation using the MACRS depreciation chart, explained later under Modified Accelerated Cost Recovery System (MACRS) . Amend tax form Your unadjusted basis for figuring depreciation is your original basis increased or decreased by certain amounts. Amend tax form   To figure your unadjusted basis, begin with your car's original basis, which generally is its cost. Amend tax form Cost includes sales taxes (see Sales taxes , earlier), destination charges, and dealer preparation. Amend tax form Increase your basis by any substantial improvements you make to your car, such as adding air conditioning or a new engine. Amend tax form Decrease your basis by any section 179 deduction, special depreciation allowance, gas guzzler tax, clean-fuel vehicle deduction (for vehicles placed in service before Jan. Amend tax form 1, 2006), and alternative motor vehicle credit. Amend tax form   See Form 8910 for information on the alternative motor vehicle credit. Amend tax form If your business use later falls to 50% or less, you may have to recapture (include in your income) any excess depreciation. Amend tax form See Car Used 50% or Less for Business, later, for more information. Amend tax form If you acquired the car by gift or inheritance, see Publication 551, Basis of Assets, for information on your basis in the car. Amend tax form Improvements. Amend tax form   A major improvement to a car is treated as a new item of 5-year recovery property. Amend tax form It is treated as placed in service in the year the improvement is made. Amend tax form It does not matter how old the car is when the improvement is added. Amend tax form Follow the same steps for depreciating the improvement as you would for depreciating the original cost of the car. Amend tax form However, you must treat the improvement and the car as a whole when applying the limits on the depreciation deductions. Amend tax form Your car's depreciation deduction for the year (plus any section 179 deduction, special depreciation allowance, and depreciation on any improvements) cannot be more than the depreciation limit that applies for that year. Amend tax form See Depreciation Limits , later. Amend tax form Car trade-in. Amend tax form   If you traded one car (the “old car”) for another car (the “new car”) in 2013, there are two ways you can treat the transaction. Amend tax form You can elect to treat the transaction as a tax-free disposition of the old car and the purchase of the new car. Amend tax form If you make this election, you treat the old car as disposed of at the time of the trade-in. Amend tax form The depreciable basis of the new car is the adjusted basis of the old car (figured as if 100% of the car's use had been for business purposes) plus any additional amount you paid for the new car. Amend tax form You then figure your depreciation deduction for the new car beginning with the date you placed it in service. Amend tax form You make this election by completing Form 2106, Part II, Section D. Amend tax form This method is explained later, beginning at Effect of trade-in on basis . Amend tax form If you do not make the election described in (1), you must figure depreciation separately for the remaining basis of the old car and for any additional amount you paid for the new car. Amend tax form You must apply two depreciation limits (see Depreciation Limits , later). Amend tax form The limit that applies to the remaining basis of the old car generally is the amount that would have been allowed had you not traded in the old car. Amend tax form The limit that applies to the additional amount you paid for the new car generally is the limit that applies for the tax year, reduced by the depreciation allowance for the remaining basis of the old car. Amend tax form You must use Form 4562 to compute your depreciation deduction. Amend tax form You cannot use Form 2106, Part II, Section D. Amend tax form This method is explained in Publication 946. Amend tax form   If you elect to use the method described in (1), you must do so on a timely filed tax return (including extensions). Amend tax form Otherwise, you must use the method described in (2). Amend tax form Effect of trade-in on basis. Amend tax form   The discussion that follows applies to trade-ins of cars in 2013, where the election was made to treat the transaction as a tax-free disposition of the old car and the purchase of the new car. Amend tax form For information on how to figure depreciation for cars involved in a like-kind exchange (trade-in) in 2013, for which the election was not made, see Publication 946 and Regulations section 1. Amend tax form 168(i)-6(d)(3). Amend tax form Traded car used only for business. Amend tax form   If you trade in a car you used only in your business for another car that will be used only in your business, your original basis in the new car is your adjusted basis in the old car, plus any additional amount you pay for the new car. Amend tax form Example. Amend tax form Paul trades in a car that has an adjusted basis of $5,000 for a new car. Amend tax form In addition, he pays cash of $20,000 for the new car. Amend tax form His original basis of the new car is $25,000 (his $5,000 adjusted basis in the old car plus the $20,000 cash paid). Amend tax form Paul's unadjusted basis is $25,000 unless he claims the section 179 deduction, special depreciation allowance, or has other increases or decreases to his original basis, discussed under Unadjusted basis , earlier. Amend tax form Traded car used partly in business. Amend tax form   If you trade in a car you used partly in your business for a new car you will use in your business, you must make a “trade-in” adjustment for the personal use of the old car. Amend tax form This adjustment has the effect of reducing your basis in your old car, but not below zero, for purposes of figuring your depreciation deduction for the new car. Amend tax form (This adjustment is not used, however, when you determine the gain or loss on the later disposition of the new car. Amend tax form See Publication 544, Sales and Other Dispositions of Assets, for information on how to report the disposition of your car. Amend tax form )   To figure the unadjusted basis of your new car for depreciation, first add to your adjusted basis in the old car any additional amount you pay for the new car. Amend tax form Then subtract from that total the excess, if any, of: The total of the amounts that would have been allowable as depreciation during the tax years before the trade if 100% of the use of the car had been business and investment use, over The total of the amounts actually allowed as depreciation during those years. Amend tax form For information about figuring depreciation, see Modified Accelerated Cost Recovery System (MACRS) , which follows Example 2, later. Amend tax form Modified Accelerated Cost Recovery System (MACRS). Amend tax form   The Modified Accelerated Cost Recovery System (MACRS) is the name given to the tax rules for getting back (recovering) through depreciation deductions the cost of property used in a trade or business or to produce income. Amend tax form   The maximum amount you can deduct is limited, depending on the year you placed your car in service. Amend tax form See Depreciation Limits , later. Amend tax form Recovery period. Amend tax form   Under MACRS, cars are classified as 5-year property. Amend tax form You actually depreciate the cost of a car, truck, or van over a period of 6 calendar years. Amend tax form This is because your car is generally treated as placed in service in the middle of the year, and you claim depreciation for one-half of both the first year and the sixth year. Amend tax form Depreciation deduction for certain Indian reservation property. Amend tax form   Shorter recovery periods are provided under MACRS for qualified Indian reservation property placed in service on Indian reservations after 1993 and before 2014. Amend tax form The recovery that applies for a business-use car is 3 years instead of 5 years. Amend tax form However, the depreciation limits, discussed later, will still apply. Amend tax form   For more information on the qualifications for this shorter recovery period and the percentages to use in figuring the depreciation deduction, see chapter 4 of Publication 946. Amend tax form Depreciation methods. Amend tax form   You can use one of the following methods to depreciate your car. Amend tax form The 200% declining balance method (200% DB) over a 5-year recovery period that switches to the straight line method when that method provides an equal or greater deduction. Amend tax form The 150% declining balance method (150% DB) over a 5-year recovery period that switches to the straight line method when that method provides an equal or greater deduction. Amend tax form The straight line method (SL) over a 5-year recovery period. Amend tax form    If you use Table 4-1 (discussed later under MACRS depreciation chart) to determine your depreciation rate for 2013, you do not need to determine in what year using the straight line method provides an equal or greater deduction. Amend tax form This is because the chart has the switch to the straight line method built into its rates. Amend tax form   Before choosing a method, you may wish to consider the following facts. Amend tax form Using the straight line method provides equal yearly deductions throughout the recovery period. Amend tax form Using the declining balance methods provides greater deductions during the earlier recovery years with the deductions generally getting smaller each year. Amend tax form MACRS depreciation chart. Amend tax form   A 2013 MACRS Depreciation Chart and instructions are included in this chapter as Table 4-1 . Amend tax form Using this table will make it easy for you to figure the 2013 depreciation deduction for your car. Amend tax form A similar chart appears in the Instructions for Form 2106. Amend tax form    You may have to use the tables in Publication 946 instead of using this MACRS Depreciation Chart. Amend tax form   You must use the Depreciation Tables in Publication 946 rather than the 2013 MACRS Depreciation Chart in this publication if any one of the following four conditions applies to you. Amend tax form You file your return on a fiscal year basis. Amend tax form You file your return for a short tax year (less than 12 months). Amend tax form During the year, all of the following conditions apply. Amend tax form You placed some property in service from January through September. Amend tax form You placed some property in service from October through December. Amend tax form Your basis in the property you placed in service from October through December (excluding nonresidential real property, residential rental property, and property placed in service and disposed of in the same year) was more than 40% of your total bases in all property you placed in service during the year. Amend tax form   You placed qualified property in service on an Indian reservation. Amend tax form Depreciation in future years. Amend tax form   If you use the percentages from the chart, you generally must continue to use them for the entire recovery period of your car. Amend tax form However, you cannot continue to use the chart if your basis in your car is adjusted because of a casualty. Amend tax form In that case, for the year of the adjustment and the remaining recovery period, figure the depreciation without the chart using your adjusted basis in the car at the end of the year of the adjustment and over the remaining recovery period. Amend tax form See Figuring the Deduction Without Using the Tables in chapter 4 of Publication 946. Amend tax form    In future years, do not use the chart in this edition of the publication. Amend tax form Instead, use the chart in the publication or the form instructions for those future years. Amend tax form Disposition of car during recovery period. Amend tax form   If you dispose of the car before the end of the recovery period, you are generally allowed a half year of depreciation in the year of disposition unless you purchased the car during the last quarter of a year. Amend tax form See Depreciation deduction for the year of disposition under Disposition of a Car, later, for information on how to figure the depreciation allowed in the year of disposition. Amend tax form How to use the 2013 chart. Amend tax form   To figure your depreciation deduction for 2013, find the percentage in the column of Table 4-1 based on the date that you first placed the car in service and the depreciation method that you are using. Amend tax form Multiply the unadjusted basis of your car (defined earlier) by that percentage to determine the amount of your depreciation deduction. Amend tax form If you prefer to figure your depreciation deduction without the help of the chart, see Publication 946. Amend tax form    Your deduction cannot be more than the maximum depreciation limit for cars. Amend tax form See Depreciation Limits, later. Amend tax form Example. Amend tax form Phil bought a used truck in February 2012 to use exclusively in his landscape business. Amend tax form He paid $9,200 for the truck with no trade-in. Amend tax form Phil did not claim any section 179 deduction, the truck did not qualify for the special depreciation allowance, and he chose to use the 200% DB method to get the largest depreciation deduction in the early years. Amend tax form Phil used the MACRS depreciation chart in 2012 to find his percentage. Amend tax form The unadjusted basis of his truck equals its cost because Phil used it exclusively for business. Amend tax form He multiplied the unadjusted basis of his truck, $9,200, by the percentage that applied, 20%, to figure his 2012 depreciation deduction of $1,840. Amend tax form In 2013, Phil used the truck for personal purposes when he repaired his father's cabin. Amend tax form His records show that the business use of his truck was 90% in 2013. Amend tax form Phil used Table 4-1 to find his percentage. Amend tax form Reading down the first column for the date placed in service and across to the 200% DB column, he locates his percentage, 32%. Amend tax form He multiplies the unadjusted basis of his truck, $8,280 ($9,200 cost × 90% business use), by 32% to figure his 2013 depreciation deduction of $2,650. Amend tax form Depreciation Limits There are limits on the amount you can deduct for depreciation of your car, truck, or van. Amend tax form The section 179 deduction and special depreciation allowance are treated as depreciation for purposes of the limits. Amend tax form The maximum amount you can deduct each year depends on the year you place the car in service. Amend tax form These limits are shown in the following tables. Amend tax form   Maximum Depreciation Deduction for Cars Date       4th & Placed 1st 2nd 3rd Later In Service Year Year Year Years 2012–2013 $11,1601 $5,100 $3,050 $1,875 2010–2011 11,0602 4,900 2,950 1,775 2008–2009 10,9603 4,800 2,850 1,775 2007 3,060 4,900 2,850 1,775 2006 2,960 4,800 2,850 1,775 2005 2,960 4,700 2,850 1,675 2004 10,6103 4,800 2,850 1,675 5/06/2003– 12/31/2003 10,7104 4,900 2,950 1,775 1/01/2003– 5/05/2003 7,6605 4,900 2,950 1,775 2001–2002 7,6605 4,900 2,950 1,775 2000 3,060 4,900 2,950 1,775 1$3,160 if the car is not qualified property or if you elect not to claim the special depreciation allowance. Amend tax form 2$3,060 if the car is not qualified property or if you elect not to claim the special depreciation allowance. Amend tax form 3$2,960 if the car is not qualified property or if you elect not to claim the special depreciation allowance. Amend tax form 4$7,660 if you acquired the car before 5/6/2003. Amend tax form $3,060 if the car is not qualified property or if you elect not to claim any special depreciation allowance. Amend tax form 5$3,060 if you acquired the car before 9/11/2001, the car is not qualified property, or you elect not to claim the special depreciation allowance. Amend tax form Trucks and vans. Amend tax form   For 2013, the maximum depreciation deductions for trucks and vans are generally higher than those for cars. Amend tax form A truck or van is a passenger automobile that is classified by the manufacturer as a truck or van and rated at 6,000 pounds gross vehicle weight or less. Amend tax form For trucks and vans placed in service before 2003, use the Maximum Depreciation Deduction for Cars table. Amend tax form Maximum Depreciation Deduction for Trucks and Vans Date       4th & Placed 1st 2nd 3rd Later In Service Year Year Year Years 2013 $11,3601 $5,400 $3,250 $1,975 2012 $11,3601 $5,300 $3,150 $1,875 2011 11,2601 5,200 3,150 1,875 2010 11,1601 5,100 3,050 1,875 2009 11,0601 4,900 2,950 1,775 2008 11,1601 5,100 3,050 1,875 2007 3,260 5,200 3,050 1,875 2005–2006 3,260 5,200 3,150 1,875 2004 10,9101 5,300 3,150 1,875 2003 11,0101,2 5,400 3,250 1,975 1If the special depreciation allowance does not apply or you make the election not to claim the special depreciation allowance, the first-year limit is $3,360 for 2012 and 2013, $3,260 for 2011, $3,160 for 2010, $3,060 for 2009, $3,160 for 2008, $3,260 for 2004, and $3,360 for 2003. Amend tax form 2If the truck or van was acquired before 5/06/2003, the truck or van is qualified property, and you claim the special depreciation allowance for the truck or van, the maximum deduction is $7,960. Amend tax form Car used less than full year. Amend tax form   The depreciation limits are not reduced if you use a car for less than a full year. Amend tax form This means that you do not reduce the limit when you either place a car in service or dispose of a car during the year. Amend tax form However, the depreciation limits are reduced if you do not use the car exclusively for business and investment purposes. Amend tax form See Reduction for personal use , next. Amend tax form Reduction for personal use. Amend tax form   The depreciation limits are reduced based on your percentage of personal use. Amend tax form If you use a car less than 100% in your business or work, you must determine the depreciation deduction limit by multiplying the limit amount by the percentage of business and investment use during the tax year. Amend tax form Section 179 deduction. Amend tax form   The section 179 deduction is treated as a depreciation deduction. Amend tax form If you place a car that is not a truck or van in service in 2013, use it only for business, and choose the section 179 deduction, the special depreciation allowance, and the depreciation deduction for that car for 2013 is limited to $11,160. Amend tax form Example. Amend tax form On September 4, 2013, Jack bought a used car for $10,000 and placed it in service. Amend tax form He used it 80% for his business, and he chooses to take a section 179 deduction for the car. Amend tax form The car is not qualified property for purposes of the special depreciation allowance. Amend tax form Before applying the limit, Jack figures his maximum section 179 deduction to be $8,000. Amend tax form This is the cost of his qualifying property (up to the maximum $500,000 amount) multiplied by his business use ($10,000 × 80%). Amend tax form Jack then figures that his section 179 deduction for 2013 is limited to $2,528 (80% of $3,160). Amend tax form He then figures his unadjusted basis of $5,472 (($10,000 × 80%) − $2,528) for determining his depreciation deduction. Amend tax form Jack has reached his maximum depreciation deduction for 2013. Amend tax form For 2014, Jack will use his unadjusted basis of $5,472 to figure his depreciation deduction. Amend tax form Deductions in years after the recovery period. Amend tax form   If the depreciation deductions for your car are reduced under the passenger automobile limits (discussed earlier), you will have unrecovered basis in your car at the end of the recovery period. Amend tax form If you continue to use your car for business, you can deduct that unrecovered basis (subject to depreciation limits) after the recovery period ends. Amend tax form Unrecovered basis. Amend tax form   This is your cost or other basis in the car reduced by any clean-fuel vehicle deduction (for vehicles placed in service before January 1, 2006), alternative motor vehicle credit, electric vehicle credit, gas guzzler tax, and depreciation (including any special depreciation allowance , discussed earlier, unless you elect not to claim it) and section 179 deductions that would have been allowable if you had used the car 100% for business and investment use. Amend tax form The recovery period. Amend tax form   For 5-year property, your recovery period is 6 calendar years. Amend tax form A part year's depreciation is allowed in the first calendar year, a full year's depreciation is allowed in each of the next 4 calendar years, and a part year's depreciation is allowed in the 6th calendar year. Amend tax form   Under MACRS, your recovery period is the same whether you use declining balance or straight line depreciation. Amend tax form You determine your unrecovered basis in the 7th year after you placed the car in service. Amend tax form How to treat unrecovered basis. Amend tax form   If you continue to use your car for business after the recovery period, you can claim a depreciation deduction in each succeeding tax year until you recover your basis in the car. Amend tax form The maximum amount you can deduct each year is determined by the date you placed the car in service and your business-use percentage. Amend tax form For example, no deduction is allowed for a year you use your car 100% for personal purposes. Amend tax form Example. Amend tax form In April 2007, Bob bought and placed in service a car he used exclusively in his business. Amend tax form The car cost $31,500. Amend tax form Bob did not claim a section 179 deduction or the special depreciation allowance for the car. Amend tax form He continued to use the car 100% in his business throughout the recovery period (2007 through 2012). Amend tax form For those years, Bob used the MACRS Depreciation Chart (200% declining balance method) and the Maximum Depreciation Deduction for Cars table, earlier, for the applicable tax year to compute his depreciation deductions during the recovery period. Amend tax form Bob's depreciation deductions were subject to the depreciation limits so he will have unrecovered basis at the end of the recovery period as shown in the following table. Amend tax form      MACRS     Deprec. Amend tax form Year % Amount Limit Allowed 2007 20. Amend tax form 00 $6,300 $3,060 $ 3,060 2008 32. Amend tax form 00 10,080 4,900 4,900 2009 19. Amend tax form 20 6,048 2,850 2,850 2010 11. Amend tax form 52 3,629 1,775 1,775 2011 11. Amend tax form 52 3,629 1,775 1,775 2012 5. Amend tax form 76 1,814 1,775 1,775 Total $31,500   16,135 For the correct limit, see Maximum Depreciation Deduction for Cars under “Depreciation Limits,” earlier, for the maximum amount of depreciation allowed each year. Amend tax form   At the end of 2012, Bob had an unrecovered basis in the car of $15,365 ($31,500 – $16,135). Amend tax form If Bob continued to use the car 100% for business in 2013 and later years, he can claim a depreciation deduction equal to the lesser of $1,775 or his remaining unrecovered basis. Amend tax form   If Bob's business use of the car was less than 100% during any year, his depreciation deduction would be less than the maximum amount allowable for that year. Amend tax form However, in determining his unrecovered basis in the car, he would still reduce his original basis by the maximum amount allowable as if the business use had been 100%. Amend tax form For example, if Bob had used his car 60% for business instead of 100%, his allowable depreciation deductions would have been $9,681 ($16,135 × 60%), but he still would have to reduce his basis by $16,135 to determine his unrecovered basis. Amend tax form Table 4-1. Amend tax form 2013 MACRS Depreciation Chart (Use to Figure Depreciation for 2013. Amend tax form ) If you claim actual expenses for your car, use the chart below to find the depreciation method and percentage to use for your 2013 return for cars placed in service in 2013. Amend tax form   First, using the left column, find the date you first placed the car in service in 2013. Amend tax form Then select the depreciation method and percentage from column (a), (b), or (c) following the rules explained in this chapter. Amend tax form For cars placed in service before 2013, you must use the same method you used on last year's return unless a decline in your business use requires you to change to the straight line method. Amend tax form Refer back to the MACRS Depreciation Chart for the year you placed the car in service. Amend tax form (See Car Used 50% or Less for Business . Amend tax form )  Multiply the unadjusted basis of your car by your business use percentage. Amend tax form Multiply the result by the percentage you found in the chart to find the amount of your depreciation deduction for 2013. Amend tax form (Also see Depreciation Limits . Amend tax form )   If you placed your car in service after September of any year and you placed other business property in service during the same year, you may have to use the Jan. Amend tax form 1—Sept. Amend tax form 30 percentage instead of the Oct. Amend tax form 1—Dec. Amend tax form 31 percentage for your car. Amend tax form               To find out if this applies to you, determine: 1) the basis of all business property you placed in service after September of that year and 2) the basis of all business property you placed in service during that entire year. Amend tax form If the basis of the property placed in service after September is not more than 40% of the basis of all property (certain property is excluded) placed in service for the entire year, use the percentage for Jan. Amend tax form 1—Sept. Amend tax form 30 for figuring depreciation for your car. Amend tax form See Which Convention Applies? in chapter 4 of Publication 946 for more details. Amend tax form               Example. Amend tax form You buy machinery (basis of $32,000) in May 2013 and a new van (basis of $20,000) in October 2013, both used 100% in your business. Amend tax form You