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H&r Block Free Tax File

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H&r Block Free Tax File

H&r block free tax file 13. H&r block free tax file   How To Get Tax Help Table of Contents Whether it's help with a tax issue, preparing your tax return or a need for a free publication or form, get the help you need the way you want it: online, use a smart phone, call or walk in to an IRS office or volunteer site near you. H&r block free tax file Free help with your tax return. H&r block free tax file   You can get free help preparing your return nationwide from IRS-certified volunteers. H&r block free tax file The Volunteer Income Tax Assistance (VITA) program helps low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers. H&r block free tax file The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. H&r block free tax file Most VITA and TCE sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. H&r block free tax file In addition, some VITA and TCE sites provide taxpayers the opportunity to prepare their own return with help from an IRS-certified volunteer. H&r block free tax file To find the nearest VITA or TCE site, you can use the VITA Locator Tool on IRS. H&r block free tax file gov, download the IRS2Go app, or call 1-800-906-9887. H&r block free tax file   As part of the TCE program, AARP offers the Tax-Aide counseling program. H&r block free tax file To find the nearest AARP Tax-Aide site, visit AARP's website at www. H&r block free tax file aarp. H&r block free tax file org/money/taxaide or call 1-888-227-7669. H&r block free tax file For more information on these programs, go to IRS. H&r block free tax file gov and enter “VITA” in the search box. H&r block free tax file Internet. H&r block free tax file    IRS. H&r block free tax file gov and IRS2Go are ready when you are —24 hours a day, 7 days a week. H&r block free tax file Download the free IRS2Go app from the iTunes app store or from Google Play. H&r block free tax file Use it to check your refund status, order transcripts of your tax returns or tax account, watch the IRS YouTube channel, get IRS news as soon as it's released to the public, subscribe to filing season updates or daily tax tips, and follow the IRS Twitter news feed, @IRSnews, to get the latest federal tax news, including information about tax law changes and important IRS programs. H&r block free tax file Check the status of your 2013 refund with the Where's My Refund? application on IRS. H&r block free tax file gov or download the IRS2Go app and select the Refund Status option. H&r block free tax file The IRS issues more than 9 out of 10 refunds in less than 21 days. H&r block free tax file Using these applications, you can start checking on the status of your return within 24 hours after we receive your e-filed return or 4 weeks after you mail a paper return. H&r block free tax file You will also be given a personalized refund date as soon as the IRS processes your tax return and approves your refund. H&r block free tax file The IRS updates Where's My Refund? every 24 hours, usually overnight, so you only need to check once a day. H&r block free tax file Use the Interactive Tax Assistant (ITA) to research your tax questions. H&r block free tax file No need to wait on the phone or stand in line. H&r block free tax file The ITA is available 24 hours a day, 7 days a week, and provides you with a variety of tax information related to general filing topics, deductions, credits, and income. H&r block free tax file When you reach the response screen, you can print the entire interview and the final response for your records. H&r block free tax file New subject areas are added on a regular basis. H&r block free tax file  Answers not provided through ITA may be found in Tax Trails, one of the Tax Topics on IRS. H&r block free tax file gov which contain general individual and business tax information or by searching the IRS Tax Map, which includes an international subject index. H&r block free tax file You can use the IRS Tax Map, to search publications and instructions by topic or keyword. H&r block free tax file The IRS Tax Map integrates forms and publications into one research tool and provides single-point access to tax law information by subject. H&r block free tax file When the user searches the IRS Tax Map, they will be provided with links to related content in existing IRS publications, forms and instructions, questions and answers, and Tax Topics. H&r block free tax file Coming this filing season, you can immediately view and print for free all 5 types of individual federal tax transcripts (tax returns, tax account, record of account, wage and income statement, and certification of non-filing) using Get Transcript. H&r block free tax file You can also ask the IRS to mail a return or an account transcript to you. H&r block free tax file Only the mail option is available by choosing the Tax Records option on the IRS2Go app by selecting Mail Transcript on IRS. H&r block free tax file gov or by calling 1-800-908-9946. H&r block free tax file Tax return and tax account transcripts are generally available for the current year and the past three years. H&r block free tax file Determine if you are eligible for the EITC and estimate the amount of the credit with the Earned Income Tax Credit (EITC) Assistant. H&r block free tax file Visit Understanding Your IRS Notice or Letter to get answers to questions about a notice or letter you received from the IRS. H&r block free tax file If you received the First Time Homebuyer Credit, you can use the First Time Homebuyer Credit Account Look-up tool for information on your repayments and account balance. H&r block free tax file Check the status of your amended return using Where's My Amended Return? Go to IRS. H&r block free tax file gov and enter Where's My Amended Return? in the search box. H&r block free tax file You can generally expect your amended return to be processed up to 12 weeks from the date we receive it. H&r block free tax file It can take up to 3 weeks from the date you mailed it to show up in our system. H&r block free tax file Make a payment using one of several safe and convenient electronic payment options available on IRS. H&r block free tax file gov. H&r block free tax file Select the Payment tab on the front page of IRS. H&r block free tax file gov for more information. H&r block free tax file Determine if you are eligible and apply for an online payment agreement, if you owe more tax than you can pay today. H&r block free tax file Figure your income tax withholding with the IRS Withholding Calculator on IRS. H&r block free tax file gov. H&r block free tax file Use it if you've had too much or too little withheld, your personal situation has changed, you're starting a new job or you just want to see if you're having the right amount withheld. H&r block free tax file Determine if you might be subject to the Alternative Minimum Tax by using the Alternative Minimum Tax Assistant on IRS. H&r block free tax file gov. H&r block free tax file Request an Electronic Filing PIN by going to IRS. H&r block free tax file gov and entering Electronic Filing PIN in the search box. H&r block free tax file Download forms, instructions and publications, including accessible versions for people with disabilities. H&r block free tax file Locate the nearest Taxpayer Assistance Center (TAC) using the Office Locator tool on IRS. H&r block free tax file gov, or choose the Contact Us option on the IRS2Go app and search Local Offices. H&r block free tax file An employee can answer questions about your tax account or help you set up a payment plan. H&r block free tax file Before you visit, check the Office Locator on IRS. H&r block free tax file gov, or Local Offices under Contact Us on IRS2Go to confirm the address, phone number, days and hours of operation, and the services provided. H&r block free tax file If you have a special need, such as a disability, you can request an appointment. H&r block free tax file Call the local number listed in the Office Locator, or look in the phone book under United States Government, Internal Revenue Service. H&r block free tax file Apply for an Employer Identification Number (EIN). H&r block free tax file Go to IRS. H&r block free tax file gov and enter Apply for an EIN in the search box. H&r block free tax file Read the Internal Revenue Code, regulations, or other official guidance. H&r block free tax file Read Internal Revenue Bulletins. H&r block free tax file Sign up to receive local and national tax news and more by email. H&r block free tax file Just click on “subscriptions” above the search box on IRS. H&r block free tax file gov and choose from a variety of options. H&r block free tax file    Phone. H&r block free tax file You can call the IRS, or you can carry it in your pocket with the IRS2Go app on your smart phone or tablet. H&r block free tax file Download the free IRS2Go app from the iTunes app store or from Google Play. H&r block free tax file Call to locate the nearest volunteer help site, 1-800-906-9887 or you can use the VITA Locator Tool on IRS. H&r block free tax file gov, or download the IRS2Go app. H&r block free tax file Low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers can get free help with their tax return from the nationwide Volunteer Income Tax Assistance (VITA) program. H&r block free tax file The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. H&r block free tax file Most VITA and TCE sites offer free electronic filing. H&r block free tax file Some VITA and TCE sites provide IRS-certified volunteers who can help prepare your tax return. H&r block free tax file Through the TCE program, AARP offers the Tax-Aide counseling program; call 1-888-227-7669 to find the nearest Tax-Aide location. H&r block free tax file Call the automated Where's My Refund? information hotline to check the status of your 2013 refund 24 hours a day, 7 days a week at 1-800-829-1954. H&r block free tax file If you e-file, you can start checking on the status of your return within 24 hours after the IRS receives your tax return or 4 weeks after you've mailed a paper return. H&r block free tax file The IRS issues more than 9 out of 10 refunds in less than 21 days. H&r block free tax file Where's My Refund? will give you a personalized refund date as soon as the IRS processes your tax return and approves your refund. H&r block free tax file Before you call this automated hotline, have your 2013 tax return handy so you can enter your social security number, your filing status, and the exact whole dollar amount of your refund. H&r block free tax file The IRS updates Where's My Refund? every 24 hours, usually overnight, so you only need to check once a day. H&r block free tax file Note, the above information is for our automated hotline. H&r block free tax file Our live phone and walk-in assistors can research the status of your refund only if it's been 21 days or more since you filed electronically or more than 6 weeks since you mailed your paper return. H&r block free tax file Call the Amended Return Hotline, 1-866-464-2050, to check the status of your amended return. H&r block free tax file You can generally expect your amended return to be processed up to 12 weeks from the date we receive it. H&r block free tax file It can take up to 3 weeks from the date you mailed it to show up in our system. H&r block free tax file Call 1-800-TAX-FORM (1-800-829-3676) to order current-year forms, instructions, publications, and prior-year forms and instructions (limited to 5 years). H&r block free tax file You should receive your order within 10 business days. H&r block free tax file Call TeleTax, 1-800-829-4477, to listen to pre-recorded messages covering general and business tax information. H&r block free tax file If, between January and April 15, you still have questions about the Form 1040, 1040A, or 1040EZ (like filing requirements, dependents, credits, Schedule D, pensions and IRAs or self-employment taxes), call 1-800-829-1040. H&r block free tax file Call using TTY/TDD equipment, 1-800-829-4059 to ask tax questions or order forms and publications. H&r block free tax file The TTY/TDD telephone number is for people who are deaf, hard of hearing, or have a speech disability. H&r block free tax file These individuals can also contact the IRS through relay services such as the Federal Relay Service. H&r block free tax file    Walk-in. H&r block free tax file You can find a selection of forms, publications and services — in-person. H&r block free tax file Products. H&r block free tax file You can walk in to some post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. H&r block free tax file Some IRS offices, libraries, and city and county government offices have a collection of products available to photocopy from reproducible proofs. H&r block free tax file Services. H&r block free tax file You can walk in to your local TAC for face-to-face tax help. H&r block free tax file An employee can answer questions about your tax account or help you set up a payment plan. H&r block free tax file Before visiting, use the Office Locator tool on IRS. H&r block free tax file gov, or choose the Contact Us option on the IRS2Go app and search Local Offices for days and hours of operation, and services provided. H&r block free tax file    Mail. H&r block free tax file You can send your order for forms, instructions, and publications to the address below. H&r block free tax file You should receive a response within 10 business days after your request is received. H&r block free tax file Internal Revenue Service 1201 N. H&r block free tax file Mitsubishi Motorway Bloomington, IL 61705-6613    The Taxpayer Advocate Service Is Here to Help You. H&r block free tax file The Taxpayer Advocate Service (TAS) is your voice at the IRS. H&r block free tax file Our job is to ensure that every taxpayer is treated fairly and that you know and understand your rights. H&r block free tax file   What can TAS do for you? We can offer you free help with IRS problems that you can't resolve on your own. H&r block free tax file We know this process can be confusing, but the worst thing you can do is nothing at all! TAS can help if you can't resolve your tax problem and: Your problem is causing financial difficulties for you, your family, or your business. H&r block free tax file You face (or your business is facing) an immediate threat of adverse action. H&r block free tax file You've tried repeatedly to contact the IRS but no one has responded, or the IRS hasn't responded by the date promised. H&r block free tax file   If you qualify for our help, you'll be assigned to one advocate who'll be with you at every turn and will do everything possible to resolve your problem. H&r block free tax file Here's why we can help: TAS is an independent organization within the IRS. H&r block free tax file Our advocates know how to work with the IRS. H&r block free tax file Our services are free and tailored to meet your needs. H&r block free tax file We have offices in every state, the District of Columbia, and Puerto Rico. H&r block free tax file   How can you reach us? If you think TAS can help you, call your local advocate, whose number is in your local directory and at Taxpayer Advocate, or call us toll-free at 1-877-777-4778. H&r block free tax file   How else does TAS help taxpayers?  TAS also works to resolve large-scale, systemic problems that affect many taxpayers. H&r block free tax file If you know of one of these broad issues, please report it to us through our Systemic Advocacy Management System. H&r block free tax file Low Income Taxpayer Clinics. H&r block free tax file   Low Income Taxpayer Clinics (LITCs) serve individuals whose income is below a certain level and need to resolve tax problems such as audits, appeals, and tax collection disputes. H&r block free tax file Some clinics can provide information about taxpayer rights and responsibilities in different languages for individuals who speak English as a second language. H&r block free tax file Visit Taxpayer Advocate or see IRS Publication 4134, Low Income Taxpayer Clinic List. H&r block free tax file Prev  Up  Next   Home   More Online Publications
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Understanding your CP71 Notice

You received this notice to remind you of the amount you owe in tax, penalty and interest.

Looking for information for CP71A Notice, CP71C Notice, or CP71D Notice?

Printable samples of this notice (PDF)

Tax publications you may find useful

How to get help

Calling the 1-800 number listed on the top right corner of your notice is the fastest way to get your questions answered.

You can also authorize someone (such as an accountant) to contact the IRS on your behalf using this Power of Attorney and Declaration of Representative (Form 2848).

Or you may qualify for help from a Low Income Taxpayer Clinic.
 


What you need to do

  • Read your notice carefully — it will explain how much money you owe on your taxes.

You may want to...


Answers to Common Questions

Am I charged interest on the money I owe?
Yes, interest accrues on your unpaid balance until you pay it in full.

Do I receive a penalty if I cannot pay the full amount?
Yes, you receive a late payment penalty.

What happens if I cannot pay the full amount I owe?
You can arrange to make a payment plan with us if you cannot pay the full amount you owe.

How can I set up a payment plan?
Call the toll-free number listed on the top right corner of your notice to discuss payment options or learn more about payment arrangements.


Tips for next year

Consider filing your taxes electronically. Filing online can help you avoid mistakes and find credits and deductions that you may qualify for. In many cases you can file for free. Learn more about e-file.

Page Last Reviewed or Updated: 06-Mar-2014

The H&r Block Free Tax File

H&r block free tax file 2. H&r block free tax file   Depreciation of Rental Property Table of Contents The BasicsWhat Rental Property Can Be Depreciated? When Does Depreciation Begin and End? Depreciation Methods Basis of Depreciable Property Claiming the Special Depreciation Allowance MACRS DepreciationDepreciation Systems Property Classes Under GDS Recovery Periods Under GDS Conventions Figuring Your Depreciation Deduction Figuring MACRS Depreciation Under ADS Claiming the Correct Amount of Depreciation You recover the cost of income producing property through yearly tax deductions. H&r block free tax file You do this by depreciating the property; that is, by deducting some of the cost each year on your tax return. H&r block free tax file Three factors determine how much depreciation you can deduct each year: (1) your basis in the property, (2) the recovery period for the property, and (3) the depreciation method used. H&r block free tax file You cannot simply deduct your mortgage or principal payments, or the cost of furniture, fixtures and equipment, as an expense. H&r block free tax file You can deduct depreciation only on the part of your property used for rental purposes. H&r block free tax file Depreciation reduces your basis for figuring gain or loss on a later sale or exchange. H&r block free tax file You may have to use Form 4562 to figure and report your depreciation. H&r block free tax file See Which Forms To Use in chapter 3. H&r block free tax file Also see Publication 946. H&r block free tax file Section 179 deduction. H&r block free tax file   The section 179 deduction is a means of recovering part or all of the cost of certain qualifying property in the year you place the property in service. H&r block free tax file This deduction is not allowed for property used in connection with residential rental property. H&r block free tax file See chapter 2 of Publication 946. H&r block free tax file Alternative minimum tax (AMT). H&r block free tax file   If you use accelerated depreciation, you may be subject to the AMT. H&r block free tax file Accelerated depreciation allows you to deduct more depreciation earlier in the recovery period than you could deduct using a straight line method (same deduction each year). H&r block free tax file   The prescribed depreciation methods for rental real estate are not accelerated, so the depreciation deduction is not adjusted for the AMT. H&r block free tax file However, accelerated methods are generally used for other property connected with rental activities (for example, appliances and wall-to-wall carpeting). H&r block free tax file   To find out if you are subject to the AMT, see the Instructions for Form 6251. H&r block free tax file The Basics The following section discusses the information you will need to have about the rental property and the decisions to be made before figuring your depreciation deduction. H&r block free tax file What Rental Property Can Be Depreciated? You can depreciate your property if it meets all the following requirements. H&r block free tax file You own the property. H&r block free tax file You use the property in your business or income-producing activity (such as rental property). H&r block free tax file The property has a determinable useful life. H&r block free tax file The property is expected to last more than one year. H&r block free tax file Property you own. H&r block free tax file   To claim depreciation, you usually must be the owner of the property. H&r block free tax file You are considered as owning property even if it is subject to a debt. H&r block free tax file Rented property. H&r block free tax file   Generally, if you pay rent for property, you cannot depreciate that property. H&r block free tax file Usually, only the owner can depreciate it. H&r block free tax file However, if you make permanent improvements to leased property, you may be able to depreciate the improvements. H&r block free tax file See Additions or improvements to property , later in this chapter, under Recovery Periods Under GDS. H&r block free tax file Cooperative apartments. H&r block free tax file   If you are a tenant-stockholder in a cooperative housing corporation and rent your cooperative apartment to others, you can deduct depreciation on your stock in the corporation. H&r block free tax file See chapter 4, Special Situations. H&r block free tax file Property having a determinable useful life. H&r block free tax file   To be depreciable, your property must have a determinable useful life. H&r block free tax file This means that it must be something that wears out, decays, gets used up, becomes obsolete, or loses its value from natural causes. H&r block free tax file What Rental Property Cannot Be Depreciated? Certain property cannot be depreciated. H&r block free tax file This includes land and certain excepted property. H&r block free tax file Land. H&r block free tax file   You cannot depreciate the cost of land because land generally does not wear out, become obsolete, or get used up. H&r block free tax file But if it does, the loss is accounted for upon disposition. H&r block free tax file The costs of clearing, grading, planting, and landscaping are usually all part of the cost of land and cannot be depreciated. H&r block free tax file   Although you cannot depreciate land, you can depreciate certain land preparation costs, such as landscaping costs, incurred in preparing land for business use. H&r block free tax file These costs must be so closely associated with other depreciable property that you can determine a life for them along with the life of the associated property. H&r block free tax file Example. H&r block free tax file You built a new house to use as a rental and paid for grading, clearing, seeding, and planting bushes and trees. H&r block free tax file Some of the bushes and trees were planted right next to the house, while others were planted around the outer border of the lot. H&r block free tax file If you replace the house, you would have to destroy the bushes and trees right next to it. H&r block free tax file These bushes and trees are closely associated with the house, so they have a determinable useful life. H&r block free tax file Therefore, you can depreciate them. H&r block free tax file Add your other land preparation costs to the basis of your land because they have no determinable life and you cannot depreciate them. H&r block free tax file Excepted property. H&r block free tax file   Even if the property meets all the requirements listed earlier under What Rental Property Can Be Depreciated , you cannot depreciate the following property. H&r block free tax file Property placed in service and disposed of (or taken out of business use) in the same year. H&r block free tax file Equipment used to build capital improvements. H&r block free tax file You must add otherwise allowable depreciation on the equipment during the period of construction to the basis of your improvements. H&r block free tax file For more information, see chapter 1 of Publication 946. H&r block free tax file When Does Depreciation Begin and End? You begin to depreciate your rental property when you place it in service for the production of income. H&r block free tax file You stop depreciating it either when you have fully recovered your cost or other basis, or when you retire it from service, whichever happens first. H&r block free tax file Placed in Service You place property in service in a rental activity when it is ready and available for a specific use in that activity. H&r block free tax file Even if you are not using the property, it is in service when it is ready and available for its specific use. H&r block free tax file Example 1. H&r block free tax file On November 22 of last year, you purchased a dishwasher for your rental property. H&r block free tax file The appliance was delivered on December 7, but was not installed and ready for use until January 3 of this year. H&r block free tax file Because the dishwasher was not ready for use last year, it is not considered placed in service until this year. H&r block free tax file If the appliance had been installed and ready for use when it was delivered in December of last year, it would have been considered placed in service in December, even if it was not actually used until this year. H&r block free tax file Example 2. H&r block free tax file On April 6, you purchased a house to use as residential rental property. H&r block free tax file You made extensive repairs to the house and had it ready for rent on July 5. H&r block free tax file You began to advertise the house for rent in July and actually rented it beginning September 1. H&r block free tax file The house is considered placed in service in July when it was ready and available for rent. H&r block free tax file You can begin to depreciate the house in July. H&r block free tax file Example 3. H&r block free tax file You moved from your home in July. H&r block free tax file During August and September you made several repairs to the house. H&r block free tax file On October 1, you listed the property for rent with a real estate company, which rented it on December 1. H&r block free tax file The property is considered placed in service on October 1, the date when it was available for rent. H&r block free tax file Conversion to business use. H&r block free tax file   If you place property in service in a personal activity, you cannot claim depreciation. H&r block free tax file However, if you change the property's use to business or the production of income, you can begin to depreciate it at the time of the change. H&r block free tax file You place the property in service for business or income-producing use on the date of the change. H&r block free tax file Example. H&r block free tax file You bought a house and used it as your personal home several years before you converted it to rental property. H&r block free tax file Although its specific use was personal and no depreciation was allowable, you placed the home in service when you began using it as your home. H&r block free tax file You can begin to claim depreciation in the year you converted it to rental property because at that time its use changed to the production of income. H&r block free tax file Idle Property Continue to claim a deduction for depreciation on property used in your rental activity even if it is temporarily idle (not in use). H&r block free tax file For example, if you must make repairs after a tenant moves out, you still depreciate the rental property during the time it is not available for rent. H&r block free tax file Cost or Other Basis Fully Recovered You must stop depreciating property when the total of your yearly depreciation deductions equals your cost or other basis of your property. H&r block free tax file For this purpose, your yearly depreciation deductions include any depreciation that you were allowed to claim, even if you did not claim it. H&r block free tax file See Basis of Depreciable Property , later. H&r block free tax file Retired From Service You stop depreciating property when you retire it from service, even if you have not fully recovered its cost or other basis. H&r block free tax file You retire property from service when you permanently withdraw it from use in a trade or business or from use in the production of income because of any of the following events. H&r block free tax file You sell or exchange the property. H&r block free tax file You convert the property to personal use. H&r block free tax file You abandon the property. H&r block free tax file The property is destroyed. H&r block free tax file Depreciation Methods Generally, you must use the Modified Accelerated Cost Recovery System (MACRS) to depreciate residential rental property placed in service after 1986. H&r block free tax file If you placed rental property in service before 1987, you are using one of the following methods. H&r block free tax file ACRS (Accelerated Cost Recovery System) for property placed in service after 1980 but before 1987. H&r block free tax file Straight line or declining balance method over the useful life of property placed in service before 1981. H&r block free tax file See MACRS Depreciation , later, for more information. H&r block free tax file Rental property placed in service before 2013. H&r block free tax file   Continue to use the same method of figuring depreciation that you used in the past. H&r block free tax file Use of real property changed. H&r block free tax file   Generally, you must use MACRS to depreciate real property that you acquired for personal use before 1987 and changed to business or income-producing use after 1986. H&r block free tax file This includes your residence that you changed to rental use. H&r block free tax file See Property Owned or Used in 1986 in Publication 946, chapter 1, for those situations in which MACRS is not allowed. H&r block free tax file Improvements made after 1986. H&r block free tax file   Treat an improvement made after 1986 to property you placed in service before 1987 as separate depreciable property. H&r block free tax file As a result, you can depreciate that improvement as separate property under MACRS if it is the type of property that otherwise qualifies for MACRS depreciation. H&r block free tax file For more information about improvements, see Additions or improvements to property , later in this chapter under Recovery Periods Under GDS. H&r block free tax file This publication discusses MACRS depreciation only. H&r block free tax file If you need information about depreciating property placed in service before 1987, see Publication 534. H&r block free tax file Basis of Depreciable Property The basis of property used in a rental activity is generally its adjusted basis when you place it in service in that activity. H&r block free tax file This is its cost or other basis when you acquired it, adjusted for certain items occurring before you place it in service in the rental activity. H&r block free tax file If you depreciate your property under MACRS, you may also have to reduce your basis by certain deductions and credits with respect to the property. H&r block free tax file Basis and adjusted basis are explained in the following discussions. H&r block free tax file If you used the property for personal purposes before changing it to rental use, its basis for depreciation is the lesser of its adjusted basis or its fair market value when you change it to rental use. H&r block free tax file See Basis of Property Changed to Rental Use in chapter 4. H&r block free tax file Cost Basis The basis of property you buy is usually its cost. H&r block free tax file The cost is the amount you pay for it in cash, in debt obligation, in other property, or in services. H&r block free tax file Your cost also includes amounts you pay for: Sales tax charged on the purchase (but see Exception next), Freight charges to obtain the property, and Installation and testing charges. H&r block free tax file Exception. H&r block free tax file   If you deducted state and local general sales taxes as an itemized deduction on Schedule A (Form 1040), do not include those sales taxes as part of your cost basis. H&r block free tax file Such taxes were deductible before 1987 and after 2003. H&r block free tax file Loans with low or no interest. H&r block free tax file   If you buy property on any time-payment plan that charges little or no interest, the basis of your property is your stated purchase price, less the amount considered to be unstated interest. H&r block free tax file See Unstated Interest and Original Issue Discount (OID) in Publication 537, Installment Sales. H&r block free tax file Real property. H&r block free tax file   If you buy real property, such as a building and land, certain fees and other expenses you pay are part of your cost basis in the property. H&r block free tax file Real estate taxes. H&r block free tax file   If you buy real property and agree to pay real estate taxes on it that were owed by the seller and the seller does not reimburse you, the taxes you pay are treated as part of your basis in the property. H&r block free tax file You cannot deduct them as taxes paid. H&r block free tax file   If you reimburse the seller for real estate taxes the seller paid for you, you can usually deduct that amount. H&r block free tax file Do not include that amount in your basis in the property. H&r block free tax file Settlement fees and other costs. H&r block free tax file   The following settlement fees and closing costs for buying the property are part of your basis in the property. H&r block free tax file Abstract fees. H&r block free tax file Charges for installing utility services. H&r block free tax file Legal fees. H&r block free tax file Recording fees. H&r block free tax file Surveys. H&r block free tax file Transfer taxes. H&r block free tax file Title insurance. H&r block free tax file Any amounts the seller owes that you agree to pay, such as back taxes or interest, recording or mortgage fees, charges for improvements or repairs, and sales commissions. H&r block free tax file   The following are settlement fees and closing costs you cannot include in your basis in the property. H&r block free tax file Fire insurance premiums. H&r block free tax file Rent or other charges relating to occupancy of the property before closing. H&r block free tax file Charges connected with getting or refinancing a loan, such as: Points (discount points, loan origination fees), Mortgage insurance premiums, Loan assumption fees, Cost of a credit report, and Fees for an appraisal required by a lender. H&r block free tax file   Also, do not include amounts placed in escrow for the future payment of items such as taxes and insurance. H&r block free tax file Assumption of a mortgage. H&r block free tax file   If you buy property and become liable for an existing mortgage on the property, your basis is the amount you pay for the property plus the amount remaining to be paid on the mortgage. H&r block free tax file Example. H&r block free tax file You buy a building for $60,000 cash and assume a mortgage of $240,000 on it. H&r block free tax file Your basis is $300,000. H&r block free tax file Separating cost of land and buildings. H&r block free tax file   If you buy buildings and your cost includes the cost of the land on which they stand, you must divide the cost between the land and the buildings to figure the basis for depreciation of the buildings. H&r block free tax file The part of the cost that you allocate to each asset is the ratio of the fair market value of that asset to the fair market value of the whole property at the time you buy it. H&r block free tax file   If you are not certain of the fair market values of the land and the buildings, you can divide the cost between them based on their assessed values for real estate tax purposes. H&r block free tax file Example. H&r block free tax file You buy a house and land for $200,000. H&r block free tax file The purchase contract does not specify how much of the purchase price is for the house and how much is for the land. H&r block free tax file The latest real estate tax assessment on the property was based on an assessed value of $160,000, of which $136,000 was for the house and $24,000 was for the land. H&r block free tax file You can allocate 85% ($136,000 ÷ $160,000) of the purchase price to the house and 15% ($24,000 ÷ $160,000) of the purchase price to the land. H&r block free tax file Your basis in the house is $170,000 (85% of $200,000) and your basis in the land is $30,000 (15% of $200,000). H&r block free tax file Basis Other Than Cost You cannot use cost as a basis for property that you received: In return for services you performed; In an exchange for other property; As a gift; From your spouse, or from your former spouse as the result of a divorce; or As an inheritance. H&r block free tax file If you received property in one of these ways, see Publication 551 for information on how to figure your basis. H&r block free tax file Adjusted Basis To figure your property's basis for depreciation, you may have to make certain adjustments (increases and decreases) to the basis of the property for events occurring between the time you acquired the property and the time you placed it in service for business or the production of income. H&r block free tax file The result of these adjustments to the basis is the adjusted basis. H&r block free tax file Increases to basis. H&r block free tax file   You must increase the basis of any property by the cost of all items properly added to a capital account. H&r block free tax file These include the following. H&r block free tax file The cost of any additions or improvements made before placing your property into service as a rental that have a useful life of more than 1 year. H&r block free tax file Amounts spent after a casualty to restore the damaged property. H&r block free tax file The cost of extending utility service lines to the property. H&r block free tax file Legal fees, such as the cost of defending and perfecting title, or settling zoning issues. H&r block free tax file Additions or improvements. H&r block free tax file   Add to the basis of your property the amount an addition or improvement actually cost you, including any amount you borrowed to make the addition or improvement. H&r block free tax file This includes all direct costs, such as material and labor, but does not include your own labor. H&r block free tax file It also includes all expenses related to the addition or improvement. H&r block free tax file   For example, if you had an architect draw up plans for remodeling your property, the architect's fee is a part of the cost of the remodeling. H&r block free tax file Or, if you had your lot surveyed to put up a fence, the cost of the survey is a part of the cost of the fence. H&r block free tax file   Keep separate accounts for depreciable additions or improvements made after you place the property in service in your rental activity. H&r block free tax file For information on depreciating additions or improvements, see Additions or improvements to property , later in this chapter, under Recovery Periods Under GDS. H&r block free tax file    The cost of landscaping improvements is usually treated as an addition to the basis of the land, which is not depreciable. H&r block free tax file However, see What Rental Property Cannot Be Depreciated, earlier. H&r block free tax file Assessments for local improvements. H&r block free tax file   Assessments for items which tend to increase the value of property, such as streets and sidewalks, must be added to the basis of the property. H&r block free tax file For example, if your city installs curbing on the street in front of your house, and assesses you and your neighbors for its cost, you must add the assessment to the basis of your property. H&r block free tax file Also add the cost of legal fees paid to obtain a decrease in an assessment levied against property to pay for local improvements. H&r block free tax file You cannot deduct these items as taxes or depreciate them. H&r block free tax file    However, you can deduct as taxes, charges or assessments for maintenance, repairs, or interest charges related to the improvements. H&r block free tax file Do not add them to your basis in the property. H&r block free tax file Deducting vs. H&r block free tax file capitalizing costs. H&r block free tax file   Do not add to your basis costs you can deduct as current expenses. H&r block free tax file However, there are certain costs you can choose either to deduct or to capitalize. H&r block free tax file If you capitalize these costs, include them in your basis. H&r block free tax file If you deduct them, do not include them in your basis. H&r block free tax file   The costs you may choose to deduct or capitalize include carrying charges, such as interest and taxes, that you must pay to own property. H&r block free tax file   For more information about deducting or capitalizing costs and how to make the election, see Carrying Charges in Publication 535, chapter 7. H&r block free tax file Decreases to basis. H&r block free tax file   You must decrease the basis of your property by any items that represent a return of your cost. H&r block free tax file These include the following. H&r block free tax file Insurance or other payment you receive as the result of a casualty or theft loss. H&r block free tax file Casualty loss not covered by insurance for which you took a deduction. H&r block free tax file Amount(s) you receive for granting an easement. H&r block free tax file Residential energy credits you were allowed before 1986, or after 2005, if you added the cost of the energy items to the basis of your home. H&r block free tax file Exclusion from income of subsidies for energy conservation measures. H&r block free tax file Special depreciation allowance claimed on qualified property. H&r block free tax file Depreciation you deducted, or could have deducted, on your tax returns under the method of depreciation you chose. H&r block free tax file If you did not deduct enough or deducted too much in any year, see Depreciation under Decreases to Basis in Publication 551. H&r block free tax file   If your rental property was previously used as your main home, you must also decrease the basis by the following. H&r block free tax file Gain you postponed from the sale of your main home before May 7, 1997, if the replacement home was converted to your rental property. H&r block free tax file District of Columbia first-time homebuyer credit allowed on the purchase of your main home after August 4, 1997 and before January 1, 2012. H&r block free tax file Amount of qualified principal residence indebtedness discharged on or after January 1, 2007. H&r block free tax file Claiming the Special Depreciation Allowance For 2013, your residential rental property may qualify for a special depreciation allowance. H&r block free tax file This allowance is figured before you figure your regular depreciation deduction. H&r block free tax file See Publication 946, chapter 3, for details. H&r block free tax file Also see the Instructions for Form 4562, Line 14. H&r block free tax file If you qualify for, but choose not to take, a special depreciation allowance, you must attach a statement to your return. H&r block free tax file The details of this election are in Publication 946, chapter 3, and the Instructions for Form 4562, Line 14. H&r block free tax file MACRS Depreciation Most business and investment property placed in service after 1986 is depreciated using MACRS. H&r block free tax file This section explains how to determine which MACRS depreciation system applies to your property. H&r block free tax file It also discusses other information you need to know before you can figure depreciation under MACRS. H&r block free tax file This information includes the property's: Recovery class, Applicable recovery period, Convention, Placed-in-service date, Basis for depreciation, and Depreciation method. H&r block free tax file Depreciation Systems MACRS consists of two systems that determine how you depreciate your property—the General Depreciation System (GDS) and the Alternative Depreciation System (ADS). H&r block free tax file You must use GDS unless you are specifically required by law to use ADS or you elect to use ADS. H&r block free tax file Excluded Property You cannot use MACRS for certain personal property (such as furniture or appliances) placed in service in your rental property in 2013 if it had been previously placed in service before 1987 when MACRS became effective. H&r block free tax file In most cases, personal property is excluded from MACRS if you (or a person related to you) owned or used it in 1986 or if your tenant is a person (or someone related to the person) who owned or used it in 1986. H&r block free tax file However, the property is not excluded if your 2013 deduction under MACRS (using a half-year convention) is less than the deduction you would have under ACRS. H&r block free tax file For more information, see What Method Can You Use To Depreciate Your Property? in Publication 946, chapter 1. H&r block free tax file Electing ADS If you choose, you can use the ADS method for most property. H&r block free tax file Under ADS, you use the straight line method of depreciation. H&r block free tax file The election of ADS for one item in a class of property generally applies to all property in that class that is placed in service during the tax year of the election. H&r block free tax file However, the election applies on a property-by-property basis for residential rental property and nonresidential real property. H&r block free tax file If you choose to use ADS for your residential rental property, the election must be made in the first year the property is placed in service. H&r block free tax file Once you make this election, you can never revoke it. H&r block free tax file For property placed in service during 2013, you make the election to use ADS by entering the depreciation on Form 4562, Part III, Section C, line 20c. H&r block free tax file Property Classes Under GDS Each item of property that can be depreciated under MACRS is assigned to a property class, determined by its class life. H&r block free tax file The property class generally determines the depreciation method, recovery period, and convention. H&r block free tax file The property classes under GDS are: 3-year property, 5-year property, 7-year property, 10-year property, 15-year property, 20-year property, Nonresidential real property, and Residential rental property. H&r block free tax file Under MACRS, property that you placed in service during 2013 in your rental activities generally falls into one of the following classes. H&r block free tax file 5-year property. H&r block free tax file This class includes computers and peripheral equipment, office machinery (typewriters, calculators, copiers, etc. H&r block free tax file ), automobiles, and light trucks. H&r block free tax file This class also includes appliances, carpeting, furniture, etc. H&r block free tax file , used in a residential rental real estate activity. H&r block free tax file Depreciation on automobiles, other property used for transportation, computers and related peripheral equipment, and property of a type generally used for entertainment, recreation, or amusement is limited. H&r block free tax file See chapter 5 of Publication 946. H&r block free tax file 7-year property. H&r block free tax file This class includes office furniture and equipment (desks, file cabinets, etc. H&r block free tax file ). H&r block free tax file This class also includes any property that does not have a class life and that has not been designated by law as being in any other class. H&r block free tax file 15-year property. H&r block free tax file This class includes roads, fences, and shrubbery (if depreciable). H&r block free tax file Residential rental property. H&r block free tax file This class includes any real property that is a rental building or structure (including a mobile home) for which 80% or more of the gross rental income for the tax year is from dwelling units. H&r block free tax file It does not include a unit in a hotel, motel, inn, or other establishment where more than half of the units are used on a transient basis. H&r block free tax file If you live in any part of the building or structure, the gross rental income includes the fair rental value of the part you live in. H&r block free tax file The other property classes do not generally apply to property used in rental activities. H&r block free tax file These classes are not discussed in this publication. H&r block free tax file See Publication 946 for more information. H&r block free tax file Recovery Periods Under GDS The recovery period of property is the number of years over which you recover its cost or other basis. H&r block free tax file The recovery periods are generally longer under ADS than GDS. H&r block free tax file The recovery period of property depends on its property class. H&r block free tax file Under GDS, the recovery period of an asset is generally the same as its property class. H&r block free tax file Class lives and recovery periods for most assets are listed in Appendix B of Publication 946. H&r block free tax file See Table 2-1 for recovery periods of property commonly used in residential rental activities. H&r block free tax file Qualified Indian reservation property. H&r block free tax file   Shorter recovery periods are provided under MACRS for qualified Indian reservation property placed in service on Indian reservations. H&r block free tax file For more information, see chapter 4 of Publication 946. H&r block free tax file Additions or improvements to property. H&r block free tax file   Treat additions or improvements you make to your depreciable rental property as separate property items for depreciation purposes. H&r block free tax file   The property class and recovery period of the addition or improvement is the one that would apply to the original property if you had placed it in service at the same time as the addition or improvement. H&r block free tax file   The recovery period for an addition or improvement to property begins on the later of: The date the addition or improvement is placed in service, or The date the property to which the addition or improvement was made is placed in service. H&r block free tax file Example. H&r block free tax file You own a residential rental house that you have been renting since 1986 and depreciating under ACRS. H&r block free tax file You built an addition onto the house and placed it in service in 2013. H&r block free tax file You must use MACRS for the addition. H&r block free tax file Under GDS, the addition is depreciated as residential rental property over 27. H&r block free tax file 5 years. H&r block free tax file Table 2-1. H&r block free tax file MACRS Recovery Periods for Property Used in Rental Activities   MACRS Recovery Period   Type of Property General Depreciation System Alternative Depreciation System   Computers and their peripheral equipment 5 years 5 years   Office machinery, such as: Typewriters Calculators Copiers 5 years 6 years   Automobiles 5 years 5 years   Light trucks 5 years 5 years   Appliances, such as: Stoves Refrigerators 5 years 9 years   Carpets 5 years 9 years   Furniture used in rental property 5 years 9 years   Office furniture and equipment, such as: Desks Files 7 years 10 years   Any property that does not have a class life and that has not been designated by law as being in any other class 7 years 12 years   Roads 15 years 20 years   Shrubbery 15 years 20 years   Fences 15 years 20 years   Residential rental property (buildings or structures) and structural components such as furnaces, waterpipes, venting, etc. H&r block free tax file 27. H&r block free tax file 5 years 40 years   Additions and improvements, such as a new roof The same recovery period as that of the property to which the addition or improvement is made, determined as if the property were placed in service at the same time as the addition or improvement. H&r block free tax file   Conventions A convention is a method established under MACRS to set the beginning and end of the recovery period. H&r block free tax file The convention you use determines the number of months for which you can claim depreciation in the year you place property in service and in the year you dispose of the property. H&r block free tax file Mid-month convention. H&r block free tax file    A mid-month convention is used for all residential rental property and nonresidential real property. H&r block free tax file Under this convention, you treat all property placed in service, or disposed of, during any month as placed in service, or disposed of, at the midpoint of that month. H&r block free tax file Mid-quarter convention. H&r block free tax file   A mid-quarter convention must be used if the mid-month convention does not apply and the total depreciable basis of MACRS property placed in service in the last 3 months of a tax year (excluding nonresidential real property, residential rental property, and property placed in service and disposed of in the same year) is more than 40% of the total basis of all such property you place in service during the year. H&r block free tax file   Under this convention, you treat all property placed in service, or disposed of, during any quarter of a tax year as placed in service, or disposed of, at the midpoint of the quarter. H&r block free tax file Example. H&r block free tax file During the tax year, Tom Martin purchased the following items to use in his rental property. H&r block free tax file He elects not to claim the special depreciation allowance discussed earlier. H&r block free tax file A dishwasher for $400 that he placed in service in January. H&r block free tax file Used furniture for $100 that he placed in service in September. H&r block free tax file A refrigerator for $800 that he placed in service in October. H&r block free tax file Tom uses the calendar year as his tax year. H&r block free tax file The total basis of all property placed in service that year is $1,300. H&r block free tax file The $800 basis of the refrigerator placed in service during the last 3 months of his tax year exceeds $520 (40% × $1,300). H&r block free tax file Tom must use the mid-quarter convention instead of the half-year convention for all three items. H&r block free tax file Half-year convention. H&r block free tax file    The half-year convention is used if neither the mid-quarter convention nor the mid-month convention applies. H&r block free tax file Under this convention, you treat all property placed in service, or disposed of, during a tax year as placed in service, or disposed of, at the midpoint of that tax year. H&r block free tax file   If this convention applies, you deduct a half year of depreciation for the first year and the last year that you depreciate the property. H&r block free tax file You deduct a full year of depreciation for any other year during the recovery period. H&r block free tax file Figuring Your Depreciation Deduction You can figure your MACRS depreciation deduction in one of two ways. H&r block free tax file The deduction is substantially the same both ways. H&r block free tax file You can either: Actually compute the deduction using the depreciation method and convention that apply over the recovery period of the property, or Use the percentage from the MACRS percentage tables. H&r block free tax file In this publication we will use the percentage tables. H&r block free tax file For instructions on how to compute the deduction, see chapter 4 of Publication 946. H&r block free tax file Residential rental property. H&r block free tax file   You must use the straight line method and a mid-month convention for residential rental property. H&r block free tax file In the first year that you claim depreciation for residential rental property, you can claim depreciation only for the number of months the property is in use, and you must use the mid-month convention (explained under Conventions , earlier). H&r block free tax file 5-, 7-, or 15-year property. H&r block free tax file   For property in the 5- or 7-year class, use the 200% declining balance method and a half-year convention. H&r block free tax file However, in limited cases you must use the mid-quarter convention, if it applies. H&r block free tax file For property in the 15-year class, use the 150% declining balance method and a half-year convention. H&r block free tax file   You can also choose to use the 150% declining balance method for property in the 5- or 7-year class. H&r block free tax file The choice to use the 150% method for one item in a class of property applies to all property in that class that is placed in service during the tax year of the election. H&r block free tax file You make this election on Form 4562. H&r block free tax file In Part III, column (f), enter “150 DB. H&r block free tax file ” Once you make this election, you cannot change to another method. H&r block free tax file   If you use either the 200% or 150% declining balance method, you figure your deduction using the straight line method in the first tax year that the straight line method gives you an equal or larger deduction. H&r block free tax file   You can also choose to use the straight line method with a half-year or mid-quarter convention for 5-, 7-, or 15-year property. H&r block free tax file The choice to use the straight line method for one item in a class of property applies to all property in that class that is placed in service during the tax year of the election. H&r block free tax file You elect the straight line method on Form 4562. H&r block free tax file In Part III, column (f), enter “S/L. H&r block free tax file ” Once you make this election, you cannot change to another method. H&r block free tax file MACRS Percentage Tables You can use the percentages in Table 2-2, earlier, to compute annual depreciation under MACRS. H&r block free tax file The tables show the percentages for the first few years or until the change to the straight line method is made. H&r block free tax file See Appendix A of Publication 946 for complete tables. H&r block free tax file The percentages in Tables 2-2a, 2-2b, and 2-2c make the change from declining balance to straight line in the year that straight line will give a larger deduction. H&r block free tax file If you elect to use the straight line method for 5-, 7-, or 15-year property, or the 150% declining balance method for 5- or 7-year property, use the tables in Appendix A of Publication 946. H&r block free tax file How to use the percentage tables. H&r block free tax file   You must apply the table rates to your property's unadjusted basis (defined below) each year of the recovery period. H&r block free tax file   Once you begin using a percentage table to figure depreciation, you must continue to use it for the entire recovery period unless there is an adjustment to the basis of your property for a reason other than: Depreciation allowed or allowable, or An addition or improvement that is depreciated as a separate item of property. H&r block free tax file   If there is an adjustment for any reason other than (1) or (2), for example, because of a deductible casualty loss, you can no longer use the table. H&r block free tax file For the year of the adjustment and for the remaining recovery period, figure depreciation using the property's adjusted basis at the end of the year and the appropriate depreciation method, as explained earlier under Figuring Your Depreciation Deduction . H&r block free tax file See Figuring the Deduction Without Using the Tables in Publication 946, chapter 4. H&r block free tax file Unadjusted basis. H&r block free tax file   This is the same basis you would use to figure gain on a sale (see Basis of Depreciable Property , earlier), but without reducing your original basis by any MACRS depreciation taken in earlier years. H&r block free tax file   However, you do reduce your original basis by other amounts claimed on the property, including: Any amortization, Any section 179 deduction, and Any special depreciation allowance. H&r block free tax file For more information, see chapter 4 of Publication 946. H&r block free tax file Please click here for the text description of the image. H&r block free tax file Table 2-2 Tables 2-2a, 2-2b, and 2-2c. H&r block free tax file   The percentages in these tables take into account the half-year and mid-quarter conventions. H&r block free tax file Use Table 2-2a for 5-year property, Table 2-2b for 7-year property, and Table 2-2c for 15-year property. H&r block free tax file Use the percentage in the second column (half-year convention) unless you are required to use the mid-quarter convention (explained earlier). H&r block free tax file If you must use the mid-quarter convention, use the column that corresponds to the calendar year quarter in which you placed the property in service. H&r block free tax file Example 1. H&r block free tax file You purchased a stove and refrigerator and placed them in service in June. H&r block free tax file Your basis in the stove is $600 and your basis in the refrigerator is $1,000. H&r block free tax file Both are 5-year property. H&r block free tax file Using the half-year convention column in Table 2-2a, the depreciation percentage for Year 1 is 20%. H&r block free tax file For that year your depreciation deduction is $120 ($600 × . H&r block free tax file 20) for the stove and $200 ($1,000 × . H&r block free tax file 20) for the refrigerator. H&r block free tax file For Year 2, the depreciation percentage is 32%. H&r block free tax file That year's depreciation deduction will be $192 ($600 × . H&r block free tax file 32) for the stove and $320 ($1,000 × . H&r block free tax file 32) for the refrigerator. H&r block free tax file Example 2. H&r block free tax file Assume the same facts as in Example 1, except you buy the refrigerator in October instead of June. H&r block free tax file Since the refrigerator was placed in service in the last 3 months of the tax year, and its basis ($1,000) is more than 40% of the total basis of all property placed in service during the year ($1,600 × . H&r block free tax file 40 = $640), you are required to use the mid-quarter convention to figure depreciation on both the stove and refrigerator. H&r block free tax file Because you placed the refrigerator in service in October, you use the fourth quarter column of Table 2-2a and find the depreciation percentage for Year 1 is 5%. H&r block free tax file Your depreciation deduction for the refrigerator is $50 ($1,000 x . H&r block free tax file 05). H&r block free tax file Because you placed the stove in service in June, you use the second quarter column of Table 2-2a and find the depreciation percentage for Year 1 is 25%. H&r block free tax file For that year, your depreciation deduction for the stove is $150 ($600 x . H&r block free tax file 25). H&r block free tax file Table 2-2d. H&r block free tax file    Use this table when you are using the GDS 27. H&r block free tax file 5 year option for residential rental property. H&r block free tax file Find the row for the month that you placed the property in service. H&r block free tax file Use the percentages listed for that month to figure your depreciation deduction. H&r block free tax file The mid-month convention is taken into account in the percentages shown in the table. H&r block free tax file Continue to use the same row (month) under the column for the appropriate year. H&r block free tax file Example. H&r block free tax file You purchased a single family rental house for $185,000 and placed it in service on February 8. H&r block free tax file The sales contract showed that the building cost $160,000 and the land cost $25,000. H&r block free tax file Your basis for depreciation is its original cost, $160,000. H&r block free tax file This is the first year of service for your residential rental property and you decide to use GDS which has a recovery period of 27. H&r block free tax file 5 years. H&r block free tax file Using Table 2-2d, you find that the percentage for property placed in service in February of Year 1 is 3. H&r block free tax file 182%. H&r block free tax file That year's depreciation deduction is $5,091 ($160,000 x . H&r block free tax file 03182). H&r block free tax file Figuring MACRS Depreciation Under ADS Table 2–1, earlier, shows the ADS recovery periods for property used in rental activities. H&r block free tax file See Appendix B in Publication 946 for other property. H&r block free tax file If your property is not listed in Appendix B, it is considered to have no class life. H&r block free tax file Under ADS, personal property with no class life is depreciated using a recovery period of 12 years. H&r block free tax file Use the mid-month convention for residential rental property and nonresidential real property. H&r block free tax file For all other property, use the half-year or mid-quarter convention, as appropriate. H&r block free tax file See Publication 946 for ADS depreciation tables. H&r block free tax file Claiming the Correct Amount of Depreciation You should claim the correct amount of depreciation each tax year. H&r block free tax file If you did not claim all the depreciation you were entitled to deduct, you must still reduce your basis in the property by the full amount of depreciation that you could have deducted. H&r block free tax file For more information, see Depreciation under Decreases to Basis in Publication 551. H&r block free tax file If you deducted an incorrect amount of depreciation for property in any year, you may be able to make a correction by filing Form 1040X, Amended U. H&r block free tax file S. H&r block free tax file Individual Income Tax Return. H&r block free tax file If you are not allowed to make the correction on an amended return, you can change your accounting method to claim the correct amount of depreciation. H&r block free tax file Filing an amended return. H&r block free tax file   You can file an amended return to correct the amount of depreciation claimed for any property in any of the following situations. H&r block free tax file You claimed the incorrect amount because of a mathematical error made in any year. H&r block free tax file You claimed the incorrect amount because of a posting error made in any year. H&r block free tax file You have not adopted a method of accounting for property placed in service by you in tax years ending after December 29, 2003. H&r block free tax file You claimed the incorrect amount on property placed in service by you in tax years ending before December 30, 2003. H&r block free tax file   Generally, you adopt a method of accounting for depreciation by using a permissible method of determining depreciation when you file your first tax return for the property used in your rental activity. H&r block free tax file This also occurs when you use the same impermissible method of determining depreciation (for example, using the wrong MACRS recovery period) in two or more consecutively filed tax returns. H&r block free tax file   If an amended return is allowed, you must file it by the later of the following dates. H&r block free tax file 3 years from the date you filed your original return for the year in which you did not deduct the correct amount. H&r block free tax file A return filed before an unextended due date is considered filed on that due date. H&r block free tax file 2 years from the time you paid your tax for that year. H&r block free tax file Changing your accounting method. H&r block free tax file   To change your accounting method, you generally must file Form 3115, Application for Change in Accounting Method, to get the consent of the IRS. H&r block free tax file In some instances, that consent is automatic. H&r block free tax file For more information, see Changing Your Accounting Method in Publication 946,  chapter 1. H&r block free tax file Prev  Up  Next   Home   More Online Publications