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File state tax return only Publication 587 - Main Content Table of Contents Qualifying for a DeductionExclusive Use Regular Use Trade or Business Use Principal Place of Business Place To Meet Patients, Clients, or Customers Separate Structure Figuring the DeductionUsing Actual Expenses Using the Simplified Method Daycare Facility Standard meal and snack rates. File state tax return only Sale or Exchange of Your HomeGain on Sale Depreciation Basis Adjustment Reporting the Sale More Information Business Furniture and EquipmentListed Property Property Bought for Business Use Personal Property Converted to Business Use Recordkeeping Where To DeductSelf-Employed Persons Employees Partners How To Get Tax HelpLow Income Taxpayer Clinics Worksheet To Figure the Deduction for Business Use of Your HomeInstructions for the Worksheet Worksheets To Figure the Deduction for Business Use of Your Home (Simplified Method) Instructions for the Simplified Method Worksheet Instructions for the Daycare Facility Worksheet Instructions for the Area Adjustment Worksheet Qualifying for a Deduction Generally, you cannot deduct items related to your home, such as mortgage interest, real estate taxes, utilities, maintenance, rent, depreciation, or property insurance, as business expenses. File state tax return only However, you may be able to deduct expenses related to the business use of part of your home if you meet specific requirements. File state tax return only Even then, the deductible amount of these types of expenses may be limited. File state tax return only Use this section and Figure A, later, to decide if you can deduct expenses for the business use of your home. File state tax return only To qualify to deduct expenses for business use of your home, you must use part of your home: Exclusively and regularly as your principal place of business (defined later), Exclusively and regularly as a place where you meet or deal with patients, clients, or customers in the normal course of your trade or business, In the case of a separate structure which is not attached to your home, in connection with your trade or business, On a regular basis for certain storage use (see Storage of inventory or product samples , later), For rental use (see Publication 527), or As a daycare facility (see Daycare Facility , later). File state tax return only Additional tests for employee use. File state tax return only   If you are an employee and you use a part of your home for business, you may qualify for a deduction for its business use. File state tax return only You must meet the tests discussed earlier plus: Your business use must be for the convenience of your employer, and You must not rent any part of your home to your employer and use the rented portion to perform services as an employee for that employer. File state tax return only If the use of the home office is merely appropriate and helpful, you cannot deduct expenses for the business use of your home. File state tax return only Exclusive Use To qualify under the exclusive use test, you must use a specific area of your home only for your trade or business. File state tax return only The area used for business can be a room or other separately identifiable space. File state tax return only The space does not need to be marked off by a permanent partition. File state tax return only You do not meet the requirements of the exclusive use test if you use the area in question both for business and for personal purposes. File state tax return only Example. File state tax return only You are an attorney and use a den in your home to write legal briefs and prepare clients' tax returns. File state tax return only Your family also uses the den for recreation. File state tax return only The den is not used exclusively in your trade or business, so you cannot claim a deduction for the business use of the den. File state tax return only Exceptions to Exclusive Use You do not have to meet the exclusive use test if either of the following applies. File state tax return only You use part of your home for the storage of inventory or product samples (discussed next). File state tax return only You use part of your home as a daycare facility, discussed later under Daycare Facility . File state tax return only Note. File state tax return only With the exception of these two uses, any portion of the home used for business purposes must meet the exclusive use test. File state tax return only Storage of inventory or product samples. File state tax return only    If you use part of your home for storage of inventory or product samples, you can deduct expenses for the business use of your home without meeting the exclusive use test. File state tax return only However, you must meet all the following tests. File state tax return only You sell products at wholesale or retail as your trade or business. File state tax return only You keep the inventory or product samples in your home for use in your trade or business. File state tax return only Your home is the only fixed location of your trade or business. File state tax return only You use the storage space on a regular basis. File state tax return only The space you use is a separately identifiable space suitable for storage. File state tax return only Example. File state tax return only Your home is the only fixed location of your business of selling mechanics' tools at retail. File state tax return only You regularly use half of your basement for storage of inventory and product samples. File state tax return only You sometimes use the area for personal purposes. File state tax return only The expenses for the storage space are deductible even though you do not use this part of your basement exclusively for business. File state tax return only Regular Use To qualify under the regular use test, you must use a specific area of your home for business on a regular basis. File state tax return only Incidental or occasional business use is not regular use. File state tax return only You must consider all facts and circumstances in determining whether your use is on a regular basis. File state tax return only Trade or Business Use To qualify under the trade-or-business-use test, you must use part of your home in connection with a trade or business. File state tax return only If you use your home for a profit-seeking activity that is not a trade or business, you cannot take a deduction for its business use. File state tax return only Example. File state tax return only You use part of your home exclusively and regularly to read financial periodicals and reports, clip bond coupons, and carry out similar activities related to your own investments. File state tax return only You do not make investments as a broker or dealer. File state tax return only So, your activities are not part of a trade or business and you cannot take a deduction for the business use of your home. File state tax return only Principal Place of Business You can have more than one business location, including your home, for a single trade or business. File state tax return only To qualify to deduct the expenses for the business use of your home under the principal place of business test, your home must be your principal place of business for that trade or business. File state tax return only To determine whether your home is your principal place of business, you must consider: The relative importance of the activities performed at each place where you conduct business, and The amount of time spent at each place where you conduct business. File state tax return only Your home office will qualify as your principal place of business if you meet the following requirements. File state tax return only You use it exclusively and regularly for administrative or management activities of your trade or business. File state tax return only You have no other fixed location where you conduct substantial administrative or management activities of your trade or business. File state tax return only If, after considering your business locations, your home cannot be identified as your principal place of business, you cannot deduct home office expenses. File state tax return only However, see the later discussions under Place To Meet Patients, Clients, or Customers and Separate Structure for other ways to qualify to deduct home office expenses. File state tax return only Administrative or management activities. File state tax return only   There are many activities that are administrative or managerial in nature. File state tax return only The following are a few examples. File state tax return only Billing customers, clients, or patients. File state tax return only Keeping books and records. File state tax return only Ordering supplies. File state tax return only Setting up appointments. File state tax return only Forwarding orders or writing reports. File state tax return only Administrative or management activities performed at other locations. File state tax return only   The following activities performed by you or others will not disqualify your home office from being your principal place of business. File state tax return only You have others conduct your administrative or management activities at locations other than your home. File state tax return only (For example, another company does your billing from its place of business. File state tax return only ) You conduct administrative or management activities at places that are not fixed locations of your business, such as in a car or a hotel room. File state tax return only You occasionally conduct minimal administrative or management activities at a fixed location outside your home. File state tax return only You conduct substantial nonadministrative or nonmanagement business activities at a fixed location outside your home. File state tax return only (For example, you meet with or provide services to customers, clients, or patients at a fixed location of the business outside your home. File state tax return only ) You have suitable space to conduct administrative or management activities outside your home, but choose to use your home office for those activities instead. File state tax return only Please click here for the text description of the image. File state tax return only Can you deduct business use of the home expenses? Example 1. File state tax return only John is a self-employed plumber. File state tax return only Most of John's time is spent at customers' homes and offices installing and repairing plumbing. File state tax return only He has a small office in his home that he uses exclusively and regularly for the administrative or management activities of his business, such as phoning customers, ordering supplies, and keeping his books. File state tax return only John writes up estimates and records of work completed at his customers' premises. File state tax return only He does not conduct any substantial administrative or management activities at any fixed location other than his home office. File state tax return only John does not do his own billing. File state tax return only He uses a local bookkeeping service to bill his customers. File state tax return only John's home office qualifies as his principal place of business for deducting expenses for its use. File state tax return only He uses the home office for the administrative or managerial activities of his plumbing business and he has no other fixed location where he conducts these administrative or managerial activities. File state tax return only His choice to have his billing done by another company does not disqualify his home office from being his principal place of business. File state tax return only He meets all the qualifications, including principal place of business, so he can deduct expenses (subject to certain limitations, explained later) for the business use of his home. File state tax return only Example 2. File state tax return only Pamela is a self-employed sales representative for several different product lines. File state tax return only She has an office in her home that she uses exclusively and regularly to set up appointments and write up orders and other reports for the companies whose products she sells. File state tax return only She occasionally writes up orders and sets up appointments from her hotel room when she is away on business overnight. File state tax return only Pamela's business is selling products to customers at various locations throughout her territory. File state tax return only To make these sales, she regularly visits customers to explain the available products and take orders. File state tax return only Pamela's home office qualifies as her principal place of business for deducting expenses for its use. File state tax return only She conducts administrative or management activities there and she has no other fixed location where she conducts substantial administrative or management activities. File state tax return only The fact that she conducts some administrative or management activities in her hotel room (not a fixed location) does not disqualify her home office from being her principal place of business. File state tax return only She meets all the qualifications, including principal place of business, so she can deduct expenses (subject to certain limitations, explained later) for the business use of her home. File state tax return only Example 3. File state tax return only Paul is a self-employed anesthesiologist. File state tax return only He spends the majority of his time administering anesthesia and postoperative care in three local hospitals. File state tax return only One of the hospitals provides him with a small shared office where he could conduct administrative or management activities. File state tax return only Paul very rarely uses the office the hospital provides. File state tax return only He uses a room in his home that he has converted to an office. File state tax return only He uses this room exclusively and regularly to conduct all the following activities. File state tax return only Contacting patients, surgeons, and hospitals regarding scheduling. File state tax return only Preparing for treatments and presentations. File state tax return only Maintaining billing records and patient logs. File state tax return only Satisfying continuing medical education requirements. File state tax return only Reading medical journals and books. File state tax return only Paul's home office qualifies as his principal place of business for deducting expenses for its use. File state tax return only He conducts administrative or management activities for his business as an anesthesiologist there and he has no other fixed location where he conducts substantial administrative or management activities for this business. File state tax return only His choice to use his home office instead of the one provided by the hospital does not disqualify his home office from being his principal place of business. File state tax return only His performance of substantial nonadministrative or nonmanagement activities at fixed locations outside his home also does not disqualify his home office from being his principal place of business. File state tax return only He meets all the qualifications, including principal place of business, so he can deduct expenses (subject to certain limitations, explained later) for the business use of his home. File state tax return only Example 4. File state tax return only Kathleen is employed as a teacher. File state tax return only She is required to teach and meet with students at the school and to grade papers and tests. File state tax return only The school provides her with a small office where she can work on her lesson plans, grade papers and tests, and meet with parents and students. File state tax return only The school does not require her to work at home. File state tax return only Kathleen prefers to use the office she has set up in her home and does not use the one provided by the school. File state tax return only She uses this home office exclusively and regularly for the administrative duties of her teaching job. File state tax return only Kathleen must meet the convenience-of-the-employer test, even if her home qualifies as her principal place of business for deducting expenses for its use. File state tax return only Her employer provides her with an office and does not require her to work at home, so she does not meet the convenience-of-the-employer test and cannot claim a deduction for the business use of her home. File state tax return only More Than One Trade or Business The same home office can be the principal place of business for two or more separate business activities. File state tax return only Whether your home office is the principal place of business for more than one business activity must be determined separately for each of your trade or business activities. File state tax return only You must use the home office exclusively and regularly for one or more of the following purposes. File state tax return only As the principal place of business for one or more of your trades or businesses. File state tax return only As a place to meet or deal with patients, clients, or customers in the normal course of one or more of your trades or businesses. File state tax return only If your home office is a separate structure, in connection with one or more of your trades or businesses. File state tax return only You can use your home office for more than one business activity, but you cannot use it for any nonbusiness (i. File state tax return only e. File state tax return only , personal) activities. File state tax return only If you are an employee, any use of the home office in connection with your employment must be for the convenience of your employer. File state tax return only See Rental to employer , later, if you rent part of your home to your employer. File state tax return only Example. File state tax return only Tracy White is employed as a teacher. File state tax return only Her principal place of work is the school, which provides her office space to do her school work. File state tax return only She also has a mail order jewelry business. File state tax return only All her work in the jewelry business is done in her home office and the office is used exclusively for that business. File state tax return only If she meets all the other tests, she can deduct expenses for the business use of her home for the jewelry business. File state tax return only If Tracy also uses the office for work related to her teaching, she must meet the exclusive use test for both businesses to qualify for the deduction. File state tax return only As an employee, Tracy must also meet the convenience-of-the-employer test to qualify for the deduction. File state tax return only She does not meet this test for her work as a teacher, so she cannot claim a deduction for the business use of her home for either activity. File state tax return only Place To Meet Patients, Clients, or Customers If you meet or deal with patients, clients, or customers in your home in the normal course of your business, even though you also carry on business at another location, you can deduct your expenses for the part of your home used exclusively and regularly for business if you meet both the following tests. File state tax return only You physically meet with patients, clients, or customers on your premises. File state tax return only Their use of your home is substantial and integral to the conduct of your business. File state tax return only Doctors, dentists, attorneys, and other professionals who maintain offices in their homes generally will meet this requirement. File state tax return only Using your home for occasional meetings and telephone calls will not qualify you to deduct expenses for the business use of your home. File state tax return only The part of your home you use exclusively and regularly to meet patients, clients, or customers does not have to be your principal place of business. File state tax return only Example. File state tax return only June Quill, a self-employed attorney, works 3 days a week in her city office. File state tax return only She works 2 days a week in her home office used only for business. File state tax return only She regularly meets clients there. File state tax return only Her home office qualifies for a business deduction because she meets clients there in the normal course of her business. File state tax return only Separate Structure You can deduct expenses for a separate free-standing structure, such as a studio, workshop, garage, or barn, if you use it exclusively and regularly for your business. File state tax return only The structure does not have to be your principal place of business or a place where you meet patients, clients, or customers. File state tax return only Example. File state tax return only John Berry operates a floral shop in town. File state tax return only He grows the plants for his shop in a greenhouse behind his home. File state tax return only He uses the greenhouse exclusively and regularly in his business, so he can deduct the expenses for its use, subject to certain limitations, explained later. File state tax return only Figuring the Deduction After you determine that you meet the tests under Qualifying for a Deduction , you can begin to figure how much you can deduct. File state tax return only When figuring the amount you can deduct for the business use of your home, you will use either your actual expenses or a simplified method. File state tax return only Electing to use the simplified method. File state tax return only   The simplified method is an alternative to the calculation, allocation, and substantiation of actual expenses. File state tax return only You choose whether or not to figure your deduction using the simplified method each taxable year. File state tax return only See Using the Simplified Method , later. File state tax return only Rental to employer. File state tax return only   If you rent part of your home to your employer and you use the rented part in performing services for your employer as an employee, your deduction for the business use of your home is limited. File state tax return only You can deduct mortgage interest, qualified mortgage insurance premiums, real estate taxes, and personal casualty losses for the rented part, subject to any limitations. File state tax return only However, you cannot deduct otherwise allowable trade or business expenses, business casualty losses, or depreciation related to the use of your home (or use the simplified method as an alternative to deducting these actual expenses) in performing services for your employer. File state tax return only Using Actual Expenses If you do not or cannot elect to use the simplified method for a home, you will figure your deduction for that home using your actual expenses. File state tax return only You will also need to figure the percentage of your home used for business and the limit on the deduction. File state tax return only If you are an employee or a partner, or you use your home in your farming business and you file Schedule F (Form 1040), you can use the Worksheet To Figure the Deduction for Business Use of Your Home, near the end of this publication, to help you figure your deduction. File state tax return only If you use your home in a trade or business and you file Schedule C (Form 1040), you will use Form 8829 to figure your deduction. File state tax return only Part-year use. File state tax return only   You cannot deduct expenses for the business use of your home incurred during any part of the year you did not use your home for business purposes. File state tax return only For example, if you begin using part of your home for business on July 1, and you meet all the tests from that date until the end of the year, consider only your expenses for the last half of the year in figuring your allowable deduction. File state tax return only Expenses related to tax-exempt income. File state tax return only   Generally, you cannot deduct expenses that are related to tax-exempt allowances. File state tax return only However, if you receive a tax-exempt parsonage allowance or a tax-exempt military allowance, your expenses for mortgage interest and real estate taxes are deductible under the normal rules. File state tax return only No deduction is allowed for other expenses related to the tax-exempt allowance. File state tax return only   If your housing is provided free of charge and the value of the housing is tax exempt, you cannot deduct the rental value of any portion of the housing. File state tax return only Actual Expenses You must divide the expenses of operating your home between personal and business use. File state tax return only The part of a home operating expense you can use to figure your deduction depends on both of the following. File state tax return only Whether the expense is direct, indirect, or unrelated. File state tax return only The percentage of your home used for business. File state tax return only Table 1, next, describes the types of expenses you may have and the extent to which they are deductible. File state tax return only Table 1. File state tax return only Types of Expenses  Expense  Description  Deductibility Direct Expenses only for  the business part  of your home. File state tax return only Deductible in full. File state tax return only *   Examples:  Painting or repairs  only in the area  used for business. File state tax return only Exception: May be only partially  deductible in a daycare facility. File state tax return only See Daycare Facility , later. File state tax return only Indirect Expenses for  keeping up and running your  entire home. File state tax return only Deductible based on the percentage of your home used for business. File state tax return only *   Examples:  Insurance, utilities, and  general repairs. File state tax return only   Unrelated Expenses only for  the parts of your  home not used  for business. File state tax return only Not deductible. File state tax return only   Examples:  Lawn care or painting  a room not used  for business. File state tax return only   *Subject to the deduction limit, discussed later. File state tax return only Form 8829 and the Worksheet To Figure the Deduction for Business Use of Your Home have separate columns for direct and indirect expenses. File state tax return only Certain expenses are deductible whether or not you use your home for business. File state tax return only If you qualify to deduct business use of the home expenses, use the business percentage of these expenses to figure your total business use of the home deduction. File state tax return only These expenses include the following. File state tax return only Real estate taxes. File state tax return only Qualified mortgage insurance premiums. File state tax return only Deductible mortgage interest. File state tax return only Casualty losses. File state tax return only Other expenses are deductible only if you use your home for business. File state tax return only You can use the business percentage of these expenses to figure your total business use of the home deduction. File state tax return only These expenses generally include (but are not limited to) the following. File state tax return only Depreciation (covered under Depreciating Your Home , later). File state tax return only Insurance. File state tax return only Rent paid for the use of property you do not own but use in your trade or business. File state tax return only Repairs. File state tax return only Security system. File state tax return only Utilities and services. File state tax return only Real estate taxes. File state tax return only   To figure the business part of your real estate taxes, multiply the real estate taxes paid by the percentage of your home used for business. File state tax return only   For more information on the deduction for real estate taxes, see Publication 530, Tax Information for Homeowners. File state tax return only Deductible mortgage interest. File state tax return only   To figure the business part of your deductible mortgage interest, multiply this interest by the percentage of your home used for business. File state tax return only You can include interest on a second mortgage in this computation. File state tax return only If your total mortgage debt is more than $1,000,000 or your home equity debt is more than $100,000, your deduction may be limited. File state tax return only For more information on what interest is deductible, see Publication 936, Home Mortgage Interest Deduction. File state tax return only Qualified mortgage insurance premiums. File state tax return only   To figure the business part of your qualified mortgage insurance premiums, multiply the premiums by the percentage of your home used for business. File state tax return only You can include premiums for insurance on a second mortgage in this computation. File state tax return only If your adjusted gross income is more than $100,000 ($50,000 if your filing status is married filing separately), your deduction may be limited. File state tax return only For more information, see Publication 936, and Line 13 in the Instructions for Schedule A (Form 1040). File state tax return only Casualty losses. File state tax return only    If you have a casualty loss on your home that you use for business, treat the casualty loss as a direct expense, an indirect expense, or an unrelated expense, depending on the property affected. File state tax return only A direct expense is the loss on the portion of the property you use only in your business. File state tax return only Use the entire loss to figure the business use of the home deduction. File state tax return only An indirect expense is the loss on property you use for both business and personal purposes. File state tax return only Use only the business portion to figure the deduction. File state tax return only An unrelated expense is the loss on property you do not use in your business. File state tax return only Do not use any of the loss to figure the deduction. File state tax return only Example. File state tax return only You meet the rules to take a deduction for an office in your home that is 10% of the total area of your house. File state tax return only A storm damages your roof. File state tax return only This is an indirect expense as the roof is part of the whole house and is considered to be used both for business and personal purposes. File state tax return only You would complete Form 4684, Casualties and Thefts, to report your loss. File state tax return only You complete both section A (Personal Use Property) and section B (Business and Income-Producing Property) as your home is used both for business and personal purposes. File state tax return only Since you use 90% of your home for personal purposes, use 90% of the cost or adjusted basis of your home, insurance or other reimbursement, and fair market value, both before and after the storm, to figure the amounts to enter on lines 2, 3, 5, and 6 of Form 4684. File state tax return only Since you use 10% of your home for business purposes, use 10% of the cost or adjusted basis of your home, insurance or other reimbursement, and fair market value, both before and after the storm, to figure the amounts to enter on lines 20, 21, 23, and 24 of Form 4684. File state tax return only Forms and worksheets to use. File state tax return only   If you are filing Schedule C (Form 1040), get Form 8829 and follow the instructions for casualty losses. File state tax return only If you are an employee or a partner, or you file Schedule F (Form 1040), use the Worksheet To Figure the Deduction for Business Use of Your Home, near the end of this publication. File state tax return only You will also need to get Form 4684. File state tax return only More information. File state tax return only   For more information on casualty losses, see Publication 547, Casualties, Disasters, and Thefts. File state tax return only Insurance. File state tax return only   You can deduct the cost of insurance that covers the business part of your home. File state tax return only However, if your insurance premium gives you coverage for a period that extends past the end of your tax year, you can deduct only the business percentage of the part of the premium that gives you coverage for your tax year. File state tax return only You can deduct the business percentage of the part that applies to the following year in that year. File state tax return only Rent. File state tax return only   If you rent the home you occupy and meet the requirements for business use of the home, you can deduct part of the rent you pay. File state tax return only To figure your deduction, multiply your rent payments by the percentage of your home used for business. File state tax return only   If you own your home, you cannot deduct the fair rental value of your home. File state tax return only However, see Depreciating Your Home , later. File state tax return only Repairs. File state tax return only   The cost of repairs that relate to your business, including labor (other than your own labor), is a deductible expense. File state tax return only For example, a furnace repair benefits the entire home. File state tax return only If you use 10% of your home for business, you can deduct 10% of the cost of the furnace repair. File state tax return only   Repairs keep your home in good working order over its useful life. File state tax return only Examples of common repairs are patching walls and floors, painting, wallpapering, repairing roofs and gutters, and mending leaks. File state tax return only However, repairs are sometimes treated as a permanent improvement and are not deductible. File state tax return only See Permanent improvements , later, under Depreciating Your Home. File state tax return only Security system. File state tax return only   If you install a security system that protects all the doors and windows in your home, you can deduct the business part of the expenses you incur to maintain and monitor the system. File state tax return only You also can take a depreciation deduction for the part of the cost of the security system relating to the business use of your home. File state tax return only Utilities and services. File state tax return only   Expenses for utilities and services, such as electricity, gas, trash removal, and cleaning services, are primarily personal expenses. File state tax return only However, if you use part of your home for business, you can deduct the business part of these expenses. File state tax return only Generally, the business percentage for utilities is the same as the percentage of your home used for business. File state tax return only Telephone. File state tax return only   The basic local telephone service charge, including taxes, for the first telephone line into your home (i. File state tax return only e. File state tax return only , landline) is a nondeductible personal expense. File state tax return only However, charges for business long-distance phone calls on that line, as well as the cost of a second line into your home used exclusively for business, are deductible business expenses. File state tax return only Do not include these expenses as a cost of using your home for business. File state tax return only Deduct these charges separately on the appropriate form or schedule. File state tax return only For example, if you file Schedule C (Form 1040), deduct these expenses on line 25, Utilities (instead of line 30, Expenses for business use of your home). File state tax return only Depreciating Your Home If you own your home and qualify to deduct expenses for its business use, you can claim a deduction for depreciation. File state tax return only Depreciation is an allowance for the wear and tear on the part of your home used for business. File state tax return only You cannot depreciate the cost or value of the land. File state tax return only You recover its cost when you sell or otherwise dispose of the property. File state tax return only Before you figure your depreciation deduction, you need to know the following information. File state tax return only The month and year you started using your home for business. File state tax return only The adjusted basis and fair market value of your home (excluding land) at the time you began using it for business. File state tax return only The cost of any improvements before and after you began using the property for business. File state tax return only The percentage of your home used for business. File state tax return only See Business Percentage , later. File state tax return only Adjusted basis defined. File state tax return only   The adjusted basis of your home is generally its cost, plus the cost of any permanent improvements you made to it, minus any casualty losses or depreciation deducted in earlier tax years. File state tax return only For a discussion of adjusted basis, see Publication 551. File state tax return only Permanent improvements. File state tax return only   A permanent improvement increases the value of property, adds to its life, or gives it a new or different use. File state tax return only Examples of improvements are replacing electric wiring or plumbing, adding a new roof or addition, paneling, or remodeling. File state tax return only    You must carefully distinguish between repairs and improvements. File state tax return only See Repairs , earlier, under Actual Expenses. File state tax return only You also must keep accurate records of these expenses. File state tax return only These records will help you decide whether an expense is a deductible or a capital (added to the basis) expense. File state tax return only However, if you make repairs as part of an extensive remodeling or restoration of your home, the entire job is an improvement. File state tax return only Example. File state tax return only You buy an older home and fix up two rooms as a beauty salon. File state tax return only You patch the plaster on the ceilings and walls, paint, repair the floor, install an outside door, and install new wiring, plumbing, and other equipment. File state tax return only Normally, the patching, painting, and floor work are repairs and the other expenses are permanent improvements. File state tax return only However, because the work gives your property a new use, the entire remodeling job is a permanent improvement and its cost is added to the basis of the property. File state tax return only You cannot deduct any portion of it as a repair expense. File state tax return only Adjusting for depreciation deducted in earlier years. File state tax return only   Decrease the basis of your property by the depreciation you deducted, or could have deducted, on your tax returns under the method of depreciation you properly selected. File state tax return only If you deducted less depreciation than you could have under the method you selected, decrease the basis by the amount you could have deducted under that method. File state tax return only If you did not deduct any depreciation, decrease the basis by the amount you could have deducted. File state tax return only   If you deducted more depreciation than you should have, decrease your basis by the amount you should have deducted, plus the part of the excess depreciation you deducted that actually decreased your tax liability for any year. File state tax return only   If you deducted the incorrect amount of depreciation, see Publication 946. File state tax return only Fair market value defined. File state tax return only   The fair market value of your home is the price at which the property would change hands between a buyer and a seller, neither having to buy or sell, and both having reasonable knowledge of all necessary facts. File state tax return only Sales of similar property, on or about the date you begin using your home for business, may be helpful in determining the property's fair market value. File state tax return only Figuring the depreciation deduction for the current year. File state tax return only   If you began using your home for business before 2013, continue to use the same depreciation method you used in past tax years. File state tax return only   If you began using your home for business for the first time in 2013, depreciate the business part as nonresidential real property under the modified accelerated cost recovery system (MACRS). File state tax return only Under MACRS, nonresidential real property is depreciated using the straight line method over 39 years. File state tax return only For more information on MACRS and other methods of depreciation, see Publication 946. File state tax return only   To figure the depreciation deduction, you must first figure the part of the cost of your home that can be depreciated (depreciable basis). File state tax return only The depreciable basis is figured by multiplying the percentage of your home used for business by the smaller of the following. File state tax return only The adjusted basis of your home (excluding land) on the date you began using your home for business. File state tax return only The fair market value of your home (excluding land) on the date you began using your home for business. File state tax return only Depreciation table. File state tax return only   If 2013 was the first year you used your home for business, you can figure your 2013 depreciation for the business part of your home by using the appropriate percentage from the following table. File state tax return only Table 2. File state tax return only MACRS Percentage Table for 39-Year Nonresidential Real Property Month First Used for Business Percentage To Use 1 2. File state tax return only 461% 2 2. File state tax return only 247% 3 2. File state tax return only 033% 4 1. File state tax return only 819% 5 1. File state tax return only 605% 6 1. File state tax return only 391% 7 1. File state tax return only 177% 8 0. File state tax return only 963% 9 0. File state tax return only 749% 10 0. File state tax return only 535% 11 0. File state tax return only 321% 12 0. File state tax return only 107%   Multiply the depreciable basis of the business part of your home by the percentage from the table for the first month you use your home for business. File state tax return only See Publication 946 for the percentages for the remaining tax years of the recovery period. File state tax return only Example. File state tax return only In May, George Miller began to use one room in his home exclusively and regularly to meet clients. File state tax return only This room is 8% of the square footage of his home. File state tax return only He bought the home in 2003 for $125,000. File state tax return only He determined from his property tax records that his adjusted basis in the house (exclusive of land) is $115,000. File state tax return only In May, the house had a fair market value of $165,000. File state tax return only He multiplies his adjusted basis of $115,000 (which is less than the fair market value) by 8%. File state tax return only The result is $9,200, his depreciable basis for the business part of the house. File state tax return only George files his return based on the calendar year. File state tax return only May is the 5th month of his tax year. File state tax return only He multiplies his depreciable basis of $9,200 by 1. File state tax return only 605% (. File state tax return only 01605), the percentage from the table for the 5th month. File state tax return only His depreciation deduction is $147. File state tax return only 66. File state tax return only Depreciating permanent improvements. File state tax return only   Add the costs of permanent improvements made before you began using your home for business to the basis of your property. File state tax return only Depreciate these costs as part of the cost of your home as explained earlier. File state tax return only The costs of improvements made after you begin using your home for business (that affect the business part of your home, such as a new roof) are depreciated separately. File state tax return only Multiply the cost of the improvement by the business-use percentage and depreciate the result over the recovery period that would apply to your home if you began using it for business at the same time as the improvement. File state tax return only For improvements made this year, the recovery period is 39 years. File state tax return only For the percentage to use for the first year, see Table 2, earlier. File state tax return only For more information on recovery periods, see Publication 946. File state tax return only Business Percentage To find the business percentage, compare the size of the part of your home that you use for business to your whole house. File state tax return only Use the resulting percentage to figure the business part of the expenses for operating your entire home. File state tax return only You can use any reasonable method to determine the business percentage. File state tax return only The following are two commonly used methods for figuring the percentage. File state tax return only Divide the area (length multiplied by the width) used for business by the total area of your home. File state tax return only If the rooms in your home are all about the same size, you can divide the number of rooms used for business by the total number of rooms in your home. File state tax return only Example 1. File state tax return only Your office is 240 square feet (12 feet × 20 feet). File state tax return only Your home is 1,200 square feet. File state tax return only Your office is 20% (240 ÷ 1,200) of the total area of your home. File state tax return only Your business percentage is 20%. File state tax return only Example 2. File state tax return only You use one room in your home for business. File state tax return only Your home has 10 rooms, all about equal size. File state tax return only Your office is 10% (1 ÷ 10) of the total area of your home. File state tax return only Your business percentage is 10%. File state tax return only Use lines 1-7 of Form 8829, or lines 1-3 on the Worksheet To Figure the Deduction for Business Use of Your Home (near the end of this publication) to figure your business percentage. File state tax return only Deduction Limit If your gross income from the business use of your home equals or exceeds your total business expenses (including depreciation), you can deduct all your business expenses related to the use of your home. File state tax return only If your gross income from the business use of your home is less than your total business expenses, your deduction for certain expenses for the business use of your home is limited. File state tax return only Your deduction of otherwise nondeductible expenses, such as insurance, utilities, and depreciation of your home (with depreciation of your home taken last), that are allocable to the business, is limited to the gross income from the business use of your home minus the sum of the following. File state tax return only The business part of expenses you could deduct even if you did not use your home for business (such as mortgage interest, real estate taxes, and casualty and theft losses that are allowable as itemized deductions on Schedule A (Form 1040)). File state tax return only These expenses are discussed in detail under Actual Expenses , earlier. File state tax return only The business expenses that relate to the business activity in the home (for example, business phone, supplies, and depreciation on equipment), but not to the use of the home itself. File state tax return only If you are self-employed, do not include in (2) above your deduction for one-half of your self-employment tax. File state tax return only Carryover of unallowed expenses. File state tax return only   If your deductions are greater than the current year's limit, you can carry over the excess to the next year in which you use actual expenses. File state tax return only They are subject to the deduction limit for that year, whether or not you live in the same home during that year. File state tax return only Figuring the deduction limit and carryover. File state tax return only   If you are an employee or a partner, or you file Schedule F (Form 1040), use the Worksheet To Figure the Deduction for Business Use of Your Home, near the end of this publication. File state tax return only If you file Schedule C (Form 1040), figure your deduction limit and carryover on Form 8829. File state tax return only Example. File state tax return only You meet the requirements for deducting expenses for the business use of your home. File state tax return only You use 20% of your home for business. File state tax return only In 2013, your business expenses and the expenses for the business use of your home are deducted from your gross income in the following order. File state tax return only    Gross income from business $6,000 Minus:   Deductible mortgage interest and real estate taxes (20%) 3,000 Business expenses not related to the use of your home (100%) (business phone, supplies, and depreciation on equipment) 2,000 Deduction limit $1,000 Minus other expenses allocable to business use of home:   Maintenance, insurance, and utilities (20%) 800 Depreciation allowed (20% = $1,600 allowable, but subject to balance of deduction limit) 200 Other expenses up to the deduction limit $1,000 Depreciation carryover to 2014 ($1,600 − $200) (subject to deduction limit in 2014) $1,400   You can deduct all of the business part of your deductible mortgage interest and real estate taxes ($3,000). File state tax return only You also can deduct all of your business expenses not related to the use of your home ($2,000). File state tax return only Additionally, you can deduct all of the business part of your expenses for maintenance, insurance, and utilities, because the total ($800) is less than the $1,000 deduction limit. File state tax return only Your deduction for depreciation for the business use of your home is limited to $200 ($1,000 minus $800) because of the deduction limit. File state tax return only You can carry over the $1,400 balance and add it to your depreciation for 2014, subject to your deduction limit in 2014. File state tax return only More than one place of business. File state tax return only   If part of the gross income from your trade or business is from the business use of part of your home and part is from a place other than your home, you must determine the part of your gross income from the business use of your home before you figure the deduction limit. File state tax return only In making this determination, consider the time you spend at each location, the business investment in each location, and any other relevant facts and circumstances. File state tax return only If your home office qualifies as your principal place of business, you can deduct your daily transportation costs between your home and another work location in the same trade or business. File state tax return only For more information on transportation costs, see Publication 463, Travel, Entertainment, Gift, and Car Expenses. File state tax return only Using the Simplified Method The simplified method is an alternative to the calculation, allocation, and substantiation of actual expenses. File state tax return only In most cases, you will figure your deduction by multiplying $5, the prescribed rate, by the area of your home used for a qualified business use. File state tax return only The area you use to figure your deduction is limited to 300 square feet. File state tax return only See Simplified Amount , later, for information about figuring the amount of the deduction. File state tax return only For more information about the simplified method, see Revenue Procedure 2013-13, 2013-06 I. File state tax return only R. File state tax return only B. File state tax return only 478, available at www. File state tax return only irs. File state tax return only gov/irb/2013-06_IRB/ar09. File state tax return only html. File state tax return only Actual expenses and depreciation of your home. File state tax return only   If you elect to use the simplified method, you cannot deduct any actual expenses for the business except for business expenses that are not related to the use of the home. File state tax return only You also cannot deduct any depreciation (including any additional first-year depreciation) or section 179 expense for the portion of the home that is used for a qualified business use. File state tax return only The depreciation deduction allowable for that portion of the home is deemed to be zero for a year you use the simplified method. File state tax return only If you figure your deduction for business use of the home using actual expenses in a subsequent year, you will have to use the appropriate optional depreciation table for MACRS to figure your depreciation. File state tax return only More information. File state tax return only   For more information about claiming depreciation in a subsequent year, see Revenue Procedure 2013-13, 2013-06 I. File state tax return only R. File state tax return only B. File state tax return only 478, available at www. File state tax return only irs. File state tax return only gov/irb/2013-06_IRB/ar09. File state tax return only html. File state tax return only See Publication 946 for the optional depreciation tables Although you cannot deduct any depreciation or section 179 expense for the portion of your home used for a qualified business use, you may still claim depreciation or the section 179 expense deduction on other assets used in the business (for example, furniture and equipment). File state tax return only Expenses deductible without regard to business use. File state tax return only   When using the simplified method, treat as personal expenses those business expenses related to the use of the home that are deductible without regard to whether there is a qualified business use of the home. File state tax return only These expenses include mortgage interest, real estate taxes, and casualty losses, subject to any limitations. File state tax return only See Where To Deduct , later. File state tax return only If you also rent part of your home, you must still allocate these expenses between rental use and personal use (for this purpose, personal use includes business use reported using the simplified method). File state tax return only No deduction of carryover of actual expenses. File state tax return only   If you used actual expenses to figure your deduction for business use of the home in a prior year and your deduction was limited, you cannot deduct the disallowed amount carried over from the prior year during a year you figure your deduction using the simplified method. File state tax return only Instead, you will continue to carry over the disallowed amount to the next year that you use actual expenses to figure your deduction. File state tax return only Electing the Simplified Method You choose whether or not to figure your deduction using the simplified method each taxable year. File state tax return only Make the election for a home by using the simplified method to figure the deduction for the qualified business use of that home on a timely filed, original federal income tax return. File state tax return only An election for a taxable year, once made, is irrevocable. File state tax return only A change from using the simplified method in one year to actual expenses in a succeeding taxable year, or vice-versa, is not a change in method of accounting and does not require the consent of the Commissioner. File state tax return only Shared use. File state tax return only   If you share your home with someone else who also uses the home in a business that qualifies for this deduction, each of you make your own election. File state tax return only More than one qualified business use. File state tax return only   If you conduct more than one business that qualifies for this deduction in your home, your election to use the simplified method applies to all your qualified business uses of that home. File state tax return only More than one home. File state tax return only   If you used more than one home during the year (for example, you moved during the year), you can elect to use the simplified method for only one of the homes. File state tax return only You must figure the deduction for any other home using actual expenses. File state tax return only Simplified Amount Your deduction for the qualified business use of a home is the sum of each amount you figure for a separate qualified business use of your home. File state tax return only To figure your deduction for the business use of a home using the simplified method, you will need to know the following information for each qualified business use of the home. File state tax return only The allowable area of your home used in conducting the business. File state tax return only If you did not conduct the business for the entire year in the home or the area changed during the year, you will need to know the allowable area you used and the number of days you conducted the business for each month. File state tax return only The gross income from the business use of your home. File state tax return only The amount of the business expenses that are not related to the use of your home. File state tax return only If the qualified business use is for a daycare facility that uses space in your home on a regular (but not exclusive) basis, you will also need to know the percentage of time that part of your home is used for daycare. File state tax return only To figure the amount you can deduct for qualified business use of your home using the simplified method, follow these 3 steps. File state tax return only Multiply the allowable area by $5 (or less than $5 if the qualified business use is for a daycare that uses space in your home on a regular, but not exclusive, basis). File state tax return only See Allowable area and Space used regularly for daycare , later. File state tax return only Subtract the expenses from the business that are not related to the use of the home from the gross income related to the business use of the home. File state tax return only If these expenses are greater than the gross income from the business use of the home, then you cannot take a deduction for this business use of the home. File state tax return only See Gross income limitation , later. File state tax return only Take the smaller of the amounts from (1) and (2). File state tax return only This is the amount you can deduct for this qualified business use of your home using the simplified method. File state tax return only If you are an employee or a partner, or you use your home in your farming business and file Schedule F (Form 1040), you can use the Simplified Method Worksheet, near the end of this publication, to help you figure your deduction. File state tax return only If you use your home in a trade or business and you file Schedule C (Form 1040), you will use the Simplified Method Worksheet in your Instructions for Schedule C to figure your deduction. File state tax return only Allowable area. File state tax return only   In most cases, the allowable area is the smaller of the actual area (in square feet) of your home used in conducting the business and 300 square feet. File state tax return only Your allowable area may be smaller if you conducted the business as a qualified joint venture with your spouse, the area used by the business was shared with another qualified business use, you used the home for the business for only part of the year, or the area used by the business changed during the year. File state tax return only You can use the Area Adjustment Worksheet (for simplified method), near the end of this publication, to help you figure your allowable area for a qualified business use. File state tax return only Area used by a qualified joint venture. File state tax return only   If the qualified business use of the home is also a qualified joint venture, you and your spouse will figure the deduction for the business use separately. File state tax return only Split the actual area used in conducting business between you and your spouse in the same manner you split your other tax attributes. File state tax return only Then, each spouse will figure the allowable area separately. File state tax return only For more information about qualified joint ventures, see Qualified Joint Venture in the Instructions for Schedule C. File state tax return only Shared use. File state tax return only   If you share your home with someone else who uses the home to conduct business that also qualifies for this deduction, you may not include the same square feet to figure your deduction as the other person. File state tax return only You must allocate the shared space between you and the other person in a reasonable manner. File state tax return only Example. File state tax return only Kristin and Lindsey are roommates. File state tax return only Kristin uses 300 square feet of their home for a qualified business use. File state tax return only Lindsey uses 200 square feet of their home for a separate qualified business use. File state tax return only The qualified business uses share 100 square feet. File state tax return only In addition to the portion that they do not share, Kristin and Lindsey can both claim 50 of the 100 square feet or divide the 100 square feet between them in any reasonable manner. File state tax return only If divided evenly, Kristin could claim 250 square feet using the simplified method and Lindsey could claim 150 square feet. File state tax return only More than one qualified business use. File state tax return only   If you conduct more than one business qualifying for the deduction, you are limited to a maximum of 300 square feet for all of the businesses. File state tax return only Allocate the actual square footage used (up to the maximum of 300 square feet) among your qualified business uses in a reasonable manner. File state tax return only However, do not allocate more square feet to a qualified business use than you actually use for that business. File state tax return only Rental use. File state tax return only   The simplified method does not apply to rental use. File state tax return only A rental use that qualifies for the deduction must be figured using actual expenses. File state tax return only If the rental use and a qualified business use share the same area, you will have to allocate the actual area used between the two uses. File state tax return only You cannot use the same area to figure a deduction for the qualified business use as you are using to figure the deduction for the rental use. File state tax return only Part-year use or area changes. File state tax return only   If your qualified business use was for a portion of the taxable year (for example, a seasonal business or a business that begins during the taxable year) or you changed the square footage of your qualified business use, your deduction is limited to the average monthly allowable square footage. File state tax return only You calculate the average monthly allowable square footage by adding the amount of allowable square feet you used in each month and dividing the sum by 12. File state tax return only When determining the average monthly allowable square footage, you cannot take more than 300 square feet into account for any one month. File state tax return only Additionally, if your qualified business use was less than 15 days in a month, you must use -0- for that month. File state tax return only Example 1. File state tax return only Andy files his federal income tax return on a calendar year basis. File state tax return only On July 20, he began using 420 square feet of his home for a qualified business use. File state tax return only He continued to use the 420 square feet until the end of the year. File state tax return only His average monthly allowable square footage is 125 square feet, which is figured using 300 square feet for each month August through December divided by the number of months in the taxable year ((0 + 0 + 0 + 0 + 0 + 0 + 0 + 300 + 300 + 300 + 300 + 300)/12). File state tax return only Example 2. File state tax return only Amy files her federal income tax return on a calendar year basis. File state tax return only On April 20, she began using 100 square feet of her home for a qualified business use. File state tax return only On August 5, she expanded the area of her qualified use to 330 square feet. File state tax return only Amy continued to use the 330 square feet until the end of the year. File state tax return only Her average monthly allowable square footage is 150 square feet, which is figured using 100 square feet for May through July and 300 square feet for August through December divided by the number of months in the taxable year ((0 + 0 + 0 + 0 + 100 + 100 +100 + 300 + 300 + 300 + 300 + 300)/12). File state tax return only Gross income limitation. File state tax return only   Your deduction for business use of the home is limited to an amount equal to the gross income derived from the qualified business use of the home reduced by the business deductions that are unrelated to the use of your home. File state tax return only If the business deductions that are unrelated to the use of your home are greater than the gross income derived from the qualified business use of your home, then you cannot take a deduction for this qualified business use of your home. File state tax return only Business expenses not related to use of the home. File state tax return only   These expenses relate to the business activity in the home, but not to the use of the home itself. File state tax return only You can still deduct business expenses that are unrelated to the use of the home. File state tax return only See Where To Deduct , later. File state tax return only Examples of business expenses that are unrelated to the use of the home are advertising, wages, supplies, dues, and depreciation for equipment. File state tax return only Space used regularly for daycare. File state tax return only   If you do not use the area of your home exclusively for daycare, you must reduce the prescribed rate (maximum $5 per square foot) before figuring your deduction. File state tax return only The reduced rate will equal the prescribed rate times a fraction. File state tax return only The numerator of the fraction is the number of hours that the space was used during the year for daycare and the denominator is the total number of hours during the year that the space was available for all uses. File state tax return only You can use the Daycare Facility Worksheet (for simplified method), near the end of this publication, to help you figure the reduced rate. File state tax return only    If you used at least 300 square feet for daycare regularly and exclusively during the year, then you do not need to reduce the prescribed rate or complete the Daycare Facility Worksheet. File state tax return only Daycare Facility If you use space in your home on a regular basis for providing daycare, you may be able to claim a deduction for that part of your home even if you use the same space for nonbusiness purposes. File state tax return only To qualify for this exception to the exclusive use rule, you must meet both of the following requirements. File state tax return only You must be in the trade or business of providing daycare for children, persons age 65 or older, or persons who are physically or mentally unable to care for themselves. File state tax return only You must have applied for, been granted, or be exempt from having, a license, certification, registration, or approval as a daycare center or as a family or group daycare home under state law. File state tax return only You do not meet this requirement if your application was rejected or your license or other authorization was revoked. File state tax return only Figuring the deduction. File state tax return only   If you elect to use the simplified method for your home, figure your deduction as described earlier in Using the Simplified Method under Figuring the Deduction. File state tax return only    If you are figuring your deduction using actual expenses and you regularly use part of your home for daycare, figure what part is used for daycare, as explained in Business Percentage , earlier, under Figuring the Deduction. File state tax return only If you also use that part exclusively for daycare, deduct all the allocable expenses, subject to the deduction limit, as explained earlier. File state tax return only   If the use of part of your home as a daycare facility is regular, but not exclusive, you must figure the percentage of time that part of your home is used for daycare. File state tax return only A room that is available for use throughout each business day and that you regularly use in your business is considered to be used for daycare throughout each business day. File state tax return only You do not have to keep records to show the specific hours the area was used for business. File state tax return only You can use the area occasionally for personal reasons. File state tax return only However, a room you use only occasionally for business does not qualify for the deduction. File state tax return only To find the percentage of time you actually use your home for business, compare the total time used for business to the total time that part of your home can be used for all purposes. File state tax return only You can compare the hours of business use in a week with the number of hours in a week (168). File state tax return only Or you can compare the hours of business use for the year with the number of hours in the year (8,760 in 2013). File state tax return only If you started or stopped using your home for daycare in 2013, you must prorate the number of hours based on the number of days the home was available for daycare. File state tax return only Example 1. File state tax return only Mary Lake used her basement to operate a daycare business for children. File state tax return only She figures the business percentage of the basement as follows. File state tax return only Square footage of the basement Square footage of her home = 1,600 3,200 = 50%           She used the basement for daycare an average of 12 hours a day, 5 days a week, for 50 weeks a year. File state tax return only During the other 12 hours a day, the family could use the basement. File state tax return only She figures the percentage of time the basement was used for daycare as follows. File state tax return only Number of hours used for daycare (12 x 5 x 50) Total number of hours in the year (24 x 365) = 3,000 8,760 = 34. File state tax return only 25%           Mary can deduct 34. File state tax return only 25% of any direct expenses for the basement. File state tax return only However, because her indirect expenses are for the entire house, she can deduct only 17. File state tax return only 13% of the indirect expenses. File state tax return only She figures the percentage for her indirect expenses as follows. File state tax return only Business percentage of the basement 50% Multiplied by: Percentage of time used for daycare × 34. File state tax return only 25% Percentage for indirect expenses 17. File state tax return only 13% Mary completes Form 8829, Part I, figuring the percentage of her home used for business, including the percentage of time the basement was used. File state tax return only In Part II, Mary figures her deductible expenses. File state tax return only She uses the following information to complete Part II. File state tax return only Gross income from her daycare business $50,000 Expenses not related to the business use of the home $25,000 Tentative profit $25,000 Rent $8,400 Utilities $850 Painting the basement $500 Mary enters her tentative profit, $25,000, on line 8. File state tax return only (This figure is the same as the amount on line 29 of her Schedule C (Form 1040). File state tax return only ) The expenses she paid for rent and utilities relate to her entire home. File state tax return only Therefore, she enters the amount paid for rent on line 18, column (b), and the amount paid for utilities on line 20, column (b). File state tax return only She shows the total of these expenses on line 22, column (b). File state tax return only For line 23, she multiplies the amount on line 22, column (b) by the percentage on line 7 and enters the result, $1,585. File state tax return only Mary paid $500 to have the basement painted. File state tax return only The painting is a direct expense. File state tax return only However, because she did not use the basement exclusively for daycare, she must multiply $500 by the percentage of time the basement was used for daycare (34. File state tax return only 25% – line 6). File state tax return only She enters $171 (34. File state tax return only 25% × $500) on line 19, column (a). File state tax return only She adds line 22, column (a), and line 23 and enters $1,756 ($171 + $1,585) on line 25. File state tax return only This is less than her deduction limit (line 15), so she can deduct the entire amount. File state tax return only She follows the instructions to complete the rest of Part II and enters $1,756 on lines 33 and 35. File state tax return only She then carries the $1,756 to line 30 of her Schedule C (Form 1040). File state tax return only Example 2. File state tax return only Assume the same facts as in Example 1 except that Mary also has another room that was available each business day for children to take naps in. File state tax return only Although she did not keep a record of the number of hours the room was actually used for naps, it was used for part of each business day. File state tax return only Since the room was available for business use during regular operating hours each business day and was used regularly in the business, it is considered used for daycare throughout each business day. File state tax return only The basement and room are 60% of the total area of her home. File state tax return only In figuring her expenses, 34. File state tax return only 25% of any direct expenses for the basement and room are deductible. File state tax return only In addition, 20. File state tax return only 55% (34. File state tax return only 25% × 60%) of her indirect expenses are deductible. File state tax return only Example 3. File state tax return only Assume the same facts as in Example 1 except that Mary stopped using her home for a daycare facility on June 24, 2013. File state tax return only She used the basement for daycare an average of 12 hours a day, 5 days a week, but for only 25 weeks of the year. File state tax return only During the other 12 hours a day, the family could still use the basement. File state tax return only She figures the percentage of time the basement was used for business as follows. File state tax return only Number of hours used for daycare (12 x 5 x 25) Total number of hours during period used (24 x 175) = 1,500 4,200 = 35. File state tax return only 71%           Mary can deduct 35. File state tax return only 71% of any direct expenses for the basement. File state tax return only However, because her indirect expenses are for the entire house, she can deduct only 17. File state tax return only 86% of the indirect expenses. File state tax return only She figures the percentage for her indirect expenses as follows. File state tax return only Business percentage of the basement 50% Multiplied by: Percentage of time used for daycare × 35. File state tax return only 71% Percentage for indirect expenses 17. File state tax return only 86% Meals. File state tax return only   If you provide food for your daycare recipients, do not include the expense as a cost of using your home for business. File state tax return only Claim it as a separate deduction on your Schedule C (Form 1040). File state tax return only You can never deduct the cost of food consumed by you or your family. File state tax return only You can deduct as a business expense 100% of the actual cost of food consumed by your daycare recipients (see Standard meal and snack rates , later, for an optional method for eligible children) and generally only 50% of the cost of food consumed by your employees. File state tax return only However, you can deduct 100% of the cost of food consumed by your employees if its value can be excluded from their wages as a de minimis fringe benefit. File state tax return only For more information on meals that meet these requirements, see Meals in chapter 2 of Publication 15-B, Employer's Tax Guide to Fringe Benefits. File state tax return only   If you deduct the actual cost of food for your daycare business, keep a separate record (with receipts) of your family's food costs. File state tax return only   Reimbursements you receive from a sponsor under the Child and Adult Care Food Program of the Department of Agriculture are taxable only to the extent they exceed your expenses for food for eligible children. File state tax return only If your reimbursements are more than your expenses for food, show the difference as income in Part I of Schedule C (Form 1040). File state tax return only If your food expenses are greater than the reimbursements, show the difference as an expense in Part V of Schedule C (Form 1040). File state tax return only Do not include payments or expenses for your own children if they are eligible for the program. File state tax return only Follow this procedure even if you receive a Form 1099-MISC, Miscellaneous Income, reporting a payment from the sponsor. File state tax return only Standard meal and snack rates. File state tax return only   If you qualify as a family daycare provider, you can use the standard meal and snack rates, instead of actual costs, to compute the deductible cost of meals and snacks provided to eligible children. File state tax return only For these purposes: A family daycare provider is a person engaged in the business of providing family daycare. File state tax return only Family daycare is childcare provided to eligible children in the home of the family daycare provider. File state tax return only The care must be non-medical, not involve a transfer of legal custody, and generally last less than 24 hours each day. File state tax return only Eligible children are minor children receiving family daycare in the home of the family daycare provider. File state tax return only Eligible children do not include children who are full-time or part-time residents in the home where the childcare is provided or children whose parents or guardians are residents of the same home. File state tax return only Eligible children do not include children who receive daycare services for personal reasons of the provider. File state tax return only For example, if a provider provides daycare services for a relative as a favor to that relative, that child is not an eligible child. File state tax return only   You can compute the deductible cost of each meal and snack you actually purchased and served to an eligible child during the time period you provided family daycare using the standard meal and snack rates shown in Table 3, later. File state tax return only You can use the standard meal and snack rates for a maximum of one breakfast, one lunch, one dinner, and three snacks per eligible child per day. File state tax return only If you receive reimbursement for a particular meal or snack, you can deduct only the portion of the applicable standard meal or snack rate that is more than the amount of the reimbursement. File state tax return only   You can use either the standard meal and snack rates or actual costs to calculate the deductible cost of food provided to eligible children in the family daycare for any particular tax year. File state tax return only If you choose to use the standard meal and snack rates for a particular tax year, you must use the rates for all your deductible food costs for eligible children during that tax year. File state tax return only However, if you use the standard meal and snack rates in any tax year, you can use actual costs to compute the deductible cost of food in any other tax year. File state tax return only   If you use the standard meal and snack rates, you must maintain records to substantiate the computation of the total amount deducted for the cost of food provided to eligible children. File state tax return only The records kept should include the name of each child, dates and hours of attendance in the daycare, and the type and quantity of meals and snacks served. File state tax return only This information can be recorded in a log similar to the one shown in Exhibit A, near the end of this publication. File state tax return only   The standard meal and snack rates include beverages, but do not include non-food supplies used for food preparation, service, or storage, such as containers, paper products, or utensils. File state tax return only These expenses can be claimed as a separate deduction on your Schedule C (Form 1040). File state tax return only     Table 3. File state tax return only Standard Meal and Snack Rates1 Location of Family Daycare Provider Breakfast Lunch Dinner Snack States other than Alaska an
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Contact My Local Office in Mississippi

Face-to-face Tax Help

IRS Taxpayer Assistance Centers (TACs) are your source for personal tax help when you believe your tax issue can only be handled face-to-face. No appointment is necessary.

Keep in mind, many questions can be resolved online without waiting in line. Through IRS.gov you can:
• Set up a payment plan.
• Get a transcript of your tax return.
• Make a payment.
• Check on your refund.
• Find answers to many of your tax questions.

We are now referring all requests for tax return preparation services to other available resources. You can take advantage of free tax preparation through Free File, Free File Fillable Forms or through a volunteer site in your community. To find the nearest volunteer site location or to get more information about Free File, go to the top of the page and enter “Free Tax Help” in the Search box.

If you have a tax account issues and feel that it requires talking with someone face-to-face, visit your local TAC.

Caution:  Many of our offices are located in Federal Office Buildings. These buildings may not allow visitors to bring in cell phones with camera capabilities.

Multilingual assistance is available in every office. Hours of operation are subject to change.

Before visiting your local office click on "Services Provided" in the chart below to see what services are available. Services are limited and not all services are available at every TAC office and may vary from site to site. You can get these services on a walk-in basis.

City  Street Address  Days/Hours of Service  Telephone* 
Clarksdale  Third & Sharkey Ave.
Clarksdale, MS 38614 

Tuesdays 9:30 a.m.- 2:30 p.m.
(Closed for lunch 12:00 noon - 1:00 p.m.)


Services Provided

(662) 627-9101
Columbus  2209 Fifth St. N.
Columbus, MS 39705 

Monday-Friday - 8:30 a.m.- 4:30 p.m.
(Closed for lunch 12:00 noon - 1:00 p.m.)


Services Provided

(662) 328-6957
Gulfport  11309 Old Highway 49
Gulfport, MS 39503 

Monday-Friday - 8:30a.m - 4:30 p.m.
(Closed for lunch 12:00 noon - 1:00 p.m.)

 

Services Provided

(228) 831-3320
Hattiesburg  701 North Main St.
Hattiesburg, MS 39401 

Monday-Friday - 8:30 a.m.- 4:30 p.m.
(Closed for lunch 12:00 noon. - 1:00 p.m.)


Services Provided

(601) 264-7991
Jackson  100 W. Capital St.
Jackson, MS 39269 

Monday-Friday - 8:30 a.m.- 4:30 p.m.

 

**This office will be open until 6:00 p.m. on 4/14 & 4/15**


Services Provided

(601) 292-4711
Tupelo  111 E. Troy Street
Tupelo, MS 38804 

Monday-Friday - 8:30 a.m.- 4:30 p.m.
(Closed for lunch 11:00 a.m. - 12:00 noon)

 

**This office will be open until 6:00 p.m. on 4/14 & 4/15**

 

Services Provided

(662) 842-5870

* Note: The phone numbers in the chart above are not toll-free for all locations. When you call, you will reach a recorded business message with information about office hours, locations and services provided in that office. If face-to-face assistance is not a priority for you, you may also get help with IRS letters or resolve tax account issues by phone, toll free at 1-800-829-1040 (individuals) or 1-800-829-4933 (businesses).

For information on where to file your tax return please see Where to File Addresses.

The Taxpayer Advocate Service: Call (601) 292-4800 in Jackson or 1-877-777-4778 elsewhere, or see  Publication 1546, The Taxpayer Advocate Service of the IRS.

For further information, see  Tax Topic 104

Partnerships

IRS and organizations all over the country are partnering to assist taxpayers. Through these partnerships, organizations are also achieving their own goals. These mutually beneficial partnerships are strengthening outreach efforts and bringing education and assistance to millions.

For more information about these programs for individuals and families, contact the Stakeholder Partnerships, Education and Communication Office at:

Internal Revenue Service
100 W. Capitol Street, Stop 50
Jackson, MS 39269

For more information about these programs for businesses, your local Stakeholder Liaison office establishes relationships with organizations representing small business and self-employed taxpayers. They provide information about the policies, practices and procedures the IRS uses to ensure compliance with the tax laws. To establish a relationship with us, use this list to find a contact in your state:

Stakeholder Liaison (SL) Phone Numbers for Organizations Representing Small Businesses and Self-employed Taxpayers.

Page Last Reviewed or Updated: 28-Mar-2014

The File State Tax Return Only

File state tax return only Publication 4492 - Main Contents Table of Contents DefinitionsHurricane Katrina Disaster Area Katrina Covered Disaster Area Gulf Opportunity (GO) Zone (Core Disaster Area) Hurricane Rita Disaster Area (Rita Covered Disaster Area) Rita GO Zone Hurricane Wilma Disaster Area Wilma Covered Disaster Area Wilma GO Zone Extended Tax Deadlines Charitable Giving IncentivesTemporary Suspension of Limits on Charitable Contributions Standard Mileage Rate for Charitable Use of Vehicles Mileage Reimbursements to Charitable Volunteers Charitable Deduction for Contributions of Food Inventory Charitable Deduction for Contributions of Book Inventories to Public Schools Casualty and Theft LossesTime limit for making election. File state tax return only Replacement Period for Nonrecognition of Gain Net Operating Losses IRAs and Other Retirement PlansDefinitions Taxation of Qualified Hurricane Distributions Repayment of Qualified Hurricane Distributions Repayment of Qualified Distributions for the Purchase or Construction of a Main Home Loans From Qualified Plans Additional Tax Relief for IndividualsEarned Income Credit and Child Tax Credit Additional Exemption for Housing Individuals Displaced by Hurricane Katrina Education Credits Recapture of Federal Mortgage Subsidy Exclusion of Certain Cancellations of Indebtedness by Reason of Hurricane Katrina Tax Relief for Temporary Relocation Additional Tax Relief for BusinessesSpecial Depreciation Allowance Increased Section 179 Deduction Work Opportunity Credit Employee Retention Credit Hurricane Katrina Housing Credit Reforestation Costs Demolition and Clean-up Costs Increase in Rehabilitation Tax Credit Request for Copy or Transcript of Tax Return How To Get Tax Help Definitions The following definitions are used throughout this publication. File state tax return only Hurricane Katrina Disaster Area The Hurricane Katrina disaster area covers the area for which the President declared a major disaster before September 14, 2005, because of Hurricane Katrina. File state tax return only The Hurricane Katrina disaster area covers the entire states of Alabama, Florida, Louisiana, and Mississippi. File state tax return only Katrina Covered Disaster Area A portion of the Hurricane Katrina disaster area has been designated by the IRS as a covered disaster area. File state tax return only The Katrina covered disaster area covers the following areas in four states. File state tax return only Alabama. File state tax return only   The counties of Baldwin, Bibb, Choctaw, Clarke, Colbert, Cullman, Greene, Hale, Jefferson, Lamar, Lauderdale, Marengo, Marion, Mobile, Monroe, Perry, Pickens, Sumter, Tuscaloosa, Washington, Wilcox, and Winston. File state tax return only Florida. File state tax return only   The counties of Bay, Broward, Collier, Escambia, Franklin, Gulf, Miami-Dade, Monroe, Okaloosa, Santa Rosa, and Walton. File state tax return only Louisiana. File state tax return only   All parishes. File state tax return only Mississippi. File state tax return only   All counties. File state tax return only Gulf Opportunity (GO) Zone (Core Disaster Area) The GO Zone (also called the core disaster area) covers the portion of the Hurricane Katrina disaster area determined by the Federal Emergency Management Agency (FEMA) to be eligible for either individual only or both individual and public assistance from the Federal Government. File state tax return only The GO Zone covers the following areas in three states. File state tax return only Alabama. File state tax return only   The counties of Baldwin, Choctaw, Clarke, Greene, Hale, Marengo, Mobile, Pickens, Sumter, Tuscaloosa, and Washington. File state tax return only Louisiana. File state tax return only   The parishes of Acadia, Ascension, Assumption, Calcasieu, Cameron, East Baton Rouge, East Feliciana, Iberia, Iberville, Jefferson, Jefferson Davis, Lafayette, Lafourche, Livingston, Orleans, Plaquemines, Pointe Coupee, St. File state tax return only Bernard, St. File state tax return only Charles, St. File state tax return only Helena, St. File state tax return only James, St. File state tax return only John the Baptist, St. File state tax return only Martin, St. File state tax return only Mary, St. File state tax return only Tammany, Tangipahoa, Terrebonne, Vermilion, Washington, West Baton Rouge, and West Feliciana. File state tax return only Mississippi. File state tax return only   The counties of Adams, Amite, Attala, Choctaw, Claiborne, Clarke, Copiah, Covington, Forrest, Franklin, George, Greene, Hancock, Harrison, Hinds, Holmes, Humphreys, Jackson, Jasper, Jefferson, Jefferson Davis, Jones, Kemper, Lamar, Lauderdale, Lawrence, Leake, Lincoln, Lowndes, Madison, Marion, Neshoba, Newton, Noxubee, Oktibbeha, Pearl River, Perry, Pike, Rankin, Scott, Simpson, Smith, Stone, Walthall, Warren, Wayne, Wilkinson, Winston, and Yazoo. File state tax return only Hurricane Rita Disaster Area (Rita Covered Disaster Area) The Hurricane Rita disaster area (also designated by the IRS as the Rita covered disaster area) covers the area for which the President declared a major disaster before October 6, 2005, because of Hurricane Rita. File state tax return only This area covers the entire states of Louisiana and Texas. File state tax return only Rita GO Zone The Rita GO Zone covers the portion of the Hurricane Rita disaster area determined by FEMA to be eligible for either individual only or both individual and public assistance from the Federal Government. File state tax return only The Rita GO Zone covers the following areas in two states. File state tax return only Louisiana. File state tax return only   The parishes of Acadia, Allen, Ascension, Beauregard, Calcasieu, Cameron, Evangeline, Iberia, Jefferson, Jefferson Davis, Lafayette, Lafourche, Livingston, Plaquemines, Sabine, St. File state tax return only Landry, St. File state tax return only Martin, St. File state tax return only Mary, St. File state tax return only Tammany, Terrebonne, Vermilion, Vernon, and West Baton Rouge. File state tax return only Texas. File state tax return only   The counties of Angelina, Brazoria, Chambers, Fort Bend, Galveston, Hardin, Harris, Jasper, Jefferson, Liberty, Montgomery, Nacogdoches, Newton, Orange, Polk, Sabine, San Augustine, San Jacinto, Shelby, Trinity, Tyler, and Walker. File state tax return only Hurricane Wilma Disaster Area The Hurricane Wilma disaster area covers the area for which the President declared a major disaster before November 14, 2005, because of Hurricane Wilma. File state tax return only The Hurricane Wilma disaster area covers the entire state of Florida. File state tax return only Wilma Covered Disaster Area A portion of the Hurricane Wilma disaster area has been designated by the IRS as a covered disaster area. File state tax return only The Wilma covered disaster area covers the following counties. File state tax return only Florida. File state tax return only   Brevard, Broward, Charlotte, Collier, DeSoto, Glades, Hardee, Hendry, Highlands, Indian River, Lee, Martin, Miami-Dade, Monroe, Okeechobee, Osceola, Palm Beach, Polk, St. File state tax return only Lucie, and Sarasota. File state tax return only Wilma GO Zone The Wilma GO Zone covers the portion of the Hurricane Wilma disaster area determined by FEMA to be eligible for either individual only or both individual and public assistance from the Federal Government. File state tax return only The Wilma GO Zone covers the following counties. File state tax return only Florida. File state tax return only   Brevard, Broward, Collier, Glades, Hendry, Indian River, Lee, Martin, Miami-Dade, Monroe, Okeechobee, Palm Beach, and St. File state tax return only Lucie. File state tax return only Extended Tax Deadlines The IRS has extended deadlines that apply to filing returns, paying taxes, and performing certain other time-sensitive acts for certain taxpayers affected by Hurricane Katrina, Rita, or Wilma, until February 28, 2006. File state tax return only The extension applies to deadlines (either an original or extended due date) that occur during the following periods. File state tax return only After August 28, 2005 (August 23, 2005, for Florida affected taxpayers), and before February 28, 2006, for taxpayers affected by Hurricane Katrina. File state tax return only After September 22, 2005, and before February 28, 2006, for taxpayers affected by Hurricane Rita. File state tax return only After October 22, 2005, and before February 28, 2006, for taxpayers affected by Hurricane Wilma. File state tax return only Affected taxpayer. File state tax return only   The following taxpayers are eligible for the extension. File state tax return only Any individual whose main home is located in a covered disaster area. File state tax return only Any business entity or sole proprietor whose principal place of business is located in a covered disaster area. File state tax return only Any individual, business entity, or sole proprietor whose records needed to meet a postponed deadline are maintained or whose tax professional's office is in a covered disaster area. File state tax return only The main home or principal place of business does not have to be located in the covered area. File state tax return only Any individual visiting a county or parish in the Hurricane Katrina or Hurricane Rita covered disaster area that was injured or killed (and the estate of an individual killed) as a result of the hurricane or its aftermath. File state tax return only Any estate or trust whose tax records needed to meet a filing or payment deadline are maintained in a covered disaster area. File state tax return only Generally, any individual who is a worker assisting in the relief activities in a covered disaster area. File state tax return only However, a relief worker assisting in the Wilma covered disaster area is not an affected taxpayer unless the worker is affiliated with a recognized government or philanthropic organization assisting in the relief activities. File state tax return only The spouse of an affected taxpayer, solely with regard to a joint income tax return with that taxpayer. File state tax return only   To ensure correct processing, affected taxpayers should write the assigned disaster designation (for example, “Hurricane Katrina”) in red ink at the top of any forms or documents filed with the IRS. File state tax return only Affected taxpayers can also identify themselves to the IRS or ask hurricane-related questions by calling the special IRS disaster hotline at 1-866-562-5227. File state tax return only Acts extended. File state tax return only   Deadlines for performing the following acts are extended. File state tax return only Filing any return of income, estate, gift, generation-skipping transfer, excise, or employment tax. File state tax return only Paying any income, estate, gift, generation-skipping transfer, excise, or employment tax. File state tax return only This includes making estimated tax payments. File state tax return only Making certain contributions, distributions, recharacterizing contributions, or making a rollover to or from a qualified retirement plan. File state tax return only Filing certain petitions with the Tax Court. File state tax return only Filing a claim for credit or refund of any tax. File state tax return only Bringing suit upon a claim for credit or refund. File state tax return only Certain other acts described in Revenue Procedure 2005-27. File state tax return only You can find Revenue Procedure 2005-27 on page 1050 of Internal Revenue Bulletin 2005-20 at www. File state tax return only irs. File state tax return only gov/pub/irs-irbs/irb05-20. File state tax return only pdf. File state tax return only Forgiveness of interest and penalties. File state tax return only   The IRS may forgive the interest and penalties on any underpaid income, estate, gift, employment, or excise tax for the length of any extension. File state tax return only Charitable Giving Incentives Temporary Suspension of Limits on Charitable Contributions Individuals. File state tax return only   Qualified contributions are not subject to the overall limit on itemized deductions or the 50% adjusted gross income (AGI) limit. File state tax return only A qualified contribution is a charitable contribution paid in cash or by check after August 27, 2005, and before January 1, 2006, to a 50% limit organization (other than certain private foundations described in section 509(a)(3)) if you make an election to have the 50% limit not apply to these contributions. File state tax return only   Your deduction for qualified contributions is limited to your AGI minus your deduction for all other charitable contributions. File state tax return only You can carry over any contributions you are not able to deduct for 2005 because of this limit. File state tax return only In 2006, treat the carryover of your unused qualified contributions as a carryover of contributions subject to the 50% limit. File state tax return only Exception. File state tax return only   Qualified contributions do not include a contribution to a segregated fund or account for which you (or any person you appoint or designate) have or expect to have advisory privileges with respect to distributions or investments based on your contribution. File state tax return only Corporations. File state tax return only   A corporation may elect to deduct qualified cash contributions without regard to the 10% taxable income limit if the contributions were made after August 27, 2005, and before January 1, 2006, to a qualified charitable organization (other than certain private foundations described in section 509(a)(3)), for Hurricane Katrina, Rita, or Wilma relief efforts. File state tax return only The corporation's deduction for these qualified contributions is limited to 100% of taxable income (as modified for the 10% limit) minus the corporation's deduction for all other charitable contributions. File state tax return only Any qualified contributions over this limit can be carried over to the next 5 years, subject to the 10% limit. File state tax return only Partners and shareholders. File state tax return only   Each partner in a partnership and each shareholder in an S corporation makes a separate election to have the appropriate limit not apply. File state tax return only More information. File state tax return only   For more information, see Publication 526 or Publication 542, Corporations. File state tax return only Publication 526 includes a worksheet you can use to figure your deduction if any limits apply to your charitable contributions. File state tax return only Standard Mileage Rate for Charitable Use of Vehicles The following are special standard mileage rates in effect in 2005 and 2006 for the cost of operating your automobile for providing charitable services solely related to Hurricane Katrina. File state tax return only 29 cents per mile for the period August 25 through August 31, 2005. File state tax return only 34 cents per mile for the period September 1 through December 31, 2005. File state tax return only 32 cents per mile for the period January 1 through December 31, 2006. File state tax return only Mileage Reimbursements to Charitable Volunteers You can exclude from income amounts you receive as mileage reimbursements for the use of a private passenger automobile for the benefit of a qualified charitable organization in providing relief related to Hurricane Katrina during the period beginning on August 25, 2005, and ending on December 31, 2006. File state tax return only You cannot claim a deduction or credit for amounts you receive as a mileage reimbursement. File state tax return only You must keep records of miles driven, time, place (or use), and purpose of the mileage. File state tax return only The amount you can exclude from income cannot exceed the standard business mileage rate (shown below) for expenses incurred during the following periods. File state tax return only 40. File state tax return only 5 cents per mile for the period August 25 through August 31, 2005. File state tax return only 48. File state tax return only 5 cents per mile for the period September 1 through December 31, 2005. File state tax return only 44. File state tax return only 5 cents per mile for the period January 1 through December 31, 2006. File state tax return only Charitable Deduction for Contributions of Food Inventory Any taxpayer engaged in a trade or business is eligible to claim a deduction for a contribution of “apparently wholesome food” inventory to a qualified charitable organization described in section 501(c)(3) (except for private nonoperating foundations) after August 27, 2005, and before January 1, 2006. File state tax return only “Apparently wholesome food” is food that meets all quality and labeling standards imposed by federal, state, and local laws and regulations even though the food may not be readily marketable due to appearance, age, freshness, grade, size, surplus, or other conditions. File state tax return only The deduction is equal to the lesser of: The basis of the donated food plus one-half of the gain that would have been realized if the donated food had been sold at fair market value on the date of the donation, or Two times the basis of the donated food. File state tax return only The taxpayer must receive written certification from the donee stating: The donated food is related to the purpose or function of the donee's basis for exemption under section 501(c)(3) and is to be used solely for the care of the ill, the needy, or infants; and The food was not given in exchange for money, other property, or services. File state tax return only For a taxpayer other than a C corporation, the deduction is limited to 10% of the taxpayer's total net income from all trades or businesses from which the food contributions were made (figured without regard to the deduction for charitable contributions). File state tax return only For example, if a taxpayer is a sole proprietor, a shareholder in an S corporation, and a partner in a partnership, and each made a contribution of apparently wholesome food inventory, the taxpayer's deduction is limited to 10% of the taxpayer's total net income from the sole proprietorship, S corporation, and partnership (figured without regard to the deduction for charitable contributions). File state tax return only Charitable Deduction for Contributions of Book Inventories to Public Schools A corporation (other than an S corporation) may be allowed a charitable deduction for a qualified book contribution made after August 27, 2005, and before January 1, 2006, to a public school that: Provides elementary or secondary education (kindergarten through grade 12), and Normally maintains a regular faculty and curriculum and has a regular enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on. File state tax return only . File state tax return only The deduction is equal to the lesser of: The basis of the donated books plus one-half of the gain that would have been realized if the donated books had been sold at fair market value on the date of the donation, or Two times the basis of the donated books. File state tax return only The corporation must receive written certification from the school stating that the donated books are suitable for the organization's educational programs and will be used for such programs. File state tax return only Casualty and Theft Losses The following paragraphs explain changes to casualty and theft losses that were caused by Hurricane Katrina, Rita, or Wilma. File state tax return only For more information, see Publication 547. File state tax return only Limits on personal casualty or theft losses caused by Hurricane Katrina, Rita, or Wilma. File state tax return only   The following losses to personal use property are not subject to the $100 or 10% of adjusted gross income limits. File state tax return only Losses that arose in the Hurricane Katrina disaster area after August 24, 2005, and that were caused by Hurricane Katrina. File state tax return only Losses that arose in the Hurricane Rita disaster area after September 22, 2005, and that were caused by Hurricane Rita. File state tax return only Losses that arose in the Hurricane Wilma disaster area after October 22, 2005, and that were caused by Hurricane Wilma. File state tax return only Qualifying losses include losses from flooding or other casualty, and from theft, that arose in the hurricane disaster area and that were caused by the hurricane. File state tax return only Special instructions for individuals who elect to claim a Hurricane Katrina, Rita, or Wilma casualty or theft loss for 2004. File state tax return only   Casualty and theft losses are generally deductible only in the year the casualty occurred or theft was discovered. File state tax return only However, Hurricane Katrina, Rita, and Wilma are Presidentially declared disasters. File state tax return only Therefore, you can elect to deduct losses from these hurricanes on your tax return for the previous year. File state tax return only If you make this election, use the following additional instructions to complete your forms. File state tax return only   Individuals filing or amending their 2004 tax return whose only casualty or theft losses to personal use property claimed on that return were caused by Hurricane Katrina, Rita, or Wilma should write “Hurricane Katrina,” “Hurricane Rita,” or “Hurricane Wilma” at the top of Form 1040 or 1040X. File state tax return only They must also complete and attach the 2004 Form 4684 and write “Hurricane Katrina,”“Hurricane Rita,” or “Hurricane Wilma” on the dotted line next to line 11 and enter -0- on lines 11 and 17. File state tax return only   Individuals filing or amending their 2004 tax return who also have casualty or theft losses to personal use property not related to Hurricane Katrina, Rita, or Wilma should disregard the caution directing taxpayers to use only one Form 4684, located above line 13, and complete lines 13 through 18 on two Forms 4684. File state tax return only The Form 1040 or 1040X and the first Form 4684 should be prepared as explained above for Hurricane Katrina, Rita, or Wilma losses only. File state tax return only The second Form 4684 should be prepared in the normal manner for all gains and non-Hurricane Katrina, Rita or Wilma losses. File state tax return only If both Forms 4684 have a loss on line 18, they should carry the combined losses from that line to Schedule A (Form 1040), line 19. File state tax return only If there is a gain on line 15 of the second Form 4684, disregard the instruction to enter it on Schedule D (Form 1040), and instead enter on Schedule A (Form 1040), line 19, the excess of the loss from the first Form 4684 over the gain on line 15 of the second Form 4684. File state tax return only , Time limit for making election. File state tax return only   You must make this election to claim your casualty or theft loss in 2004 by the later of the following dates. File state tax return only The due date (without extensions) for filing your 2005 income tax return. File state tax return only The due date (with extensions) for filing your 2004 income tax return. File state tax return only Example. File state tax return only If you are a calendar year individual taxpayer, you have until April 17, 2006, to amend your 2004 tax return to claim a casualty or theft loss that occurred during 2005. File state tax return only Replacement Period for Nonrecognition of Gain Generally, an involuntary conversion occurs when property is damaged, destroyed, stolen, seized, requisitioned, or condemned, and you receive other property or money in payment, such as insurance or a condemnation award. File state tax return only Generally, you do not have to report a gain (if any) if you replace the property within 2 years (4 years for a main home in a Presidentially declared disaster area). File state tax return only However, for property that was involuntarily converted after August 24, 2005, as a result of Hurricane Katrina, a 5-year replacement period applies if substantially all of the use of the replacement property is in the Hurricane Katrina disaster area. File state tax return only For more information, see the Instructions for Form 4684. File state tax return only Net Operating Losses Qualified GO Zone loss. File state tax return only   Generally, you can carry a net operating loss (NOL) back to the 2 tax years before the NOL year. File state tax return only However, the portion of an NOL that is a qualified GO Zone loss can be carried back to the 5 tax years before the NOL year. File state tax return only In addition, the 90% limit on the alternative tax NOL deduction (ATNOLD) does not apply to such portion of the ATNOLD. File state tax return only   A qualified GO Zone loss is the smaller of: The excess of the NOL for the year over the specified liability loss for the year to which a 10-year carryback applies, or The total of the following deductions (to the extent they are taken into account in computing the NOL for the tax year): Qualified GO Zone casualty loss (as defined below), Moving expenses paid or incurred after August 27, 2005, and before January 1, 2008, for the employment of an individual whose main home was in the GO Zone before August 28, 2005, who was unable to remain in that home because of Hurricane Katrina, and whose main job location (after the move) is in the GO Zone, Temporary housing expenses paid or incurred after August 27, 2005, and before January 1, 2008, to house employees of the taxpayer whose main job location is in the GO Zone, Depreciation or amortization allowable for any qualified GO Zone property (even if you elected not to claim the special GO Zone depreciation allowance for such property) for the year placed in service, and Repair expenses (including expenses for the removal of debris) paid or incurred after August 27, 2005, and before January 1, 2008, for any damage from Hurricane Katrina to property located in the GO Zone. File state tax return only Qualified GO Zone casualty loss. File state tax return only   A qualified GO Zone casualty loss is any deductible section 1231 loss of property located in the GO Zone if the loss was caused by Hurricane Katrina. File state tax return only For this purpose, the amount of the loss is reduced by any recognized gain from an involuntary conversion caused by Hurricane Katrina of property located in the GO Zone. File state tax return only Any such loss taken into account in figuring your qualified GO Zone loss is not eligible for the election to be treated as having occurred in the previous tax year. File state tax return only 5-year NOL carryback of certain timber losses. File state tax return only   Generally, you can carry the portion of an NOL due to income and deductions attributable to a farming business back to the 5 tax years before the NOL year. File state tax return only You can treat income and deductions attributable to qualified timber property as attributable to a farming business if any portion of the property is located in the GO Zone, Rita GO Zone, or Wilma GO Zone, and the income and deductions are allocable to the part of your tax year which is after the applicable date below. File state tax return only August 27, 2005, if any portion of the property is located in the GO Zone. File state tax return only September 22, 2005, if any portion of the property is located in the Rita GO Zone (but not in the GO Zone). File state tax return only October 22, 2005, if any portion of the property is located in the Wilma GO Zone (but not in the GO Zone or the RITA GO Zone). File state tax return only   These rules will not apply after 2006. File state tax return only   However, these rules apply only to a timber producer who: Held qualified timber property (defined in Publication 535, Business Expenses) on the applicable date below: August 28, 2005, if any portion of the property is located in the GO Zone, September 23, 2005, if any portion of the property is located in the Rita GO Zone (but not in the GO Zone), or October 23, 2005, if any portion of the property is located in the Wilma GO Zone (but not in the GO Zone or the Rita GO Zone); Is not a corporation with stock publicly traded on an established securities market; Is not a real estate investment trust; and Did not hold more than 500 acres of qualified timber property on the applicable date above. File state tax return only More information. File state tax return only   For more information on NOLs, see Publication 536 or Publication 542, Corporations. File state tax return only IRAs and Other Retirement Plans New rules provide for tax-favored withdrawals, repayments, and loans from certain retirement plans for taxpayers who suffered economic losses as a result of Hurricane Katrina, Rita, or Wilma. File state tax return only Definitions Qualified hurricane distribution. File state tax return only   A qualified hurricane distribution is any distribution you received from an eligible retirement plan if all of the following apply. File state tax return only The distribution was made: After August 24, 2005, and before January 1, 2007, for Hurricane Katrina; After September 22, 2005, and before January 1, 2007, for Hurricane Rita; or After October 22, 2005, and before January 1, 2007, for Hurricane Wilma. File state tax return only Your main home was located in a hurricane disaster area listed below on the date shown for that area. File state tax return only August 28, 2005, for the Hurricane Katrina disaster area. File state tax return only September 23, 2005, for the Hurricane Rita disaster area. File state tax return only October 23, 2005, for the Hurricane Wilma disaster area. File state tax return only You sustained an economic loss because of Hurricane Katrina, Rita, or Wilma and your main home was in that hurricane disaster area on the date shown in (2) above for that hurricane. File state tax return only Examples of an economic loss include, but are not limited to: Loss, damage to, or destruction of real or personal property from fire, flooding, looting, vandalism, theft, wind, or other cause; Loss related to displacement from your home; or Loss of livelihood due to temporary or permanent layoffs. File state tax return only   If (1) through (3) above apply, you can generally designate any distribution (including periodic payments and required minimum distributions) from an eligible retirement plan as a qualified hurricane distribution, regardless of whether the distribution was made on account of Hurricane Katrina, Rita, or Wilma. File state tax return only Qualified hurricane distributions are permitted without regard to your need or the actual amount of your economic loss. File state tax return only   The total of your qualified hurricane distributions from all plans is limited to $100,000. File state tax return only If you have distributions in excess of $100,000 from more than one type of plan, such as a 401(k) plan and an IRA, you may allocate the $100,000 limit among the plans any way you choose. File state tax return only   A reduction or offset (after August 24, 2005, for Katrina; after September 22, 2005, for Rita; or after October 22, 2005, for Wilma) of your account balance in an eligible retirement plan in order to repay a loan can also be designated as a qualified hurricane distribution. File state tax return only Eligible retirement plan. File state tax return only   An eligible retirement plan can be any of the following. File state tax return only A qualified pension, profit-sharing, or stock bonus plan (including a 401(k) plan). File state tax return only A qualified annuity plan. File state tax return only A tax-sheltered annuity contract. File state tax return only A governmental section 457 deferred compensation plan. File state tax return only A traditional, SEP, SIMPLE, or Roth IRA. File state tax return only Main home. File state tax return only   Generally, your main home is the home where you live most of the time. File state tax return only A temporary absence due to special circumstances, such as illness, education, business, military service, evacuation, or vacation, will not change your main home. File state tax return only Taxation of Qualified Hurricane Distributions Qualified hurricane distributions are included in income in equal amounts over three years. File state tax return only However, if you elect, you can include the entire distribution in your income in the year it was received. File state tax return only Qualified hurricane distributions are not subject to the additional 10% tax (or the additional 25% tax for certain distributions from SIMPLE IRAs) on early distributions from qualified retirement plans (including IRAs). File state tax return only However, any distributions you receive in excess of the $100,000 qualified hurricane distribution limit may be subject to the additional tax on early distributions. File state tax return only For more information, see Form 8915. File state tax return only Repayment of Qualified Hurricane Distributions If you choose, you generally can repay any portion of a qualified hurricane distribution that is eligible for tax-free rollover treatment to an eligible retirement plan. File state tax return only Also, you can repay a qualified hurricane distribution made on account of a hardship from a retirement plan. File state tax return only However, see Exceptions below for qualified hurricane distributions you cannot repay. File state tax return only You have three years from the day after the date you received the distribution to make a repayment. File state tax return only Amounts that are repaid are treated as a qualified rollover and are not included in income. File state tax return only Also, for purposes of the one-rollover-per-year limitation for IRAs, a repayment to an IRA is not considered a qualified rollover. File state tax return only See Form 8915 for more information on how to report repayments. File state tax return only Exceptions. File state tax return only   You cannot repay the following types of distributions. File state tax return only Qualified hurricane distributions received as a beneficiary (other than a surviving spouse). File state tax return only Required minimum distributions. File state tax return only Periodic payments (other than from an IRA) that are for: A period of 10 years or more, Your life or life expectancy, or The joint lives or joint life expectancies of you and your beneficiary. File state tax return only Repayment of Qualified Distributions for the Purchase or Construction of a Main Home If you received a qualified distribution to purchase or construct a main home in the Hurricane Katrina, Rita, or Wilma disaster area, you can repay that distribution before March 1, 2006, to an eligible retirement plan after August 24, 2005 (Katrina); after September 22, 2005 (Rita); or after October 22, 2005 (Wilma). File state tax return only For this purpose, an eligible retirement plan is any plan, annuity, or IRA to which a qualified rollover can be made. File state tax return only To be a qualified distribution, the distribution must meet all of the following requirements. File state tax return only The distribution is a hardship distribution from a 401(k) plan, a hardship distribution from a tax-sheltered annuity contract, or a qualified first-time homebuyer distribution from an IRA. File state tax return only The distribution was received in 2005 after February 28 and before: August 29 for Hurricane Katrina; September 24 for Hurricane Rita; or October 24 for Hurricane Wilma. File state tax return only The distribution was to be used to purchase or construct a main home in the Hurricane Katrina, Rita, or Wilma disaster area that was not purchased or constructed because of Hurricane Katrina, Rita, or Wilma. File state tax return only Amounts that are repaid before March 1, 2006, are treated as a qualified rollover and are not included in income. File state tax return only Also, for purposes of the one-rollover-per-year limitation for IRAs, a repayment to an IRA is not considered a qualified rollover. File state tax return only A qualified distribution not repaid before March 1, 2006, may be taxable for 2005 and subject to the additional 10% tax (or the additional 25% tax for certain SIMPLE IRAs) on early distributions. File state tax return only You must file Form 8915 if you received a qualified distribution that you repaid, in whole or in part, before March 1, 2006. File state tax return only Loans From Qualified Plans The following benefits are available to qualified individuals. File state tax return only Increases to the limits for distributions treated as loans from employer plans. File state tax return only A 1-year suspension for payments due on plan loans. File state tax return only Qualified individual. File state tax return only   You are a qualified individual if any of the following apply. File state tax return only Your main home on August 28, 2005, was located in the Hurricane Katrina disaster area and you had an economic loss because of Hurricane Katrina. File state tax return only Your main home on September 23, 2005, was located in the Hurricane Rita disaster area and you had an economic loss because of Hurricane Rita. File state tax return only Your main home on October 23, 2005, was located in the Hurricane Wilma disaster area and you had an economic loss because of Hurricane Wilma. File state tax return only Examples of an economic loss include, but are not limited to: Loss, damage to, or destruction of real or personal property from fire, flooding, looting, vandalism, theft, wind, or other cause; Loss related to displacement from your home; or Loss of livelihood due to temporary or permanent layoffs. File state tax return only Limits on plan loans. File state tax return only   The $50,000 limit for distributions treated as plan loans is increased to $100,000. File state tax return only In addition, the limit based on 50% of your vested accrued benefit is increased to 100% of that benefit. File state tax return only The higher limits apply only to loans received during the following period. File state tax return only If your main home was located in the Hurricane Katrina disaster area, the period began on September 24, 2005, and ends on December 31, 2006. File state tax return only If your main home was located in the Hurricane Rita or Wilma disaster area, the period began on December 21, 2005, and ends on December 31, 2006. File state tax return only If you are a qualified individual based on Hurricane Katrina and another hurricane, use the period based on Hurricane Katrina. File state tax return only One-year suspension of loan payments. File state tax return only   Payments on plan loans due before 2007 may be suspended for 1 year by the plan administrator. File state tax return only To qualify for the suspension, the due date for any loan payment must occur during the period beginning on: August 28, 2005, if your main home was located in the Hurricane Katrina disaster area. File state tax return only September 23, 2005, if your main home was located in the Hurricane Rita disaster area. File state tax return only October 23, 2005, if your main home was located in the Hurricane Wilma disaster area. File state tax return only If you are a qualified individual based on more than one hurricane, use the period with the earliest beginning date. File state tax return only Additional Tax Relief for Individuals Earned Income Credit and Child Tax Credit You can elect to use your 2004 earned income to figure your earned income credit (EIC) and additional child tax credit for 2005 if: Your 2005 earned income is less than your 2004 earned income, and At least one of the following statements is true. File state tax return only Your main home on August 25, 2005, was in the Gulf Opportunity (GO) Zone. File state tax return only Your main home on August 25, 2005, was in the Hurricane Katrina disaster area and you were displaced from that home because of Hurricane Katrina. File state tax return only Your main home on September 23, 2005, was in the Rita GO Zone. File state tax return only Your main home on September 23, 2005, was in the Hurricane Rita disaster area and you were displaced from that home because of Hurricane Rita. File state tax return only Your main home on October 23, 2005, was in the Wilma GO Zone. File state tax return only Your main home on October 23, 2005, was in the Hurricane Wilma disaster area and you were displaced from that home because of Hurricane Wilma. File state tax return only Earned income. File state tax return only    For the purpose of this election, your earned income for both the EIC and the additional child tax credit is the amount of earned income used to figure your EIC, even if you did not take the EIC and even if that amount is different than your earned income for the additional child tax credit. File state tax return only If you are claiming only the additional child tax credit, you must figure the amount of your earned income for EIC purposes to determine your eligibility to make the election and the amount of the credit. File state tax return only Joint returns. File state tax return only   If you file a joint return, you qualify to make this election even if only one spouse meets the requirements. File state tax return only If you make the election, your 2004 earned income is the sum of your 2004 earned income and your spouse's 2004 earned income. File state tax return only Making the election. File state tax return only   If you make the election to use your 2004 earned income, the election applies for figuring both the EIC and the additional child tax credit. File state tax return only However, you can make the election for the additional child tax credit even if you do not take the EIC. File state tax return only   Electing to use your 2004 earned income may increase or decrease your EIC. File state tax return only Take the following steps to decide whether to make the election. File state tax return only Figure your 2005 EIC using your 2004 earned income. File state tax return only Figure your 2005 additional child tax credit using your 2004 earned income for EIC purposes. File state tax return only Add the results of (1) and (2). File state tax return only Figure your 2005 EIC using your 2005 earned income. File state tax return only Figure your 2005 additional child tax credit using your 2005 earned income for additional child tax credit purposes. File state tax return only Add the results of (4) and (5). File state tax return only Compare the results of (3) and (6). File state tax return only If (3) is larger than (6), it is to your benefit to make the election. File state tax return only If (3) is equal to or smaller than (6), making the election will not help you. File state tax return only   If you elect to use your 2004 earned income and you are claiming the EIC, enter “PYEI” and the amount of your 2004 earned income on the dotted line next to line 66a of Form 1040, on the line next to line 41a of Form 1040A, or in the space to the left of line 8a of Form 1040EZ. File state tax return only   If you elect to use your 2004 earned income and you are claiming the additional child tax credit, enter your 2004 earned income for EIC purposes (even if you did not claim the EIC) on Form 8812, Additional Child Tax Credit, line 4a, and check the box on that line. File state tax return only   Because Form 8812 was released before the GO Zone legislation was enacted, the instructions refer only to individuals whose main home was in the Hurricane Katrina disaster area. File state tax return only When completing Form 8812, line 4a, use the above rules to determine your eligibility to make the election (instead of the Form 8812 instructions). File state tax return only Getting your 2004 tax return information. File state tax return only   If you do not have your 2004 tax records, you can get the amount of earned income used to figure your 2004 EIC by calling 1-866-562-5227. File state tax return only You can also get this information by visiting the IRS website at www. File state tax return only irs. File state tax return only gov. File state tax return only   If you prefer to figure your 2004 earned income yourself, copies or transcripts of your filed and processed tax returns can help you reconstruct your tax records. File state tax return only See Request for Copy or Transcript of Tax Return on page 16. File state tax return only Additional Exemption for Housing Individuals Displaced by Hurricane Katrina You may be able to claim an additional exemption amount of $500 for providing housing in your main home for each individual displaced by Hurricane Katrina. File state tax return only The additional exemption amount is claimed on new Form 8914. File state tax return only The additional exemption amount is allowable once per taxpayer for a specific individual in 2005 or 2006, but not in both years. File state tax return only The maximum additional exemption amount you can claim for all displaced individuals is $2,000 ($1,000 if married filing separately). File state tax return only The additional exemption amount you claim for displaced individuals in 2005 will reduce the $2,000 maximum for 2006. File state tax return only If two or more taxpayers share the same main home, only one taxpayer in that main home can claim the additional exemption amount for a specific displaced individual. File state tax return only If married filing separately, only one spouse may claim the additional exemption amount for a specific displaced individual. File state tax return only In order for you to be considered to have provided housing, you must have a legal interest in the main home (that is, own or rent the home). File state tax return only To qualify as a displaced individual, the individual: Must have had his or her main home in the Hurricane Katrina disaster area on August 28, 2005, and he or she must have been displaced from that home. File state tax return only If the individual's main home was located outside the core disaster area, that home must have been damaged by Hurricane Katrina or the individual must have been evacuated from that home because of Hurricane Katrina, Must have been provided housing in your main home for a period of at least 60 consecutive days ending in the tax year in which the exemption is claimed, and Cannot be your spouse or dependent. File state tax return only You cannot claim the additional exemption amount if you received rent (or any other amount) from any source for providing the housing. File state tax return only You are permitted to receive payments or reimbursements that do not relate to normal housing costs, including the following. File state tax return only Food, clothing, or personal items consumed or used by the displaced individual. File state tax return only Reimbursement for the cost of any long distance telephone calls made by the displaced individual. File state tax return only Reimbursement for the cost of gasoline for the displaced individual's use of your vehicle. File state tax return only However, you cannot claim the additional exemption amount if you received any reimbursement for the extra costs of heat, electricity, or water used by the displaced individual. File state tax return only Also, you must report on Form 8914 the displaced individual's social security number or individual taxpayer identification number to claim an additional exemption amount. File state tax return only For more information, see Form 8914. File state tax return only Education Credits The education credits have been expanded for students attending an eligible educational institution located in the Gulf Opportunity Zone (GOZ students) for any tax year beginning in 2005 or 2006. File state tax return only The Hope credit for a GOZ student is increased to 100% of the first $2,000 in qualified education expenses and 50% of the next $2,000 of qualified education expenses for a maximum credit of $3,000 per student. File state tax return only The lifetime learning credit rate for a GOZ student is increased from 20% to 40%. File state tax return only The definition of qualified education expenses for a GOZ student also has been expanded. File state tax return only In addition to tuition and fees required for the student's enrollment or attendance at an eligible educational institution, qualified education expenses for a GOZ student include the following. File state tax return only Books, supplies, and equipment required for enrollment or attendance at an eligible educational institution. File state tax return only For a special needs student, expenses that are necessary for that person's enrollment or attendance at an eligible educational institution. File state tax return only For a student who is at least a half-time student, the reasonable costs of room and board, but only to the extent that the costs are not more than the greater of the following two amounts. File state tax return only The allowance for room and board, as determined by the eligible educational institution, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student. File state tax return only The actual amount charged if the student is residing in housing owned or operated by the eligible educational institution. File state tax return only You will need to contact the eligible educational institution for qualified room and board costs. File state tax return only For more information, see Form 8863. File state tax return only Recapture of Federal Mortgage Subsidy Generally, if you financed your home under a federally subsidized program (loans from tax-exempt qualified mortgage bonds or loans with mortgage credit certificates), you may have to recapture all or part of the benefit you received from that program when you sell or otherwise dispose of your home. File state tax return only However, you do not have to recapture any benefit if your mortgage loan was a qualified home improvement loan of not more than $15,000. File state tax return only This amount is increased to $150,000 if the loan was provided before 2011 and was used to: Repair damage caused by Hurricane Katrina to a residence in the Hurricane Katrina disaster area, or Alter, repair, or improve an existing owner-occupied residence in the GO Zone, Rita GO Zone, or Wilma GO Zone. File state tax return only Exclusion of Certain Cancellations of Indebtedness by Reason of Hurricane Katrina Generally, discharges of nonbusiness debts (such as mortgages) made after August 24, 2005, and before January 1, 2007, are excluded from income for individuals whose main home was in the Hurricane Katrina disaster area on August 25, 2005. File state tax return only If the individual's main home was located outside the core disaster area, the individual also must have had an economic loss because of Hurricane Katrina. File state tax return only Examples of an economic loss include, but are not limited to: Loss, damage to, or destruction of real or personal property from fire, flooding, looting, vandalism, theft, wind, or other cause; Loss related to displacement from your home; or Loss of livelihood due to temporary or permanent layoffs. File state tax return only This relief does not apply to any debt secured by real property located outside the Hurricane Katrina disaster area. File state tax return only You may also have to reduce certain tax attributes by the amount excluded. File state tax return only For more information, see Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment). File state tax return only Tax Relief for Temporary Relocation Under the Gulf Opportunity Zone Act of 2005, the IRS may adjust the internal revenue laws to ensure that taxpayers do not lose a deduction or credit or experience a change of filing status in 2005 or 2006 as a result of a temporary relocation caused by Hurricane Katrina, Rita, or Wilma. File state tax return only However, any such adjustment must ensure that an individual is not taken into account by more than one taxpayer for the same tax benefit. File state tax return only The IRS has exercised this authority as follows. File state tax return only In determining whether you furnished over one-half of the cost of maintaining a household, you can exclude from total household costs any assistance received from the government or charitable organizations because you were temporarily relocated as a result of Hurricane Katrina, Rita, or Wilma. File state tax return only In determining whether you provided more than one-half of an individual's support, you can disregard any assistance received from the government or charitable organizations because you were temporarily relocated as a result of Hurricane Katrina, Rita, or Wilma. File state tax return only You can treat as a student an individual who enrolled in school before August 25, 2005, and who is unable to attend classes because of Hurricane Katrina, for each month of the enrollment period that individual is prevented by Hurricane Katrina from attending school as planned. File state tax return only You can treat as a student an individual who enrolled in school before September 23, 2005, and who is unable to attend classes because of Hurricane Rita, for each month of the enrollment period that individual is prevented by Hurricane Rita from attending school as planned. File state tax return only You can treat as a student an individual who enrolled in school before October 23, 2005, and who is unable to attend classes because of Hurricane Wilma, for each month of the enrollment period that individual is prevented by Hurricane Wilma from attending school as planned. File state tax return only Additional Tax Relief for Businesses Special Depreciation Allowance You can take a special depreciation allowance for qualified Gulf Opportunity (GO) Zone property (as defined below) you place in service after August 27, 2005. File state tax return only The allowance is an additional deduction of 50% of the property's depreciable basis (after any section 179 deduction and before figuring your regular depreciation deduction). File state tax return only The special allowance applies only for the first year the property is placed in service. File state tax return only The allowance is deductible for both the regular tax and the alternative minimum tax (AMT). File state tax return only There is no AMT adjustment required for any depreciation figured on the remaining basis of the property. File state tax return only You can elect not to deduct the special GO Zone depreciation allowance for qualified property. File state tax return only If you make this election for any property, it applies to all property in the same class placed in service during the year. File state tax return only Qualified GO Zone property. File state tax return only   Property that qualifies for the special GO Zone depreciation allowance includes the following. File state tax return only Tangible property depreciated under the modified accelerated cost recovery system (MACRS) with a recovery period of 20 years or less. File state tax return only Water utility property. File state tax return only Computer software that is readily available for purchase by the general public, is subject to a nonexclusive license, and has not been substantially modified. File state tax return only (The cost of some computer software is treated as part of the cost of hardware and is depreciated under MACRS. File state tax return only ) Qualified leasehold improvement property. File state tax return only Nonresidential real property and residential rental property. File state tax return only   For more information on this property, see Publication 946. File state tax return only Other tests to be met. File state tax return only   To be qualified GO Zone property, the property must also meet all of the following tests. File state tax return only You must have acquired the property, by purchase, after August 27, 2005, but only if no binding written contract for the acquisition was in effect before August 28, 2005. File state tax return only The property must be placed in service before 2008 (2009 in the case of nonresidential real property and residential rental property). File state tax return only Substantially all of the use of the property must be in the GO Zone and in the active conduct of your trade or business in the GO Zone. File state tax return only The original use of the property in the GO Zone must begin with you after August 27, 2005. File state tax return only Used property can be qualified GO Zone property if it has not previously been used within the GO Zone. File state tax return only Also, additional capital expenditures you incurred after August 27, 2005, to recondition or rebuild your property meet the original use test if the original use of the property in the GO Zone began with you. File state tax return only Excepted property. File state tax return only   Qualified GO Zone property does not include any of the following. File state tax return only Property required to be depreciated using the Alternative Depreciation System (ADS). File state tax return only Property any portion of which is financed with the proceeds of a tax-exempt obligation under section 103. File state tax return only Property for which you are claiming a commercial revitalization deduction. File state tax return only Any property used in connection with any private or commercial golf course, country club, massage parlor, hot tub facility, suntan facility, or any store, the principal business of which is the sale of alcoholic beverages for consumption off premises. File state tax return only Any gambling or animal racing property (as defined below). File state tax return only Property in the same class as that for which you elected not to claim the special GO Zone depreciation allowance. File state tax return only   Gambling or animal racing property is: Any equipment, furniture, software, or other property used directly in connection with gambling, the racing of animals, or the on-site viewing of such racing, and The portion of any real property (determined by square footage) that is dedicated to gambling, the racing of animals, or the on-site viewing of such racing, unless this portion is less than 100 square feet. File state tax return only Recapture of special allowance. File state tax return only   If, in any year after the year you claim the special allowance, the property ceases to be qualified GO Zone property, you may have to recapture as ordinary income any excess benefit you received from claiming the special allowance. File state tax return only Increased Section 179 Deduction An increased section 179 deduction is allowable for qualified section 179 Gulf Opportunity (GO) Zone property (as defined later) placed in service in the GO Zone. File state tax return only Increased dollar limit. File state tax return only   The limit on the section 179 deduction ($105,000 for 2005, $108,000 for 2006) for qualified section 179 GO Zone property acquired after August 27, 2005, is increased by the smaller of: $100,000, or The cost of qualified section 179 GO Zone property placed in service during the year (including such property placed in service by your spouse, even if you are filing a separate return). File state tax return only   The amount for which you can make the election is reduced if the cost of all qualified section 179 GO Zone property you placed in service during the year exceeds $420,000 for 2005 ($430,000 for 2006) increased by the smaller of: $600,000, or The cost of qualified section 179 GO Zone property placed in service during the year. File state tax return only Qualified section 179 GO Zone property. File state tax return only   Qualified section 179 GO Zone property is section 179 property that is qualified GO Zone property (explained earlier under Special Depreciation Allowance). File state tax return only Section 179 property does not include nonresidential real property or residential rental property. File state tax return only For more information, including the requirements that must be met for property to qualify for the section 179 deduction, see chapter 2 of Publication 946. File state tax return only Work Opportunity Credit For the work opportunity credit, the definition of “targeted group employee” has been expanded to include a Hurricane Katrina employee. File state tax return only Hurricane Katrina employee. File state tax return only   A Hurricane Katrina employee is: A person who, on August 28, 2005, had a main home in the core disaster area and, within a two-year period beginning on that date, is hired to perform services principally in the core disaster area; or A person who, on August 28, 2005, had a main home in the core disaster area, was displaced from that main home as a result of Hurricane Katrina, and was hired during the period beginning on August 28, 2005, and ending on December 31, 2005. File state tax return only Qualified wages. File state tax return only   Generally, qualified wages do not include wages you paid to a targeted group employee who worked for you previously. File state tax return only However, wages will qualify if: You paid them to an employee who is a Hurricane Katrina employee, The employee was not in your employment on August 28, 2005, and This is your first hire of the employee as a Hurricane Katrina employee after August 28, 2005. File state tax return only   For more information, see Form 5884. File state tax return only Certification requirements. File state tax return only   An employee must provide to the employer reasonable evidence that he or she is a Hurricane Katrina employee. File state tax return only An employer may accept a completed Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity and Welfare-to-Work Credits, as such evidence. File state tax return only The certification requirements described in Form 8850 do not apply to a Hurricane Katrina employee. File state tax return only Do not send any Forms 8850 that have only box 1 checked to the state employment security agency. File state tax return only Instead, the employer should keep these Forms 8850 with the employer's other records. File state tax return only For more information, see Form 8850 and its instructions. File state tax return only Employee Retention Credit An eligible employer who conducted an active trade or business in the Gulf Opportunity (GO) Zone, the Rita GO Zone, or the Wilma GO Zone can claim the employee retention credit. File state tax return only The credit is 40% of qualified wages for each eligible employee (up to a maximum of $6,000 in qualified wages per employee). File state tax return only Generally, you must reduce your deduction for salaries and wages by the amount of this credit (before the tax liability limit). File state tax return only Use Form 5884-A to claim the credit. File state tax return only See the following rules and definitions for each hurricane. File state tax return only Employers affected by Hurricane Katrina. File state tax return only   The following definitions apply to employers affected by Hurricane Katrina. File state tax return only Eligible employer. File state tax return only   For this purpose, an eligible employer is any employer who conducted an active trade or business on August 28, 2005, in the GO Zone and whose trade or business was inoperable on any day after August 28, 2005, and before January 1, 2006, because of damage caused by Hurricane Katrina. File state tax return only Eligible employee. File state tax return only   For this purpose, an eligible employee is an employee whose principal place of employment on August 28, 2005, with such eligible employer was in the GO Zone. File state tax return only An employee is not an eligible employee for purposes of Hurricane Katrina if the employee is treated as an eligible employee for the work opportunity credit. File state tax return only Employers affected by Hurricane Rita. File state tax return only   The following definitions apply to employers affected by Hurricane Rita. File state tax return only Eligible employer. File state tax return only   For this purpose, an eligible employer is any employer who conducted an active trade or business on September 23, 2005, in the Rita GO Zone and whose trade or business was inoperable on any day after September 23, 2005, and before January 1, 2006, because of damage caused by Hurricane Rita. File state tax return only Eligible employee. File state tax return only   For this purpose, an eligible employee is an employee whose principal place of employment on September 23, 2005, with such eligible employer was in the Rita GO Zone. File state tax return only An employee is not an eligible employee for purposes of Hurricane Rita if the employee is treated as an eligible employee for the work opportunity credit or the Hurricane Katrina employee retention credit. File state tax return only Employers affected by Hurricane Wilma. File state tax return only   The following definitions apply to employers affected by Hurricane Wilma. File state tax return only Eligible employer. File state tax return only   For this purpose, an eligible employer is any employer who conducted an active trade or business on October 23, 2005, in the Wilma GO Zone and whose trade or business was inoperable on any day after October 23, 2005, and before January 1, 2006, because of damage caused by Hurricane Wilma. File state tax return only Eligible employee. File state tax return only   For this purpose, an eligible employee is an employee whose principal place of employment on October 23, 2005, with such eligible employer was in the Wilma GO Zone. File state tax return only An employee is not an eligible employee for purposes of Hurricane Wilma if the employee is treated as an eligible employee for the work opportunity credit or the Hurricane Katrina or Rita employee retention credit. File state tax return only Qualified wages. File state tax return only   Qualified wages are wages you paid or incurred before January 1, 2006, (up to $6,000 per employee) for an eligible employee beginning on the date your trade or business first became inoperable at the employee's principal place of employment immediately before the applicable hurricane, and ending on the date your trade or business resumed significant operations at that place. File state tax return only In addition, the wages must have been paid or incurred after the following date. File state tax return only August 28, 2005, for Hurricane Katrina. File state tax return only September 23, 2005, for Hurricane Rita. File state tax return only October 23, 2005, for Hurricane Wilma. File state tax return only    This includes wages paid even if the employee performed no services, performed services at a place of employment other than the principal place of employment, or performed services at the principal place of employment before significant operations resumed. File state tax return only    Wages qualifying for the credit generally have the same meaning as wages subject to the Federal Unemployment Tax Act (FUTA). File state tax return only Qualified wages also include amounts you paid for medical or hospitalization expenses in connection with sickness or accident disability. File state tax return only Qualified wages for any employee must be reduced by the amount of any work supplementation payment you received under the Social Security Act. File state tax return only   For agricultural employees, if the work performed by any employee during more than half of any pay period qualified under FUTA as agricultural labor, that employee's wages subject to social security and Medicare taxes are qualified wages. File state tax return only For a special rule that applies to railroad employees, see section 51(h)(1)(B). File state tax return only   Qualified wages do not include the following. File state tax return only Wages paid to your dependent or a related individual. File state tax return only See section 51(i)(1). File state tax return only Wages paid to any employee during the period for which you received payment for the employee from a federally funded on-the-job training program. File state tax return only Wages for services of replacement workers during a strike or lockout. File state tax return only   For more information, see Form 5884-A. File state tax return only Hurricane Katrina Housing Credit An employer who conducted an active trade or business in the Gulf Opportunity (GO) Zone can claim the Hurricane Katrina housing credit. File state tax return only The credit is equal to 30% of the value (up to $600 per month per employee) of in-kind lodging furnished to a qualified employee (and the employee's spouse or dependents) from January 1, 2006, through July 1, 2006. File state tax return only The value of the lodging is excluded from the income of the qualified employee but is treated as wages for purposes of taxes imposed under the Federal Insurance Contributions Act (FICA) and the Federal Unemployment Tax Act (FUTA). File state tax return only Generally, you must reduce your deduction for salaries and wages by the amount of this credit (before the tax liability limit). File state tax return only The employer must use Form 5884-A to claim the credit. File state tax return only A qualified employee is an individual who had a main home in the GO Zone on August 28, 2005, and who performs substantially all employment services in the GO Zone for the employer furnishing the lodging. File state tax return only The employee cannot be your dependent or a related individual. File state tax return only See section 51(i)(1). File state tax return only For more information, see Form 5884-A. File state tax return only Reforestation Costs You may be able to elect to deduct a limited amount of reforestation costs for each qualified timber property. File state tax return only The deduction for any tax year generally is limited to $10,000 ($5,000 if married filing separately, $0 for a trust). File state tax return only However, this limit is increased if you paid or incurred reforestation costs after the applicable date below and any portion of the qualified timber property is located in one of the following areas. File state tax return only August 27, 2005, if any portion of the property is located in the GO Zone. File state tax return only September 22, 2005, if any portion of the property is located in the Rita GO Zone (but not in the GO Zone). File state tax return only October 22, 2005, if any portion of the property is located in the Wilma GO Zone. File state tax return only The limit for each qualified timber property is increased by the smaller of: $10,000 ($5,000 if married filing separately, $0 for a trust), or The amount of reforestation costs you paid or incurred after the applicable date for the qualified timber property, any portion of which is located in the zone described above. File state tax return only The increase in the limit applies only to costs paid or incurred before 2008. File state tax return only However, these rules do not apply to any timber producer who: Held more than 500 acres of qualified timber property at any time during the tax year, Is a corporation with stock publicly traded on an established securities market, or Is a real estate investment trust. File state tax return only For more information about the election to deduct reforestation costs, see chapter 8 in Publication 535, Business Expenses. File state tax return only Demolition and Clean-up Costs You can elect to deduct 50% of any qualified GO Zone clean-up costs for the tax year in which the costs are paid or incurred, instead of capitalizing them. File state tax return only Qualified GO Zone clean-up costs are any amounts paid or incurred after August 27, 2005, and before January 1, 2008, for the removal of debris from, or the demolition of structures on, real property located in the GO Zone that is: Held by you for use in a trade or business or for the production of income, or Inventory or other property held primarily for sale to customers in the ordinary course of your trade or business. File state tax return only Increase in Rehabilitation Tax Credit The rehabilitation credit is increased for qualified rehabilitation expenditures paid or incurred after August 27, 2005, and before January 1, 2009, on buildings located in the GO Zone as follows. File state tax return only For pre-1936 buildings (other than certified historic structures), the credit percentage is increased from 10% to 13%. File state tax return only For certified historic structures, the credit percentage is increased from 20% to 26%. File state tax return only For more information, see Form 3468, Investment Credit. File state tax return only Request for Copy or Transcript of Tax Return Request for copy of tax return. File state tax return only   You can use Form 4506 to order a copy of your tax return. File state tax return only Generally, there is a $39. File state tax return only 00 fee for requesting each copy of a tax return. File state tax return only If your main home, principal place of business, or tax records are located in a Presidentially declared disaster area, the fee will be waived if the assigned disaster designation (for example, “Hurricane Katrina”) is written in red across the top of the form when filed. File state tax return only Request for transcript of tax return. File state tax return only   You can use Form 4506-T to order a free transcript of your tax return. File state tax return only A transcript provides most of the line entries from a tax return and usually contains the information that a third party requires. File state tax return only You can also call 1-800-829-1040 to order a transcript. File state tax return only How To Get Tax Help Special IRS assistance. File state tax return only   The IRS is providing special help for those affected by Hurricane Katrina, Rita, or Wilma, as well as survivors and personal representatives of the victims. File state tax return only We have set up a special toll-free number for people who may have trouble filing or paying their taxes because they were affected by Hurricane Katrina, Rita, or Wilma, or who have other tax issues related to the hurricanes. File state tax return only Call 1-866-562-5227 Monday through Friday In English-7 a. File state tax return only m. File state tax return only to 10 p. File state tax return only m. File state tax return only local time In Spanish-8 a. File state tax return only m. File state tax return only to 9:30 p. File state tax return only m. File state tax return only local time   The IRS website at www. File state tax return only irs. File state tax return only gov has notices and other tax relief information. File state tax return only Check it periodically for any new guidance. File state tax return only Other help from the IRS. File state tax return only   You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get more information from the IRS in several ways. File state tax return only By selecting the method that is best for you, you will have quick and easy access to tax help. File state tax return only Contacting your Taxpayer Advocate. File state tax return only   If you have attempted to deal with an IRS problem unsuccessfully, you should contact your Taxpayer Advocate. File state tax return only   The Taxpayer Advocate independently represents your interests and concerns within the IRS by protecting your rights and resolving problems that have not been fixed through normal channels. File state tax return only While Taxpayer Advocates cannot change the tax law or make a technical tax decision, they can clear up problems that resulted from previous contacts and ensure that your case is given a complete and impartial review. File state tax return only   To contact your Taxpayer Advocate: Call the Taxpayer Advocate toll free at 1-877-777-4778. File state tax return only Call, write, or fax the Taxpayer Advocate office in your area. File state tax return only Call 1-800-829-4059 if you are a TTY/TDD user. File state tax return only Visit www. File state tax return only irs. File state tax return only gov/advocate. File state tax return only   For more information, see Publication 1546, How To Get Help With Unresolved Tax Problems (now available in Chinese, Korean, Russian, and Vietnamese, in addition to English and Spanish). File state tax return only Free tax services. File state tax return only   To find out what services are available, get Publication 910, IRS Guide to Free Tax Services. File state tax return only It contains a list of free tax publications and an index of tax topics. File state tax return only It also describes other free tax information services, including tax education and assistance programs and a list of TeleTax topics. File state tax return only Internet. File state tax return only You can access the IRS website 24 hours a day, 7 days a week, at www. File state tax return only irs. File state tax return only gov to: E-file your return. File state tax return only Find out about commercial tax preparation and e-file services available free to eligible taxpayers. File state tax return only Check the status of your refund. File state tax return only Click on Where's My Refund. File state tax return only Be sure to wait at least 6 weeks from the date you filed your return (3 weeks if you filed electronically). File state tax return only Have your tax return available because you will need to know your social security number, your filing status, and the exact whole dollar amount of your refund. File state tax return only Download forms, instructions, and publications. File state tax return only Order IRS products online. File state tax return only Research your tax questions online. File state tax return only Search publications online by topic or keyword. File state tax return only View Internal Revenue Bulletins (IRBs) published in the last few years. File state tax return only Figure your withholdin