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Free Online Tax 2010

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Free Online Tax 2010

Free online tax 2010 Part One -   The Income Tax Return The four chapters in this part provide basic information on the tax system. Free online tax 2010 They take you through the first steps of filling out a tax return—such as deciding what your filing status is, how many exemptions you can take, and what form to file. Free online tax 2010 They also discuss recordkeeping requirements, IRS e-file (electronic filing), certain penalties, and the two methods used to pay tax during the year: withholding and estimated tax. Free online tax 2010 Table of Contents 1. Free online tax 2010   Filing InformationWhat's New Reminders Introduction Do I Have To File a Return?Individuals—In General Dependents Certain Children Under Age 19 or Full-Time Students Self-Employed Persons Aliens Who Should File Which Form Should I Use?Form 1040EZ Form 1040A Form 1040 Does My Return Have To Be on Paper?IRS e-file When Do I Have To File?Private delivery services. Free online tax 2010 Extensions of Time To File How Do I Prepare My Return?When Do I Report My Income and Expenses? Social Security Number (SSN) Presidential Election Campaign Fund Computations Attachments Third Party Designee Signatures Paid Preparer Refunds Amount You Owe Gift To Reduce Debt Held by the Public Name and Address Where Do I File? What Happens After I File?What Records Should I Keep? Why Keep Records? Kinds of Records to Keep Basic Records How Long to Keep Records Refund Information Interest on Refunds Change of Address What If I Made a Mistake?Amended Returns and Claims for Refund Penalties Identity Theft 2. Free online tax 2010   Filing StatusWhat's New Introduction Useful Items - You may want to see: Marital StatusDivorced persons. Free online tax 2010 Divorce and remarriage. Free online tax 2010 Annulled marriages. Free online tax 2010 Head of household or qualifying widow(er) with dependent child. Free online tax 2010 Considered married. Free online tax 2010 Same-sex marriage. Free online tax 2010 Spouse died during the year. Free online tax 2010 Married persons living apart. Free online tax 2010 Single Married Filing JointlyFiling a Joint Return Married Filing SeparatelySpecial Rules Head of HouseholdConsidered Unmarried Keeping Up a Home Qualifying Person Qualifying Widow(er) With Dependent Child 3. Free online tax 2010   Personal Exemptions and DependentsWhat's New Introduction Useful Items - You may want to see: ExemptionsPersonal Exemptions Exemptions for Dependents Qualifying Child Qualifying Relative Phaseout of Exemptions Social Security Numbers for DependentsBorn and died in 2013. Free online tax 2010 Taxpayer identification numbers for aliens. Free online tax 2010 Taxpayer identification numbers for adoptees. Free online tax 2010 4. Free online tax 2010   Tax Withholding and Estimated TaxWhat's New for 2014 Reminders Introduction Useful Items - You may want to see: Tax Withholding for 2014Salaries and Wages Tips Taxable Fringe Benefits Sick Pay Pensions and Annuities Gambling Winnings Unemployment Compensation Federal Payments Backup Withholding Estimated Tax for 2014Who Does Not Have To Pay Estimated Tax Who Must Pay Estimated Tax How To Figure Estimated Tax When To Pay Estimated Tax How To Figure Each Payment How To Pay Estimated Tax Credit for Withholding and Estimated Tax for 2013Withholding Estimated Tax Underpayment Penalty for 2013 Prev  Up  Next   Home   More Online Publications
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The Free Online Tax 2010

Free online tax 2010 Accelerated Cost Recovery System (ACRS) Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: ACRS Defined What Can and Cannot Be Depreciated Under ACRSRecovery Property Nonrecovery Property How To Figure the DeductionUnadjusted Basis Classes of Recovery Property Recovery Periods Alternate ACRS Method (Modified Straight Line Method) ACRS Deduction in Short Tax Year DispositionsEarly dispositions of ACRS property other than 15-, 18-, or 19-year real property. Free online tax 2010 Dispositions — mass asset accounts. Free online tax 2010 Early dispositions — 15-year real property. Free online tax 2010 Early dispositions — 18- and 19-year real property. Free online tax 2010 Depreciation Recapture Topics - This chapter discusses: The definition of ACRS What can and cannot be depreciated under ACRS How to figure the deduction Dispositions Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets 551 Basis of Assets 583 Starting a Business and Keeping Records Form (and Instructions) 3115 Application for Change in Accounting Method 4562 Depreciation and Amortization The Accelerated Cost Recovery System (ACRS) applies to property first used before 1987. Free online tax 2010 It is the name given to tax rules for getting back (recovering) through depreciation deductions the cost of property used in a trade or business or to produce income. Free online tax 2010 These rules are mandatory and generally apply to tangible property placed in service after 1980 and before 1987. Free online tax 2010 If you placed property in service during this period, you must continue to figure your depreciation under ACRS. Free online tax 2010 If you used listed property placed in service after June 18, 1984, less than 50% for business in 1995, see Predominant Use Test in chapter 3. Free online tax 2010 Listed property includes cars, other means of transportation, and certain computers. Free online tax 2010 Any additions or improvements placed in service after 1986, including any components of a building (such as plumbing, wiring, storm windows, etc. Free online tax 2010 ), are depreciated using MACRS, discussed in chapter 3 of Publication 946. Free online tax 2010 It does not matter that the underlying property is depreciated under ACRS or one of the other methods. Free online tax 2010 ACRS Defined ACRS consists of accelerated depreciation methods and an alternate ACRS method that could have been elected. Free online tax 2010 The alternate ACRS method used a recovery percentage based on a modified straight line method. Free online tax 2010 The law prescribes fixed percentages to be uses for each class of property. Free online tax 2010 Property depreciable under ACRS is called recovery property. Free online tax 2010 The recovery class of property determines the recovery period. Free online tax 2010 Generally, the class life of property places it in a 3-year, 5-year, 10-year, 15-year, 18-year, or 19-year recovery class. Free online tax 2010 Under ACRS, the prescribed percentages are used to recover the unadjusted basis of recovery property. Free online tax 2010 To figure a depreciation deduction, you multiply the prescribed percentage for the recovery class by the unadjusted basis of the recovery property. Free online tax 2010 You must continue to figure your depreciation under ACRS for property placed in service after 1980 and before 1987. Free online tax 2010 For property you placed in service after 1986, you must use MACRS, discussed in chapter 3 of Publication 946. Free online tax 2010 What Can and Cannot Be Depreciated Under ACRS ACRS applies to most depreciable tangible property placed in service after 1980 and before 1987. Free online tax 2010 It includes new or used and real or personal property. Free online tax 2010 The property must be for use in a trade or business or for the production of income. Free online tax 2010 Property you acquired before 1981 or after 1986 is not ACRS recovery property. Free online tax 2010 For information on depreciating property acquired before 1981, see chapter 2. Free online tax 2010 For information on depreciating property acquired after 1986, see chapter 3 of Publication 946. Free online tax 2010 Recovery Property Recovery property under ACRS is tangible depreciable property placed in service after 1980 and before 1987. Free online tax 2010 It generally includes new or used property that you acquired after 1980 and before 1987 for use in your trade or business or for the production of income. Free online tax 2010 Nonrecovery Property You cannot use ACRS for property you placed in service before 1981 or after 1986. Free online tax 2010 Nonrecovery property also includes: Intangible property, Property you elected to exclude from ACRS that is properly depreciated under a method of depreciation that is not based on a term of years, Certain public utility property, and Certain property acquired and excluded from ACRS because of the antichurning rules. Free online tax 2010 Intangible property. Free online tax 2010   Intangible property is not depreciated under ACRS. Free online tax 2010 Property depreciated under methods not expressed in a term of years. Free online tax 2010   Certain property depreciated under a method not expressed in a term of years is not depreciated under ACRS. Free online tax 2010 This included any property: If you made an irrevocable election to exclude such property, and In the first year that you could have claimed depreciation, you properly used the unit-of-production method or any method of depreciation not expressed in a term of years (not including the retirement-replacement-betterment method). Free online tax 2010 Public utility property. Free online tax 2010   Public utility property for which the taxpayer does not use a normalization method of accounting is excluded from ACRS and is subject to depreciation under a special rule. Free online tax 2010 Additions or improvements to ACRS property after 1986. Free online tax 2010   Any additions or improvements placed in service after 1986, including any components of a building (plumbing, wiring, storm windows, etc. Free online tax 2010 ) are depreciated using MACRS, discussed in chapter 3 of Publication 946. Free online tax 2010 It does not matter that the underlying property is depreciated under ACRS or one of the other methods. Free online tax 2010 How To Figure the Deduction After you determine that your property can be depreciated under ACRS, you are ready to figure your deduction. Free online tax 2010 Because the conventions are built into the percentage table rates, you only need to know the following: The unadjusted basis of your recovery property, The classes of recovery property, The recovery periods, and Whether to use the prescribed percentages based on accelerated methods or percentages based on using the alternate ACRS method. Free online tax 2010 Unadjusted Basis To figure your ACRS deduction, you multiply the unadjusted basis in your recovery property by its applicable percentage for the year. Free online tax 2010 Unadjusted basis is the same amount you would use to figure gain on a sale, but it is figured without taking into account any depreciation taken in earlier years. Free online tax 2010 However, reduce your original basis by the amount of amortization taken on the property and by any section 179 deduction claimed as discussed in chapter 2 of Publication 946. Free online tax 2010 If you buy property, your unadjusted basis is usually its cost minus any amortized amount and minus any section 179 deduction elected. Free online tax 2010 If you acquire property in some other way, such as by inheriting it, getting it as a gift, or building it yourself, you figure your unadjusted basis under other rules. Free online tax 2010 See Publication 551. Free online tax 2010 Classes of Recovery Property All recovery property under ACRS is in one of the following classes. Free online tax 2010 The class for your property was determined when you began to depreciate it. Free online tax 2010 3-Year Property 3-year property includes automobiles, light-duty trucks (actual unloaded weight less than 13,000 pounds), and tractor units for use over-the-road. Free online tax 2010 Race horses over 2 years old when placed in service are 3-year property. Free online tax 2010 Any other horses over 12 years old when you placed them in service are also included in the 3-year property class. Free online tax 2010 The ACRS percentages for 3-year recovery property are: Recovery Period Percentage 1st year 25% 2nd year 38% 3rd year 37% If you used the percentages above to depreciate your 3-year recovery property, your property, except for certain passenger automobiles, is fully depreciated. Free online tax 2010 You cannot claim depreciation for this property after 1988. Free online tax 2010 5-Year Property 5-year property includes computers, copiers, and equipment, such as office furniture and fixtures. Free online tax 2010 It also includes single purpose agricultural or horticultural structures and petroleum storage facilities (other than buildings and their structural components). Free online tax 2010 The ACRS percentages for 5-year recovery property are: Recovery period Percentage 1st year 15% 2nd year 22% 3rd through 5th year 21% If you used the percentages above to depreciate your 5-year recovery property, it is fully depreciated. Free online tax 2010 You cannot claim depreciation for this property after 1990. Free online tax 2010 10-Year Property 10-year property includes certain real property such as theme-park structures and certain public utility property. Free online tax 2010 Manufactured homes (including mobile homes) and railroad tank cars are also 10-year property. Free online tax 2010 You do not treat a building, and its structural components, as 10-year property by reason of a change in use after you placed the property in service. Free online tax 2010 For example, a building (15-year real property) that was placed in service in 1981 and was converted to a theme-park structure in 1986 remains 15-year real property. Free online tax 2010 The ACRS percentages for 10-year recovery property are: Recovery Period Percentage 1st year 8% 2nd year 14% 3rd year 12% 4th through 6th year 10% 7th through 10th year 9% If you used the percentages above, you cannot claim depreciation for this property after 1995. Free online tax 2010 Example. Free online tax 2010 On April 21, 1986, you bought and placed in service a new mobile home for $26,000 to be used as rental property. Free online tax 2010 You paid $10,000 cash and signed a note for $16,000 giving you an unadjusted basis of $26,000. Free online tax 2010 On June 8, 1986, you bought and placed in service a used mobile home for use as rental property at a total cost of $11,500. Free online tax 2010 The total unadjusted basis of your 10-year recovery property placed in service in 1986 was $37,500 ($26,000 + $11,500). Free online tax 2010 Your ACRS deduction was $3,000 (8% × $37,500). Free online tax 2010 In 1987, your ACRS deduction was $5,250 (14% × $37,500). Free online tax 2010 In 1988, your ACRS deduction was $4,500 (12% × $37,500). Free online tax 2010 In 1989, 1990, and 1991, your ACRS deduction was $3,750 (10% × $37,500). Free online tax 2010 In 1992, 1993, 1994, and 1995 your deduction for each year is $3,375 (9% × $37,500). Free online tax 2010 15-Year Real Property 15-year real property is real property that is recovery property placed in service before March 16, 1984. Free online tax 2010 It includes all real property, such as buildings, other than that designated as 5-year or 10-year property. Free online tax 2010 Unlike the 3-, 5-, or 10-year classes of property, the percentages for 15-year real property depend on when you placed the property in service during your tax year. Free online tax 2010 You could group 15-year real property by month and year placed in service. Free online tax 2010 In Table 1, at the end of this publication in the Appendix, find the month in your tax year that you placed the property in service in your trade or business or for the production of income. Free online tax 2010 You use the percentages listed under that month for each year of the recovery period to determine your depreciation deduction each year. Free online tax 2010 Example. Free online tax 2010 On March 5, 1984, you placed an apartment building in service in your business. Free online tax 2010 It is 15-year real property. Free online tax 2010 After subtracting the value of the land, your unadjusted basis in the building is $250,000. Free online tax 2010 You use the calendar year as your tax year. Free online tax 2010 March is the third month of your tax year. Free online tax 2010 Your ACRS deduction for 1984 was $25,000 (10% × $250,000). Free online tax 2010 For 1985, the percentage for the third month of the second year of the recovery period is 11%. Free online tax 2010 Your deduction was $27,500 (11% × $250,000). Free online tax 2010 For the third, fourth, and fifth years of the recovery period (1986, 1987, and 1988), the percentages are 9%, 8%, and 7%. Free online tax 2010 For 1989 through 1992, the percentage for the third month is 6%. Free online tax 2010 Your deduction each year is $15,000 (6% × $250,000). Free online tax 2010 For 1993, 1994, and 1995, the percentage for the third month is 5%. Free online tax 2010 Your depreciation deduction is $12,500 (5% × $250,000) for 1993, 1994, and 1995. Free online tax 2010 Low-Income Housing Low-income housing that was assigned a 15-year recovery period under ACRS includes the following types of property: Federally assisted housing projects where the mortgage is insured under section 221(d)(3) or 236 of the National Housing Act, or housing financed or assisted by direct loan or tax abatement under similar provisions of state or local laws. Free online tax 2010 Low-income rental housing for which a depreciation deduction for rehabilitation expenditures is allowed. Free online tax 2010 Low-income rental housing held for occupancy by families or individuals eligible to receive subsidies under section 8 of the United States Housing Act of 1937, as amended, or under the provisions of state or local laws that authorize similar subsidies for low-income families. Free online tax 2010 Housing financed or assisted by direct loan or insured under Title V of the Housing Act of 1949. Free online tax 2010 The ACRS percentages for low-income housing real property, like the regular 15-year real property percentages, depend on when you placed the property in service. Free online tax 2010 Find the month in your tax year in Table 2 or 3 at the end of this publication in the Appendix that you first placed the property in service as rental housing. Free online tax 2010 Use the percentages listed under that month for each year of the recovery period. Free online tax 2010 Table 2 shows percentages for low-income housing placed in service before May 9, 1985. Free online tax 2010 Table 3 shows percentages for low-income housing placed in service after May 8, 1985, and before 1987. Free online tax 2010 Example. Free online tax 2010 In May 1986, you acquired and placed in service a house that qualified as low-income rental housing under item 3) of the above listing. Free online tax 2010 You use the calendar year as your tax year. Free online tax 2010 You use Table C–3 because the property was placed in service after May 8, 1985. Free online tax 2010 Your unadjusted basis for the property, not including the land, was $59,000. Free online tax 2010 Your deduction for 1986 through 2001 is shown in the following table. Free online tax 2010 Year Rate Deduction 1986 8. Free online tax 2010 9% $5,251 1987 12. Free online tax 2010 1% 7,139 1988 10. Free online tax 2010 5% 6,195 1989 9. Free online tax 2010 1% 5,369 1990 7. Free online tax 2010 9% 4,661 1991 6. Free online tax 2010 9% 4,071 1992 5. Free online tax 2010 9% 3,481 1993 5. Free online tax 2010 2% 3,068 1994 4. Free online tax 2010 6% 2,714 1995 4. Free online tax 2010 6% 2,714 1996 4. Free online tax 2010 6% 2,714 1997 4. Free online tax 2010 6% 2,714 1998 4. Free online tax 2010 6% 2,714 1999 4. Free online tax 2010 5% 2,655 2000 4. Free online tax 2010 5% 2,655 2001 1. Free online tax 2010 5% 885 18-Year Real Property 18-year real property is real property that is recovery property placed in service after March 15, 1984, and before May 9, 1985. Free online tax 2010 It includes real property, such as buildings, other than that designated as 5-year, 10-year, 15-year real property, or low-income housing. Free online tax 2010 The ACRS percentages for 18-year real property depend on when you placed the property in service in your trade or business or for the production of income during your tax year. Free online tax 2010 There are also tables for 18-year real property in the Appendix. Free online tax 2010 Table 4 shows the percentages for 18-year real property you placed in service after June 22, 1984, and before May 9, 1985. Free online tax 2010 Table 5 is for 18-year real property placed in service after March 15, 1984, and before June 23, 1984. Free online tax 2010 Find the month in your tax year that you placed the property in service in a trade or business or for the production of income. Free online tax 2010 Use the percentages listed under that month for each year of the recovery period. Free online tax 2010 Example. Free online tax 2010 On April 28, 1985, you bought and placed in service a rental house. Free online tax 2010 The house, not including the land, cost $95,000. Free online tax 2010 This is your unadjusted basis for the house. Free online tax 2010 You use the calendar year as your tax year. Free online tax 2010 Because the house was placed in service after June 22, 1984, and before May 9, 1985, it is 18-year real property. Free online tax 2010 You use Table 4 to figure your deduction for the house. Free online tax 2010 April is the fourth month of your tax year. Free online tax 2010 Your deduction for 1985 through 2003 is shown in the following table. Free online tax 2010 Year Rate Deduction 1985 7. Free online tax 2010 0% $6,650 1986 9. Free online tax 2010 0% 8,550 1987 8. Free online tax 2010 0% 7,600 1988 7. Free online tax 2010 0% 6,650 1989 7. Free online tax 2010 0% 6,650 1990 6. Free online tax 2010 0% 5,700 1991 5. Free online tax 2010 0% 4,750 1992 5. Free online tax 2010 0% 4,750 1993 5. Free online tax 2010 0% 4,750 1994 5. Free online tax 2010 0% 4,750 1995 5. Free online tax 2010 0% 4,750 1996 5. Free online tax 2010 0% 4,750 1997 5. Free online tax 2010 0% 4,750 1998 4. Free online tax 2010 0% 3,800 1999 4. Free online tax 2010 0% 3,800 2000 4. Free online tax 2010 0% 3,800 2001 4. Free online tax 2010 0% 3,800 2002 4. Free online tax 2010 0% 3,800 2003 1. Free online tax 2010 0% 950 19-Year Real Property 19-year real property is real property that is recovery property placed in service after May 8, 1985, and before 1987. Free online tax 2010 It includes all real property, other than that designated as 5-year, 10-year, 15-year, or 18-year real property, or low-income housing. Free online tax 2010 The ACRS percentages for 19-year real property depend on when you placed the property in service in a trade or business or for the production of income during your tax year. Free online tax 2010 Table 6 shows the percentages for 19-year real property. Free online tax 2010 You find the month in your tax year that you placed the property in service. Free online tax 2010 You use the percentages listed under that month for each year of the recovery period. Free online tax 2010 Recovery Periods Each item of recovery property is assigned to a class of property. Free online tax 2010 The classes of recovery property establish the recovery periods over which the unadjusted basis of items in a class is recovered. Free online tax 2010 The classes of property are: 3-Year property 5-Year property 10-Year property 15-Year real property Low-income housing 18-Year real property 19-Year real property Alternate ACRS Method (Modified Straight Line Method) ACRS provides an alternate ACRS method that could be elected. Free online tax 2010 This alternate ACRS method uses a recovery percentage based on a modified straight line method. Free online tax 2010 This alternate ACRS method generally uses percentages other than those from the tables. Free online tax 2010 If you elected the alternate ACRS method, you determine the recovery period by using the following schedule. Free online tax 2010 This schedule is for other than 18- and 19-year real property and low-income housing: In the case of: You could have elected a recovery period of: 3-year property 3, 5, or 12 years 5-year property 5, 12, or 25 years 15-year real property 15, 35, or 45 years Percentages. Free online tax 2010   The straight-line percentages for the alternate ACRS method are: Recovery Period Percentage 5 years 20. Free online tax 2010 00% 10 years 10. Free online tax 2010 00% 12 years 8. Free online tax 2010 333% 15 years 6. Free online tax 2010 667% 25 years 4. Free online tax 2010 00% 35 years 2. Free online tax 2010 857%   You apply the percentage to the unadjusted basis(defined earlier) of the property to figure your ACRS deduction. Free online tax 2010 There are tables for 18- and 19-year real property later in this publication in the Appendix. Free online tax 2010 For 15-year real property, see 15-year real property, later. Free online tax 2010 3-, 5-, and 10-year property. Free online tax 2010   If you elected to use an alternate recovery percentage, you have to use the same recovery percentage for all property in that class that you placed in service in that tax year. Free online tax 2010 This applies throughout the recovery period you selected. Free online tax 2010 Half-year convention. Free online tax 2010   If you elected the alternate method, only a half-year of depreciation was deducted for the year you placed the property in service. Free online tax 2010 This applied regardless of when in the tax year you placed the property in service. Free online tax 2010 For each of the remaining years in the recovery period, you take a full year's deduction. Free online tax 2010 If you hold the property for the entire recovery period, a half-year of depreciation is allowable for the year following the end of the recovery period. Free online tax 2010 Example. Free online tax 2010 You operate a small upholstery business. Free online tax 2010 On March 19, 1986, you bought and placed in service a $13,000 light-duty panel truck to be used in your business and a $500 electric saw. Free online tax 2010 You elected to use the alternate ACRS method. Free online tax 2010 You did not elect to take a section 179 deduction. Free online tax 2010 You decided to recover the cost of the truck, which is 3-year recovery property, over 5 years. Free online tax 2010 The saw is 5-year property, but you decided to recover its cost over 12 years. Free online tax 2010 For 1986, your ACRS deduction reflected the half-year convention. Free online tax 2010 In the first year, you deducted half of the amount determined for a full year. Free online tax 2010 Your ACRS deduction for 1986 is as follows: Light-duty truck   5 years straight line = 20% 20% ÷ $13,000 = $2,600 Half-year convention -½ of $2,600= $1,300. Free online tax 2010 00     Electric saw   12 years straight line = 8. Free online tax 2010 333% 8. Free online tax 2010 333% ÷ $500 = $41. Free online tax 2010 67 Half-year convention -½ of $41. Free online tax 2010 67= 20. Free online tax 2010 84 Total ACRS deduction for 1986 $1,320. Free online tax 2010 84       You take a full year of depreciation for both the truck and the saw for the years 1987 through 1990. Free online tax 2010 Your ACRS deduction for each of those years is as follows: Light-duty truck   5 years straight line = 20% 20% ÷ $13,000 = $2,600     Electric saw     12 years straight line = 8. Free online tax 2010 333% 8. Free online tax 2010 333% ÷ $500 = $41. Free online tax 2010 67 Total annual ACRS deduction for 1987 through 1990 $2,641. Free online tax 2010 67       In 1991, you take a half-year of depreciation for the truck and a full year of depreciation for the saw. Free online tax 2010 Your ACRS deduction for 1991 is as follows: Light-duty truck   5 years straight line = 20% 20% ÷ $13,000 = $2,600 Half-year convention -½ of $2,600= $1,300. Free online tax 2010 00     Electric saw   12 years straight line = 8. Free online tax 2010 333% 8. Free online tax 2010 333% ÷ $500 = $41. Free online tax 2010 67 Total ACRS deduction for 1991 $1,341. Free online tax 2010 67       The truck is fully depreciated after 1991. Free online tax 2010 You take a full year of depreciation for the saw for the years 1992 through 1997. Free online tax 2010 Your ACRS deduction for each of those years is as follows: Electric saw     12 years straight line = 8. Free online tax 2010 333% 8. Free online tax 2010 333% ÷ $500 = $41. Free online tax 2010 67 Total annual ACRS deduction for 1992 through 1997 $41. Free online tax 2010 67       You take a half-year of depreciation for the saw for 1998. Free online tax 2010 Your ACRS deduction for 1998 is as follows: Electric saw   12 years straight line = 8. Free online tax 2010 333% 8. Free online tax 2010 333% ÷ $500 = $41. Free online tax 2010 67 Half-year convention -½ of $41. Free online tax 2010 67= 20. Free online tax 2010 84 Total ACRS deduction for 1998 $20. Free online tax 2010 84       The saw is fully depreciated after 1998. Free online tax 2010 15-year real property. Free online tax 2010   Under ACRS, you could also elect to use the alternate ACRS method for 15-year real property. Free online tax 2010 The alternate ACRS method allows you to depreciate your 15-year real property using the straight line ACRS method over the alternate recovery periods of 15, 35, or 45 years. Free online tax 2010 If you selected a 15-year recovery period, you use the percentage (6. Free online tax 2010 667%) from the schedule above. Free online tax 2010 You prorate this percentage for the number of months the property was in service in the first year. Free online tax 2010 If you selected a 35- or 45-year recovery period, you use either Table 11 or 15. Free online tax 2010 Alternate periods for 18-year real property. Free online tax 2010   For 18-year real property, the alternate recovery periods are 18, 35, or 45 years. Free online tax 2010 The percentages for 18-year real property under the alternate method are in Tables 7, 8, 10, 11, 14, and 15 in the Appendix. Free online tax 2010 There are two tables for each alternate recovery period. Free online tax 2010 One table shows the percentage for property placed in service after June 22, 1984. Free online tax 2010 The other table has the percentages for property placed in service after March 15, 1984, and before June 23, 1984. Free online tax 2010 Alternate periods for 19-year real property. Free online tax 2010   For 19-year real property, the alternate recovery periods are 19, 35, or 45 years. Free online tax 2010 If you selected a 19-year recovery period, use Table 9 to determine your deduction. Free online tax 2010 If you select a 35- or 45-year recovery period, use either Table 13 or 14. Free online tax 2010 Example. Free online tax 2010 You placed in service an apartment building on August 3, 1986. Free online tax 2010 The building is 19-year real property. Free online tax 2010 The sales contract allocated $300,000 to the building and $100,000 to the land. Free online tax 2010 You use the calendar year as your tax year. Free online tax 2010 You chose the alternate ACRS method over a recovery period of 35 years. Free online tax 2010 For 1986, you figure your ACRS deduction usingTable 13. Free online tax 2010 August is the eighth month of your tax year. Free online tax 2010 The percentage from Table 13 for the eighth month is 1. Free online tax 2010 1%. Free online tax 2010 Your deduction was $3,300 ($300,000 ÷ 1. Free online tax 2010 1%). Free online tax 2010 The deduction rate from ACRS Table 13 for years 2 through 20 is 2. Free online tax 2010 9% so that your deduction in 1987 through 2005 is $8,700 ($300,000 ÷ 2. Free online tax 2010 9%). Free online tax 2010 Alternate periods for low-income housing. Free online tax 2010   For low-income housing, the alternate recovery periods are 15, 35, or 45 years. Free online tax 2010 If you selected a 15-year period for this property, use 6. Free online tax 2010 667% as the percentage. Free online tax 2010 If you selected a 35- or 45-year period, use either Table 11, 12, or 15. Free online tax 2010 Election. Free online tax 2010   You had to make the election to use the alternate ACRS method by the return due date (including extensions) for the tax year you placed the property in service. Free online tax 2010 Revocation of election. Free online tax 2010   Your election to use an alternate ACRS method, once made, can be changed only with the consent of the Commissioner. Free online tax 2010 The Commissioner grants consent only in extraordinary circumstances. Free online tax 2010 Any request for a revocation will be considered a request for a ruling. Free online tax 2010 ACRS Deduction in Short Tax Year For a tax year that is less than 12 months, the ACRS deduction is prorated on a 12-month basis. Free online tax 2010 Figure the amount of the ACRS deduction for a short tax year as follows: First, you figure the ACRS deduction for a full year. Free online tax 2010 You figure this by multiplying the unadjusted basis by the recovery percentage. Free online tax 2010 You then multiply the ACRS deduction determined for a full tax year by a fraction. Free online tax 2010 The numerator (top number) of the fraction is the number of months in the short tax year and the denominator (bottom number) is 12. Free online tax 2010 For example, a corporation placed in service in June 1986 an item of 3-year property with an unadjusted basis of $10,000. Free online tax 2010 The corporation files a tax return, because of a change in its accounting period, for the 6-month short tax year ending June 30, 1986. Free online tax 2010 The full year's ACRS deduction for this item is $2,500 ($10,000 ÷ 25%), the first year percentage from the 3-year table. Free online tax 2010 The ACRS deduction for the short tax year is $1,250 ($2,500 ÷ 6/12). Free online tax 2010 You use the full ACRS percentages during the remaining years of the recovery period. Free online tax 2010 For the first tax year after the recovery period, the unrecovered basis will be deductible. Free online tax 2010 Exception. Free online tax 2010   For the tax year in which you placed 15-, 18-, or 19-year real property in service or in the tax year you dispose of it, you compute the ACRS deduction for the number of months that the property is in service during that tax year. Free online tax 2010 You compute the number of months using either a full month or mid-month convention. Free online tax 2010 This is true regardless of the number of months in the tax year and the recovery period and method used. Free online tax 2010 Dispositions A disposition is the permanent withdrawal of property from use in your trade or business or in the production of income. Free online tax 2010 You can make a withdrawal by sale, exchange, retirement, abandonment, or destruction. Free online tax 2010 You generally recognize gain or loss on the disposition of an asset by sale. Free online tax 2010 However, nonrecognition rules can allow you to postpone some gain. Free online tax 2010 See Publication 544. Free online tax 2010 If you physically abandon property, you can deduct as a loss the adjusted basis of the asset at the time of its abandonment. Free online tax 2010 Your intent must be to discard the asset so that you will not use it again or retrieve it for sale, exchange, or other disposition. Free online tax 2010 Early dispositions. Free online tax 2010   The disposal of an asset before the end of its specified recovery period, is referred to as an early disposition. Free online tax 2010 When an early disposition occurs, the depreciation deduction in the year of disposition depends on the class of property involved. Free online tax 2010 Early dispositions of ACRS property other than 15-, 18-, or 19-year real property. Free online tax 2010   Generally, you get no ACRS deduction for the tax year in which you dispose of or retire recovery property, except for 15-, 18-, and 19-year real property. Free online tax 2010 This means there is no depreciation deduction under ACRS in the year you dispose of or retire any of your 3-, 5-, or 10-year recovery property. Free online tax 2010 Dispositions — mass asset accounts. Free online tax 2010   The law provides a special rule to avoid the calculation of gain on the disposition of assets from mass asset accounts. Free online tax 2010 A mass asset account includes items usually minor in value in relation to the group, numerous in quantity, impractical to separately identify, and not usually accounted for on a separate basis, but on a total dollar value. Free online tax 2010 Examples of mass assets include minor items of office, plant, and store furniture and fixtures. Free online tax 2010   Under the special rule, if you elected to use a mass asset account, you recognize gain to the extent of the proceeds from the disposition of the asset. Free online tax 2010 You leave the unadjusted basis of the property in the account until recovered in future years. Free online tax 2010 If you did this, include the total proceeds realized from the disposition in income on the tax return for the year of disposition. Free online tax 2010 Early dispositions — 15-year real property. Free online tax 2010   If you dispose of 15-year real property, you base your ACRS deduction for the year of disposition on the number of months in use. Free online tax 2010 You use a full-month convention. Free online tax 2010 For a disposition at any time during a particular month before the end of the recovery period, no deduction is allowed for the month of disposition. Free online tax 2010 This applies whether you use the regular ACRS method or elected the alternate ACRS method. Free online tax 2010 Example. Free online tax 2010 You purchased and placed in service a rental house on March 2, 1984, for $98,000 (not including the cost of land). Free online tax 2010 You file your return based on a calendar year. Free online tax 2010 Your rate from Table 1 for the third month is 10%. Free online tax 2010 Your ACRS deduction for 1984 was $9,800 ($98. Free online tax 2010 000 ÷ 10%). Free online tax 2010 For 1985 through 1988, you figured your ACRS deductions using 11%, 9%, 8%, and 7% ÷ $98,000. Free online tax 2010 For 1989 through 1992, you figured your ACRS deductions using 6% for each year. Free online tax 2010 The deduction each year was $98,000 ÷ 6%. Free online tax 2010 For 1993 and 1994, the ACRS deduction is ($98,000 ÷ 5%) $4,900 for each year. Free online tax 2010 You sell the house on June 1, 1995. Free online tax 2010 You figure your ACRS deduction for 1995 for the full year and then prorate that amount for the months of use. Free online tax 2010 The full ACRS deduction for 1995 is $4,900 ($98,000 ÷ 5%). Free online tax 2010 You then prorate this amount to the 5 months in 1995 during which it was rented. Free online tax 2010 Your ACRS deduction for 1995 is $2,042 ($4,900 ÷ 5/12). Free online tax 2010 Early dispositions — 18- and 19-year real property. Free online tax 2010   If you dispose of 18- or 19-year real property, you base your ACRS deduction for the year of disposition on the number of months in use. Free online tax 2010 For 18-year property placed in service before June 23, 1984, use a full-month convention on a disposition. Free online tax 2010 For 18-year property placed in service after June 22, 1984, and for 19-year property, determine the number of months in use by using the mid-month convention. Free online tax 2010 Under the mid-month convention,treat real property disposed of any time during a month as disposed of in the middle of that month. Free online tax 2010 Count the month of disposition as half a month of use. Free online tax 2010 Example. Free online tax 2010 You purchased and placed in service a rental house on July 2, 1984, for $100,000 (not including the cost of land). Free online tax 2010 You file your return based on a calendar year. Free online tax 2010 Your rate from Table 4 for the seventh month is 4%. Free online tax 2010 You figured your ACRS deduction for 1984 was $4,000 ($100,000 ÷ 4%). Free online tax 2010 In 1985 through 1994, your ACRS deductions were 9%, 8%, 8%, 7%, 6%, 6%, 5%, 5%, and 5% ÷ $100,000. Free online tax 2010 You sell the house on September 24, 1995. Free online tax 2010 Figure your ACRS deduction for 1995 for the months of use. Free online tax 2010 The full ACRS deduction for 1995 is $5,000 ($100,000 ÷ 5%). Free online tax 2010 Prorate this amount for the 8. Free online tax 2010 5 months in 1995 that you held the property. Free online tax 2010 Under the mid-month convention, you count September as half a month. Free online tax 2010 Your ACRS deduction for 1995 is $3,542 ($5,000 ÷ 8. Free online tax 2010 5/12). Free online tax 2010 Depreciation Recapture If you dispose of property depreciated under ACRS that is section 1245 recovery property, you will generally recognize gain or loss. Free online tax 2010 Gain recognized on a disposition is ordinary income to the extent of prior depreciation deductions taken. Free online tax 2010 This recapture rule applies to all personal property in the 3-year, 5-year, and 10-year classes. Free online tax 2010 You recapture gain on manufactured homes and theme park structures in the 10-year class as section 1245 property. Free online tax 2010 Section 1245 property generally includes all personal property. Free online tax 2010 See Section 1245 property in chapter 4 of Publication 544 for more information. Free online tax 2010 You treat dispositions of section 1250 real property on which you have a gain as section 1245 recovery property. Free online tax 2010 You recognize gain on this property as ordinary income to the extent of prior depreciation deductions taken. Free online tax 2010 Section 1250 property includes most real property. Free online tax 2010 See Section 1250 property in chapter 4 of Publication 544 for more information. Free online tax 2010 This rule applies to all section 1250 real property except the following property: Any 15-, 18-, or 19-year real property that is residential rental property. Free online tax 2010 Any 15-, 18-, or 19-year real property that you elected to depreciate using the alternate ACRS method. Free online tax 2010 Any 15-, 18-, or 19-year real property that is subsidized low-income housing. Free online tax 2010 For these recapture rules, you treat the section 179 deduction and 50% of the investment credit that reduced your basis as depreciation. Free online tax 2010 See Publication 544 for further discussion of dispositions of section 1245 and 1250 property. 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