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Irs free tax preparation Publication 17 - Introductory Material Table of Contents What's New Reminders IntroductionIcons. Irs free tax preparation Ordering forms and publications. Irs free tax preparation Tax questions. Irs free tax preparation All material in this publication may be reprinted freely. Irs free tax preparation A citation to Your Federal Income Tax (2013) would be appropriate. Irs free tax preparation The explanations and examples in this publication reflect the interpretation by the Internal Revenue Service (IRS) of: Tax laws enacted by Congress, Treasury regulations, and Court decisions. Irs free tax preparation However, the information given does not cover every situation and is not intended to replace the law or change its meaning. Irs free tax preparation This publication covers some subjects on which a court may have made a decision more favorable to taxpayers than the interpretation by the IRS. Irs free tax preparation Until these differing interpretations are resolved by higher court decisions or in some other way, this publication will continue to present the interpretations by the IRS. Irs free tax preparation All taxpayers have important rights when working with the IRS. Irs free tax preparation These rights are described in Your Rights as a Taxpayer in the back of this publication. Irs free tax preparation What's New This section summarizes important tax changes that took effect in 2013. Irs free tax preparation Most of these changes are discussed in more detail throughout this publication. Irs free tax preparation Future developments. Irs free tax preparation  For the latest information about the tax law topics covered in this publication, including information about any tax legislation, go to www. Irs free tax preparation irs. Irs free tax preparation gov/pub17. Irs free tax preparation Additional Medicare Tax. Irs free tax preparation  Beginning in 2013, a 0. Irs free tax preparation 9% Additional Medicare Tax applies to Medicare wages, railroad retirement (RRTA) compensation, and self-employment income that are more than: $125,000 if married filing separately, $250,000 if married filing jointly, or $200,000 for any other filing status. Irs free tax preparation See Form 8959 and its instructions. Irs free tax preparation Net Investment Income Tax. Irs free tax preparation  Beginning in 2013, you may be subject to Net Investment Income Tax (NIIT). Irs free tax preparation The NIIT is 3. Irs free tax preparation 8% of the smaller of (a) your net investment income or (b) the excess of your modified adjusted gross income over: $125,000 if married filing separately, $250,000 if married filing jointly or qualifying widow(er), or $200,000 if any other filing status. Irs free tax preparation See Form 8960 and its instructions. Irs free tax preparation Change in tax rates. Irs free tax preparation  The highest tax rate is 39. Irs free tax preparation 6%. Irs free tax preparation For more information, see the 2013 Tax Computation Worksheet or the 2013 Tax Rate Schedules near the end of this publication. Irs free tax preparation Tax rate on net capital gain and qualified dividends. Irs free tax preparation  The maximum tax rate of 15% on net capital gain and qualified dividends has increased to 20% for some taxpayers. Irs free tax preparation See chapter 16. Irs free tax preparation Medical and dental expenses. Irs free tax preparation  You can deduct only the part of your medical and dental expenses that is more than 10% of your adjusted gross income (7. Irs free tax preparation 5% if either you or your spouse is age 65 or older). Irs free tax preparation See chapter 21. Irs free tax preparation Personal exemption amount increased for certain taxpayers. Irs free tax preparation  Your personal exemption is increased to $3,900. Irs free tax preparation But the amount is reduced if your adjusted gross income is more than: $150,000 if married filing separately, $250,000 if single, $275,000 if head of household, or $300,000 if any other filing status. Irs free tax preparation See chapter 3. Irs free tax preparation Limit on itemized deductions. Irs free tax preparation  You may not be able to deduct all of your itemized deductions if your adjusted gross income is more than: $150,000 if married filing separately, $250,000 if single, $275,000 if head of household, or $300,000 if any other filing status. Irs free tax preparation See chapter 29. Irs free tax preparation Same-sex marriages. Irs free tax preparation  If you have a same-sex spouse whom you legally married in a state (or foreign country) that recognizes same-sex marriage, you and your spouse generally must use the married filing jointly or married filing separately filing status on your 2013 return, even if you and your spouse now live in a state (or foreign country) that does not recognize same-sex marriage. Irs free tax preparation See chapter 2. Irs free tax preparation If you meet certain requirements, you may be able to file amended returns to change your filing status for some earlier years. Irs free tax preparation For details on filing amended returns, see chapter 1. Irs free tax preparation Health flexible spending arrangements (FSAs). Irs free tax preparation  You cannot have more than $2,500 in salary reduction contributions made to a health FSA for plan years beginning after 2012. Irs free tax preparation See chapter 5. Irs free tax preparation Expiring credits. Irs free tax preparation  The plug-in electric vehicle credit and the refundable part of the credit for prior year minimum tax have expired. Irs free tax preparation You cannot claim either one on your 2013 return. Irs free tax preparation See chapter 37. Irs free tax preparation Ponzi-type investment schemes. Irs free tax preparation  There are new rules for how to claim a theft loss deduction on Form 4684 due to a Ponzi-type investment scheme. Irs free tax preparation See chapter 25. Irs free tax preparation Home office deduction simplified method. Irs free tax preparation  If you can take a home office deduction, you may be able to use a simplified method to figure it. Irs free tax preparation See Publication 587. Irs free tax preparation Standard mileage rates. Irs free tax preparation  The 2013 rate for business use of your car is increased to 56½ cents a mile. Irs free tax preparation See chapter 26. Irs free tax preparation The 2013 rate for use of your car to get medical care is increased to 24 cents a mile. Irs free tax preparation See chapter 21. Irs free tax preparation The 2013 rate for use of your car to move is increased to 24 cents a mile. Irs free tax preparation See Publication 521, Moving Expenses. Irs free tax preparation Reminders Listed below are important reminders and other items that may help you file your 2013 tax return. Irs free tax preparation Many of these items are explained in more detail later in this publication. Irs free tax preparation Enter your social security number (SSN). Irs free tax preparation  Enter your SSN in the space provided on your tax form. Irs free tax preparation If you filed a joint return for 2012 and are filing a joint return for 2013 with the same spouse, enter your names and SSNs in the same order as on your 2012 return. Irs free tax preparation See chapter 1. Irs free tax preparation Secure your tax records from identity theft. Irs free tax preparation  Identity theft occurs when someone uses your personal information, such as your name, SSN, or other identifying information, without your permission, to commit fraud or other crimes. Irs free tax preparation An identity thief may use your SSN to get a job or may file a tax return using your SSN to receive a refund. Irs free tax preparation For more information about identity theft and how to reduce your risk from it, see chapter 1. Irs free tax preparation Taxpayer identification numbers. Irs free tax preparation  You must provide the taxpayer identification number for each person for whom you claim certain tax benefits. Irs free tax preparation This applies even if the person was born in 2013. Irs free tax preparation Generally, this number is the person's social security number (SSN). Irs free tax preparation See chapter 1. Irs free tax preparation Foreign source income. Irs free tax preparation  If you are a U. Irs free tax preparation S. Irs free tax preparation citizen with income from sources outside the United States (foreign income), you must report all such income on your tax return unless it is exempt by U. Irs free tax preparation S. Irs free tax preparation law. Irs free tax preparation This is true whether you live inside or outside the United States and whether or not you receive a Form W-2 or Form 1099 from the foreign payer. Irs free tax preparation This applies to earned income (such as wages and tips) as well as unearned income (such as interest, dividends, capital gains, pensions, rents and royalties). Irs free tax preparation If you live outside the United States, you may be able to exclude part or all of your foreign source earned income. Irs free tax preparation For details, see Publication 54, Tax Guide for U. Irs free tax preparation S. Irs free tax preparation Citizens and Resident Aliens Abroad. Irs free tax preparation Foreign financial assets. Irs free tax preparation  If you had foreign financial assets in 2013, you may have to file Form 8938 with your return. Irs free tax preparation Check www. Irs free tax preparation IRS. Irs free tax preparation gov/form8938 for details. Irs free tax preparation Automatic 6-month extension to file tax return. Irs free tax preparation  You can use Form 4868, Application for Automatic Extension of Time To File U. Irs free tax preparation S. Irs free tax preparation Individual Income Tax Return, to obtain an automatic 6-month extension of time to file your tax return. Irs free tax preparation See chapter 1. Irs free tax preparation Include your phone number on your return. Irs free tax preparation  To promptly resolve any questions we have in processing your tax return, we would like to be able to call you. Irs free tax preparation Please enter your daytime telephone number on your tax form next to your signature and occupation. Irs free tax preparation If you are filing a joint return, you can enter either your or your spouse's daytime phone number. Irs free tax preparation Payment of taxes. Irs free tax preparation   You can pay your taxes online, by phone, or by check or money order. Irs free tax preparation You can make a direct transfer from your bank account or use a credit or debit card. Irs free tax preparation If you e-file, you can schedule an electronic payment. Irs free tax preparation See chapter 1. Irs free tax preparation Faster ways to file your return. Irs free tax preparation  The IRS offers fast, accurate ways to file your tax return information without filing a paper tax return. Irs free tax preparation You can use IRS e-file (electronic filing). Irs free tax preparation See chapter 1. Irs free tax preparation Free electronic filing. Irs free tax preparation  You may be able to file your 2013 taxes online for free. Irs free tax preparation See chapter 1. Irs free tax preparation Change of address. Irs free tax preparation  If you change your address, you should notify the IRS. Irs free tax preparation See Change of Address in chapter 1. Irs free tax preparation Refund on a late filed return. Irs free tax preparation  If you were due a refund but you did not file a return, you generally must file your return within 3 years from the date the return was due (including extensions) to get that refund. Irs free tax preparation See chapter 1. Irs free tax preparation Frivolous tax returns. Irs free tax preparation  The IRS has published a list of positions that are identified as frivolous. Irs free tax preparation The penalty for filing a frivolous tax return is $5,000. Irs free tax preparation See chapter 1. Irs free tax preparation Filing erroneous claim for refund or credit. Irs free tax preparation  You may have to pay a penalty if you file an erroneous claim for refund or credit. Irs free tax preparation See chapter 1. Irs free tax preparation Privacy Act and paperwork reduction information. Irs free tax preparation   The IRS Restructuring and Reform Act of 1998, the Privacy Act of 1974, and the Paperwork Reduction Act of 1980 require that when we ask you for information we must first tell you what our legal right is to ask for the information, why we are asking for it, how it will be used, what could happen if we do not receive it, and whether your response is voluntary, required to obtain a benefit, or mandatory under the law. Irs free tax preparation A complete statement on this subject can be found in your tax form instructions. Irs free tax preparation Customer service for taxpayers. Irs free tax preparation  You can set up a personal appointment at the most convenient Taxpayer Assistance Center, on the most convenient business day. Irs free tax preparation See How To Get Tax Help in the back of this publication. Irs free tax preparation Preparer e-file mandate. Irs free tax preparation  Most paid preparers must e-file returns they prepare and file. Irs free tax preparation Your preparer may make you aware of this requirement and the options available to you. Irs free tax preparation Treasury Inspector General for Tax Administration. Irs free tax preparation   If you want to confidentially report misconduct, waste, fraud, or abuse by an IRS employee, you can call 1-800-366-4484 (call 1-800-877-8339 if you are deaf, hard of hearing, or have a speech disability, and are using TTY/TDD equipment). Irs free tax preparation You can remain anonymous. Irs free tax preparation Photographs of missing children. Irs free tax preparation  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Irs free tax preparation Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Irs free tax preparation You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Irs free tax preparation Introduction This publication covers the general rules for filing a federal income tax return. Irs free tax preparation It supplements the information contained in your tax form instructions. Irs free tax preparation It explains the tax law to make sure you pay only the tax you owe and no more. Irs free tax preparation How this publication is arranged. Irs free tax preparation   This publication closely follows Form 1040, U. Irs free tax preparation S. Irs free tax preparation Individual Income Tax Return. Irs free tax preparation It is divided into six parts which cover different sections of Form 1040. Irs free tax preparation Each part is further divided into chapters which generally discuss one line of the form. Irs free tax preparation Do not worry if you file Form 1040A or Form 1040EZ. Irs free tax preparation Anything included on a line of either of these forms is also included on Form 1040. Irs free tax preparation   The table of contents inside the front cover and the index in the back of the publication are useful tools to help you find the information you need. Irs free tax preparation What is in this publication. Irs free tax preparation   The publication begins with the rules for filing a tax return. Irs free tax preparation It explains: Who must file a return, Which tax form to use, When the return is due, How to e-file your return, and Other general information. Irs free tax preparation It will help you identify which filing status you qualify for, whether you can claim any dependents, and whether the income you receive is taxable. Irs free tax preparation The publication goes on to explain the standard deduction, the kinds of expenses you may be able to deduct, and the various kinds of credits you may be able to take to reduce your tax. Irs free tax preparation   Throughout the publication are examples showing how the tax law applies in typical situations. Irs free tax preparation Also throughout the publication are flowcharts and tables that present tax information in an easy-to-understand manner. Irs free tax preparation   Many of the subjects discussed in this publication are discussed in greater detail in other IRS publications. Irs free tax preparation References to those other publications are provided for your information. Irs free tax preparation Icons. Irs free tax preparation   Small graphic symbols, or icons, are used to draw your attention to special information. Irs free tax preparation See Table 1 later for an explanation of each icon used in this publication. Irs free tax preparation What is not covered in this publication. Irs free tax preparation   Some material that you may find helpful is not included in this publication but can be found in your tax form instruction booklet. Irs free tax preparation This includes lists of: Where to report certain items shown on information documents, and Recorded tax information topics (TeleTax). Irs free tax preparation   If you operate your own business or have other self-employment income, such as from babysitting or selling crafts, see the following publications for more information. Irs free tax preparation Publication 334, Tax Guide for Small Business (For Individuals Who Use Schedule C or C-EZ). Irs free tax preparation Publication 535, Business Expenses. Irs free tax preparation Publication 587, Business Use of Your Home (Including Use by Daycare Providers). Irs free tax preparation Help from the IRS. Irs free tax preparation   There are many ways you can get help from the IRS. Irs free tax preparation These are explained under How To Get Tax Help in the back of this publication. Irs free tax preparation Comments and suggestions. Irs free tax preparation   We welcome your comments about this publication and your suggestions for future editions. Irs free tax preparation   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Irs free tax preparation NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Irs free tax preparation Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Irs free tax preparation   You can send your comments from www. Irs free tax preparation irs. Irs free tax preparation gov/formspubs/. Irs free tax preparation Click on “More Information” and then on “Comment on Tax Forms and Publications”. Irs free tax preparation   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Irs free tax preparation Ordering forms and publications. Irs free tax preparation   Visit www. Irs free tax preparation irs. Irs free tax preparation gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. Irs free tax preparation Internal Revenue Service 1201 N. Irs free tax preparation Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Irs free tax preparation   If you have a tax question, check the information available on IRS. Irs free tax preparation gov or call 1-800-829-1040. Irs free tax preparation We cannot answer tax questions sent to either of the above addresses. Irs free tax preparation IRS mission. Irs free tax preparation   Provide America's taxpayers top quality service by helping them understand and meet their tax responsibilities and by applying the tax law with integrity and fairness to all. Irs free tax preparation Table 1. Irs free tax preparation Legend of Icons Icon Explanation Items that may cause you particular problems, or an alert about pending legislation that may be enacted after this publication goes to print. Irs free tax preparation An Internet site or an email address. Irs free tax preparation An address you may need. Irs free tax preparation Items you should keep in your personal records. Irs free tax preparation Items you may need to figure or a worksheet you may need to complete and keep for your records. Irs free tax preparation An important phone number. Irs free tax preparation Helpful information you may need. Irs free tax preparation Prev  Up  Next   Home   More Online Publications
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Irs free tax preparation Listed Property Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Listed Property DefinedPassenger Automobile Defined Dwelling Unit Other Property Used for Transportation Computers and Related Peripheral Equipment Predominant Use TestMeeting the Predominant Use Test Qualified Business Use Method of Allocating Use Applying the Predominant Use Test Deductions After Recovery Period Leased PropertyLessor Lessee What Records Must Be KeptAdequate Records Reporting Information on Form 4562 Deductions in Later Years Appendix Topics - This chapter discusses: Listed property defined The predominant use test What records must be kept Useful Items - You may want to see: Publication 463 Travel, Entertainment, and Gift Expenses 587 Business Use of Your Home (Including Use by Day-Care Providers) 917 Business Use of a Car 946 How To Depreciate Property Form (and Instructions) 2106–EZ Unreimbursed Employee Business Expenses 2106 Employee Business Expenses 4255 Recapture of Investment Credit 4562 Depreciation and Amortization This chapter discusses some special rules and recordkeeping requirements for listed property. Irs free tax preparation For complete coverage of the rules, including the rules concerning passenger automobiles, see Publication 946. Irs free tax preparation If listed property is not used predominantly (more than 50%) in a qualified business use as discussed inPredominant Use Test, later, the section 179 deduction is not allowable and the property must be depreciated using the straight line method. Irs free tax preparation Listed Property Defined Listed property is any of the following: Any passenger automobile (defined later), Any other property used for transportation, Any property of a type generally used for entertainment, recreation, or amusement (including photographic, phonographic, communication, and video recording equipment), Any computer and related peripheral equipment, defined later, unless it is used only at a regular business establishment and owned or leased by the person operating the establishment. Irs free tax preparation A regular business establishment includes a portion of a dwelling unit (defined later), if, and only if, that portion is used both regularly and exclusively for business as discussed in Publication 587. Irs free tax preparation Any cellular telephone (or similar telecommunication equipment) placed in service or leased in a tax year beginning after 1989. Irs free tax preparation Passenger Automobile Defined A passenger automobile is any four-wheeled vehicle made primarily for use on public streets, roads, and highways and rated at 6,000 pounds or less of unloaded gross vehicle weight (at 6,000 pounds or less of gross vehicle weight for trucks and vans). Irs free tax preparation It includes any part, component, or other item physically attached to the automobile or usually included in the purchase price of an automobile. Irs free tax preparation A passenger automobile does not include: An ambulance, hearse, or combination ambulance-hearse used directly in a trade or business, and A vehicle used directly in the trade or business of transporting persons or property for compensation or hire. Irs free tax preparation Dwelling Unit A dwelling unit is a house or apartment used to provide living accommodations in a building or structure. Irs free tax preparation It does not include a unit in a hotel, motel, inn, or other establishment where more than half the units are used on a transient basis. Irs free tax preparation Other Property Used for Transportation Other property used for transportation includes trucks, buses, boats, airplanes, motorcycles, and any other vehicles for transporting persons or goods. Irs free tax preparation Listed property does not include: Any vehicle which, by reason of its design, is not likely to be used more than a minimal amount for personal purposes, such as clearly marked police and fire vehicles, ambulances, or hearses used for those purposes, Any vehicle that is designed to carry cargo and that has a loaded gross vehicle weight over 14,000 pounds, bucket trucks (cherry pickers), cement mixers, combines, cranes and derricks, delivery trucks with seating only for the driver (or only for the driver plus a folding jump seat), dump trucks (including garbage trucks), flatbed trucks, forklifts, qualified moving vans, qualified specialized utility repair trucks, and refrigerated trucks, Any passenger bus used for that purpose with a capacity of at least 20 passengers and school buses, Any tractor or other special purpose farm vehicle, and unmarked vehicles used by law enforcement officers if the use is officially authorized, and Any vehicle, such as a taxicab, if substantially all its use is in the trade or business of providing services to transport persons or property for compensation or hire by unrelated persons. Irs free tax preparation Computers and Related Peripheral Equipment A computer is a programmable electronically activated device that: Is capable of accepting information, applying prescribed processes to the information, and supplying the results of those processes with or without human intervention, and Consists of a central processing unit with extensive storage, logic, arithmetic, and control capabilities. Irs free tax preparation Related peripheral equipment is any auxiliary machine which is designed to be controlled by the central processing unit of a computer. Irs free tax preparation Computer or peripheral equipment does not include: Any equipment which is an integral part of property which is not a computer, Typewriters, calculators, adding and accounting machines, copiers, duplicating equipment, and similar equipment, and Equipment of a kind, used primarily for the user's amusement or entertainment, such as video games. Irs free tax preparation Predominant Use Test If “listed property,” defined earlier, placed in service after June 18, 1984, is not used predominantly (more than 50%) in a qualified business use during any tax year: The section 179 deduction on the property is not allowable, and You must depreciate the property using the straight line method. Irs free tax preparation Listed property placed in service before 1987. Irs free tax preparation   For listed property placed in service before 1987, depreciate the property over the following period: Class of Property Listed Property Recovery Period 3-year property 5 years 5-year property 12 years 10-year property 25 years 18-year real property 40 years 19-year real property 40 years If you must use the above recovery periods for listed property not used predominantly in a trade or business, use the percentages from Table 16 titled Listed Property Not Used Predominantly (Other Than 18- or 19-year Real Property), and Table 17 for 18- or 19-year real property, near the end of this publication in the Appendix. Irs free tax preparation Listed property placed in service after 1986. Irs free tax preparation   For information on listed property placed in service after 1986, see Publication 946. Irs free tax preparation Meeting the Predominant Use Test Listed property meets the predominant use test for any tax year if its business use is more than 50% of its total use. Irs free tax preparation You must allocate the use of any item of listed property used for more than one purpose during the tax year among its various uses. Irs free tax preparation The percentage of investment use of listed property cannot be used as part of the percentage of qualified business use to meet the predominant use test. Irs free tax preparation However, the combined total of business and investment use is taken into account to figure your depreciation deduction for the property. Irs free tax preparation Note: Property does not stop being predominantly used in a qualified business use because of a transfer at death. Irs free tax preparation Example. Irs free tax preparation Sarah Bradley uses a home computer 50% of the time to manage her investments. Irs free tax preparation She also uses the computer 40% of the time in her part-time consumer research business. Irs free tax preparation Sarah's home computer is listed property because it is not used at a regular business establishment. Irs free tax preparation Because her business use of the computer does not exceed 50%, the computer is not predominantly used in a qualified business use for the tax year. Irs free tax preparation Because she does not meet the predominant use test, she cannot elect a section 179 deduction for this property. Irs free tax preparation Her combined rate of business/investment use for determining her depreciation deduction is 90%. Irs free tax preparation Qualified Business Use A qualified business use is any use in your trade or business. Irs free tax preparation However, it does not include: The use of property held merely to produce income (investment use), The leasing of property to any 5% owner or related person (to the point that the property is used by a 5% owner or person related to the owner or lessee of the property), The use of property as compensation for the performance of services by a 5% owner or related person, or The use of property as compensation for the performance of services by any person (other than a5% owner or related person) unless the value of the use is included in that person's gross income for the use of the property and income tax is withheld on that amount where required. Irs free tax preparation See Employees, later. Irs free tax preparation 5% owner. Irs free tax preparation   A 5% owner of a business, other than a corporation, is any person who owns more than 5% of the capital or profits interest in the business. Irs free tax preparation   A 5% owner of a corporation is any person who owns, or is considered to own: More than 5% of the outstanding stock of the corporation, or Stock possessing more than 5% of the total combined voting power of all stock in the corporation. Irs free tax preparation Related person. Irs free tax preparation   A related person is anyone related to a taxpayer as discussed under Related persons, in chapter 2 under Nonqualifying Property in Publication 946. Irs free tax preparation Entertainment Use The use of listed property for entertainment, recreation, or amusement purposes is treated as a qualified business use only to the extent that expenses (other than interest and property tax expenses) for its use are deductible as ordinary and necessary business expenses. Irs free tax preparation See Publication 463. Irs free tax preparation Leasing or Compensatory Use of Aircraft If at least 25% of the total use of any aircraft during the tax year is for a qualified business use, the leasing or compensatory use of the aircraft by a 5% owner or related person is treated as a qualified business use. Irs free tax preparation Commuting The use of a vehicle for commuting is not business use, regardless of whether work is performed during the trip. Irs free tax preparation Use of Your Passenger Automobile by Another Person If someone else uses your automobile, that use is not business use unless: That use is directly connected with your business, The value of the use is property reported by you as income to the other person and tax is withheld on the income where required, or The value of the use results in a payment of fair market rent. Irs free tax preparation Any payment to you for the use of the automobile is treated as a rent payment for 3). Irs free tax preparation Employees Any use by an employee of his or her own listed property (or listed property rented by an employee) in performing services as an employee is not business use unless: The use is for the employer's convenience, and The use is required as a condition of employment. Irs free tax preparation Use for the employer's convenience. Irs free tax preparation   Whether the use of listed property is for the employer's convenience must be determined from all the facts. Irs free tax preparation The use is for the employer's convenience if it is for a substantial business reason of the employer. Irs free tax preparation The use of listed property during the employee's regular working hours to carry on the employer's business is generally for the employer's convenience. Irs free tax preparation Use required as a condition of employment. Irs free tax preparation   Whether the use of listed property is a condition of employment depends on all the facts and circumstances. Irs free tax preparation The use of property must be required for the employee to perform duties properly. Irs free tax preparation The employer need not explicitly require the employee to use the property. Irs free tax preparation A mere statement by the employer that the use of the property is a condition of employment is not sufficient. Irs free tax preparation Example 1. Irs free tax preparation Virginia Sycamore is employed as a courier with We Deliver which provides local courier services. Irs free tax preparation She owns and uses a motorcycle to deliver packages to downtown offices. Irs free tax preparation We Deliver explicitly requires all delivery persons to own a small car or motorcycle for use in their employment. Irs free tax preparation The company reimburses delivery persons for their costs. Irs free tax preparation Virginia's use of the motorcycle is for the convenience of We Deliver and is required as a condition of employment. Irs free tax preparation Example 2. Irs free tax preparation Bill Nelson is an inspector for Uplift, a construction company with many sites in the local area. Irs free tax preparation He must travel to these sites on a regular basis. Irs free tax preparation Uplift does not furnish an automobile or explicitly require him to use his own automobile. Irs free tax preparation However, it reimburses him for any costs he incurs in traveling to the various sites. Irs free tax preparation The use of his own automobile or a rental automobile is for the convenience of Uplift and is required as a condition of employment. Irs free tax preparation Method of Allocating Use For passenger automobiles and other means of transportation, allocate the property's use on the basis of mileage. Irs free tax preparation You determine the percentage of qualified business use by dividing the number of miles the vehicle is driven for business purposes during the year by the total number of miles the vehicle is driven for all purposes (including business miles) during the year. Irs free tax preparation For other items of listed property, allocate the property's use on the basis of the most appropriate unit of time. Irs free tax preparation For example, you can determine the percentage of business use of a computer by dividing the number of hours the computer is used for business purposes during the year by the total number of hours the computer is used for all purposes (including business hours) during the year. Irs free tax preparation Applying the Predominant Use Test You must apply the predominant use test for an item of listed property each year of the recovery period. Irs free tax preparation First Recovery Year If any item of listed property is not used predominantly in a qualified business use in the year it is placed in service: The property is not eligible for a section 179 deduction, and The depreciation deduction must be figured using the straight line method. Irs free tax preparation Note: The required use of the straight line method for an item of listed property that does not meet the predominant use test is not the same as electing the straight line method. Irs free tax preparation It does not mean that you have to use the straight line method for other property in the same class as the item of listed property. Irs free tax preparation Years After the First Recovery Year If you use listed property predominantly (more than 50%) in a qualified business use in the tax year you place it in service, but not in a subsequent tax year during the recovery period, the following rules apply: Figure depreciation using the straight line method. Irs free tax preparation Do this for each year, beginning with the year you no longer use the property predominantly in a qualified business use, and Figure any excess depreciation on the property and add it to: Your gross income, and The adjusted basis of your property. Irs free tax preparation See Recapture of excess depreciation, next. Irs free tax preparation Recapture of excess depreciation. Irs free tax preparation   You must include any excess depreciation in your gross income for the first tax year the property is not predominantly used in a qualified business use. Irs free tax preparation Any excess depreciation must also be added to the adjusted basis of your property. Irs free tax preparation Excess depreciation is the excess (if any) of: The amount of depreciation allowable for the property (including any section 179 deduction claimed) for tax years before the first tax year the property was not predominantly used in a qualified business use, over The amount of depreciation that would have been allowable for those years if the property were not used predominantly in a qualified business use for the year it was placed in service. Irs free tax preparation This means you figure your depreciation using the percentages fromTable 16 or 17. Irs free tax preparation For information on investment credit recapture, see the instructions for Form 4255. Irs free tax preparation Deductions After Recovery Period When listed property (other than passenger automobiles) is used for business, investment, and personal purposes, no deduction is ever allowable for the personal use. Irs free tax preparation In tax years after the recovery period, you must determine if there is any unrecovered basis remaining before you compute the depreciation deduction for that tax year. Irs free tax preparation To make this determination, figure the depreciation for earlier tax years as if your property were used 100% for business or investment purposes, beginning with the first tax year in which some or all use is for business or investment. Irs free tax preparation See Car Used 50% or Less for Business in Publication 917. Irs free tax preparation Leased Property The limitations on cost recovery deductions apply to the rental of listed property. Irs free tax preparation The following discussion covers the rules that apply to the lessor (the owner of the property) and the lessee (the person who rents the property from the owner). Irs free tax preparation SeeLeasing a Car in Publication 917 for a discussion of leased passenger automobiles. Irs free tax preparation Lessor The limitations on cost recovery generally do not apply to any listed property leased or held for leasing by anyone regularly engaged in the business of leasing listed property. Irs free tax preparation A person is considered regularly engaged in the business of leasing listed property only if contracts for leasing of listed property are entered into with some frequency over a continuous period of time. Irs free tax preparation This determination is made on the basis of the facts and circumstances in each case and takes into account the nature of the person's business in its entirety. Irs free tax preparation Occasional or incidental leasing activity is insufficient. Irs free tax preparation For example, a person leasing only one passenger automobile during a tax year is not regularly engaged in the business of leasing automobiles. Irs free tax preparation An employer who allows an employee to use the employer's property for personal purposes and charges the employee for the use is not regularly engaged in the business of leasing the property used by the employee. Irs free tax preparation Lessee A lessee of listed property (other than passenger automobiles), must include an amount in gross income called the inclusion amount for the first tax year the property is not used predominantly in a qualified business use. Irs free tax preparation Inclusion amount for property leased before 1987. Irs free tax preparation   You determine the inclusion amount for property leased after June 18, 1984 and before 1987 by multiplying the fair market value of the property by both the average business/investment use percentage and the applicable percentage. Irs free tax preparation You can find the applicable percentages for listed property that is 5- or 10-year recovery property in Tables 19 or 20 in Appendix A of Publication 946. Irs free tax preparation   The lease term for listed property other than 18- or 19-year real property, and residential rental or nonresidential real property, includes options to renew. Irs free tax preparation For 18- or 19-year real property and residential rental or nonresidential real property that is listed property, the period of the lease does not include any option to renew at fair market value, determined at the time of renewal. Irs free tax preparation You treat two or more successive leases that are part of the same transaction (or a series of related transactions) for the same or substantially similar property as one lease. Irs free tax preparation Special rules. Irs free tax preparation   The lessee adds the inclusion amount to gross income in the next tax year if: The lease term begins within 9 months before the close of the lessee's tax year, The lessee does not use the property predominantly in a qualified business use during that portion of the tax year, and The lease term continues into the lessee's next tax year. Irs free tax preparation The lessee determines the inclusion amount by taking into account the average of the business/investment use for both tax years and the applicable percentage for the tax year the lease term begins. Irs free tax preparation   If the lease term is less than one year, the amount included in gross income is the amount that bears the same ratio to the additional inclusion amount as the number of days in the lease term bears to 365. Irs free tax preparation Maximum inclusion amount. Irs free tax preparation   The inclusion amount cannot be more than the sum of the deductible amounts of rent allocable to the lessee's tax year in which the amount must be included in gross income. Irs free tax preparation What Records Must Be Kept You cannot take any depreciation or section 179 deduction for the use of listed property (including passenger automobiles) unless you can prove business/investment use with adequate records or sufficient evidence to support your own statements. Irs free tax preparation How long to keep records. Irs free tax preparation   For listed property, records must be kept for as long as any excess depreciation can be recaptured (included in income). Irs free tax preparation Adequate Records To meet the adequate records requirement, you must maintain an account book, diary, log, statement of expense, trip sheet, or similar record or other documentary evidence that, together with the receipt, is sufficient to establish each element of an expenditure or use. Irs free tax preparation It is not necessary to record information in an account book, diary, or similar record if the information is already shown on the receipt. Irs free tax preparation However, your records should back up your receipts in an orderly manner. Irs free tax preparation Elements of Expenditure or Use The records or other documentary evidence must support: The amount of each separate expenditure, such as the cost of acquiring the item, maintenance and repair costs, capital improvement costs, lease payments, and any other expenses, The amount of each business and investment use (based on an appropriate measure, such as mileage for vehicles and time for other listed property), and the total use of the property for the tax year, The date of the expenditure or use, and The business or investment purpose for the expenditure or use. Irs free tax preparation Written documents of your expenditure or use are generally better evidence than oral statements alone. Irs free tax preparation A written record prepared at or near the time of the expenditure or use has greater value as proof of the expenditure or use. Irs free tax preparation A daily log is not required. Irs free tax preparation However, some type of record containing the elements of an expenditure or the business or investment use of listed property made at or near the time and backed up by other documents is preferable to a statement prepared later. Irs free tax preparation Timeliness The elements of an expenditure or use must be recorded at the time you have full knowledge of the elements. Irs free tax preparation An expense account statement made from an account book, diary, or similar record prepared or maintained at or near the time of the expenditure or use is generally considered a timely record if in the regular course of business: The statement is submitted by an employee to the employer, or The statement is submitted by an independent contractor to the client or customer. Irs free tax preparation For example, a log maintained on a weekly basis, which accounts for use during the week, will be considered a record made at or near the time of use. Irs free tax preparation Business Purpose Supported An adequate record of business purpose must generally be in the form of a written statement. Irs free tax preparation However, the amount of backup necessary to establish a business purpose depends on the facts and circumstances of each case. Irs free tax preparation A written explanation of the business purpose will not be required if the purpose can be determined from the surrounding facts and circumstances. Irs free tax preparation For example, a salesperson visiting customers on an established sales route will not normally need a written explanation of the business purpose of his or her travel. Irs free tax preparation Business Use Supported An adequate record contains enough information on each element of every business or investment use. Irs free tax preparation The amount of detail required to support the use depends on the facts and circumstances. Irs free tax preparation For example, a taxpayer whose only business use of a truck is to make customer deliveries on an established route can satisfy the requirement by recording the length of the route, including the total number of miles driven during the tax year and the date of each trip at or near the time of the trips. Irs free tax preparation Although an adequate record generally must be written, a record of the business use of listed property, such as a computer or automobile, can be prepared in a computer memory device using a logging program. Irs free tax preparation Separate or Combined Expenditures or Uses Each use by you is normally considered a separate use. Irs free tax preparation However, repeated uses can be combined as a single item. Irs free tax preparation Each expenditure is recorded as a separate item and not combined with other expenditures. Irs free tax preparation If you choose, however, amounts spent for the use of listed property during a tax year, such as for gasoline or automobile repairs, can be combined. Irs free tax preparation If these expenses are combined, you do not need to support the business purpose of each expense. Irs free tax preparation Instead, you can divide the expenses based on the total business use of the listed property. Irs free tax preparation Uses which can be considered part of a single use, such as a round trip or uninterrupted business use, can be accounted for by a single record. Irs free tax preparation For example, use of a truck to make deliveries at several locations which begin and end at the business premises and can include a stop at the business in between deliveries can be accounted for by a single record of miles driven. Irs free tax preparation Use of a passenger automobile by a salesperson for a business trip away from home over a period of time can be accounted for by a single record of miles traveled. Irs free tax preparation Minimal personal use (such as a stop for lunch between two business stops) is not an interruption of business use. Irs free tax preparation Confidential Information If any of the information on the elements of an expenditure or use is confidential, it does not need to be in the account book or similar record if it is recorded at or near the time of the expenditure or use. Irs free tax preparation It must be kept elsewhere and made available as support to the district director on request. Irs free tax preparation Substantial Compliance If you have not fully supported a particular element of an expenditure or use, but have complied with the adequate records requirement for the expenditure or use to the district director's satisfaction, you can establish this element by any evidence the district director deems adequate. Irs free tax preparation If you fail to establish that you have substantially complied with the adequate records requirement for an element of an expenditure or use to the district director's satisfaction, you must establish the element: By your own oral or written statement containing detailed information as to the element, and By other evidence sufficient to establish the element. Irs free tax preparation If the element is the cost or amount, time, place, or date of an expenditure or use, its supporting evidence must be direct, such as oral testimony by witnesses or a written statement setting forth detailed information about the element or the documentary evidence. Irs free tax preparation If the element is the business purpose of an expenditure, its supporting evidence can be circumstantial evidence. Irs free tax preparation Sampling You can maintain an adequate record for portions of a tax year and use that record to support your business and investment use for the entire tax year if it can be shown by other evidence that the periods for which an adequate record is maintained are representative of use throughout the year. Irs free tax preparation Loss of Records When you establish that failure to produce adequate records is due to loss of the records through circumstances beyond your control, such as through fire, flood, earthquake, or other casualty, you have the right to support a deduction by reasonable reconstruction of your expenditures and use. Irs free tax preparation Reporting Information on Form 4562 If you claim a deduction for any listed property, you must provide the requested information on page 2, Section B of Form 4562. Irs free tax preparation If you claim a deduction for any vehicle, you must answer certain questions onpage 2 of Form 4562 to provide information about the vehicle use. Irs free tax preparation Employees. Irs free tax preparation   Employees claiming the standard mileage rate or actual expenses (including depreciation) must use Form 2106 instead of Part V of Form 4562. Irs free tax preparation Employees claiming the standard mileage rate may be able to use Form 2106–EZ. Irs free tax preparation Employer who provides vehicles to employees. Irs free tax preparation   An employer who provides vehicles to employees must obtain enough information from those employees to provide the requested information onForm 4562. Irs free tax preparation   An employer who provides more than five vehicles to employees need not include any information on his or her tax return. Irs free tax preparation Instead, the employer must obtain the information from his or her employees and indicate on his or her return that the information was obtained and is being retained. Irs free tax preparation   You do not need to provide the information requested on page 2 of Form 4562 if, as an employer: You can satisfy the requirements of a written policy statement for vehicles either not used for personal purposes, or not used for personal purposes other than commuting, or You treat all vehicle use by employees as personal use. Irs free tax preparation See the instructions for Form 4562. Irs free tax preparation Deductions in Later Years When listed property is used for business, investment, and personal purposes, no deduction is allowable for its personal use either in the current year or any later tax year. Irs free tax preparation In later years, you must determine if there is any remaining unadjusted or unrecovered basis before you compute the depreciation deduction for that tax year. Irs free tax preparation In making this determination, figure the depreciation deductions for earlier tax years as if the listed property were used 100% for business or investment purposes in those years, beginning with the first tax year in which some or all of the property use is for business or investment. Irs free tax preparation For more information about deductions after the recovery period for automobiles, see Publication 917. Irs free tax preparation Appendix The following tables are for use in figuring depreciation deductions under the ACRS system. Irs free tax preparation Table 1. Irs free tax preparation 15-Year Real Property* (Other Than Low-Inclome Housing) Table 3. Irs free tax preparation Low-Income Housing* Table 6 - Table 9 Table 6 - Table 9 Table 10 - Table 13 Table 14 - Table 17 Prev  Up  Next   Home   More Online Publications