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Amend Tax Return

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Amend Tax Return

Amend tax return 33. Amend tax return   Credit for the Elderly or the Disabled Table of Contents Introduction Useful Items - You may want to see: Are You Eligible for the Credit?Qualified Individual Income Limits How to Claim the CreditCredit Figured for You Credit Figured by You Introduction If you qualify, you may be able to reduce the tax you owe by taking the credit for the elderly or the disabled which is figured on Schedule R (Form 1040A or 1040). Amend tax return This chapter explains the following. Amend tax return Who qualifies for the credit for the elderly or the disabled. Amend tax return How to claim the credit. Amend tax return You may be able to take the credit for the elderly or the disabled if: You are age 65 or older at the end of 2013, or You retired on permanent and total disability and have taxable disability income. Amend tax return Useful Items - You may want to see: Publication 524 Credit for the Elderly or the Disabled 554 Tax Guide for Seniors Form (and Instruction) Schedule R (Form 1040A or 1040) Credit for the Elderly or the Disabled Are You Eligible for the Credit? You can take the credit for the elderly or the disabled if you meet both of the following requirements. Amend tax return You are a qualified individual. Amend tax return Your income is not more than certain limits. Amend tax return You can use Figure 33-A and Table 33-1 as guides to see if you are eligible for the credit. Amend tax return Use Figure 33-A first to see if you are a qualified individual. Amend tax return If you are, go to Table 33-1 to make sure your income is not too high to take the credit. Amend tax return You can take the credit only if you file Form 1040 or Form 1040A. Amend tax return You cannot take the credit if you file Form 1040EZ. Amend tax return Qualified Individual You are a qualified individual for this credit if you are a U. Amend tax return S. Amend tax return citizen or resident alien, and either of the following applies. Amend tax return You were age 65 or older at the end of 2013. Amend tax return You were under age 65 at the end of 2013 and all three of the following statements are true. Amend tax return You retired on permanent and total disability (explained later). Amend tax return You received taxable disability income for 2013. Amend tax return On January 1, 2013, you had not reached mandatory retirement age (defined later under Disability income ). Amend tax return Age 65. Amend tax return   You are considered to be age 65 on the day before your 65th birthday. Amend tax return Therefore, if you were born on January 1, 1949, you are considered to be age 65 at the end of 2013. Amend tax return U. Amend tax return S. Amend tax return Citizen or Resident Alien You must be a U. Amend tax return S. Amend tax return citizen or resident alien (or be treated as a resident alien) to take the credit. Amend tax return Generally, you cannot take the credit if you were a nonresident alien at any time during the tax year. Amend tax return Exceptions. Amend tax return   You may be able to take the credit if you are a nonresident alien who is married to a U. Amend tax return S. Amend tax return citizen or resident alien at the end of the tax year and you and your spouse choose to treat you as a U. Amend tax return S. Amend tax return resident alien. Amend tax return If you make that choice, both you and your spouse are taxed on your worldwide incomes. Amend tax return If you were a nonresident alien at the beginning of the year and a resident alien at the end of the year, and you were married to a U. Amend tax return S. Amend tax return citizen or resident alien at the end of the year, you may be able to choose to be treated as a U. Amend tax return S. Amend tax return resident alien for the entire year. Amend tax return In that case, you may be allowed to take the credit. Amend tax return For information on these choices, see chapter 1 of Publication 519, U. Amend tax return S. Amend tax return Tax Guide for Aliens. Amend tax return Married Persons Generally, if you are married at the end of the tax year, you and your spouse must file a joint return to take the credit. Amend tax return However, if you and your spouse did not live in the same household at any time during the tax year, you can file either a joint return or separate returns and still take the credit. Amend tax return Head of household. Amend tax return   You can file as head of household and qualify to take the credit, even if your spouse lived with you during the first 6 months of the year, if you meet certain tests. Amend tax return See Head of Household in chapter 2 for the tests you must meet. Amend tax return Under Age 65 If you are under age 65 at the end of 2013, you can qualify for the credit only if you are retired on permanent and total disability (discussed next) and have taxable disability income (discussed later under Disability income ). Amend tax return You are retired on permanent and total disability if: You were permanently and totally disabled when you retired, and You retired on disability before the close of the tax year. Amend tax return Even if you do not retire formally, you may be considered retired on disability when you have stopped working because of your disability. Amend tax return If you retired on disability before 1977, and were not permanently and totally disabled at the time, you can qualify for the credit if you were permanently and totally disabled on January 1, 1976, or January 1, 1977. Amend tax return Permanent and total disability. Amend tax return    You are permanently and totally disabled if you cannot engage in any substantial gainful activity because of your physical or mental condition. Amend tax return A qualified physician must certify that the condition has lasted or can be expected to last continuously for 12 months or more, or that the condition can be expected to result in death. Amend tax return See Physician's statement , later. Amend tax return Substantial gainful activity. Amend tax return   Substantial gainful activity is the performance of significant duties over a reasonable period of time while working for pay or profit, or in work generally done for pay or profit. Amend tax return Full-time work (or part-time work done at your employer's convenience) in a competitive work situation for at least the minimum wage conclusively shows that you are able to engage in substantial gainful activity. Amend tax return   Substantial gainful activity is not work you do to take care of yourself or your home. Amend tax return It is not unpaid work on hobbies, institutional therapy or training, school attendance, clubs, social programs, and similar activities. Amend tax return However, doing this kind of work may show that you are able to engage in substantial gainful activity. Amend tax return    The fact that you have not worked for some time is not, of itself, conclusive evidence that you cannot engage in substantial gainful activity. Amend tax return Sheltered employment. Amend tax return   Certain work offered at qualified locations to physically or mentally impaired persons is considered sheltered employment. Amend tax return These qualified locations are in sheltered workshops, hospitals, and similar institutions, homebound programs, and Department of Veterans Affairs (VA) sponsored homes. Amend tax return   Compared to commercial employment, pay is lower for sheltered employment. Amend tax return Therefore, one usually does not look for sheltered employment if he or she can get other employment. Amend tax return The fact that one has accepted sheltered employment is not proof of the person's ability to engage in substantial gainful activity. Amend tax return Physician's statement. Amend tax return   If you are under age 65, you must have your physician complete a statement certifying that you were permanently and totally disabled on the date you retired. Amend tax return You can use the statement in the Instructions for Schedule R. Amend tax return    Figure 33-A. Amend tax return Are You a Qualified Individual? This image is too large to be displayed in the current screen. Amend tax return Please click the link to view the image. Amend tax return Figure 33-A Are You a Qualified Individual?   You do not have to file this statement with your Form 1040 or Form 1040A, but you must keep it for your records. Amend tax return Veterans. Amend tax return   If the Department of Veterans Affairs (VA) certifies that you are permanently and totally disabled, you can substitute VA Form 21-0172, Certification of Permanent and Total Disability, for the physician's statement you are required to keep. Amend tax return VA Form 21-0172 must be signed by a person authorized by the VA to do so. Amend tax return You can get this form from your local VA regional office. Amend tax return Physician's statement obtained in earlier year. Amend tax return   If you got a physician's statement in an earlier year and, due to your continued disabled condition, you were unable to engage in any substantial gainful activity during 2013, you may not need to get another physician's statement for 2013. Amend tax return For a detailed explanation of the conditions you must meet, see the instructions for Schedule R, Part II. Amend tax return If you meet the required conditions, check the box on your Schedule R, Part II, line 2. Amend tax return   If you checked box 4, 5, or 6 in Part I of Schedule R, enter in the space above the box on line 2 in Part II the first name(s) of the spouse(s) for whom the box is checked. Amend tax return Table 33-1. Amend tax return Income Limits IF your filing status is . Amend tax return . Amend tax return . Amend tax return THEN, even if you qualify (see Figure 33-A ), you CANNOT take the credit if. Amend tax return . Amend tax return . Amend tax return   Your adjusted gross income (AGI)* is equal to or more than. Amend tax return . Amend tax return . Amend tax return     OR the total of your nontaxable social security and other nontaxable pension(s), annuities, or disability income is equal to or more than. Amend tax return . Amend tax return . Amend tax return   single, head of household, or qualifying widow(er) with dependent child   $17,500     $5,000   married filing jointly and only one spouse qualifies in Figure 33-A   $20,000     $5,000   married filing jointly and both spouses qualify in Figure 33-A   $25,000     $7,500   married filing separately and you lived apart from your spouse for all of 2013   $12,500     $3,750   * AGI is the amount on Form 1040A, line 22, or Form 1040, line 38. Amend tax return Disability income. Amend tax return   If you are under age 65, you must also have taxable disability income to qualify for the credit. Amend tax return Disability income must meet both of the following requirements. Amend tax return It must be paid under your employer's accident or health plan or pension plan. Amend tax return It must be included in your income as wages (or payments instead of wages) for the time you are absent from work because of permanent and total disability. Amend tax return Payments that are not disability income. Amend tax return   Any payment you receive from a plan that does not provide for disability retirement is not disability income. Amend tax return Any lump-sum payment for accrued annual leave that you receive when you retire on disability is a salary payment and is not disability income. Amend tax return   For purposes of the credit for the elderly or the disabled, disability income does not include amounts you receive after you reach mandatory retirement age. Amend tax return Mandatory retirement age is the age set by your employer at which you would have had to retire, had you not become disabled. Amend tax return Income Limits To determine if you can claim the credit, you must consider two income limits. Amend tax return The first limit is the amount of your adjusted gross income (AGI). Amend tax return The second limit is the amount of nontaxable social security and other nontaxable pensions, annuities, or disability income you received. Amend tax return The limits are shown in Table 33-1. Amend tax return If your AGI and nontaxable pensions, annuities, or disability income are less than the income limits, you may be able to claim the credit. Amend tax return See How to Claim the Credit , later. Amend tax return If either your AGI or your nontaxable pensions, annuities, or disability income are equal to or more than the income limits, you cannot take the credit. Amend tax return How to Claim the Credit You can figure the credit yourself or the Internal Revenue Service will figure it for you. Amend tax return Credit Figured for You If you choose to have the IRS figure the credit for you, read the following discussion for the form you will file (Form 1040 or 1040A). Amend tax return If you want the IRS to figure your tax, see chapter 30. Amend tax return Form 1040. Amend tax return   If you want the IRS to figure your credit, see Form 1040 Line Entries under Tax Figured by IRS in chapter 30. Amend tax return Form 1040A. Amend tax return   If you want the IRS to figure your credit, see Form 1040A Line Entries under Tax Figured by IRS in chapter 30. Amend tax return Credit Figured by You If you choose to figure the credit yourself, fill out the front of Schedule R. Amend tax return Next, fill out Schedule R, Part III. Amend tax return If you file Form 1040A, enter the amount from Schedule R, line 22, on Form 1040A, line 30. Amend tax return If you file Form 1040, include the amount from Schedule R, line 22, on line 53; check box c, and enter “Sch R” on the line next to that box. Amend tax return For a step-by-step discussion about filling out Part III of Schedule R, see Figuring the Credit Yourself in Publication 524. Amend tax return Limit on credit. Amend tax return   The amount of the credit you can claim is generally limited to the amount of your tax. Amend tax return Use the Credit Limit Worksheet in the Instructions for Schedule R to determine if your credit is limited. Amend tax return Prev  Up  Next   Home   More Online Publications
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The Amend Tax Return

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