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Instructions For Form 1040x

Efile Tax Return For FreeFree 1040ezFree H&r Block Software1040x For 2009How Can I File My 2012 TaxesForm 1040 2010Filing Your State Taxes FreeAmended Tax ReturnIrs 2008 Tax FormsTax Forms 1040ez2012 Irs Form 1040 Ez1040ez 20122012 Schedule A Tax Form1040x Turbo TaxFile Extension OnlineFiling Tax AmendmentsFree Income Tax Filing2013 Form 1040ezIrs Ez FormFree State FilingFile 2006 Taxes FreeTurbotax Free EditionTax Form 1040nrFile A 2010 Tax ReturnNeed To File My 2012 TaxesHow To Fill 1040nr1040 Ez Tax Forms1040eztaxformIrs 1040ez 2013 Form And InstructionsStatetaxes2010 Taxes Cheap 1099g Form WAmended Tax Return 2012Filling Out 1040x2010 Tax ReturnHow Do I File My 2010 Taxes For Free2010 Turbo TaxIrs Gov Free File 2011Turbotax For Military MembersHow Do I File My 2011 Tax ReturnCan You File An Amended Tax Return Online

Instructions For Form 1040x

Instructions for form 1040x Part Four -   Ajustes a los Ingresos Los tres capítulos de esta sección abordan algunos de los ajustes a los ingresos que puede deducir al calcular el ingreso bruto ajustado. Instructions for form 1040x Estos capítulos abarcan: Aportaciones a arreglos tradicionales de ahorros para la jubilación (IRA, por sus siglas en inglés), el capítulo 17 , Pensión para el cónyuge divorciado que paga, el capítulo 18 e Intereses sobre préstamos de estudios que usted paga, el capítulo 19 . Instructions for form 1040x Otros ajustes a los ingresos se explican en otras partes de esta publicación o en otras publicaciones. Instructions for form 1040x Vea la Tabla V que aparece a continuación. Instructions for form 1040x Tabla V. Instructions for form 1040x Otros Ajustes a los Ingresos  Utilice esta tabla para buscar información acerca de otros ajustes a los ingresos no abarcados en esta sección de la publicación. Instructions for form 1040x SI busca más información sobre la deducción por. Instructions for form 1040x . Instructions for form 1040x . Instructions for form 1040x ENTONCES vea. Instructions for form 1040x . Instructions for form 1040x . Instructions for form 1040x Determinados gastos de negocio de personal en reserva de las Fuerzas Armadas, artistas del espectáculo y funcionarios que prestan servicios por honorarios el capítulo 26 . Instructions for form 1040x Aportaciones a cuentas de ahorros para gastos médicos la Publicación 969, Health Savings Accounts and Other Tax-Favored Health Plans (Cuentas de ahorros para gastos médicos y otros planes para la salud con beneficios tributarios), en inglés. Instructions for form 1040x Gastos de mudanza la Publicación 521, Moving Expenses (Gastos de mudanza), en inglés. Instructions for form 1040x Una porción del impuesto sobre el trabajo por cuenta propia el capítulo 22 . Instructions for form 1040x Seguro médico para personas que trabajan por cuenta propia el capítulo 21 . Instructions for form 1040x Pagos a planes SEP, SIMPLE y planes calificados para personas que trabajan por cuenta propia la Publicación 560, Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans) (Planes de jubilación para pequeños negocios (SEP, SIMPLE y planes calificados)), en inglés. Instructions for form 1040x Multa por retiro prematuro de ahorros el capítulo 7 . Instructions for form 1040x Aportaciones a un plan de ahorros médicos Archer (MSA, por sus siglas en inglés) la Publicación 969, en inglés. Instructions for form 1040x Amortización o gasto de reforestación los capítulos 7 y 8 de la Publicación 535, Business Expenses (Gastos de negocios), en inglés. Instructions for form 1040x Aportaciones a planes de pensiones conforme a la sección 501(c)(18)(D) del Código Federal de Impuestos Internos la Publicación 525, Taxable and Nontaxable Income (Ingreso tributable y no tributable), en inglés. Instructions for form 1040x Gastos procedentes del alquiler de bienes muebles el capítulo 12 . Instructions for form 1040x Determinados reintegros obligatorios de prestaciones suplementarias por desempleo (sub-pago) el capítulo 12 . Instructions for form 1040x Gastos por concepto de vivienda en el extranjero el capítulo 4 de la Publicación 54, Tax Guide for U. Instructions for form 1040x S. Instructions for form 1040x Citizens and Resident Aliens Abroad (Guía tributaria para ciudadanos estadounidenses y extranjeros residentes que viven en el extranjero), en inglés. Instructions for form 1040x Pago de servicio de juraduría que se le haya entregado a su empleador el capítulo 12 . Instructions for form 1040x Aportaciones hechas por determinados capellanes a planes conforme a la sección 403(b) del Código Federal de Impuestos Internos la Publicación 517, Social Security and Other Information for Members of the Clergy and Religious Workers (Seguro Social y otra información para miembros del clero y empleados religiosos), en inglés. Instructions for form 1040x Honorarios de abogado y determinados costos por acciones legales con respecto a reclamaciones por discriminación ilegal y premios a denunciantes dentro de su propia empresa la Publicación 525, en inglés. Instructions for form 1040x Deducción por actividades de producción nacional el Formulario 8903, Domestic Production Activities Deduction (Deducción por actividades de producción nacional), en inglés. Instructions for form 1040x Table of Contents 17. Instructions for form 1040x   Arreglos de Ahorros para la Jubilación (Arreglos IRA)Qué Hay de Nuevo en el Año 2013 Recordatorios Introduction Useful Items - You may want to see: Arreglos IRA Tradicionales¿Quién Puede Abrir un Arreglo IRA Tradicional? ¿Cuándo y Cómo se Puede Abrir un Arreglo IRA Tradicional? ¿Cuánto se Puede Aportar? ¿Cuándo se Pueden Hacer Aportaciones? ¿Cuánto se Puede Deducir? Aportaciones no Deducibles Arreglos IRA Heredados ¿Puede Traspasar Activos de un Plan de Jubilación? ¿Cuándo Puede Retirar o Utilizar Activos de un Arreglo IRA? ¿Cuándo Tiene que Retirar Activos de un Arreglo IRA? (Distribuciones Mínimas Obligatorias) ¿Están Sujetas a Impuestos las Distribuciones? ¿Qué Acciones Dan Lugar a Multas o Impuestos Adicionales? Arreglos Roth IRA ¿Qué Es un Arreglo Roth IRA? ¿Cuándo se Puede Abrir un Arreglo Roth IRA? ¿Puede Hacer Aportaciones a un Arreglo Roth IRA? ¿Se Pueden Trasladar Activos a un Arreglo Roth IRA? ¿Están Sujetas a Impuestos las Distribuciones? 18. Instructions for form 1040x   Pensión para el Cónyuge DivorciadoIntroductionCónyuge o ex cónyuge. Instructions for form 1040x Documento (instrumento) de divorcio o separación judicial. Instructions for form 1040x Useful Items - You may want to see: Reglas GeneralesPagos hipotecarios. Instructions for form 1040x Impuestos y seguro. Instructions for form 1040x Otros pagos a terceros. Instructions for form 1040x Documentos Firmados Después de 1984Pagos a terceros. Instructions for form 1040x Excepción. Instructions for form 1040x Pagos sustitutivos. Instructions for form 1040x Específicamente designado como pensión para hijos menores. Instructions for form 1040x Contingencia relacionada con su hijo. Instructions for form 1040x Pago claramente asociado con una contingencia. Instructions for form 1040x Cómo Deducir la Pensión para el Cónyuge Divorciado que Pagó Cómo Declarar la Pensión para el Cónyuge Divorciado Recibida Regla de Recuperación 19. Instructions for form 1040x   Ajustes Tributarios por EstudiosIntroduction Useful Items - You may want to see: Deducción por Intereses sobre Préstamos de EstudiosDefinición de los Intereses sobre Préstamos de Estudios ¿Puede Reclamar la Deducción? ¿Cuánto Puede Deducir? ¿Cómo Calcular la Deducción? Deducción por Matrícula y Cuotas Escolares¿Puede Reclamar la Deducción? Gastos que Califican Estudiante que Reúne los Requisitos Quién Puede Reclamar los Gastos de un Dependiente Cuánto se Puede Deducir Gastos del Educador Prev  Up  Next   Home   More Online Publications
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Understanding Your CP288 Notice

We accepted your election to be treated as a Qualified Subchapter S Trust (QSST).


What you need to do

  • File Form 1041, U.S. Income Tax Return for Estates and Trusts, timely.
  • Include Schedule K-1, Beneficiary’s Share of Income, Deductions, Credits, etc., reflecting your ownership in the S corporation.
  • Keep this notice for your records.

You may want to


  • Answers to Common Questions

    How do I terminate the QSST election?
    This election can only be terminated by permission of the Commissioner of Internal Revenue. See IR Bulletin 2012-1 for instructions


    Understanding your notice

    Your notice may look different from the sample because the information contained in your notice is tailored to your situation.

    Notice CP288, Page 1

Page Last Reviewed or Updated: 09-Dec-2013

How to get help

  • Call the 1-800 number listed on the top right corner of your notice.
  • Authorize someone (e.g., accountant) to contact the IRS on your behalf using Form 2848.
  • See if you qualify for help from a Low Income Taxpayer Clinic.
     

The Instructions For Form 1040x

Instructions for form 1040x 5. Instructions for form 1040x   Soil and Water Conservation Expenses Table of Contents Introduction Topics - This chapter discusses: Business of Farming Plan Certification Conservation ExpensesWater well. Instructions for form 1040x Assessment by Conservation DistrictAssessment for Depreciable Property 25% Limit on DeductionNet operating loss. Instructions for form 1040x 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. Instructions for form 1040x Otherwise, these are capital expenses that must be added to the basis of the land. Instructions for form 1040x (See chapter 6 for information on determining basis. Instructions for form 1040x ) Conservation expenses for land in a foreign country do not qualify for this special treatment. Instructions for form 1040x The deduction for conservation expenses cannot be more than 25% of your gross income from farming. Instructions for form 1040x See 25% Limit on Deduction , later. Instructions for form 1040x Although some expenses are not deductible as soil and water conservation expenses, they may be deductible as ordinary and necessary farm expenses. Instructions for form 1040x 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. Instructions for form 1040x You must include in income most government payments for approved conservation practices. Instructions for form 1040x However, you can exclude some payments you receive under certain cost-sharing conservation programs. Instructions for form 1040x For more information, see Agricultural Program Payments in chapter 3. Instructions for form 1040x 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. Instructions for form 1040x 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. Instructions for form 1040x You are not in the business of farming if you cultivate or operate a farm for recreation or pleasure, rather than for profit. Instructions for form 1040x You are not farming if you are engaged only in forestry or the growing of timber. Instructions for form 1040x Farm defined. Instructions for form 1040x   A farm includes livestock, dairy, poultry, fish, fruit, and truck farms. Instructions for form 1040x It also includes plantations, ranches, ranges, and orchards. Instructions for form 1040x A fish farm is an area where fish and other marine animals are grown or raised and artificially fed, protected, etc. Instructions for form 1040x It does not include an area where they are merely caught or harvested. Instructions for form 1040x A plant nursery is a farm for purposes of deducting soil and water conservation expenses. Instructions for form 1040x Farm rental. Instructions for form 1040x   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. Instructions for form 1040x 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. Instructions for form 1040x   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. Instructions for form 1040x Example. Instructions for form 1040x You own a farm in Iowa and live in California. Instructions for form 1040x 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. Instructions for form 1040x You cannot deduct your soil conservation expenses for this farm. Instructions for form 1040x You must capitalize the expenses and add them to the basis of the land. Instructions for form 1040x     For more information, see Material participation for landlords under Landlord Participation in Farming in chapter 12. Instructions for form 1040x 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. Instructions for form 1040x If no such plan exists, the expenses must be consistent with a soil conservation plan of a comparable state agency. Instructions for form 1040x Keep a copy of the plan with your books and records to support your deductions. Instructions for form 1040x Conservation plan. Instructions for form 1040x   A conservation plan includes the farming conservation practices approved for the area where your farmland is located. Instructions for form 1040x There are three types of approved plans. Instructions for form 1040x NRCS individual site plans. Instructions for form 1040x These plans are issued individually to farmers who request assistance from NRCS to develop a conservation plan designed specifically for their farmland. Instructions for form 1040x NRCS county plans. Instructions for form 1040x These plans include a listing of farm conservation practices approved for the county where the farmland is located. Instructions for form 1040x 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. Instructions for form 1040x Comparable state agency plans. Instructions for form 1040x These plans are approved by state agencies and can be approved individual site plans or county plans. Instructions for form 1040x   A list of NRCS conservation programs is available at www. Instructions for form 1040x nrcs. Instructions for form 1040x usda. Instructions for form 1040x gov/programs. Instructions for form 1040x Individual site plans can be obtained from NRCS offices and the comparable state agencies. Instructions for form 1040x Conservation Expenses You can deduct conservation expenses only for land you or your tenant are using, or have used in the past, for farming. Instructions for form 1040x These expenses include, but are not limited to, the following. Instructions for form 1040x The treatment or movement of earth, such as: Leveling, Conditioning, Grading, Terracing, Contour furrowing, and Restoration of soil fertility. Instructions for form 1040x The construction, control, and protection of: Diversion channels, Drainage ditches, Irrigation ditches, Earthen dams, and Watercourses, outlets, and ponds. Instructions for form 1040x The eradication of brush. Instructions for form 1040x The planting of windbreaks. Instructions for form 1040x You cannot deduct expenses to drain or fill wetlands, or to prepare land for center pivot irrigation systems, as soil and water conservation expenses. Instructions for form 1040x These expenses are added to the basis of the land. Instructions for form 1040x 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. Instructions for form 1040x See chapter 3 for information about payments eligible for the cost-sharing exclusion. Instructions for form 1040x New farm or farmland. Instructions for form 1040x   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. Instructions for form 1040x 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. Instructions for form 1040x The new farming activity does not have to be the same as the old farming activity. Instructions for form 1040x 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. Instructions for form 1040x Land not used for farming. Instructions for form 1040x   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. Instructions for form 1040x 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. Instructions for form 1040x You can use another method to allocate these expenses if you can clearly show that your method is more reasonable. Instructions for form 1040x Depreciable conservation assets. Instructions for form 1040x   You generally cannot deduct your expenses for depreciable conservation assets. Instructions for form 1040x 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. Instructions for form 1040x See Assessment for Depreciable Property , later. Instructions for form 1040x   You must capitalize expenses to buy, build, install, or improve depreciable structures or facilities. Instructions for form 1040x 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. Instructions for form 1040x You recover your capital investment through annual allowances for depreciation. Instructions for form 1040x   You can deduct soil and water conservation expenses for nondepreciable earthen items. Instructions for form 1040x Nondepreciable earthen items include certain dams, ponds, and terraces described under Property Having a Determinable Useful Life in chapter 7. Instructions for form 1040x Water well. Instructions for form 1040x   You cannot deduct the cost of drilling a water well for irrigation and other agricultural purposes as a soil and water conservation expense. Instructions for form 1040x It is a capital expense. Instructions for form 1040x You recover your cost through depreciation. Instructions for form 1040x You also must capitalize your cost for drilling a test hole. Instructions for form 1040x 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. Instructions for form 1040x You can recover the total cost through depreciation deductions. Instructions for form 1040x   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. Instructions for form 1040x Abandonment means that all economic benefits from the well are terminated. Instructions for form 1040x For example, filling or sealing a well excavation or casing so that all economic benefits from the well are terminated constitutes an abandonment. Instructions for form 1040x Endangered species recovery expenses. Instructions for form 1040x   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. Instructions for form 1040x Otherwise, these are capital expenses that must be added to the basis of the land. Instructions for form 1040x   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. Instructions for form 1040x See Internal Revenue Code section 175 for more information. Instructions for form 1040x 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. Instructions for form 1040x 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. Instructions for form 1040x 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. Instructions for form 1040x This includes items such as pumps, locks, concrete structures (including dams and weir gates), draglines, and similar equipment. Instructions for form 1040x The depreciable property must be used in the district's soil and water conservation activities. Instructions for form 1040x However, the following limits apply to these assessments. Instructions for form 1040x The total assessment limit. Instructions for form 1040x The yearly assessment limit. Instructions for form 1040x After you apply these limits, the amount you can deduct is added to your other conservation expenses for the year. Instructions for form 1040x The total for these expenses is then subject to the 25% of gross income from farming limit on the deduction, discussed later. Instructions for form 1040x See Table 5-1 for a brief summary of these limits. Instructions for form 1040x Table 5-1. Instructions for form 1040x 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. Instructions for form 1040x Your deductible share of the cost to the district for the property. Instructions for form 1040x Your gross income from farming. Instructions for form 1040x No one taxpayer can deduct more than 10% of the total assessment. Instructions for form 1040x Any amount over 10% is a capital expense and is added to the basis of your land. Instructions for form 1040x If an assessment is paid in installments, each payment must be prorated between the conservation expense and the capital expense. Instructions for form 1040x 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. Instructions for form 1040x You can deduct the remainder in equal amounts over the next 9 tax years. Instructions for form 1040x Limit for all conservation expenses, including assessments for depreciable property. Instructions for form 1040x Amounts greater than 25% can be carried to the following year and added to that year's expenses. Instructions for form 1040x The total is then subject to the 25% of gross income from farming limit in that year. Instructions for form 1040x To ensure your deduction is within the deduction limits, keep records to show the following. Instructions for form 1040x The total assessment against all members of the district for the depreciable property. Instructions for form 1040x Your deductible share of the cost to the district for the depreciable property. Instructions for form 1040x Your gross income from farming. Instructions for form 1040x Total assessment limit. Instructions for form 1040x   You cannot deduct more than 10% of the total amount assessed to all members of the conservation or drainage district for the depreciable property. Instructions for form 1040x This applies whether you pay the assessment in one payment or in installments. Instructions for form 1040x If your assessment is more than 10% of the total amount assessed, both the following rules apply. Instructions for form 1040x The amount over 10% is a capital expense and is added to the basis of your land. Instructions for form 1040x If the assessment is paid in installments, each payment must be prorated between the conservation expense and the capital expense. Instructions for form 1040x Yearly assessment limit. Instructions for form 1040x   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. Instructions for form 1040x 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. Instructions for form 1040x If the amount you pay or incur is more, you can deduct in that year only 10% of your deductible share of the cost. Instructions for form 1040x You can deduct the remainder in equal amounts over the next 9 tax years. Instructions for form 1040x 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. Instructions for form 1040x Example 1. Instructions for form 1040x This year, the soil conservation district levies and you pay an assessment of $2,400 against your farm. Instructions for form 1040x Of the assessment, $1,500 is for digging drainage ditches. Instructions for form 1040x You can deduct this part as a soil or conservation expense as if you had paid it directly. Instructions for form 1040x The remaining $900 is for depreciable equipment to be used in the district's irrigation activities. Instructions for form 1040x The total amount assessed by the district against all its members for the depreciable equipment is $7,000. Instructions for form 1040x 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. Instructions for form 1040x The $200 excess ($900 − $700) is a capital expense you must add to the basis of your farm. Instructions for form 1040x 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%. Instructions for form 1040x Add $500 to the result for a total of $570. Instructions for form 1040x 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). Instructions for form 1040x You can deduct the balance at the rate of $70 a year over the next 9 years. Instructions for form 1040x You add $70 to the $1,500 portion of the assessment for drainage ditches. Instructions for form 1040x 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. Instructions for form 1040x Example 2. Instructions for form 1040x 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. Instructions for form 1040x The total amount assessed by the district against all its members for depreciable equipment is $5,500. Instructions for form 1040x The total amount you can deduct for the depreciable equipment is limited to 10% of this amount, or $550. Instructions for form 1040x 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). Instructions for form 1040x Since your deductible share is less than the maximum amount deductible in one year, you can deduct the entire $550 this year. Instructions for form 1040x 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. Instructions for form 1040x Sale or other disposal of land during 9-year period. Instructions for form 1040x   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. Instructions for form 1040x Death of farmer during 9-year period. Instructions for form 1040x   If a farmer dies during the 9-year period, any remaining amounts not yet deducted are deducted in the year of death. Instructions for form 1040x 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. Instructions for form 1040x Gross income from farming. Instructions for form 1040x   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. Instructions for form 1040x Gains from sales of draft, breeding, or dairy livestock are included. Instructions for form 1040x Gains from sales of assets such as farm machinery, or from the disposition of land, are not included. Instructions for form 1040x Carryover of deduction. Instructions for form 1040x   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. Instructions for form 1040x However, the deduction in any later year is limited to 25% of the gross income from farming for that year as well. Instructions for form 1040x Example. Instructions for form 1040x In 2012, you have gross income of $32,000 from two farms. Instructions for form 1040x During the year, you incurred $10,000 of deductible soil and water conservation expenses for one of the farms. Instructions for form 1040x However, your deduction is limited to 25% of $32,000, or $8,000. Instructions for form 1040x 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. Instructions for form 1040x 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. Instructions for form 1040x Any expenses over the limit in that year are carried to 2014 and later years. Instructions for form 1040x Net operating loss. Instructions for form 1040x   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. Instructions for form 1040x 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. Instructions for form 1040x 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. Instructions for form 1040x If you do not choose to deduct the expenses, you must capitalize them. Instructions for form 1040x Change of method. Instructions for form 1040x   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. Instructions for form 1040x 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. Instructions for form 1040x You or your authorized representative must sign the request. Instructions for form 1040x   The request must include the following information. Instructions for form 1040x Your name and address. Instructions for form 1040x The first tax year the method or change of method is to apply. Instructions for form 1040x 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. Instructions for form 1040x If the method or change of method does not apply to all your expenses, identify the project or farm to which the expenses apply. Instructions for form 1040x The total expenses you paid or incurred in the first tax year the method or change of method is to apply. Instructions for form 1040x A statement that you will account separately in your books for the expenses to which this method or change of method relates. Instructions for form 1040x Send your request to the following  address. Instructions for form 1040x  Department of the Treasury Internal Revenue Service Center Cincinnati, OH 45999  For more information, see Change in  Accounting Method in chapter 2. Instructions for form 1040x 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). Instructions for form 1040x However, if you acquire another farm and return to the business of farming, you can start taking deductions again for the unused carryovers. Instructions for form 1040x Gain on sale of farmland. Instructions for form 1040x   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. Instructions for form 1040x 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. Instructions for form 1040x See Section 1252 property under Other Gains in chapter 9. Instructions for form 1040x Prev  Up  Next   Home   More Online Publications