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Income Tax Return 2014

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Income Tax Return 2014

Income tax return 2014 34. Income tax return 2014   Child Tax Credit Table of Contents Introduction Useful Items - You may want to see: Qualifying Child Amount of CreditLimits on the Credit Claiming the Credit Additional Child Tax Credit Completing Schedule 8812 (Form 1040A or 1040)Part I Parts II–IV Introduction The child tax credit is a credit that may reduce your tax by as much as $1,000 for each of your qualifying children. Income tax return 2014 The additional child tax credit is a credit you may be able to take if you are not able to claim the full amount of the child tax credit. Income tax return 2014 This chapter explains the following. Income tax return 2014 Who is a qualifying child. Income tax return 2014 The amount of the credit. Income tax return 2014 How to claim the credit. Income tax return 2014 The child tax credit and the additional child tax credit should not be confused with the child and dependent care credit discussed in chapter 32. Income tax return 2014 If you have no tax. Income tax return 2014   Credits, such as the child tax credit or the credit for child and dependent care expenses, are used to reduce tax. Income tax return 2014 If your tax on Form 1040, line 46, or Form 1040A, line 28, is zero, do not figure the child tax credit because there is no tax to reduce. Income tax return 2014 However, you may qualify for the additional child tax credit on line 65 (Form 1040) or line 39 (Form 1040A). Income tax return 2014 Useful Items - You may want to see: Publication 972 Child Tax Credit Form (and Instructions) Schedule 8812 (Form 1040A or 1040) Child Tax Credit W-4 Employee's Withholding Allowance Certificate Qualifying Child A qualifying child for purposes of the child tax credit is a child who: Is your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, or a descendant of any of them (for example, your grandchild, niece, or nephew), Was under age 17 at the end of 2013, Did not provide over half of his or her own support for 2013, Lived with you for more than half of 2013 (see Exceptions to time lived with you , later), Is claimed as a dependent on your return, Does not file a joint return for the year (or files it only as a claim for refund), and Was a U. Income tax return 2014 S. Income tax return 2014 citizen, a U. Income tax return 2014 S. Income tax return 2014 national, or a resident of the United States. Income tax return 2014 If the child was adopted, see Adopted child , later. Income tax return 2014 For each qualifying child you must check the box on Form 1040 or Form 1040A, line 6c. Income tax return 2014 Example 1. Income tax return 2014 Your son turned 17 on December 30, 2013. Income tax return 2014 He is a citizen of the United States and you claimed him as a dependent on your return. Income tax return 2014 He is not a qualifying child for the child tax credit because he was not under age 17 at the end of 2013. Income tax return 2014 Example 2. Income tax return 2014 Your daughter turned 8 years old in 2013. Income tax return 2014 She is not a citizen of the United States, has an ITIN, and lived in Mexico all of 2013. Income tax return 2014 She is not a qualifying child for the child tax credit because she was not a resident of the United States for 2013. Income tax return 2014 Filers who have certain child dependents with an Individual Taxpayer Identification Number (ITIN). Income tax return 2014   If you are claiming a child tax credit or additional child tax credit for a child you identified on your tax return with an ITIN instead of an SSN, you must complete Part I of Schedule 8812 (Form 1040A or 1040). Income tax return 2014   Although a child may be your dependent, you may only claim a child tax credit or additional child tax credit for a dependent who is a citizen, national, or resident of the United States. Income tax return 2014 To be treated as a resident of the United States, a child generally will need to meet the requirements of the substantial presence test. Income tax return 2014 For more information about the substantial presence test, see Publication 519, U. Income tax return 2014 S. Income tax return 2014 Tax Guide for Aliens. Income tax return 2014 Adopted child. Income tax return 2014   An adopted child is always treated as your own child. Income tax return 2014 An adopted child includes a child lawfully placed with you for legal adoption. Income tax return 2014   If you are a U. Income tax return 2014 S. Income tax return 2014 citizen or U. Income tax return 2014 S. Income tax return 2014 national and your adopted child lived with you all year as a member of your household in 2013, that child meets condition (7) above to be a qualifying child for the child tax credit. Income tax return 2014 Exceptions to time lived with you. Income tax return 2014   A child is considered to have lived with you for more than half of 2013 if the child was born or died in 2013 and your home was this child's home for more than half the time he or she was alive. Income tax return 2014 Temporary absences by you or the child for special circumstances, such as for school, vacation, business, medical care, military service, or detention in a juvenile facility, count as time the child lived with you. Income tax return 2014   There are also exceptions for kidnapped children and children of divorced or separated parents. Income tax return 2014 For details, see Residency Test in chapter 3. Income tax return 2014 Qualifying child of more than one person. Income tax return 2014   A special rule applies if your qualifying child is the qualifying child of more than one person. Income tax return 2014 For details, see Special Rule for Qualifying Child of More Than One Person in chapter 3. Income tax return 2014 Amount of Credit The maximum amount you can claim for the credit is $1,000 for each qualifying child. Income tax return 2014 Limits on the Credit You must reduce your child tax credit if either (1) or (2) applies. Income tax return 2014 The amount on Form 1040, line 46, or Form 1040A, line 28, is less than the credit. Income tax return 2014 If this amount is zero, you cannot take this credit because there is no tax to reduce. Income tax return 2014 But you may be able to take the additional child tax credit. Income tax return 2014 See Additional Child Tax Credit , later. Income tax return 2014 Your modified adjusted gross income (AGI) is more than the amount shown below for your filing status. Income tax return 2014 Married filing jointly - $110,000. Income tax return 2014 Single, head of household, or qualifying widow(er) - $75,000. Income tax return 2014 Married filing separately - $55,000. Income tax return 2014 Modified AGI. Income tax return 2014   For purposes of the child tax credit, your modified AGI is your AGI plus the following amounts that may apply to you. Income tax return 2014 Any amount excluded from income because of the exclusion of income from  Puerto Rico. Income tax return 2014 On the dotted line next to Form 1040, line 38, enter the amount excluded and identify it as “EPRI. Income tax return 2014 ” Also attach a copy of any Form(s) 499R-2/W-2PR to your return. Income tax return 2014 Any amount on line 45 or line 50 of Form 2555, Foreign Earned Income. Income tax return 2014 Any amount on line 18 of Form 2555-EZ, Foreign Earned Income Exclusion. Income tax return 2014 Any amount on line 15 of Form 4563, Exclusion of Income for Bona Fide Residents of American Samoa. Income tax return 2014   If you do not have any of the above, your modified AGI is the same as your AGI. Income tax return 2014 AGI. Income tax return 2014   Your AGI is the amount on Form 1040, line 38, or Form 1040A, line 22. Income tax return 2014 Claiming the Credit To claim the child tax credit, you must file Form 1040 or Form 1040A. Income tax return 2014 You cannot claim the child tax credit on Form 1040EZ. Income tax return 2014 You must provide the name and identification number (usually a social security number) on your tax return for each qualifying child. Income tax return 2014 If you claim the child tax credit with a child identified by an ITIN, you must also file Schedule 8812. Income tax return 2014 To figure your credit, first review the Child Tax Credit Worksheet in your Form 1040 or 1040A instructions. Income tax return 2014 If you are instructed to use Publication 972, you may not use the worksheet in your tax return instructions; instead, you must use Publication 972 to figure the credit. Income tax return 2014 If you are not instructed to use Publication 972, you may use the Child Tax Credit Worksheet in your Form 1040 or 1040A instructions or Publication 972 to figure the credit. Income tax return 2014 Additional Child Tax Credit This credit is for certain individuals who get less than the full amount of the child tax credit. Income tax return 2014 The additional child tax credit may give you a refund even if you do not owe any tax. Income tax return 2014 How to claim the additional child tax credit. Income tax return 2014   To claim the additional child tax credit, follow the steps below. Income tax return 2014 Make sure you figured the amount, if any, of your child tax credit. Income tax return 2014 See Claiming the Credit , earlier. Income tax return 2014 If you answered “Yes” on line 9 or line 10 of the Child Tax Credit Worksheet in the Form 1040 or Form 1040A instructions, or line 13 of the Child Tax Credit Worksheet in Publication 972, use Parts II through IV of Schedule 8812 to see if you can take the additional child tax credit. Income tax return 2014 If you have an additional child tax credit on line 13 of Schedule 8812, carry it to Form 1040, line 65, or Form 1040A, line 39. Income tax return 2014 Completing Schedule 8812 (Form 1040A or 1040) Schedule 8812 contains four parts, but can really be thought of as two sections. Income tax return 2014 Part I is distinct and separate from Parts II–IV. Income tax return 2014 If all your children are identified by social security numbers or IRS adoption taxpayer identification numbers and you are not claiming the additional child tax credit, you do not need to complete or attach Schedule 8812 to your tax return. Income tax return 2014 Part I You only need to complete Part I if you are claiming the child tax credit for a child identified by an IRS individual taxpayer identification number (ITIN). Income tax return 2014 When completing Part I, only answer the questions with regard to children identified by an ITIN; you do not need to complete Part I of Schedule 8812 for any child that is identified by a social security number (SSN) or an IRS adoption taxpayer identification number (ATIN). Income tax return 2014 If all the children for whom you checked the box in column 4 of line 6c on your Form 1040 or Form 1040A are identified by an SSN or an ATIN, you do not need to complete Part I of Schedule 8812. Income tax return 2014 Parts II–IV Parts II–IV help you figure your additional child tax credit. Income tax return 2014 Generally, you should only complete Parts II–IV if you are instructed to do so after completing the Child Tax Credit Worksheet in your tax return instructions or Publication 972. Income tax return 2014 See How to claim the additional child tax credit , earlier. Income tax return 2014 Prev  Up  Next   Home   More Online Publications
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The Income Tax Return 2014

Income tax return 2014 5. Income tax return 2014   Soil and Water Conservation Expenses Table of Contents Introduction Topics - This chapter discusses: Business of Farming Plan Certification Conservation ExpensesWater well. Income tax return 2014 Assessment by Conservation DistrictAssessment for Depreciable Property 25% Limit on DeductionNet operating loss. Income tax return 2014 When to Deduct or Capitalize Sale of a Farm Introduction If you are in the business of farming, you can choose to deduct certain expenses for: Soil or water conservation, Prevention of erosion of land used in farming, or Endangered species recovery. Income tax return 2014 Otherwise, these are capital expenses that must be added to the basis of the land. Income tax return 2014 (See chapter 6 for information on determining basis. Income tax return 2014 ) Conservation expenses for land in a foreign country do not qualify for this special treatment. Income tax return 2014 The deduction for conservation expenses cannot be more than 25% of your gross income from farming. Income tax return 2014 See 25% Limit on Deduction , later. Income tax return 2014 Although some expenses are not deductible as soil and water conservation expenses, they may be deductible as ordinary and necessary farm expenses. Income tax return 2014 These include interest and taxes, the cost of periodically clearing brush from productive land, the regular removal of sediment from a drainage ditch, and expenses paid or incurred primarily to produce an agricultural crop that may also conserve soil. Income tax return 2014 You must include in income most government payments for approved conservation practices. Income tax return 2014 However, you can exclude some payments you receive under certain cost-sharing conservation programs. Income tax return 2014 For more information, see Agricultural Program Payments in chapter 3. Income tax return 2014 To get the full deduction to which you are entitled, you should maintain your records to clearly distinguish between your ordinary and necessary farm business expenses and your soil and water conservation expenses. Income tax return 2014 Topics - This chapter discusses: Business of farming Plan certification Conservation expenses Assessment by conservation district 25% limit on deduction When to deduct or capitalize Sale of a farm Business of Farming For purposes of soil and water conservation expenses, you are in the business of farming if you cultivate, operate, or manage a farm for profit, either as an owner or a tenant. Income tax return 2014 You are not in the business of farming if you cultivate or operate a farm for recreation or pleasure, rather than for profit. Income tax return 2014 You are not farming if you are engaged only in forestry or the growing of timber. Income tax return 2014 Farm defined. Income tax return 2014   A farm includes livestock, dairy, poultry, fish, fruit, and truck farms. Income tax return 2014 It also includes plantations, ranches, ranges, and orchards. Income tax return 2014 A fish farm is an area where fish and other marine animals are grown or raised and artificially fed, protected, etc. Income tax return 2014 It does not include an area where they are merely caught or harvested. Income tax return 2014 A plant nursery is a farm for purposes of deducting soil and water conservation expenses. Income tax return 2014 Farm rental. Income tax return 2014   If you own a farm and receive farm rental payments based on farm production, either in cash or crop shares, you are in the business of farming. Income tax return 2014 If you get cash rental for a farm you own that is not used in farm production, you cannot deduct soil and water conservation expenses for that farm. Income tax return 2014   If you receive a fixed rental payment that is not based on farm production, you are in the business of farming only if you materially participate in operating or managing the farm. Income tax return 2014 Example. Income tax return 2014 You own a farm in Iowa and live in California. Income tax return 2014 You rent the farm for $175 in cash per acre and do not materially participate in producing or managing production of the crops grown on the farm. Income tax return 2014 You cannot deduct your soil conservation expenses for this farm. Income tax return 2014 You must capitalize the expenses and add them to the basis of the land. Income tax return 2014     For more information, see Material participation for landlords under Landlord Participation in Farming in chapter 12. Income tax return 2014 Plan Certification You can deduct soil and water conservation expenses only if they are consistent with a plan approved by the Natural Resources Conservation Service (NRCS) of the Department of Agriculture. Income tax return 2014 If no such plan exists, the expenses must be consistent with a soil conservation plan of a comparable state agency. Income tax return 2014 Keep a copy of the plan with your books and records to support your deductions. Income tax return 2014 Conservation plan. Income tax return 2014   A conservation plan includes the farming conservation practices approved for the area where your farmland is located. Income tax return 2014 There are three types of approved plans. Income tax return 2014 NRCS individual site plans. Income tax return 2014 These plans are issued individually to farmers who request assistance from NRCS to develop a conservation plan designed specifically for their farmland. Income tax return 2014 NRCS county plans. Income tax return 2014 These plans include a listing of farm conservation practices approved for the county where the farmland is located. Income tax return 2014 You can deduct expenses for conservation practices not included on the NRCS county plans only if the practice is a part of an individual site plan. Income tax return 2014 Comparable state agency plans. Income tax return 2014 These plans are approved by state agencies and can be approved individual site plans or county plans. Income tax return 2014   A list of NRCS conservation programs is available at www. Income tax return 2014 nrcs. Income tax return 2014 usda. Income tax return 2014 gov/programs. Income tax return 2014 Individual site plans can be obtained from NRCS offices and the comparable state agencies. Income tax return 2014 Conservation Expenses You can deduct conservation expenses only for land you or your tenant are using, or have used in the past, for farming. Income tax return 2014 These expenses include, but are not limited to, the following. Income tax return 2014 The treatment or movement of earth, such as: Leveling, Conditioning, Grading, Terracing, Contour furrowing, and Restoration of soil fertility. Income tax return 2014 The construction, control, and protection of: Diversion channels, Drainage ditches, Irrigation ditches, Earthen dams, and Watercourses, outlets, and ponds. Income tax return 2014 The eradication of brush. Income tax return 2014 The planting of windbreaks. Income tax return 2014 You cannot deduct expenses to drain or fill wetlands, or to prepare land for center pivot irrigation systems, as soil and water conservation expenses. Income tax return 2014 These expenses are added to the basis of the land. Income tax return 2014 If you choose to deduct soil and water conservation expenses, you cannot exclude from gross income any cost-sharing payments you receive for those expenses. Income tax return 2014 See chapter 3 for information about payments eligible for the cost-sharing exclusion. Income tax return 2014 New farm or farmland. Income tax return 2014   If you acquire a new farm or new farmland from someone who was using it in farming immediately before you acquired the land, soil and water conservation expenses you incur on it will be treated as made on land used in farming at the time the expenses were paid or incurred. Income tax return 2014 You can deduct soil and water conservation expenses for this land if your use of it is substantially a continuation of its use in farming. Income tax return 2014 The new farming activity does not have to be the same as the old farming activity. Income tax return 2014 For example, if you buy land that was used for grazing cattle and then prepare it for use as an apple orchard, you can deduct your conservation expenses. Income tax return 2014 Land not used for farming. Income tax return 2014   If your conservation expenses benefit both land that does not qualify as land used for farming and land that does qualify, you must allocate the expenses between the two types of land. Income tax return 2014 For example, if the expenses benefit 200 acres of your land, but only 120 acres of this land are used for farming, then you can deduct 60% (120 ÷ 200) of the expenses. Income tax return 2014 You can use another method to allocate these expenses if you can clearly show that your method is more reasonable. Income tax return 2014 Depreciable conservation assets. Income tax return 2014   You generally cannot deduct your expenses for depreciable conservation assets. Income tax return 2014 However, you can deduct certain amounts you pay or incur for an assessment for depreciable property that a soil and water conservation or drainage district levies against your farm. Income tax return 2014 See Assessment for Depreciable Property , later. Income tax return 2014   You must capitalize expenses to buy, build, install, or improve depreciable structures or facilities. Income tax return 2014 These expenses include those for materials, supplies, wages, fuel, hauling, and moving dirt when making structures such as tanks, reservoirs, pipes, culverts, canals, dams, wells, or pumps composed of masonry, concrete, tile, metal, or wood. Income tax return 2014 You recover your capital investment through annual allowances for depreciation. Income tax return 2014   You can deduct soil and water conservation expenses for nondepreciable earthen items. Income tax return 2014 Nondepreciable earthen items include certain dams, ponds, and terraces described under Property Having a Determinable Useful Life in chapter 7. Income tax return 2014 Water well. Income tax return 2014   You cannot deduct the cost of drilling a water well for irrigation and other agricultural purposes as a soil and water conservation expense. Income tax return 2014 It is a capital expense. Income tax return 2014 You recover your cost through depreciation. Income tax return 2014 You also must capitalize your cost for drilling a test hole. Income tax return 2014 If the test hole produces no water and you continue drilling, the cost of the test hole is added to the cost of the producing well. Income tax return 2014 You can recover the total cost through depreciation deductions. Income tax return 2014   If a test hole, dry hole, or dried-up well (resulting from prolonged lack of rain, for instance) is abandoned, you can deduct your unrecovered cost in the year of abandonment. Income tax return 2014 Abandonment means that all economic benefits from the well are terminated. Income tax return 2014 For example, filling or sealing a well excavation or casing so that all economic benefits from the well are terminated constitutes an abandonment. Income tax return 2014 Endangered species recovery expenses. Income tax return 2014   If you are in the business of farming and meet other specific requirements, you can choose to deduct the conservation expenses discussed earlier as endangered species recovery expenses. Income tax return 2014 Otherwise, these are capital expenses that must be added to the basis of the land. Income tax return 2014   The expenses must be paid or incurred for the purpose of achieving site-specific management actions recommended in a recovery plan approved under section 4(f) of the Endangered Species Act of 1973. Income tax return 2014 See Internal Revenue Code section 175 for more information. Income tax return 2014 Assessment by Conservation District In some localities, a soil or water conservation or drainage district incurs expenses for soil or water conservation and levies an assessment against the farmers who benefit from the expenses. Income tax return 2014 You can deduct as a conservation expense amounts you pay or incur for the part of an assessment that: Covers expenses you could deduct if you had paid them directly, or Covers expenses for depreciable property used in the district's business. Income tax return 2014 Assessment for Depreciable Property You generally can deduct as a conservation expense amounts you pay or incur for the part of a conservation or drainage district assessment that covers expenses for depreciable property. Income tax return 2014 This includes items such as pumps, locks, concrete structures (including dams and weir gates), draglines, and similar equipment. Income tax return 2014 The depreciable property must be used in the district's soil and water conservation activities. Income tax return 2014 However, the following limits apply to these assessments. Income tax return 2014 The total assessment limit. Income tax return 2014 The yearly assessment limit. Income tax return 2014 After you apply these limits, the amount you can deduct is added to your other conservation expenses for the year. Income tax return 2014 The total for these expenses is then subject to the 25% of gross income from farming limit on the deduction, discussed later. Income tax return 2014 See Table 5-1 for a brief summary of these limits. Income tax return 2014 Table 5-1. Income tax return 2014 Limits on Deducting an Assessment by a Conservation District for Depreciable Property Total Limit on Deduction for Assessment for Depreciable Property Yearly Limit on Deduction for Assessment for Depreciable Property Yearly Limit for All Conservation Expenses 10% of: $500 + 10% of: 25% of: Total assessment against all members of the district for the property. Income tax return 2014 Your deductible share of the cost to the district for the property. Income tax return 2014 Your gross income from farming. Income tax return 2014 No one taxpayer can deduct more than 10% of the total assessment. Income tax return 2014 Any amount over 10% is a capital expense and is added to the basis of your land. Income tax return 2014 If an assessment is paid in installments, each payment must be prorated between the conservation expense and the capital expense. Income tax return 2014 If the amount you pay or incur for any year is more than the limit, you can deduct for that year only 10% of your deductible share of the cost. Income tax return 2014 You can deduct the remainder in equal amounts over the next 9 tax years. Income tax return 2014 Limit for all conservation expenses, including assessments for depreciable property. Income tax return 2014 Amounts greater than 25% can be carried to the following year and added to that year's expenses. Income tax return 2014 The total is then subject to the 25% of gross income from farming limit in that year. Income tax return 2014 To ensure your deduction is within the deduction limits, keep records to show the following. Income tax return 2014 The total assessment against all members of the district for the depreciable property. Income tax return 2014 Your deductible share of the cost to the district for the depreciable property. Income tax return 2014 Your gross income from farming. Income tax return 2014 Total assessment limit. Income tax return 2014   You cannot deduct more than 10% of the total amount assessed to all members of the conservation or drainage district for the depreciable property. Income tax return 2014 This applies whether you pay the assessment in one payment or in installments. Income tax return 2014 If your assessment is more than 10% of the total amount assessed, both the following rules apply. Income tax return 2014 The amount over 10% is a capital expense and is added to the basis of your land. Income tax return 2014 If the assessment is paid in installments, each payment must be prorated between the conservation expense and the capital expense. Income tax return 2014 Yearly assessment limit. Income tax return 2014   The maximum amount you can deduct in any one year is the total of 10% of your deductible share of the cost as explained earlier, plus $500. Income tax return 2014 If the amount you pay or incur is equal to or less than the maximum amount, you can deduct it in the year it is paid or incurred. Income tax return 2014 If the amount you pay or incur is more, you can deduct in that year only 10% of your deductible share of the cost. Income tax return 2014 You can deduct the remainder in equal amounts over the next 9 tax years. Income tax return 2014 Your total conservation expense deduction for each year is also subject to the 25% of gross income from farming limit on the deduction, discussed later. Income tax return 2014 Example 1. Income tax return 2014 This year, the soil conservation district levies and you pay an assessment of $2,400 against your farm. Income tax return 2014 Of the assessment, $1,500 is for digging drainage ditches. Income tax return 2014 You can deduct this part as a soil or conservation expense as if you had paid it directly. Income tax return 2014 The remaining $900 is for depreciable equipment to be used in the district's irrigation activities. Income tax return 2014 The total amount assessed by the district against all its members for the depreciable equipment is $7,000. Income tax return 2014 The total amount you can deduct for the depreciable equipment is limited to 10% of the total amount assessed by the district against all its members for depreciable equipment, or $700. Income tax return 2014 The $200 excess ($900 − $700) is a capital expense you must add to the basis of your farm. Income tax return 2014 To figure the maximum amount you can deduct for the depreciable equipment this year, multiply your deductible share of the total assessment ($700) by 10%. Income tax return 2014 Add $500 to the result for a total of $570. Income tax return 2014 Your deductible share, $700, is greater than the maximum amount deductible in one year, so you can deduct only $70 of the amount you paid or incurred for depreciable property this year (10% of $700). Income tax return 2014 You can deduct the balance at the rate of $70 a year over the next 9 years. Income tax return 2014 You add $70 to the $1,500 portion of the assessment for drainage ditches. Income tax return 2014 You can deduct $1,570 of the $2,400 assessment as a soil and water conservation expense this year, subject to the 25% of gross income from farming limit on the deduction, discussed later. Income tax return 2014 Example 2. Income tax return 2014 Assume the same facts in Example 1 except that $1,850 of the $2,400 assessment is for digging drainage ditches and $550 is for depreciable equipment. Income tax return 2014 The total amount assessed by the district against all its members for depreciable equipment is $5,500. Income tax return 2014 The total amount you can deduct for the depreciable equipment is limited to 10% of this amount, or $550. Income tax return 2014 The maximum amount you can deduct this year for the depreciable equipment is $555 (10% of your deductible share of the total assessment, $55, plus $500). Income tax return 2014 Since your deductible share is less than the maximum amount deductible in one year, you can deduct the entire $550 this year. Income tax return 2014 You can deduct the entire assessment, $2,400, as a soil and water conservation expense this year, subject to the 25% of gross income from farming limit on the deduction, discussed below. Income tax return 2014 Sale or other disposal of land during 9-year period. Income tax return 2014   If you dispose of the land during the 9-year period for deducting conservation expenses subject to the yearly limit, any amounts you have not yet deducted because of this limit are added to the basis of the property. Income tax return 2014 Death of farmer during 9-year period. Income tax return 2014   If a farmer dies during the 9-year period, any remaining amounts not yet deducted are deducted in the year of death. Income tax return 2014 25% Limit on Deduction The total deduction for conservation expenses in any tax year is limited to 25% of your gross income from farming for the year. Income tax return 2014 Gross income from farming. Income tax return 2014   Gross income from farming is the income you derive in the business of farming from the production of crops, fish, fruits, other agricultural products, or livestock. Income tax return 2014 Gains from sales of draft, breeding, or dairy livestock are included. Income tax return 2014 Gains from sales of assets such as farm machinery, or from the disposition of land, are not included. Income tax return 2014 Carryover of deduction. Income tax return 2014   If your deductible conservation expenses in any year are more than 25% of your gross income from farming for that year, you can carry the unused deduction over to later years. Income tax return 2014 However, the deduction in any later year is limited to 25% of the gross income from farming for that year as well. Income tax return 2014 Example. Income tax return 2014 In 2012, you have gross income of $32,000 from two farms. Income tax return 2014 During the year, you incurred $10,000 of deductible soil and water conservation expenses for one of the farms. Income tax return 2014 However, your deduction is limited to 25% of $32,000, or $8,000. Income tax return 2014 The $2,000 excess ($10,000 − $8,000) is carried over to 2013 and added to deductible soil and water conservation expenses made in that year. Income tax return 2014 The total of the 2012 carryover plus 2013 expenses is deductible in 2013, subject to the limit of 25% of your gross income from farming in 2013. Income tax return 2014 Any expenses over the limit in that year are carried to 2014 and later years. Income tax return 2014 Net operating loss. Income tax return 2014   The deduction for soil and water conservation expenses, after applying the 25% limit, is included when figuring a net operating loss (NOL) for the year. Income tax return 2014 If the NOL is carried to another year, the soil and water conservation deduction included in the NOL is not subject to the 25% limit in the year to which it is carried. Income tax return 2014 When to Deduct or Capitalize If you choose to deduct soil and water conservation expenses, you must deduct the total allowable amount on your tax return for the first year you pay or incur these expenses. Income tax return 2014 If you do not choose to deduct the expenses, you must capitalize them. Income tax return 2014 Change of method. Income tax return 2014   If you want to change your method for the treatment of soil and water conservation expenses, or you want to treat the expenses for a particular project or a single farm in a different manner, you must get the approval of the IRS. Income tax return 2014 To get this approval, submit a written request by the due date of your return for the first tax year you want the new method to apply. Income tax return 2014 You or your authorized representative must sign the request. Income tax return 2014   The request must include the following information. Income tax return 2014 Your name and address. Income tax return 2014 The first tax year the method or change of method is to apply. Income tax return 2014 Whether the method or change of method applies to all your soil and water conservation expenses or only to those for a particular project or farm. Income tax return 2014 If the method or change of method does not apply to all your expenses, identify the project or farm to which the expenses apply. Income tax return 2014 The total expenses you paid or incurred in the first tax year the method or change of method is to apply. Income tax return 2014 A statement that you will account separately in your books for the expenses to which this method or change of method relates. Income tax return 2014 Send your request to the following  address. Income tax return 2014  Department of the Treasury Internal Revenue Service Center Cincinnati, OH 45999  For more information, see Change in  Accounting Method in chapter 2. Income tax return 2014 Sale of a Farm If you sell your farm, you cannot adjust the basis of the land at the time of the sale for any unused carryover of soil and water conservation expenses (except for deductions of assessments for depreciable property, discussed earlier). Income tax return 2014 However, if you acquire another farm and return to the business of farming, you can start taking deductions again for the unused carryovers. Income tax return 2014 Gain on sale of farmland. Income tax return 2014   If you held the land 5 years or less before you sold it, gain on the sale of the land is treated as ordinary income up to the amount you previously deducted for soil and water conservation expenses. Income tax return 2014 If you held the land less than 10 but more than 5 years, the gain is treated as ordinary income up to a specified percentage of the previous deductions. Income tax return 2014 See Section 1252 property under Other Gains in chapter 9. 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