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Amending A Return

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Amending A Return

Amending a return 1. Amending a return   403(b) Plan Basics Table of Contents What Is a 403(b) Plan? What Are the Benefits of Contributing to a 403(b) Plan?Excluded. Amending a return Deducted. Amending a return Who Can Participate in a 403(b) Plan?Ministers. Amending a return Who Can Set Up a 403(b) Account? How Can Contributions Be Made to My 403(b) Account? Do I Report Contributions on My Tax Return? How Much Can Be Contributed to My 403(b) Account? This chapter introduces you to 403(b) plans and accounts. Amending a return Specifically, the chapter answers the following questions. Amending a return What is a 403(b) plan? What are the benefits of contributing to a 403(b) plan? Who can participate in a 403(b) plan? Who can set up a 403(b) account? How can contributions be made to my 403(b) account? Do I report contributions on my tax return? How much can be contributed to my 403(b) account? What Is a 403(b) Plan? A 403(b) plan, also known as a tax-sheltered annuity (TSA) plan, is a retirement plan for certain employees of public schools, employees of certain tax-exempt organizations, and certain ministers. Amending a return Individual accounts in a 403(b) plan can be any of the following types. Amending a return An annuity contract, which is a contract provided through an insurance company, A custodial account, which is an account invested in mutual funds, or A retirement income account set up for church employees. Amending a return Generally, retirement income accounts can invest in either annuities or mutual funds. Amending a return We use the term “403(b) account” to refer to any one of these funding arrangements throughout this publication, unless otherwise specified. Amending a return What Are the Benefits of Contributing to a 403(b) Plan?  There are three benefits to contributing to a 403(b) plan. Amending a return The first benefit is that you do not pay income tax on allowable contributions until you begin making withdrawals from the plan, usually after you retire. Amending a return Allowable contributions to a 403(b) plan are either excluded or deducted from your income. Amending a return However, if your contributions are made to a Roth contribution program, this benefit does not apply. Amending a return Instead, you pay income tax on the contributions to the plan but distributions from the plan (if certain requirements are met) are tax free. Amending a return Note. Amending a return Generally, employees must pay social security and Medicare tax on their contributions to a 403(b) plan, including those made under a salary reduction agreement. Amending a return See chapter 4, Limit on Elective Deferrals , for more information. Amending a return The second benefit is that earnings and gains on amounts in your 403(b) account are not taxed until you withdraw them. Amending a return Earnings and gains on amounts in a Roth contribution program are not taxed if your withdrawals are qualified distributions. Amending a return Otherwise, they are taxed when you withdraw them. Amending a return The third benefit is that you may be eligible to take a credit for elective deferrals contributed to your 403(b) account. Amending a return See chapter 10, Retirement Savings Contributions Credit (Saver's Credit) . Amending a return Excluded. Amending a return   If an amount is excluded from your income, it is not included in your total wages on your Form W-2. Amending a return This means that you do not report the excluded amount on your tax return. Amending a return Deducted. Amending a return   If an amount is deducted from your income, it is included with your other wages on your Form W-2. Amending a return You report this amount on your tax return, but you are allowed to subtract it when figuring the amount of income on which you must pay tax. Amending a return Who Can Participate in a 403(b) Plan? Any eligible employee can participate in a 403(b) plan. Amending a return Eligible employees. Amending a return   The following employees are eligible to participate in a 403(b) plan. Amending a return Employees of tax-exempt organizations established under section 501(c)(3). Amending a return These organizations are usually referred to as section 501(c)(3) organizations or simply 501(c)(3) organizations. Amending a return Employees of public school systems who are involved in the day-to-day operations of a school. Amending a return Employees of cooperative hospital service organizations. Amending a return Civilian faculty and staff of the Uniformed Services University of the Health Sciences. Amending a return Employees of public school systems organized by Indian tribal governments. Amending a return Certain ministers (explained next). Amending a return Ministers. Amending a return   The following ministers are eligible employees for whom a 403(b) account can be established. Amending a return Ministers employed by section 501(c)(3) organizations. Amending a return Self-employed ministers. Amending a return A self-employed minister is treated as employed by a tax-exempt organization that is a qualified employer. Amending a return Ministers (chaplains) who meet both of the following requirements. Amending a return They are employed by organizations that are not section 501(c)(3) organizations. Amending a return They function as ministers in their day-to-day professional responsibilities with their employers. Amending a return   Throughout this publication, the term chaplain will be used to mean ministers described in the third category in the list above. Amending a return Example. Amending a return A minister employed as a chaplain by a state-run prison and a chaplain in the United States Armed Forces are eligible employees because their employers are not section 501(c)(3) organizations and they are employed as ministers. Amending a return Who Can Set Up a 403(b) Account? You cannot set up your own 403(b) account. Amending a return Only employers can set up 403(b) accounts. Amending a return A self-employed minister cannot set up a 403(b) account for his or her benefit. Amending a return If you are a self-employed minister, only the organization (denomination) with which you are associated can set up an account for your benefit. Amending a return How Can Contributions Be Made to My 403(b) Account? Generally, only your employer can make contributions to your 403(b) account. Amending a return However, some plans will allow you to make after-tax contributions (defined below). Amending a return The following types of contributions can be made to 403(b) accounts. Amending a return Elective deferrals . Amending a return These are contributions made under a salary reduction agreement. Amending a return This agreement allows your employer to withhold money from your paycheck to be contributed directly into a 403(b) account for your benefit. Amending a return Except for Roth contributions, you do not pay income tax on these contributions until you withdraw them from the account. Amending a return If your contributions are Roth contributions, you pay taxes on your contributions but any qualified distributions from your Roth account are tax free. Amending a return Nonelective contributions . Amending a return These are employer contributions that are not made under a salary reduction agreement. Amending a return Nonelective contributions include matching contributions, discretionary contributions, and mandatory contributions from your employer. Amending a return You do not pay income tax on these contributions until you withdraw them from the account. Amending a return After-tax contributions . Amending a return These are contributions (that are not Roth contributions) you make with funds that you must include in income on your tax return. Amending a return A salary payment on which income tax has been withheld is a source of these contributions. Amending a return If your plan allows you to make after-tax contributions, they are not excluded from income and you cannot deduct them on your tax return. Amending a return A combination of any of the three contribution types listed above. Amending a return Self-employed minister. Amending a return   If you are a self-employed minister, you are considered both an employee and an employer, and you can contribute to a retirement income account for your own benefit. Amending a return Do I Report Contributions on My Tax Return? Generally, you do not report contributions to your 403(b) account (except Roth contributions) on your tax return. Amending a return Your employer will report contributions on your 2013 Form W-2. Amending a return Elective deferrals will be shown in box 12 and the Retirement plan box will be checked in box 13. Amending a return If you are a self-employed minister or chaplain, see the discussions next. Amending a return Self-employed ministers. Amending a return   If you are a self-employed minister, you must report the total contributions as a deduction on your tax return. Amending a return Deduct your contributions on line 28 of the 2013 Form 1040. Amending a return Chaplains. Amending a return   If you are a chaplain and your employer does not exclude contributions made to your 403(b) account from your earned income, you may be able to take a deduction for those contributions on your tax return. Amending a return    However, if your employer has agreed to exclude the contributions from your earned income, you will not be allowed a deduction on your tax return. Amending a return   If you can take a deduction, include your contributions on line 36 of the 2013 Form 1040. Amending a return Enter the amount of your deduction and write “403(b)” on the dotted line next to line 36. Amending a return How Much Can Be Contributed to My 403(b) Account? There are limits on the amount of contributions that can be made to your 403(b) account each year. Amending a return If contributions made to your 403(b) account are more than these contribution limits, penalties may apply. Amending a return Chapters 2 through 6 provide information on how to determine the amount that can be contributed to your 403(b) account. Amending a return Worksheets are provided in Chapter 9 to help you determine the maximum amount that can be contributed to your 403(b) account each year. Amending a return Chapter 7, Excess Contributions , describes how to prevent excess contributions and how to get an excess contribution corrected. Amending a return Prev  Up  Next   Home   More Online Publications
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The Amending A Return

Amending a return 2. Amending a return   Electing the Section 179 Deduction Table of Contents Introduction Useful Items - You may want to see: What Property Qualifies?Eligible Property Property Acquired for Business Use Property Acquired by Purchase What Property Does Not Qualify?Land and Improvements Excepted Property How Much Can You Deduct?Dollar Limits Business Income Limit Partnerships and Partners S Corporations Other Corporations How Do You Elect the Deduction? When Must You Recapture the Deduction? Introduction You can elect to recover all or part of the cost of certain qualifying property, up to a limit, by deducting it in the year you place the property in service. Amending a return This is the section 179 deduction. Amending a return You can elect the section 179 deduction instead of recovering the cost by taking depreciation deductions. Amending a return Estates and trusts cannot elect the section 179 deduction. Amending a return This chapter explains what property does and does not qualify for the section 179 deduction, what limits apply to the deduction (including special rules for partnerships and corporations), and how to elect it. Amending a return It also explains when and how to recapture the deduction. Amending a return Useful Items - You may want to see: Publication 537 Installment Sales 544 Sales and Other Dispositions of Assets 954 Tax Incentives for Distressed Communities Form (and Instructions) 4562 Depreciation and Amortization 4797 Sales of Business Property See chapter 6 for information about getting publications and forms. Amending a return What Property Qualifies? To qualify for the section 179 deduction, your property must meet all the following requirements. Amending a return It must be eligible property. Amending a return It must be acquired for business use. Amending a return It must have been acquired by purchase. Amending a return It must not be property described later under What Property Does Not Qualify . Amending a return The following discussions provide information about these requirements and exceptions. Amending a return Eligible Property To qualify for the section 179 deduction, your property must be one of the following types of depreciable property. Amending a return Tangible personal property. Amending a return Other tangible property (except buildings and their structural components) used as: An integral part of manufacturing, production, or extraction or of furnishing transportation, communications, electricity, gas, water, or sewage disposal services, A research facility used in connection with any of the activities in (a) above, or A facility used in connection with any of the activities in (a) for the bulk storage of fungible commodities. Amending a return Single purpose agricultural (livestock) or horticultural structures. Amending a return See chapter 7 of Publication 225 for definitions and information regarding the use requirements that apply to these structures. Amending a return Storage facilities (except buildings and their structural components) used in connection with distributing petroleum or any primary product of petroleum. Amending a return Off-the-shelf computer software. Amending a return Qualified real property (described below). Amending a return Tangible personal property. Amending a return   Tangible personal property is any tangible property that is not real property. Amending a return It includes the following property. Amending a return Machinery and equipment. Amending a return Property contained in or attached to a building (other than structural components), such as refrigerators, grocery store counters, office equipment, printing presses, testing equipment, and signs. Amending a return Gasoline storage tanks and pumps at retail service stations. Amending a return Livestock, including horses, cattle, hogs, sheep, goats, and mink and other furbearing animals. Amending a return   The treatment of property as tangible personal property for the section 179 deduction is not controlled by its treatment under local law. Amending a return For example, property may not be tangible personal property for the deduction even if treated so under local law, and some property (such as fixtures) may be tangible personal property for the deduction even if treated as real property under local law. Amending a return Off-the-shelf computer software. Amending a return   Off-the-shelf computer software placed in service during the tax year is qualifying property for purposes of the section 179 deduction. Amending a return This is computer software that is readily available for purchase by the general public, is subject to a nonexclusive license, and has not been substantially modified. Amending a return It includes any program designed to cause a computer to perform a desired function. Amending a return However, a database or similar item is not considered computer software unless it is in the public domain and is incidental to the operation of otherwise qualifying software. Amending a return Qualified real property. Amending a return   You can elect to treat certain qualified real property you placed in service as section 179 property for tax years beginning in 2013. Amending a return If this election is made, the term “section 179 property” will include any qualified real property that is: Qualified leasehold improvement property, Qualified restaurant property, or Qualified retail improvement property. Amending a return The maximum section 179 expense deduction that can be elected for qualified section 179 real property is $250,000 of the maximum section 179 deduction of $500,000 in 2013. Amending a return For more information, see Special rules for qualified section 179 real property, later. Amending a return Also, see Election for certain qualified section 179 real property, later, for information on how to make this election. Amending a return Qualified leasehold improvement property. Amending a return   Generally, this is any improvement to an interior part of a building (placed in service before January 1, 2014) that is nonresidential real property, provided all of the requirements discussed in chapter 3 under Qualified leasehold improvement property are met. Amending a return   In addition, an improvement made by the lessor does not qualify as qualified leasehold improvement property to any subsequent owner unless it is acquired from the original lessor by reason of the lessor’s death or in any of the following types of transactions. Amending a return A transaction to which section 381(a) applies, A mere change in the form of conducting the trade or business so long as the property is retained in the trade or business as qualified leasehold improvement property and the taxpayer retains a substantial interest in the trade or business, A like-kind exchange, involuntary conversion, or re-acquisition of real property to the extent that the basis in the property represents the carryover basis, or Certain nonrecognition transactions to the extent that your basis in the property is determined by reference to the transferor’s or distributor’s basis in the property. Amending a return Examples include the following. Amending a return A complete liquidation of a subsidiary. Amending a return A transfer to a corporation controlled by the transferor. Amending a return An exchange of property by a corporation solely for stock or securities in another corporation in a reorganization. Amending a return Qualified restaurant property. Amending a return   Qualified restaurant property is any section 1250 property that is a building or an improvement to a building placed in service after December 31, 2008, and before January 1, 2014. Amending a return Also, more than 50% of the building’s square footage must be devoted to preparation of meals and seating for on-premise consumption of prepared meals. Amending a return Qualified retail improvement property. Amending a return   Generally, this is any improvement (placed in service after December 31, 2008, and before January 1, 2014) to an interior portion of nonresidential real property if it meets the following requirements. Amending a return The portion is open to the general public and is used in the retail trade or business of selling tangible property to the general public. Amending a return The improvement is placed in service more than 3 years after the date the building was first placed in service. Amending a return The expenses are not for the enlargement of the building, any elevator or escalator, any structural components benefiting a common area, or the internal structural framework of the building. Amending a return In addition, an improvement made by the lessor does not qualify as qualified retail improvement property to any subsequent owner unless it is acquired from the original lessor by reason of the lessor’s death or in any of the following types of transactions. Amending a return A transaction to which section 381(a) applies, A mere change in the form of conducting the trade or business so long as the property is retained in the trade or business as qualified leasehold improvement property and the taxpayer retains a substantial interest in the trade or business, A like-kind exchange, involuntary conversion, or re-acquisition of real property to the extent that the basis in the property represents the carryover basis, or Certain nonrecognition transactions to the extent that your basis in the property is determined by reference to the transferor’s or distributor’s basis in the property. Amending a return Examples include the following. Amending a return A complete liquidation of a subsidiary. Amending a return A transfer to a corporation controlled by the transferor. Amending a return An exchange of property by a corporation solely for stock or securities in another corporation in a reorganization. Amending a return Property Acquired for Business Use To qualify for the section 179 deduction, your property must have been acquired for use in your trade or business. Amending a return Property you acquire only for the production of income, such as investment property, rental property (if renting property is not your trade or business), and property that produces royalties, does not qualify. Amending a return Partial business use. Amending a return   When you use property for both business and nonbusiness purposes, you can elect the section 179 deduction only if you use the property more than 50% for business in the year you place it in service. Amending a return If you use the property more than 50% for business, multiply the cost of the property by the percentage of business use. Amending a return Use the resulting business cost to figure your section 179 deduction. Amending a return Example. Amending a return May Oak bought and placed in service an item of section 179 property costing $11,000. Amending a return She used the property 80% for her business and 20% for personal purposes. Amending a return The business part of the cost of the property is $8,800 (80% × $11,000). Amending a return Property Acquired by Purchase To qualify for the section 179 deduction, your property must have been acquired by purchase. Amending a return For example, property acquired by gift or inheritance does not qualify. Amending a return Property is not considered acquired by purchase in the following situations. Amending a return It is acquired by one component member of a controlled group from another component member of the same group. Amending a return Its basis is determined either— In whole or in part by its adjusted basis in the hands of the person from whom it was acquired, or Under the stepped-up basis rules for property acquired from a decedent. Amending a return It is acquired from a related person. Amending a return Related persons. Amending a return   Related persons are described under Related persons earlier. Amending a return However, to determine whether property qualifies for the section 179 deduction, treat as an individual's family only his or her spouse, ancestors, and lineal descendants and substitute "50%" for "10%" each place it appears. Amending a return Example. Amending a return Ken Larch is a tailor. Amending a return He bought two industrial sewing machines from his father. Amending a return He placed both machines in service in the same year he bought them. Amending a return They do not qualify as section 179 property because Ken and his father are related persons. Amending a return He cannot claim a section 179 deduction for the cost of these machines. Amending a return What Property Does Not Qualify? Certain property does not qualify for the section 179 deduction. Amending a return This includes the following. Amending a return Land and Improvements Land and land improvements do not qualify as section 179 property. Amending a return Land improvements include swimming pools, paved parking areas, wharves, docks, bridges, and fences. Amending a return Excepted Property Even if the requirements explained earlier under What Property Qualifies are met, you cannot elect the section 179 deduction for the following property. Amending a return Certain property you lease to others (if you are a noncorporate lessor). Amending a return Certain property used predominantly to furnish lodging or in connection with the furnishing of lodging. Amending a return Air conditioning or heating units. Amending a return Property used predominantly outside the United States, except property described in section 168(g)(4) of the Internal Revenue Code. Amending a return Property used by certain tax-exempt organizations, except property used in connection with the production of income subject to the tax on unrelated trade or business income. Amending a return Property used by governmental units or foreign persons or entities, except property used under a lease with a term of less than 6 months. Amending a return Leased property. Amending a return   Generally, you cannot claim a section 179 deduction based on the cost of property you lease to someone else. Amending a return This rule does not apply to corporations. Amending a return However, you can claim a section 179 deduction for the cost of the following property. Amending a return Property you manufacture or produce and lease to others. Amending a return Property you purchase and lease to others if both the following tests are met. Amending a return The term of the lease (including options to renew) is less than 50% of the property's class life. Amending a return For the first 12 months after the property is transferred to the lessee, the total business deductions you are allowed on the property (other than rents and reimbursed amounts) are more than 15% of the rental income from the property. Amending a return Property used for lodging. Amending a return   Generally, you cannot claim a section 179 deduction for property used predominantly to furnish lodging or in connection with the furnishing of lodging. Amending a return However, this does not apply to the following types of property. Amending a return Nonlodging commercial facilities that are available to those not using the lodging facilities on the same basis as they are available to those using the lodging facilities. Amending a return Property used by a hotel or motel in connection with the trade or business of furnishing lodging where the predominant portion of the accommodations is used by transients. Amending a return Any certified historic structure to the extent its basis is due to qualified rehabilitation expenditures. Amending a return Any energy property. Amending a return Energy property. Amending a return   Energy property is property that meets the following requirements. Amending a return It is one of the following types of property. Amending a return Equipment that uses solar energy to generate electricity, to heat or cool a structure, to provide hot water for use in a structure, or to provide solar process heat, except for equipment used to generate energy to heat a swimming pool. Amending a return Equipment placed in service after December 31, 2005, and before January 1, 2017, that uses solar energy to illuminate the inside of a structure using fiber-optic distributed sunlight. Amending a return Equipment used to produce, distribute, or use energy derived from a geothermal deposit. Amending a return For electricity generated by geothermal power, this includes equipment up to (but not including) the electrical transmission stage. Amending a return Qualified fuel cell property or qualified microturbine property placed in service after December 31, 2005, and before January 1, 2017. Amending a return The construction, reconstruction, or erection of the property must be completed by you. Amending a return For property you acquire, the original use of the property must begin with you. Amending a return The property must meet the performance and quality standards, if any, prescribed by Income Tax Regulations in effect at the time you get the property. Amending a return   For periods before February 14, 2008, energy property does not include any property that is public utility property as defined by section 46(f)(5) of the Internal Revenue Code (as in effect on November 4, 1990). Amending a return How Much Can You Deduct? Your section 179 deduction is generally the cost of the qualifying property. Amending a return However, the total amount you can elect to deduct under section 179 is subject to a dollar limit and a business income limit. Amending a return These limits apply to each taxpayer, not to each business. Amending a return However, see Married Individuals under Dollar Limits , later. Amending a return For a passenger automobile, the total section 179 deduction and depreciation deduction are limited. Amending a return See Do the Passenger Automobile Limits Apply in chapter 5 . Amending a return If you deduct only part of the cost of qualifying property as a section 179 deduction, you can generally depreciate the cost you do not deduct. Amending a return Trade-in of other property. Amending a return   If you buy qualifying property with cash and a trade-in, its cost for purposes of the section 179 deduction includes only the cash you paid. Amending a return Example. Amending a return Silver Leaf, a retail bakery, traded two ovens having a total adjusted basis of $680 for a new oven costing $1,320. Amending a return They received an $800 trade-in allowance for the old ovens and paid $520 in cash for the new oven. Amending a return The bakery also traded a used van with an adjusted basis of $4,500 for a new van costing $9,000. Amending a return They received a $4,800 trade-in allowance on the used van and paid $4,200 in cash for the new van. Amending a return Only the portion of the new property's basis paid by cash qualifies for the section 179 deduction. Amending a return Therefore, Silver Leaf's qualifying costs for the section 179 deduction are $4,720 ($520 + $4,200). Amending a return Dollar Limits The total amount you can elect to deduct under section 179 for most property placed in service in 2013 generally cannot be more than $500,000. Amending a return If you acquire and place in service more than one item of qualifying property during the year, you can allocate the section 179 deduction among the items in any way, as long as the total deduction is not more than $500,000. Amending a return You do not have to claim the full $500,000. Amending a return Qualified real property (described earlier) that you elected to treat as section 179 real property is limited to $250,000 of the maximum deduction of $500,000 for 2013. Amending a return The amount you can elect to deduct is not affected if you place qualifying property in service in a short tax year or if you place qualifying property in service for only a part of a 12-month tax year. Amending a return After you apply the dollar limit to determine a tentative deduction, you must apply the business income limit (described later) to determine your actual section 179 deduction. Amending a return Example. Amending a return In 2013, you bought and placed in service $500,000 in machinery and a $25,000 circular saw for your business. Amending a return You elect to deduct $475,000 for the machinery and the entire $25,000 for the saw, a total of $500,000. Amending a return This is the maximum amount you can deduct. Amending a return Your $25,000 deduction for the saw completely recovered its cost. Amending a return Your basis for depreciation is zero. Amending a return The basis for depreciation of your machinery is $25,000. Amending a return You figure this by subtracting your $475,000 section 179 deduction for the machinery from the $500,000 cost of the machinery. Amending a return Situations affecting dollar limit. Amending a return   Under certain circumstances, the general dollar limits on the section 179 deduction may be reduced or increased or there may be additional dollar limits. Amending a return The general dollar limit is affected by any of the following situations. Amending a return The cost of your section 179 property placed in service exceeds $2,000,000. Amending a return Your business is an enterprise zone business. Amending a return You placed in service a sport utility or certain other vehicles. Amending a return You are married filing a joint or separate return. Amending a return Costs exceeding $2,000,000 If the cost of your qualifying section 179 property placed in service in a year is more than $2,000,000, you generally must reduce the dollar limit (but not below zero) by the amount of cost over $2,000,000. Amending a return 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. Amending a return Example. Amending a return In 2013, Jane Ash placed in service machinery costing $2,100,000. Amending a return This cost is $100,000 more than $2,000,000, so she must reduce her dollar limit to $400,000 ($500,000 − $100,000). Amending a return Enterprise Zone Businesses An increased section 179 deduction is available to enterprise zone businesses for qualified zone property placed in service during the tax year, in an empowerment zone. Amending a return For more information including the definitions of “enterprise zone business” and “qualified zone property,” see sections 1397A, 1397C, and 1397D of the Internal Revenue Code. Amending a return The dollar limit on the section 179 deduction is increased by the smaller of: $35,000, or The cost of section 179 property that is also qualified zone property placed in service before January 1, 2014 (including such property placed in service by your spouse, even if you are filing a separate return). Amending a return Note. Amending a return   You take into account only 50% (instead of 100%) of the cost of qualified zone property placed in service in a year when figuring the reduced dollar limit for costs exceeding $2,000,000 (explained earlier). Amending a return Sport Utility and Certain Other Vehicles You cannot elect to expense more than $25,000 of the cost of any heavy sport utility vehicle (SUV) and certain other vehicles placed in service during the tax year. Amending a return This rule applies to any 4-wheeled vehicle primarily designed or used to carry passengers over public streets, roads, or highways, that is rated at more than 6,000 pounds gross vehicle weight and not more than 14,000 pounds gross vehicle weight. Amending a return However, the $25,000 limit does not apply to any vehicle: Designed to seat more than nine passengers behind the driver's seat, Equipped with a cargo area (either open or enclosed by a cap) of at least six feet in interior length that is not readily accessible 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. Amending a return Married Individuals If you are married, how you figure your section 179 deduction depends on whether you file jointly or separately. Amending a return If you file a joint return, you and your spouse are treated as one taxpayer in determining any reduction to the dollar limit, regardless of which of you purchased the property or placed it in service. Amending a return If you and your spouse file separate returns, you are treated as one taxpayer for the dollar limit, including the reduction for costs over $2,000,000. Amending a return You must allocate the dollar limit (after any reduction) between you equally, unless you both elect a different allocation. Amending a return If the percentages elected by each of you do not total 100%, 50% will be allocated to each of you. Amending a return Example. Amending a return Jack Elm is married. Amending a return He and his wife file separate returns. Amending a return Jack bought and placed in service $2,000,000 of qualified farm machinery in 2013. Amending a return His wife has her own business, and she bought and placed in service $30,000 of qualified business equipment. Amending a return Their combined dollar limit is $470,000. Amending a return This is because they must figure the limit as if they were one taxpayer. Amending a return They reduce the $500,000 dollar limit by the $30,000 excess of their costs over $2,000,000. Amending a return They elect to allocate the $470,000 dollar limit as follows. Amending a return $446,500 ($470,000 x 95%) to Mr. Amending a return Elm's machinery. Amending a return $23,500 ($470,000 x 5%) to Mrs. Amending a return Elm's equipment. Amending a return If they did not make an election to allocate their costs in this way, they would have to allocate $235,000 ($470,000 × 50%) to each of them. Amending a return Joint return after filing separate returns. Amending a return   If you and your spouse elect to amend your separate returns by filing a joint return after the due date for filing your return, the dollar limit on the joint return is the lesser of the following amounts. Amending a return The dollar limit (after reduction for any cost of section 179 property over $2,000,000). Amending a return The total cost of section 179 property you and your spouse elected to expense on your separate returns. Amending a return Example. Amending a return The facts are the same as in the previous example except that Jack elected to deduct $30,000 of the cost of section 179 property on his separate return and his wife elected to deduct $2,000. Amending a return After the due date of their returns, they file a joint return. Amending a return Their dollar limit for the section 179 deduction is $32,000. Amending a return This is the lesser of the following amounts. Amending a return $470,000—The dollar limit less the cost of section 179 property over $2,000,000. Amending a return $32,000—The total they elected to expense on their separate returns. Amending a return Business Income Limit The total cost you can deduct each year after you apply the dollar limit is limited to the taxable income from the active conduct of any trade or business during the year. Amending a return Generally, you are considered to actively conduct a trade or business if you meaningfully participate in the management or operations of the trade or business. Amending a return Any cost not deductible in one year under section 179 because of this limit can be carried to the next year. Amending a return Special rules apply to a 2013 deduction of qualified section 179 real property that is disallowed because of the business income limit. Amending a return See Special rules for qualified section 179 property under Carryover of disallowed deduction, later. Amending a return Taxable income. Amending a return   In general, figure taxable income for this purpose by totaling the net income and losses from all trades and businesses you actively conducted during the year. Amending a return Net income or loss from a trade or business includes the following items. Amending a return Section 1231 gains (or losses). Amending a return Interest from working capital of your trade or business. Amending a return Wages, salaries, tips, or other pay earned as an employee. Amending a return For information about section 1231 gains and losses, see chapter 3 in Publication 544. Amending a return   In addition, figure taxable income without regard to any of the following. Amending a return The section 179 deduction. Amending a return The self-employment tax deduction. Amending a return Any net operating loss carryback or carryforward. Amending a return Any unreimbursed employee business expenses. Amending a return Two different taxable income limits. Amending a return   In addition to the business income limit for your section 179 deduction, you may have a taxable income limit for some other deduction. Amending a return You may have to figure the limit for this other deduction taking into account the section 179 deduction. Amending a return If so, complete the following steps. Amending a return Step Action 1 Figure taxable income without the section 179 deduction or the other deduction. Amending a return 2 Figure a hypothetical section 179 deduction using the taxable income figured in Step 1. Amending a return 3 Subtract the hypothetical section 179 deduction figured in Step 2 from the taxable income figured in Step 1. Amending a return 4 Figure a hypothetical amount for the other deduction using the amount figured in Step 3 as taxable income. Amending a return 5 Subtract the hypothetical other deduction figured in Step 4 from the taxable income figured in Step 1. Amending a return 6 Figure your actual section 179 deduction using the taxable income figured in Step 5. Amending a return 7 Subtract your actual section 179 deduction figured in Step 6 from the taxable income figured in Step 1. Amending a return 8 Figure your actual other deduction using the taxable income figured in Step 7. Amending a return Example. Amending a return On February 1, 2013, the XYZ corporation purchased and placed in service qualifying section 179 property that cost $500,000. Amending a return It elects to expense the entire $500,000 cost under section 179. Amending a return In June, the corporation gave a charitable contribution of $10,000. Amending a return A corporation's limit on charitable contributions is figured after subtracting any section 179 deduction. Amending a return The business income limit for the section 179 deduction is figured after subtracting any allowable charitable contributions. Amending a return XYZ's taxable income figured without the section 179 deduction or the deduction for charitable contributions is $520,000. Amending a return XYZ figures its section 179 deduction and its deduction for charitable contributions as follows. Amending a return Step 1– Taxable income figured without either deduction is $520,000. Amending a return Step 2– Using $520,000 as taxable income, XYZ's hypothetical section 179 deduction is $500,000. Amending a return Step 3– $20,000 ($520,000 − $500,000). Amending a return Step 4– Using $20,000 (from Step 3) as taxable income, XYZ's hypothetical charitable contribution (limited to 10% of taxable income) is $2,000. Amending a return Step 5– $518,000 ($520,000 − $2,000). Amending a return Step 6– Using $518,000 (from Step 5) as taxable income, XYZ figures the actual section 179 deduction. Amending a return Because the taxable income is at least $500,000, XYZ can take a $500,000 section 179 deduction. Amending a return Step 7– $20,000 ($520,000 − $500,000). Amending a return Step 8– Using $20,000 (from Step 7) as taxable income, XYZ's actual charitable contribution (limited to 10% of taxable income) is $2,000. Amending a return Carryover of disallowed deduction. Amending a return   You can carry over for an unlimited number of years the cost of any section 179 property you elected to expense but were unable to because of the business income limit. Amending a return This disallowed deduction amount is shown on line 13 of Form 4562. Amending a return You use the amount you carry over to determine your section 179 deduction in the next year. Amending a return Enter that amount on line 10 of your Form 4562 for the next year. Amending a return   If you place more than one property in service in a year, you can select the properties for which all or a part of the costs will be carried forward. Amending a return Your selections must be shown in your books and records. Amending a return For this purpose, treat section 179 costs allocated from a partnership or an S corporation as one item of section 179 property. Amending a return If you do not make a selection, the total carryover will be allocated equally among the properties you elected to expense for the year. Amending a return   If costs from more than one year are carried forward to a subsequent year in which only part of the total carryover can be deducted, you must deduct the costs being carried forward from the earliest year first. Amending a return Special rules for qualified section 179 real property. Amending a return   You can carry over to 2013 a 2012 deduction attributable to qualified section 179 real property that you elected to expense but were unable to take because of the business income limitation. Amending a return Any such 2012 carryover amounts that are not deducted in 2013, plus any 2013 disallowed section 179 expense deductions attributable to qualified real property, are not carried over to 2014. Amending a return Instead these amounts are treated as property placed in service on the first day of 2013 for purposes of computing depreciation (including the special depreciation allowance, if applicable). Amending a return See section 179(f) of the Internal Revenue Code and Notice 2013-59 for more information. Amending a return If there is a sale or other disposition of your property (including a transfer at death) before you can use the full amount of any outstanding carryover of your disallowed section 179 deduction, neither you nor the new owner can deduct any of the unused amount. Amending a return Instead, you must add it back to the property's basis. Amending a return Partnerships and Partners The section 179 deduction limits apply both to the partnership and to each partner. Amending a return The partnership determines its section 179 deduction subject to the limits. Amending a return It then allocates the deduction among its partners. Amending a return Each partner adds the amount allocated from partnerships (shown on Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc. Amending a return ) to his or her nonpartnership section 179 costs and then applies the dollar limit to this total. Amending a return To determine any reduction in the dollar limit for costs over $2,000,000, the partner does not include any of the cost of section 179 property placed in service by the partnership. Amending a return After the dollar limit (reduced for any nonpartnership section 179 costs over $2,000,000) is applied, any remaining cost of the partnership and nonpartnership section 179 property is subject to the business income limit. Amending a return Partnership's taxable income. Amending a return   For purposes of the business income limit, figure the partnership's taxable income by adding together the net income and losses from all trades or businesses actively conducted by the partnership during the year. Amending a return See the Instructions for Form 1065 for information on how to figure partnership net income (or loss). Amending a return However, figure taxable income without regard to credits, tax-exempt income, the section 179 deduction, and guaranteed payments under section 707(c) of the Internal Revenue Code. Amending a return Partner's share of partnership's taxable income. Amending a return   For purposes of the business income limit, the taxable income of a partner engaged in the active conduct of one or more of a partnership's trades or businesses includes his or her allocable share of taxable income derived from the partnership's active conduct of any trade or business. Amending a return Example. Amending a return In 2013, Beech Partnership placed in service section 179 property with a total cost of $2,025,000. Amending a return The partnership must reduce its dollar limit by $25,000 ($2,025,000 − $2,000,000). Amending a return Its maximum section 179 deduction is $475,000 ($500,000 − $25,000), and it elects to expense that amount. Amending a return The partnership's taxable income from the active conduct of all its trades or businesses for the year was $600,000, so it can deduct the full $475,000. Amending a return It allocates $40,000 of its section 179 deduction and $50,000 of its taxable income to Dean, one of its partners. Amending a return In addition to being a partner in Beech Partnership, Dean is also a partner in the Cedar Partnership, which allocated to him a $30,000 section 179 deduction and $35,000 of its taxable income from the active conduct of its business. Amending a return He also conducts a business as a sole proprietor and, in 2013, placed in service in that business qualifying section 179 property costing $55,000. Amending a return He had a net loss of $5,000 from that business for the year. Amending a return Dean does not have to include section 179 partnership costs to figure any reduction in his dollar limit, so his total section 179 costs for the year are not more than $2,000,000 and his dollar limit is not reduced. Amending a return His maximum section 179 deduction is $500,000. Amending a return He elects to expense all of the $70,000 in section 179 deductions allocated from the partnerships ($40,000 from Beech Partnership plus $30,000 from Cedar Partnership), plus $55,000 of his sole proprietorship's section 179 costs, and notes that information in his books and records. Amending a return However, his deduction is limited to his business taxable income of $80,000 ($50,000 from Beech Partnership, plus $35,000 from Cedar Partnership minus $5,000 loss from his sole proprietorship). Amending a return He carries over $45,000 ($125,000 − $80,000) of the elected section 179 costs to 2014. Amending a return He allocates the carryover amount to the cost of section 179 property placed in service in his sole proprietorship, and notes that allocation in his books and records. Amending a return Different tax years. Amending a return   For purposes of the business income limit, if the partner's tax year and that of the partnership differ, the partner's share of the partnership's taxable income for a tax year is generally the partner's distributive share for the partnership tax year that ends with or within the partner's tax year. Amending a return Example. Amending a return John and James Oak are equal partners in Oak Partnership. Amending a return Oak Partnership uses a tax year ending January 31. Amending a return John and James both use a tax year ending December 31. Amending a return For its tax year ending January 31, 2013, Oak Partnership's taxable income from the active conduct of its business is $80,000, of which $70,000 was earned during 2012. Amending a return John and James each include $40,000 (each partner's entire share) of partnership taxable income in computing their business income limit for the 2013 tax year. Amending a return Adjustment of partner's basis in partnership. Amending a return   A partner must reduce the basis of his or her partnership interest by the total amount of section 179 expenses allocated from the partnership even if the partner cannot currently deduct the total amount. Amending a return If the partner disposes of his or her partnership interest, the partner's basis for determining gain or loss is increased by any outstanding carryover of disallowed section 179 expenses allocated from the partnership. Amending a return Adjustment of partnership's basis in section 179 property. Amending a return   The basis of a partnership's section 179 property must be reduced by the section 179 deduction elected by the partnership. Amending a return This reduction of basis must be made even if a partner cannot deduct all or part of the section 179 deduction allocated to that partner by the partnership because of the limits. Amending a return S Corporations Generally, the rules that apply to a partnership and its partners also apply to an S corporation and its shareholders. Amending a return The deduction limits apply to an S corporation and to each shareholder. Amending a return The S corporation allocates its deduction to the shareholders who then take their section 179 deduction subject to the limits. Amending a return Figuring taxable income for an S corporation. Amending a return   To figure taxable income (or loss) from the active conduct by an S corporation of any trade or business, you total the net income and losses from all trades or businesses actively conducted by the S corporation during the year. Amending a return   To figure the net income (or loss) from a trade or business actively conducted by an S corporation, you take into account the items from that trade or business that are passed through to the shareholders and used in determining each shareholder's tax liability. Amending a return However, you do not take into account any credits, tax-exempt income, the section 179 deduction, and deductions for compensation paid to shareholder-employees. Amending a return For purposes of determining the total amount of S corporation items, treat deductions and losses as negative income. Amending a return In figuring the taxable income of an S corporation, disregard any limits on the amount of an S corporation item that must be taken into account when figuring a shareholder's taxable income. Amending a return Other Corporations A corporation's taxable income from its active conduct of any trade or business is its taxable income figured with the following changes. Amending a return It is figured before deducting the section 179 deduction, any net operating loss deduction, and special deductions (as reported on the corporation's income tax return). Amending a return It is adjusted for items of income or deduction included in the amount figured in 1, above, not derived from a trade or business actively conducted by the corporation during the tax year. Amending a return How Do You Elect the Deduction? You elect to take the section 179 deduction by completing Part I of Form 4562. Amending a return If you elect the deduction for listed property (described in chapter 5), complete Part V of Form 4562 before completing Part I. Amending a return For property placed in service in 2013, file Form 4562 with either of the following. Amending a return Your original 2013 tax return, whether or not you file it timely. Amending a return An amended return for 2013 filed within the time prescribed by law. Amending a return 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. Amending a return The amended return must also include any resulting adjustments to taxable income. Amending a return You must keep records that show the specific identification of each piece of qualifying section 179 property. Amending a return These records must show how you acquired the property, the person you acquired it from, and when you placed it in service. Amending a return Election for certain qualified section 179 real property. Amending a return   You can elect to expense certain qualified real property that you placed in service as section 179 property for tax years beginning in 2013. Amending a return If you elect to treat this property as section 179 property, you must elect the application of the special rules for qualified real property described in section 179(f) of the Internal Revenue Code. Amending a return   To make the election, attach a statement indicating you are “electing the application of section 179(f) of the Internal Revenue Code” with either of the following. Amending a return Your original 2013 tax return, whether or not you file it timely. Amending a return An amended return for 2013 filed within the time prescribed by law. Amending a return The amended return must also include any adjustments to taxable income. Amending a return   The statement should indicate your election to expense certain qualified real property under section 179(f) on your return. Amending a return It must specify one or more of the three types of qualified property (described under Qualified real property ) to which the election applies, the cost of each such type, and the portion of the cost of each such property to be taken into account. Amending a return Also, report this on line 6 of Form 4562. Amending a return    The maximum section 179 expense deduction that can be taken for qualified section 179 real property is limited to $250,000. Amending a return Revoking an election. Amending a return   An election (or any specification made in the election) to take a section 179 deduction for 2013 can be revoked without IRS approval by filing an amended return. Amending a return The amended return must be filed within the time prescribed by law. Amending a return The amended return must also include any resulting adjustments to taxable income. Amending a return Once made, the revocation is irrevocable. Amending a return When Must You Recapture the Deduction? You may have to recapture the section 179 deduction if, in any year during the property's recovery period, the percentage of business use drops to 50% or less. Amending a return In the year the business use drops to 50% or less, you include the recapture amount as ordinary income in Part IV of Form 4797. Amending a return You also increase the basis of the property by the recapture amount. Amending a return Recovery periods for property are discussed under Which Recovery Period Applies in chapter 4 . Amending a return If you sell, exchange, or otherwise dispose of the property, do not figure the recapture amount under the rules explained in this discussion. Amending a return Instead, use the rules for recapturing depreciation explained in chapter 3 of Publication 544 under Section 1245 Property. Amending a return For qualified real property (described earlier), see Notice 2013-59 for determining the portion of the gain that is attributable to section 1245 property upon the sale or other disposition of qualified real property. Amending a return If the property is listed property (described in chapter 5 ), do not figure the recapture amount under the rules explained in this discussion when the percentage of business use drops to 50% or less. Amending a return Instead, use the rules for recapturing excess depreciation in chapter 5 under What Is the Business-Use Requirement. Amending a return Figuring the recapture amount. Amending a return   To figure the amount to recapture, take the following steps. Amending a return Figure the depreciation that would have been allowable on the section 179 deduction you claimed. Amending a return Begin with the year you placed the property in service and include the year of recapture. Amending a return Subtract the depreciation figured in (1) from the section 179 deduction you claimed. Amending a return The result is the amount you must recapture. Amending a return Example. Amending a return In January 2011, Paul Lamb, a calendar year taxpayer, bought and placed in service section 179 property costing $10,000. Amending a return The property is not listed property. Amending a return The property is 3-year property. Amending a return He elected a $5,000 section 179 deduction for the property and also elected not to claim a special depreciation allowance. Amending a return He used the property only for business in 2011 and 2012. Amending a return In 2013, he used the property 40% for business and 60% for personal use. Amending a return He figures his recapture amount as follows. Amending a return Section 179 deduction claimed (2011) $5,000. Amending a return 00 Minus: Allowable depreciation using Table A-1 (instead of section 179 deduction):   2011 $1,666. Amending a return 50   2012 2,222. Amending a return 50   2013 ($740. Amending a return 50 × 40% (business)) 296. Amending a return 20 4,185. Amending a return 20 2013 — Recapture amount $ 814. Amending a return 80 Paul must include $814. Amending a return 80 in income for 2013. Amending a return If any qualified zone property placed in service during the year ceases to be used in an empowerment zone by an enterprise zone business in a later year, the benefit of the increased section 179 deduction must be reported as other income on your return. Amending a return Prev  Up  Next   Home   More Online Publications