Filing Your Taxes Online is Fast, Easy and Secure.
Start now and receive your tax refund in as little as 7 days.

1. Get Answers

Your online questions are customized to your unique tax situation.

2. Maximize your Refund

Find tax credits for everything from school tuition to buying a hybri

3. E-File for FREE

E-file free with direct deposit to get your refund in as few as 7 days.

Filing your taxes with paper mail can be difficult and it could take weeks for your refund to arrive. IRS e-file is easy, fast and secure. There is no paperwork going to the IRS so tax refunds can be processed in as little as 7 days with direct deposit. As you prepare your taxes online, you can see your tax refund in real time.

FREE audit support and representation from an enrolled agent – NEW and only from H&R Block

Irs Short Form

Filing 2011 Taxes In 2013File Taxes Online FreeFree H&r Block Tax SoftwareFree Efile State Tax ReturnIrs Tax Extension Forms1040 Ez Form OnlineTurbotax Deluxe Federal E File 2012Free 1040 Ez FormsTax Forms 20112011 Federal Tax Forms And InstructionsFree 1040ez FormIrs Form 1040ez2010 Tax Form 1040xIrs For 1040x1040x FillableWww Irs Gov Com2011 Irs Forms 1040File State Taxes Online Free2012 1040ezIt 1040xState Tax Return FreeFile Amended ReturnIrs.gov/form1040xFile Taxes 2006Amending Your TaxesDo I Need To File Taxes If I Was UnemployedFiling 1040x With Form 9821040 Tax Form2010 1040x FormTurbotax 2008 Free EditionFiling Free State Tax Return2012 1040 Ez Tax FormHttps Www Freefilefillableforms Com Ffa Checkstatus Htm1040x Site Irs GovFree Tax Calculator 2012How To Amend Tax Return Online2011 Tax Return1040nr InstructionsCan I File 1040nr OnlineForm 1040ez

Irs Short Form

Irs short form 7. Irs short form   Depreciation, Depletion, and Amortization Table of Contents What's New for 2013 Introduction Topics - This chapter discusses: Useful Items - You may want to see: Overview of DepreciationWhat Property Can Be Depreciated? What Property Cannot Be Depreciated? When Does Depreciation Begin and End? Can You Use MACRS To Depreciate Your Property? What Is the Basis of Your Depreciable Property? How Do You Treat Repairs and Improvements? Do You Have To File Form 4562? How Do You Correct Depreciation Deductions? Section 179 Expense DeductionWhat Property Qualifies? What Property Does Not Qualify? How Much Can You Deduct? How Do You Elect the Deduction? When Must You Recapture the Deduction? Claiming the Special Depreciation AllowanceWhat is Qualified Property? How Can You Elect Not To Claim the Allowance? When Must You Recapture an Allowance Figuring Depreciation Under MACRSWhich Depreciation System (GDS or ADS) Applies? Which Property Class Applies Under GDS? What Is the Placed-in-Service Date? What Is the Basis for Depreciation? Which Recovery Period Applies? Which Convention Applies? Which Depreciation Method Applies? How Is the Depreciation Deduction Figured? How Do You Use General Asset Accounts? When Do You Recapture MACRS Depreciation? Additional Rules for Listed PropertyWhat Is Listed Property? What Is the Business-Use Requirement? Do the Passenger Automobile Limits Apply? Depletion Who Can Claim Depletion? Figuring Depletion AmortizationBusiness Start-Up Costs Reforestation Costs Section 197 Intangibles What's New for 2013 Increased section 179 expense deduction dollar limits. Irs short form  The maximum amount you can elect to deduct for most section 179 property you placed in service in 2013 is $500,000. Irs short form This limit is reduced by the amount by which the cost of the property placed in service during the tax year exceeds $2 million. Irs short form See Dollar Limits under Section 179 Expense Deduction , later. Irs short form Extension of special depreciation allowance for certain qualified property acquired after December 31, 2007. Irs short form . Irs short form  You may be able to take a 50% special depreciation allowance for certain qualified property acquired after December 31, 2007, and placed in service before January 1, 2014. Irs short form See Claiming the Special Depreciation Allowance , later. Irs short form Expiration of the 3- year recovery period for certain race horses. Irs short form  The 3-year recovery period for race horses two years old or younger will expire for such horses placed in service after December 31, 2013. Irs short form Introduction If you buy or make improvements to farm property such as machinery, equipment, livestock, or a structure with a useful life of more than a year, you generally cannot deduct its entire cost in one year. Irs short form Instead, you must spread the cost over the time you use the property and deduct part of it each year. Irs short form For most types of property, this is called depreciation. Irs short form This chapter gives information on depreciation methods that generally apply to property placed in service after 1986. Irs short form For information on depreciating pre-1987 property, see Publication 534, Depreciating Property Placed in Service Before 1987. Irs short form Topics - This chapter discusses: Overview of depreciation Section 179 expense deduction Special depreciation allowance Modified Accelerated Cost Recovery System (MACRS) Listed property Basic information on cost depletion (including timber depletion) and percentage depletion Amortization of the costs of going into business, reforestation costs, the costs of pollution control facilities, and the costs of section 197 intangibles Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 534 Depreciating Property Placed in Service Before 1987 535 Business Expenses 544 Sales and Other Dispositions of Assets 551 Basis of Assets 946 How To Depreciate Property Form (and Instructions) T (Timber), Forest Activities Schedule 3115 Application for Change in Accounting Method 4562 Depreciation and Amortization 4797 Sales of Business Property See chapter 16 for information about getting publications and forms. Irs short form It is important to keep good records for property you depreciate. Irs short form Do not file these records with your return. Irs short form Instead, you should keep them as part of the permanent records of the depreciated property. Irs short form They will help you verify the accuracy of the depreciation of assets placed in service in the current and previous tax years. Irs short form For general information on recordkeeping, see Publication 583, Starting a Business and Keeping Records. Irs short form For specific information on keeping records for section 179 property and listed property, see Publication 946, How To Depreciate Property. Irs short form Overview of Depreciation This overview discusses basic information on the following. Irs short form What property can be depreciated. Irs short form What property cannot be depreciated. Irs short form When depreciation begins and ends. Irs short form Whether MACRS can be used to figure depreciation. Irs short form What is the basis of your depreciable property. Irs short form How to treat repairs and improvements. Irs short form When you must file Form 4562. Irs short form How you can correct depreciation claimed incorrectly. Irs short form What Property Can Be Depreciated? You can depreciate most types of tangible property (except land), such as buildings, machinery, equipment, vehicles, certain livestock, and furniture. Irs short form You can also depreciate certain intangible property, such as copyrights, patents, and computer software. Irs short form To be depreciable, the property must meet all the following requirements. Irs short form It must be property you own. Irs short form It must be used in your business or income-producing activity. Irs short form It must have a determinable useful life. Irs short form It must have a useful life that extends substantially beyond the year you place it in service. Irs short form Property You Own To claim depreciation, you usually must be the owner of the property. Irs short form You are considered as owning property even if it is subject to a debt. Irs short form Leased property. Irs short form   You can depreciate leased property only if you retain the incidents of ownership in the property. Irs short form This means you bear the burden of exhaustion of the capital investment in the property. Irs short form Therefore, if you lease property from someone to use in your trade or business or for the production of income, you generally cannot depreciate its cost because you do not retain the incidents of ownership. Irs short form You can, however, depreciate any capital improvements you make to the leased property. Irs short form See Additions and Improvements under Which Recovery Period Applies in chapter 4 of Publication 946. Irs short form   If you lease property to someone, you generally can depreciate its cost even if the lessee (the person leasing from you) has agreed to preserve, replace, renew, and maintain the property. Irs short form However, you cannot depreciate the cost of the property if the lease provides that the lessee is to maintain the property and return to you the same property or its equivalent in value at the expiration of the lease in as good condition and value as when leased. Irs short form Life tenant. Irs short form   Generally, if you hold business or investment property as a life tenant, you can depreciate it as if you were the absolute owner of the property. Irs short form See Certain term interests in property , later, for an exception. Irs short form Property Used in Your Business or Income-Producing Activity To claim depreciation on property, you must use it in your business or income-producing activity. Irs short form If you use property to produce income (investment use), the income must be taxable. Irs short form You cannot depreciate property that you use solely for personal activities. Irs short form However, if you use property for business or investment purposes and for personal purposes, you can deduct depreciation based only on the percentage of business or investment use. Irs short form Example 1. Irs short form   If you use your car for farm business, you can deduct depreciation based on its percentage of use in farming. Irs short form If you also use it for investment purposes, you can depreciate it based on its percentage of investment use. Irs short form Example 2. Irs short form   If you use part of your home for business, you may be able to deduct depreciation on that part based on its business use. Irs short form For more information, see Business Use of Your Home in chapter 4. Irs short form Inventory. Irs short form   You can never depreciate inventory because it is not held for use in your business. Irs short form Inventory is any property you hold primarily for sale to customers in the ordinary course of your business. Irs short form Livestock. Irs short form   Livestock purchased for draft, breeding, or dairy purposes can be depreciated only if they are not kept in an inventory account. Irs short form Livestock you raise usually has no depreciable basis because the costs of raising them are deducted and not added to their basis. Irs short form However, see Immature livestock under When Does Depreciation Begin and End , later, for a special rule. Irs short form Property Having a Determinable Useful Life To be depreciable, your property must have a determinable useful life. Irs short form This means it must be something that wears out, decays, gets used up, becomes obsolete, or loses its value from natural causes. Irs short form Irrigation systems and water wells. Irs short form   Irrigation systems and wells used in a trade or business can be depreciated if their useful life can be determined. Irs short form You can depreciate irrigation systems and wells composed of masonry, concrete, tile, metal, or wood. Irs short form In addition, you can depreciate costs for moving dirt to construct irrigation systems and water wells composed of these materials. Irs short form However, land preparation costs for center pivot irrigation systems are not depreciable. Irs short form Dams, ponds, and terraces. Irs short form   In general, you cannot depreciate earthen dams, ponds, and terraces unless the structures have a determinable useful life. Irs short form What Property Cannot Be Depreciated? Certain property cannot be depreciated, even if the requirements explained earlier are met. Irs short form This includes the following. Irs short form Land. Irs short form You can never depreciate the cost of land because land does not wear out, become obsolete, or get used up. Irs short form The cost of land generally includes the cost of clearing, grading, planting, and landscaping. Irs short form Although you cannot depreciate land, you can depreciate certain costs incurred in preparing land for business use. Irs short form See chapter 1 of Publication 946. Irs short form Property placed in service and disposed of in the same year. Irs short form Determining when property is placed in service is explained later. Irs short form Equipment used to build capital improvements. Irs short form You must add otherwise allowable depreciation on the equipment during the period of construction to the basis of your improvements. Irs short form Intangible property such as section 197 intangibles. Irs short form This property does not have a determinable useful life and generally cannot be depreciated. Irs short form However, see Amortization , later. Irs short form Special rules apply to computer software (discussed below). Irs short form Certain term interests (discussed below). Irs short form Computer software. Irs short form   Computer software is generally not a section 197 intangible even if acquired in connection with the acquisition of a business, if it meets all of the following tests. Irs short form It is readily available for purchase by the general public. Irs short form It is subject to a nonexclusive license. Irs short form It has not been substantially modified. Irs short form   If the software meets the tests above, it can be depreciated and may qualify for the section 179 expense deduction and the special depreciation allowance (if applicable), discussed later. Irs short form Certain term interests in property. Irs short form   You cannot depreciate a term interest in property created or acquired after July 27, 1989, for any period during which the remainder interest is held, directly or indirectly, by a person related to you. Irs short form This rule does not apply to the holder of a term interest in property acquired by gift, bequest, or inheritance. Irs short form For more information, see chapter 1 of Publication 946. Irs short form When Does Depreciation Begin and End? You begin to depreciate your property when you place it in service for use in your trade or business or for the production of income. Irs short form You stop depreciating property either when you have fully recovered your cost or other basis or when you retire it from service, whichever happens first. Irs short form Placed in Service Property is placed in service when it is ready and available for a specific use, whether in a business activity, an income-producing activity, a tax-exempt activity, or a personal activity. Irs short form Even if you are not using the property, it is in service when it is ready and available for its specific use. Irs short form Example. Irs short form You bought a planter for use in your farm business. Irs short form The planter was delivered in December 2012 after harvest was over. Irs short form You begin to depreciate the planter for 2012 because it was ready and available for its specific use in 2012, even though it will not be used until the spring of 2013. Irs short form If your planter comes unassembled in December 2012 and is put together in February 2013, it is not placed in service until 2013. Irs short form You begin to depreciate it in 2013. Irs short form If your planter was delivered and assembled in February 2013 but not used until April 2013, it is placed in service in February 2013, because this is when the planter was ready for its specified use. Irs short form You begin to depreciate it in 2013. Irs short form Fruit or nut trees and vines. Irs short form   If you acquire an orchard, grove, or vineyard before the trees or vines have reached the income-producing stage, and they have a preproductive period of more than 2 years, you must capitalize the preproductive-period costs under the uniform capitalization rules (unless you elect not to use these rules). Irs short form See chapter 6 for information about the uniform capitalization rules. Irs short form Your depreciation begins when the trees and vines reach the income-producing stage (that is, when they bear fruit, nuts, or grapes in quantities sufficient to commercially warrant harvesting). Irs short form Immature livestock. Irs short form   Depreciation for livestock begins when the livestock reaches the age of maturity. Irs short form If you bought immature livestock for drafting purposes, depreciation begins when they can be worked. Irs short form If you bought immature livestock for dairy purposes, depreciation begins when they can be milked. Irs short form If you bought immature livestock for breeding purposes, depreciation begins when they can be bred. Irs short form Your basis for depreciation is your initial cost for the immature livestock. Irs short form Idle Property Continue to claim a deduction for depreciation on property used in your business or for the production of income even if it is temporarily idle. Irs short form For example, if you stop using a machine because there is a temporary lack of a market for a product made with that machine, continue to deduct depreciation on the machine. Irs short form Cost or Other Basis Fully Recovered You stop depreciating property when you have fully recovered your cost or other basis. Irs short form This happens when your section 179 and allowed or allowable depreciation deductions equal your cost or investment in the property. Irs short form Retired From Service You stop depreciating property when you retire it from service, even if you have not fully recovered its cost or other basis. Irs short form You retire property from service when you permanently withdraw it from use in a trade or business or from use in the production of income because of any of the following events. Irs short form You sell or exchange the property. Irs short form You convert the property to personal use. Irs short form You abandon the property. Irs short form You transfer the property to a supplies or scrap account. Irs short form The property is destroyed. Irs short form For information on abandonment of property, see chapter 8. Irs short form For information on destroyed property, see chapter 11 and Publication 547, Casualties, Disasters, and Thefts. Irs short form Can You Use MACRS To Depreciate Your Property? You must use the Modified Accelerated Cost Recovery System (MACRS) to depreciate most business and investment property placed in service after 1986. Irs short form MACRS is explained later under Figuring Depreciation Under MACRS . Irs short form You cannot use MACRS to depreciate the following property. Irs short form Property you placed in service before 1987. Irs short form Use the methods discussed in Publication 534. Irs short form Certain property owned or used in 1986. Irs short form See chapter 1 of Publication 946. Irs short form Intangible property. Irs short form Films, video tapes, and recordings. Irs short form Certain corporate or partnership property acquired in a nontaxable transfer. Irs short form Property you elected to exclude from MACRS. Irs short form For more information, see chapter 1 of Publication 946. Irs short form What Is the Basis of Your Depreciable Property? To figure your depreciation deduction, you must determine the basis of your property. Irs short form To determine basis, you need to know the cost or other basis of your property. Irs short form Cost or other basis. Irs short form   The basis of property you buy is usually its cost plus amounts you paid for items such as sales tax, freight charges, and installation and testing fees. Irs short form The cost includes the amount you pay in cash, debt obligations, other property, or services. Irs short form   There are times when you cannot use cost as basis. Irs short form In these situations, the fair market value (FMV) or the adjusted basis of the property may be used. Irs short form Adjusted basis. Irs short form   To find your property's basis for depreciation, you may have to make certain adjustments (increases and decreases) to the basis of the property for events occurring between the time you acquired the property and the time you placed it in service. Irs short form Basis adjustment for depreciation allowed or allowable. Irs short form   After you place your property in service, you must reduce the basis of the property by the depreciation allowed or allowable, whichever is greater. Irs short form Depreciation allowed is depreciation you actually deducted (from which you received a tax benefit). Irs short form Depreciation allowable is depreciation you are entitled to deduct. Irs short form   If you do not claim depreciation you are entitled to deduct, you must still reduce the basis of the property by the full amount of depreciation allowable. Irs short form   If you deduct more depreciation than you should, you must reduce your basis by any amount deducted from which you received a tax benefit (the depreciation allowed). Irs short form   For more information, see chapter 6. Irs short form How Do You Treat Repairs and Improvements? You generally deduct the cost of repairing business property in the same way as any other business expense. Irs short form However, if a repair or replacement increases the value of your property, makes it more useful, or lengthens its life, you must treat it as an improvement and depreciate it. Irs short form Treat improvements as separate depreciable property. Irs short form See chapter 1 of Publication 946 for more information. Irs short form Example. Irs short form You repair a small section on a corner of the roof of a barn that you rent to others. Irs short form You deduct the cost of the repair as a business expense. Irs short form However, if you replace the entire roof, the new roof is considered to be an improvement because it increases the value and lengthens the life for the property. Irs short form You depreciate the cost of the new roof. Irs short form Improvements to rented property. Irs short form   You can depreciate permanent improvements you make to business property you rent from someone else. Irs short form Do You Have To File Form 4562? Use Form 4562 to claim your deduction for depreciation and amortization. Irs short form You must complete and attach Form 4562 to your tax return if you are claiming any of the following. Irs short form A section 179 expense deduction for the current year or a section 179 carryover from a prior year. Irs short form Depreciation for property placed in service during the current year. Irs short form Depreciation on any vehicle or other listed property, regardless of when it was placed in service. Irs short form Amortization of costs that began in the current year. Irs short form For more information, see the Instructions for Form 4562. Irs short form How Do You Correct Depreciation Deductions? If you deducted an incorrect amount of depreciation in any year, you may be able to make a correction by filing an amended return for that year. Irs short form You can file an amended return to correct the amount of depreciation claimed for any property in any of the following situations. Irs short form You claimed the incorrect amount because of a mathematical error made in any year. Irs short form You claimed the incorrect amount because of a posting error made in any year, for example, omitting an asset from the depreciation schedule. Irs short form You have not adopted a method of accounting for the property placed in service by you in tax years ending after December 29, 2003. Irs short form You claimed the incorrect amount on property placed in service by you in tax years ending before December 30, 2003. Irs short form Note. Irs short form You have adopted a method of accounting if you used the same incorrect method of depreciation for two or more consecutively filed returns. Irs short form If you are not allowed to make the correction on an amended return, you may be able to change your accounting method to claim the correct amount of depreciation. Irs short form See the Instructions for Form 3115. Irs short form Section 179 Expense Deduction You can elect to recover all or part of the cost of certain qualifying property, up to a limit, by deducting it in the year you place the property in service. Irs short form This is the section 179 expense deduction. Irs short form You can elect the section 179 expense deduction instead of recovering the cost by taking depreciation deductions. Irs short form This part of the chapter explains the rules for the section 179 expense deduction. Irs short form It explains what property qualifies for the deduction, what property does not qualify for the deduction, the limits that may apply, how to elect the deduction, and when you may have to recapture the deduction. Irs short form For more information, see chapter 2 of Publication 946. Irs short form What Property Qualifies? To qualify for the section 179 expense deduction, your property must meet all the following requirements. Irs short form It must be eligible property. Irs short form It must be acquired for business use. Irs short form It must have been acquired by purchase. Irs short form Eligible Property To qualify for the section 179 expense deduction, your property must be one of the following types of depreciable property. Irs short form Tangible personal property. Irs short form Qualified real property. Irs short form (Special rules apply to qualified real property that you elect to treat as qualified section 179 real property. Irs short form For more information, see chapter 2 of Publication 946 and section 179(f) of the Internal Revenue Code. Irs short form ) Other tangible property (except buildings and their structural components) used as: An integral part of manufacturing, production, or extraction or of furnishing transportation, communications, electricity, gas, water, or sewage disposal services; A research facility used in connection with any of the activities in (a) above; or A facility used in connection with any of the activities in (a) for the bulk storage of fungible commodities. Irs short form Single purpose agricultural (livestock) or horticultural structures. Irs short form Storage facilities (except buildings and their structural components) used in connection with distributing petroleum or any primary product of petroleum. Irs short form Off-the-shelf computer software that is readily available for purchase by the general public, is subject to a nonexclusive lease, and has not been substantially modified. Irs short form Tangible personal property. Irs short form   Tangible personal property is any tangible property that is not real property. Irs short form It includes the following property. Irs short form Machinery and equipment. Irs short form Property contained in or attached to a building (other than structural components), such as milk tanks, automatic feeders, barn cleaners, and office equipment. Irs short form Gasoline storage tanks and pumps at retail service stations. Irs short form Livestock, including horses, cattle, hogs, sheep, goats, and mink and other fur-bearing animals. Irs short form Facility used for the bulk storage of fungible commodities. Irs short form   A facility used for the bulk storage of fungible commodities is qualifying property for purposes of the section 179 expense deduction if it is used in connection with any of the activities listed earlier in item (3)(a). Irs short form Bulk storage means the storage of a commodity in a large mass before it is used. Irs short form Grain bins. Irs short form   A grain bin is an example of a storage facility that is qualifying section 179 property. Irs short form It is a facility used in connection with the production of grain or livestock for the bulk storage of fungible commodities. Irs short form Single purpose agricultural or horticultural structures. Irs short form   A single purpose agricultural (livestock) or horticultural structure is qualifying property for purposes of the section 179 expense deduction. Irs short form Agricultural structure. Irs short form   A single purpose agricultural (livestock) structure is any building or enclosure specifically designed, constructed, and used for both the following reasons. Irs short form To house, raise, and feed a particular type of livestock and its produce. Irs short form To house the equipment, including any replacements, needed to house, raise, or feed the livestock. Irs short form For this purpose, livestock includes poultry. Irs short form   Single purpose structures are qualifying property if used, for example, to breed chickens or hogs, produce milk from dairy cattle, or produce feeder cattle or pigs, broiler chickens, or eggs. Irs short form The facility must include, as an integral part of the structure or enclosure, equipment necessary to house, raise, and feed the livestock. Irs short form Horticultural structure. Irs short form   A single purpose horticultural structure is either of the following. Irs short form A greenhouse specifically designed, constructed, and used for the commercial production of plants. Irs short form A structure specifically designed, constructed, and used for the commercial production of mushrooms. Irs short form Use of structure. Irs short form   A structure must be used only for the purpose that qualified it. Irs short form For example, a hog barn will not be qualifying property if you use it to house poultry. Irs short form Similarly, using part of your greenhouse to sell plants will make the greenhouse nonqualifying property. Irs short form   If a structure includes work space, the work space can be used only for the following activities. Irs short form Stocking, caring for, or collecting livestock or plants or their produce. Irs short form Maintaining the enclosure or structure. Irs short form Maintaining or replacing the equipment or stock enclosed or housed in the structure. Irs short form Property Acquired by Purchase To qualify for the section 179 expense deduction, your property must have been acquired by purchase. Irs short form For example, property acquired by gift or inheritance does not qualify. Irs short form Property acquired from a related person (that is, your spouse, ancestors, or lineal descendants) is not considered acquired by purchase. Irs short form Example. Irs short form Ken is a farmer. Irs short form He purchased two tractors, one from his brother and one from his father. Irs short form He placed both tractors in service in the same year he bought them. Irs short form The tractor purchased from his father does not qualify for the section 179 expense deduction because he is a related person (as defined above). Irs short form The tractor purchased from his brother does qualify for the deduction because Ken is not a related person (as defined above). Irs short form What Property Does Not Qualify? Land and improvements. Irs short form   Land and land improvements, do not qualify as section 179 property. Irs short form Land improvements include nonagricultural fences, swimming pools, paved parking areas, wharves, docks, bridges, and fences. Irs short form However, agricultural fences do qualify as section 179 property. Irs short form Similarly, field drainage tile also qualifies as section 179 property. Irs short form Excepted property. Irs short form   Even if the requirements explained in the preceding discussions are met, farmers cannot elect the section 179 expense deduction for the following property. Irs short form Certain property you lease to others (if you are a noncorporate lessor). Irs short form Certain property used predominantly to furnish lodging or in connection with the furnishing of lodging. Irs short form Property used by a tax-exempt organization (other than a tax-exempt farmers' cooperative) unless the property is used mainly in a taxable unrelated trade or business. Irs short form Property used by governmental units or foreign persons or entities (except property used under a lease with a term of less than 6 months). Irs short form How Much Can You Deduct? Your section 179 expense deduction is generally the cost of the qualifying property. Irs short form However, the total amount you can elect to deduct under section 179 is subject to a dollar limit and a business income limit. Irs short form These limits apply to each taxpayer, not to each business. Irs short form However, see Married individuals under Dollar Limits , later. Irs short form See also the special rules for applying the limits for partnerships and S corporations under Partnerships and S Corporations , later. Irs short form If you deduct only part of the cost of qualifying property as a section 179 expense deduction, you can generally depreciate the cost you do not deduct. Irs short form Use Part I of Form 4562 to figure your section 179 expense deduction. Irs short form Partial business use. Irs short form   When you use property for business and nonbusiness purposes, you can elect the section 179 expense deduction only if you use it more than 50% for business in the year you place it in service. Irs short form If you used the property more than 50% for business, multiply the cost of the property by the percentage of business use. Irs short form Use the resulting business cost to figure your section 179 expense deduction. Irs short form Trade-in of other property. Irs short form   If you buy qualifying property with cash and a trade-in, its cost for purposes of the section 179 expense deduction includes only the cash you paid. Irs short form For example, if you buy (for cash and a trade-in) a new tractor for use in your business, your cost for the section 179 expense deduction is the cash you paid. Irs short form It does not include the adjusted basis of the old tractor you trade for the new tractor. Irs short form Example. Irs short form J-Bar Farms traded two cultivators having a total adjusted basis of $6,800 for a new cultivator costing $13,200. Irs short form They received an $8,000 trade-in allowance for the old cultivators and paid $5,200 cash for the new cultivator. Irs short form J-Bar also traded a used pickup truck with an adjusted basis of $8,000 for a new pickup truck costing $35,000. Irs short form They received a $5,000 trade-in allowance and paid $30,000 cash for the new pickup truck. Irs short form Only the cash paid by J-Bar qualifies for the section 179 expense deduction. Irs short form J-Bar's business costs that qualify for a section 179 expense deduction are $35,200 ($5,200 + $30,000). Irs short form Dollar Limits The total amount you can elect to deduct under section 179 for most property placed in service in 2013 is $500,000. Irs short form If you acquire and place in service more than one item of qualifying property during the year, you can allocate the section 179 expense deduction among the items in any way, as long as the total deduction is not more than $500,000. Irs short form Qualified real property that you elect to treat as section 179 property is limited to $250,000 of the maximum section 179 deduction of $500,000 for 2013. Irs short form You do not have to claim the full $500,000. Irs short form For specific information on the section 179 dollar limits, see chapter 2 of Publication 946. Irs short form Reduced dollar limit for cost exceeding $2 million. Irs short form   If the cost of your qualifying section 179 property placed in service in 2013 is over $2 million, you must reduce the dollar limit (but not below zero) by the amount of cost over $2 million. Irs short form If the cost of your section 179 property placed in service during 2013 is $2,500,000 or more, you cannot take a section 179 expense deduction and you cannot carry over the cost that is more than $2,500,000. Irs short form Example. Irs short form This year, James Smith placed in service machinery costing $2,050,000. Irs short form Because this cost is $50,000 more than $2 million, he must reduce his dollar limit to $450,000 ($500,000 − $50,000). Irs short form Limits for sport utility vehicles. Irs short form   The total amount you can elect to deduct for certain sport utility vehicles and certain other vehicles placed in service in 2013 is $25,000. Irs short form This rule applies to any 4-wheeled vehicle primarily designed or used to carry passengers over public streets, roads, and highways that is rated at more than 6,000 pounds gross vehicle weight and not more than 14,000 pounds gross vehicle weight. Irs short form   For more information, see chapter 2 of Publication 946. Irs short form Limits for passenger automobiles. Irs short form   For a passenger automobile that is placed in service in 2013, the total section 179 and depreciation deduction is limited. Irs short form See Do the Passenger Automobile Limits Apply , later. Irs short form Married individuals. Irs short form   If you are married, how you figure your section 179 expense deduction depends on whether you file jointly or separately. Irs short form If you file a joint return, you and your spouse are treated as one taxpayer in determining any reduction to the dollar limit, regardless of which of you purchased the property or placed it in service. Irs short form If you and your spouse file separate returns, you are treated as one taxpayer for the dollar limit, including the reduction for costs over $2 million. Irs short form You must allocate the dollar limit (after any reduction) equally between you, unless you both elect a different allocation. Irs short form If the percentages elected by each of you do not total 100%, 50% will be allocated to each of you. Irs short form Joint return after separate returns. Irs short form   If you and your spouse elect to amend your separate returns by filing a joint return after the due date for filing your return, the dollar limit on the joint return is the lesser of the following amounts. Irs short form The dollar limit (after reduction for any cost of section 179 property over $2 million). Irs short form The total cost of section 179 property you and your spouse elected to expense on your separate returns. Irs short form Business Income Limit The total cost you can deduct each year after you apply the dollar limit is limited to the taxable income from the active conduct of any trade or business during the year. Irs short form Generally, you are considered to actively conduct a trade or business if you meaningfully participate in the management or operations of the trade or business. Irs short form Any cost not deductible in one year under section 179 because of this limit can be carried to the next year. Irs short form See Carryover of disallowed deduction , later. Irs short form Taxable income. Irs short form   In general, figure taxable income for this purpose by totaling the net income and losses from all trades and businesses you actively conducted during the year. Irs short form In addition to net income or loss from a sole proprietorship, partnership, or S corporation, net income or loss derived from a trade or business also includes the following items. Irs short form Section 1231 gains (or losses) as discussed in chapter 9. Irs short form Interest from working capital of your trade or business. Irs short form Wages, salaries, tips, or other pay earned by you (or your spouse if you file a joint return) as an employee of any employer. Irs short form   In addition, figure taxable income without regard to any of the following. Irs short form The section 179 expense deduction. Irs short form The self-employment tax deduction. Irs short form Any net operating loss carryback or carryforward. Irs short form Any unreimbursed employee business expenses. Irs short form Two different taxable income limits. Irs short form   In addition to the business income limit for your section 179 expense deduction, you may have a taxable income limit for some other deduction (for example, charitable contributions). Irs short form You may have to figure the limit for this other deduction taking into account the section 179 expense deduction. Irs short form If so, complete the following steps. Irs short form Step Action 1 Figure taxable income without the section 179 expense deduction or the other deduction. Irs short form 2 Figure a hypothetical section 179 expense deduction using the taxable income figured in Step 1. Irs short form 3 Subtract the hypothetical section 179 expense deduction figured in Step 2 from the taxable income figured in Step 1. Irs short form 4 Figure a hypothetical amount for the other deduction using the amount figured in Step 3 as taxable income. Irs short form 5 Subtract the hypothetical other deduction figured in Step 4 from the taxable income figured in  Step 1. Irs short form 6 Figure your actual section 179 expense deduction using the taxable income figured in Step 5. Irs short form 7 Subtract your actual section 179 expense deduction figured in Step 6 from the taxable income figured in Step 1. Irs short form 8 Figure your actual other deduction using the taxable income figured in Step 7. Irs short form Example. Irs short form On February 1, 2013, the XYZ farm corporation purchased and placed in service qualifying section 179 property that cost $500,000. Irs short form It elects to expense the entire $500,000 cost under section 179. Irs short form In June, the corporation gave a charitable contribution of $10,000. Irs short form A corporation's limit on charitable contributions is figured after subtracting any section 179 expense deduction. Irs short form The business income limit for the section 179 expense deduction is figured after subtracting any allowable charitable contributions. Irs short form XYZ's taxable income figured without the section 179 expense deduction or the deduction for charitable contributions is $520,000. Irs short form XYZ figures its section 179 expense deduction and its deduction for charitable contributions as follows. Irs short form Step 1. Irs short form Taxable income figured without either deduction is $520,000. Irs short form Step 2. Irs short form Using $520,000 as taxable income, XYZ's hypothetical section 179 expense deduction is $500,000. Irs short form Step 3. Irs short form $20,000 ($520,000 − $500,000). Irs short form Step 4. Irs short form Using $20,000 (from Step 3) as taxable income, XYZ's hypothetical charitable contribution (limited to 10% of taxable income) is $2,000. Irs short form Step 5. Irs short form $518,000 ($520,000 − $2,000). Irs short form Step 6. Irs short form Using $518,000 (from Step 5) as taxable income, XYZ figures the actual section 179 expense deduction. Irs short form Because the taxable income is at least $500,000, XYZ can take a $500,000 section 179 expense deduction. Irs short form Step 7. Irs short form $20,000 ($520,000 − $500,000). Irs short form Step 8. Irs short form Using $20,000 (from Step 7) as taxable income, XYZ's actual charitable contribution (limited to 10% of taxable income) is $2,000. Irs short form Carryover of disallowed deduction. Irs short form   You can carry over for an unlimited number of years the cost of any section 179 property you elected to expense but were unable to because of the business income limit. Irs short form   The amount you carry over is used in determining your section 179 expense deduction in the next year. Irs short form However, it is subject to the limits in that year. Irs short form If you place more than one property in service in a year, you can select the properties for which all or a part of the cost will be carried forward. Irs short form Your selections must be shown in your books and records. Irs short form Example. Irs short form Last year, Joyce Jones placed in service a machine that cost $8,000 and elected to deduct all $8,000 under section 179. Irs short form The taxable income from her business (determined without regard to both a section 179 expense deduction for the cost of the machine and the self-employment tax deduction) was $6,000. Irs short form Her section 179 expense deduction was limited to $6,000. Irs short form The $2,000 cost that was not allowed as a section 179 expense deduction (because of the business income limit) is carried to this year. Irs short form This year, Joyce placed another machine in service that cost $9,000. Irs short form Her taxable income from business (determined without regard to both a section 179 expense deduction for the cost of the machine and the self-employment tax deduction) is $10,000. Irs short form Joyce can deduct the full cost of the machine ($9,000) but only $1,000 of the carryover from last year because of the business income limit. Irs short form She can carry over the balance of $1,000 to next year. Irs short form Partnerships and S Corporations The section 179 expense deduction limits apply both to the partnership or S corporation and to each partner or shareholder. Irs short form The partnership or S corporation determines its section 179 expense deduction subject to the limits. Irs short form It then allocates the deduction among its partners or shareholders. Irs short form If you are a partner in a partnership or shareholder of an S corporation, you add the amount allocated from the partnership or S corporation to any section 179 costs not related to the partnership or S corporation and then apply the dollar limit to this total. Irs short form To determine any reduction in the dollar limit for costs over $560,000, you do not include any of the cost of section 179 property placed in service by the partnership or S corporation. Irs short form After you apply the dollar limit, you apply the business income limit to any remaining section 179 costs. Irs short form For more information, see chapter 2 of Publication 946. Irs short form Example. Irs short form In 2013, Partnership P placed in service section 179 property with a total cost of $2,160,000. Irs short form P must reduce its dollar limit by $160,000 ($2,160,000 − $2,000,000). Irs short form Its maximum section 179 expense deduction is $340,000 ($500,000 − $160,000), and it elects to expense that amount. Irs short form Because P's taxable income from the active conduct of all its trades or businesses for the year was $400,000, it can deduct the full $340,000. Irs short form P allocates $100,000 of its section 179 expense deduction and $110,000 of its taxable income to John, one of its partners. Irs short form John also conducts a business as a sole proprietor and in 2013, placed in service in that business, section 179 property costing $28,000. Irs short form John's taxable income from that business was $10,000. Irs short form In addition to the $100,000 allocated from P, he elects to expense the $28,000 of his sole proprietorship's section 179 costs. Irs short form However, John's deduction is limited to his business taxable income of $120,000 ($110,000 from P plus $10,000 from his sole proprietorship). Irs short form He carries over $8,000 ($128,000 − $120,000) of the elected section 179 costs to 2014. Irs short form How Do You Elect the Deduction? You elect to take the section 179 expense deduction by completing Part I of Form 4562. Irs short form If you elect the deduction for listed property, complete Part V of  Form 4562 before completing Part I. Irs short form   File Form 4562 with either of the following: Your original tax return (whether or not you filed it timely), or An amended return filed within the time prescribed by law. Irs short form An election made on an amended return must specify the item of section 179 property to which the election applies and the part of the cost of each such item to be taken into account. Irs short form The amended return must also include any resulting adjustments to taxable income. Irs short form Revoking an election. Irs short form   An election (or any specification made in the election) to take a section 179 expense deduction for 2013 can be revoked without IRS approval by filing an amended return. Irs short form The amended return must be filed within the time prescribed by law. Irs short form The amended return must also include any resulting adjustments to taxable income (for example, allowable depreciation in that tax year for the item of section 179 property for which the election pertains. Irs short form ) Once made, the revocation is irrevocable. Irs short form When Must You Recapture the Deduction? You may have to recapture the section 179 expense deduction if, in any year during the property's recovery period, the percentage of business use drops to 50% or less. Irs short form In the year the business use drops to 50% or less, you include the recapture amount as ordinary income. Irs short form You also increase the basis of the property by the recapture amount. Irs short form Recovery periods for property are discussed later. Irs short form If you sell, exchange, or otherwise dispose of the property, do not figure the recapture amount under the rules explained in this discussion. Irs short form Instead, use the rules for recapturing depreciation explained in  chapter 9 under Section 1245 Property. Irs short form   If the property is listed property, do not figure the recapture amount under the rules explained in this discussion when the percentage of business use drops to 50% or less. Irs short form Instead, use the rules for recapturing depreciation explained in chapter 5 of Publication 946 under Recapture of Excess Depreciation. Irs short form Figuring the recapture amount. Irs short form   To figure the amount to recapture, take the following steps. Irs short form Figure the allowable depreciation for the section 179 expense deduction you claimed. Irs short form Begin with the year you placed the property in service and include the year of recapture. Irs short form Subtract the depreciation figured in (1) from the section 179 expense deduction you actually claimed. Irs short form The result is the amount you must recapture. Irs short form Example. Irs short form In January 2011, Paul Lamb, a calendar year taxpayer, bought and placed in service section 179 property costing $10,000. Irs short form The property is not listed property. Irs short form He elected a $5,000 section 179 expense deduction for the property and also elected not to claim a special depreciation allowance. Irs short form He used the property only for business in 2011 and 2012. Irs short form During 2013, he used the property 40% for business and 60% for personal use. Irs short form He figures his recapture amount as follows. Irs short form Section 179 expense deduction claimed (2011) $5,000 Minus: Allowable depreciation (instead of section 179 expense deduction):   2011 $1,250   2012 1,875   2013 ($1,250 × 40% (business)) 500 3,625 2013 — Recapture amount $1,375     Paul must include $1,375 in income for 2013. Irs short form Where to report recapture. Irs short form   Report any recapture of the section 179 expense deduction as ordinary income in Part IV of Form 4797 and include it in income on Schedule F (Form 1040). Irs short form Recapture for qualified section 179 GO Zone property. Irs short form   If any qualified section 179 GO Zone property ceases to be used in the GO Zone in a later year, you must recapture the benefit of the increased section 179 expense deduction as “other income. Irs short form ” Claiming the Special Depreciation Allowance For qualified property (defined below) placed in service in 2013, you can take an additional 50% special depreciation allowance. Irs short form The allowance is an additional deduction you can take after any section 179 expense deduction and before you figure regular depreciation under MACRS. Irs short form Figure the special depreciation allowance by multiplying the depreciable basis of the qualified property by 50%. Irs short form What is Qualified Property? For farmers, qualified property generally is certain qualified property acquired after December 31, 2007, and placed in service before January 1, 2014. Irs short form Certain qualified property acquired after December 31, 2007, and placed in service before January 1, 2014. Irs short form   Certain qualified property (defined below) acquired after December 31, 2007, and before January 1, 2014, is eligible for a 50% special depreciation allowance. Irs short form   Qualified property includes the following: Tangible property depreciated under the Modified Accelerated Cost Recovery System (MACRS) with a recovery period of 20 years or less. Irs short form Water utility property. Irs short form Off-the-shelf computer software. Irs short form Qualified leasehold improvement property. Irs short form   Qualified property must also meet all of the following tests: You must have acquired qualified property by purchase after December 31, 2007. Irs short form If a binding contract to acquire the property existed before January 1, 2008, the property does not qualify. Irs short form Qualified property must be placed in service after December 31, 2007 and placed in service before January 1, 2014 (before January 1, 2015 for certain property with a long production period and for certain aircraft). Irs short form The original use of the property must begin with you after December 31, 2007. Irs short form For more information, see chapter 3 of Publication 946. Irs short form How Can You Elect Not To Claim the Allowance? You can elect, for any class of property, not to deduct the special depreciation allowance for all property in such class placed in service during the tax year. Irs short form To make the election, attach a statement to your return indicating the class of property for which you are making the election. Irs short form Generally, you must make the election on a timely filed tax return (including extensions) for the year in which you place the property in service. Irs short form However, if you timely filed your return for the year without making the election, you still can make the election by filing an amended return within 6 months of the due date of the original return (not including extensions). Irs short form Attach the election statement to the amended return. Irs short form On the amended return, write “Filed pursuant to section 301. Irs short form 9100-2. Irs short form ” Once made, the election may not be revoked without IRS consent. Irs short form If you elect not to have the special depreciation allowance apply, the property may be subject to an alternative minimum tax adjustment for depreciation. Irs short form When Must You Recapture an Allowance When you dispose of property for which you claimed a special depreciation allowance, any gain on the disposition is generally recaptured (included in income) as ordinary income up to the amount of the special depreciation allowance previously allowed or allowable. Irs short form For more information, see chapter 3 of Publication 946. Irs short form Figuring Depreciation Under MACRS The Modified Accelerated Cost Recovery System (MACRS) is used to recover the basis of most business and investment property placed in service after 1986. Irs short form MACRS consists of two depreciation systems, the General Depreciation System (GDS) and the Alternative Depreciation System (ADS). Irs short form Generally, these systems provide different methods and recovery periods to use in figuring depreciation deductions. Irs short form To be sure you can use MACRS to figure depreciation for your property, see Can You Use MACRS To Depreciate Your Property, earlier. Irs short form This part explains how to determine which MACRS depreciation system applies to your property. Irs short form It also discusses the following information that you need to know before you can figure depreciation under MACRS. Irs short form Property's recovery class. Irs short form Placed-in-service date. Irs short form Basis for depreciation. Irs short form Recovery period. Irs short form Convention. Irs short form Depreciation method. Irs short form Finally, this part explains how to use this information to figure your depreciation deduction. Irs short form Which Depreciation System (GDS or ADS) Applies? Your use of either the General Depreciation System (GDS) or the Alternative Depreciation System (ADS) to depreciate property under MACRS determines what depreciation method and recovery period you use. Irs short form You generally must use GDS unless you are specifically required by law to use ADS or you elect to use ADS. Irs short form Required use of ADS. Irs short form   You must use ADS for the following property. Irs short form All property used predominantly in a farming business and placed in service in any tax year during which an election not to apply the uniform capitalization rules to certain farming costs is in effect. Irs short form Listed property used 50% or less in a qualified business use. Irs short form See Additional Rules for Listed Property , later. Irs short form Any tax-exempt use property. Irs short form Any tax-exempt bond-financed property. Irs short form Any property imported from a foreign country for which an Executive Order is in effect because the country maintains trade restrictions or engages in other discriminatory acts. Irs short form Any tangible property used predominantly outside the United States during the year. Irs short form If you are required to use ADS to depreciate your property, you cannot claim the special depreciation allowance. Irs short form Electing ADS. Irs short form   Although your property may qualify for GDS, you can elect to use ADS. Irs short form The election generally must cover all property in the same property class you placed in service during the year. Irs short form However, the election for residential rental property and nonresidential real property can be made on a property-by-property basis. Irs short form Once you make this election, you can never revoke it. Irs short form   You make the election by completing line 20 in Part III of Form 4562. Irs short form Which Property Class Applies Under GDS? The following is a list of the nine property classes under GDS. Irs short form 3-year property. Irs short form 5-year property. Irs short form 7-year property. Irs short form 10-year property. Irs short form 15-year property. Irs short form 20-year property. Irs short form 25-year property. Irs short form Residential rental property. Irs short form Nonresidential real property. Irs short form See Which Property Class Applies Under GDS in chapter 4 of Publication 946 for examples of the types of property included in each class. Irs short form What Is the Placed-in-Service Date? You begin to claim depreciation when your property is placed in service for use either in a trade or business or for the production of income. Irs short form The placed-in-service date for your property is the date the property is ready and available for a specific use. Irs short form It is therefore not necessarily the date it is first used. Irs short form If you converted property held for personal use to use in a trade or business or for the production of income, treat the property as being placed in service on the conversion date. Irs short form See Placed in Service under When Does Depreciation Begin and End , earlier, for examples illustrating when property is placed in service. Irs short form What Is the Basis for Depreciation? The basis for depreciation of MACRS property is the property's cost or other basis multiplied by the percentage of business/investment use. Irs short form Reduce that amount by any credits and deductions allocable to the property. Irs short form The following are examples of some of the credits and deductions that reduce basis. Irs short form Any deduction for section 179 property. Irs short form Any deduction for removal of barriers to the disabled and the elderly. Irs short form Any disabled access credit, enhanced oil recovery credit, and credit for employer-provided childcare facilities and services. Irs short form Any special depreciation allowance. Irs short form Basis adjustment for investment credit property under section 50(c) of the Internal Revenue Code. Irs short form For information about how to determine the cost or other basis of property, see What Is the Basis of Your Depreciable Property , earlier. Irs short form Also, see chapter 6. Irs short form For additional credits and deductions that affect basis, see section 1016 of the Internal Revenue Code. Irs short form Which Recovery Period Applies? The recovery period of property is the number of years over which you recover its cost or other basis. Irs short form It is determined based on the depreciation system (GDS or ADS) used. Irs short form See Table 7-1 for recovery periods under both GDS and ADS for some commonly used assets. Irs short form For a complete list of recovery periods, see the Table of Class Lives and Recovery Periods in Appendix B of Publication 946. Irs short form House trailers for farm laborers. Irs short form   To depreciate a house trailer you supply as housing for those who work on your farm, use one of the following recovery periods if the house trailer is mobile (it has wheels and a history of movement). Irs short form A 7-year recovery period under GDS. Irs short form A 10-year recovery period under ADS. Irs short form   However, if the house trailer is not mobile (its wheels have been removed and permanent utilities and pipes attached to it), use one of the following recovery periods. Irs short form A 20-year recovery period under GDS. Irs short form A 25-year recovery period under ADS. Irs short form Water wells. Irs short form   Water wells used to provide water for raising poultry and livestock are land improvements. Irs short form If they are depreciable, use one of the following recovery periods. Irs short form A 15-year recovery period under GDS. Irs short form A 20-year recovery period under ADS. Irs short form   The types of water wells that can be depreciated were discussed earlier in Irrigation systems and water wells under Property Having a Determinable Useful Life . Irs short form Table 7-1. Irs short form Farm Property Recovery Periods   Recovery Period in Years Assets GDS ADS Agricultural structures (single purpose) 10 15 Automobiles 5 5 Calculators and copiers 5 6 Cattle (dairy or breeding) 5 7 Communication equipment1 7 10 Computer and peripheral equipment 5 5 Drainage facilities 15 20 Farm buildings2 20 25 Farm machinery and equipment 7 10 Fences (agricultural) 7 10 Goats and sheep (breeding) 5 5 Grain bin 7 10 Hogs (breeding) 3 3 Horses (age when placed in service)     Breeding and working (12 years or less) 7 10 Breeding and working (more than 12 years) 3 10 Racing horses 3 12 Horticultural structures (single purpose) 10 15 Logging machinery and equipment3 5 6 Nonresidential real property 394 40 Office furniture, fixtures, and equipment (not calculators, copiers, or typewriters) 7 10 Paved lots 15 20 Residential rental property 27. Irs short form 5 40 Tractor units (over-the-road) 3 4 Trees or vines bearing fruit or nuts 10 20 Truck (heavy duty, unloaded weight 13,000 lbs. Irs short form or more) 5 6 Truck (actual weight less than 13,000 lbs) 5 5 Water wells 15 20 1 Not including communication equipment listed in other classes. Irs short form 2 Not including single purpose agricultural or horticultural structures. Irs short form 3 Used by logging and sawmill operators for cutting of timber. Irs short form 4 For property placed in service after May 12, 1993; for property placed in service before May 13, 1993,  the recovery period is 31. Irs short form 5 years. Irs short form Which Convention Applies? Under MACRS, averaging conventions establish when the recovery period begins and ends. Irs short form The convention you use determines the number of months for which you can claim depreciation in the year you place property in service and in the year you dispose of the property. Irs short form Use one of the following conventions. Irs short form The half-year convention. Irs short form The mid-month convention. Irs short form The mid-quarter convention. Irs short form For a detailed explanation of each convention, see Which Convention Applies in chapter 4 of Publication 946. Irs short form Also, see the Instructions for Form 4562. Irs short form Which Depreciation Method Applies? MACRS provides three depreciation methods under GDS and one depreciation method under ADS. Irs short form The 200% declining balance method over a GDS recovery period. Irs short form The 150% declining balance method over a GDS recovery period. Irs short form The straight line method over a GDS recovery period. Irs short form The straight line method over an ADS recovery period. Irs short form Depreciation Table. Irs short form   The following table lists the types of property you can depreciate under each method. Irs short form The declining balance method is abbreviated as DB and the straight line method is abbreviated as SL. Irs short form Depreciation Table System/Method   Type of Property GDS using  150% DB • All property used in a farming business (except real property)   • All 15- and 20-year property   • Nonfarm 3-, 5-, 7-, and 10-year property1 GDS using SL • Nonresidential real property   • Residential rental property   • Trees or vines bearing fruit or nuts   • All 3-, 5-, 7-, 10-, 15-, and 20-year property1 ADS using SL • Property used predomi- nantly outside the United States   • Farm property used when an election not to apply the uniform capitalization rules is in effect   • Tax-exempt property   • Tax-exempt bond-financed property   • Imported property2   • Any property for which you elect to use this method1 GDS using  200% DB • Nonfarm 3-, 5-, 7-, and 10-year property 1Elective method 2See section 168(g)(6) of the Internal Revenue  Code Property used in farming business. Irs short form   For personal property placed in service after 1988 in a farming business, you must use the 150% declining balance method over a GDS recovery period or you can elect one of the following methods. Irs short form The straight line method over a GDS recovery period. Irs short form The straight line method over an ADS recovery period. Irs short form For property placed in service before 1999, you could have elected to use the 150% declining balance method using the ADS recovery periods for certain property classes. Irs short form If you made this election, continue to use the same method and recovery period for that property. Irs short form Real property. Irs short form   You can depreciate real property using the straight line method under either GDS or ADS. Irs short form Switching to straight line. Irs short form   If you use a declining balance method, you switch to the straight line method in the year it provides an equal or greater deduction. Irs short form If you use the MACRS percentage tables, discussed later under How Is the Depreciation Deduction Figured , you do not need to determine in which year your deduction is greater using the straight line method. Irs short form The tables have the switch to the straight line method built into their rates. Irs short form Fruit or nut trees and vines. Irs short form   Depreciate trees and vines bearing fruit or nuts under GDS using the straight line method over a 10-year recovery period. Irs short form ADS required for some farmers. Irs short form   If you elect not to apply the uniform capitalization rules to any plant shown in Table 6-1 of chapter 6 and produced in your farming business, you must use ADS for all property you place in service in any year the election is in effect. Irs short form See chapter 6 for a discussion of the application of the uniform capitalization rules to farm property. Irs short form Electing a different method. Irs short form   As shown in the Depreciation Table , you can elect a different method for depreciation for certain types of property. Irs short form You must make the election by the due date of the return (including extensions) for the year you placed the property in service. Irs short form However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of your return (excluding extensions). Irs short form Attach the election to the amended return and write “Filed pursuant to section 301. Irs short form 9100-2” on the election statement. Irs short form File the amended return at the same address you filed the original return. Irs short form Once you make the election, you cannot change it. Irs short form    If you elect to use a different method for one item in a property class, you must apply the same method to all property in that class placed in service during the year of the election. Irs short form However, you can make the election on a property-by-property basis for residential rental and nonresidential real property. Irs short form Straight line election. Irs short form   Instead of using the declining balance method, you can elect to use the straight line method over the GDS recovery period. Irs short form Make the election by entering “S/L” under column (f) in Part III of Form 4562. Irs short form ADS election. Irs short form   As explained earlier under Which Depreciation System (GDS or ADS) Applies , you can elect to use ADS even though your property may come under GDS. Irs short form ADS uses the straight line method of depreciation over the ADS recovery periods, which are generally longer than the GDS recovery periods. Irs short form The ADS recovery periods for many assets used in the business of farming are listed in Table 7–1. Irs short form Additional ADS recovery periods for other classes of property may be found in the Table of Class Lives and Recovery Periods in Appendix B of Publication 946. Irs short form How Is the Depreciation Deduction Figured? To figure your depreciation deduction under MACRS, you first determine the depreciation system, property class, placed-in-service date, basis amount, recovery period, convention, and depreciation method that applies to your property. Irs short form Then you are ready to figure your depreciation deduction. Irs short form You can figure it in one of two ways. Irs short form You can use the percentage tables provided by the IRS. Irs short form You can figure your own deduction without using the tables. Irs short form Figuring your own MACRS deduction will generally result in a slightly different amount than using the tables. Irs short form Using the MACRS Percentage Tables To help you figure your deduction under MACRS, the IRS has established percentage tables that incorporate the applicable convention and depreciation method. Irs short form These percentage tables are in Appendix A of Publication 946. Irs short form Rules for using the tables. Irs short form   The following rules cover the use of the percentage tables. Irs short form You must apply the rates in the percentage tables to your property's unadjusted basis. Irs short form Unadjusted basis is the same basis amount you would use to figure gain on a sale but figured without reducing your original basis by any MACRS depreciation taken in earlier years. Irs short form You cannot use the percentage tables for a short tax year. Irs short form See chapter 4 of Publication 946 for information on how to figure the deduction for a short tax year. Irs short form You generally must continue to use them for the entire recovery period of the property. Irs short form You must stop using the tables if you adjust the basis of the property for any reason other than— Depreciation allowed or allowable, or An addition or improvement to the property, which is depreciated as a separate property. Irs short form Basis adjustment due to casualty loss. Irs short form   If you reduce the basis of your property because of a casualty, you cannot continue to use the percentage tables. Irs short form For the year of the adjustment and the remaining recovery period, you must figure the depreciation yourself using the property's adjusted basis at the end of the year. Irs short form See Figuring the Deduction Without Using the Tables in chapter 4 of Publication 946. Irs short form Figuring depreciation using the 150% DB method and half-year convention. Irs short form    Table 7-2 has the percentages for 3-, 5-, 7-, and 20-year property. Irs short form The percentages are based on the 150% declining balance method with a change to the straight line method. Irs short form This table covers only the half-year convention and the first 8 years for 20-year property. Irs short form See Appendix A in Publication 946 for complete MACRS tables, including tables for the mid-quarter and mid-month convention. Irs short form   The following examples show how to figure depreciation under MACRS using the percentages in Table 7-2 . Irs short form Example 1. Irs short form During the year, you bought an item of 7-year property for $10,000 and placed it in service. Irs short form You do not elect a section 179 expense deduction for this property. Irs short form In addition, the property is not qualified property for purposes of the special depreciation allowance. Irs short form The unadjusted basis of the property is $10,000. Irs short form You use the percentages in Table 7-2 to figure your deduction. Irs short form Since this is 7-year property, you multiply $10,000 by 10. Irs short form 71% to get this year's depreciation of $1,071. Irs short form For next year, your depreciation will be $1,913 ($10,000 × 19. Irs short form 13%). Irs short form Example 2. Irs short form You had a barn constructed on your farm at a cost of $20,000. Irs short form You placed the barn in service this year. Irs short form You elect not to claim the special depreciation allowance. Irs short form The barn is 20-year property and you use the table percentages to figure your deduction. Irs short form You figure this year's depreciation by multiplying $20,000 (unadjusted basis) by 3. Irs short form 75% to get $750. Irs short form For next year, your depreciation will be $1,443. Irs short form 80 ($20,000 × 7. Irs short form 219%). Irs short form Table 7-2. Irs short form 150% Declining Balance Method (Half-Year Convention) Year 3-Year 5-Year 7-Year 20-Year 1 25. Irs short form 0 % 15. Irs short form 00 % 10. Irs short form 71 % 3. Irs short form 750 % 2 37. Irs short form 5   25. Irs short form 50   19. Irs short form 13   7. Irs short form 219   3 25. Irs short form 0   17. Irs short form 85   15. Irs short form 03   6. Irs short form 677   4 12. Irs short form 5   16. Irs short form 66   12. Irs short form 25   6. Irs short form 177   5     16. Irs short form 66   12. Irs short form 25   5. Irs short form 713   6     8. Irs short form 33   12. Irs short form 25   5. Irs short form 285   7         12. Irs short form 25   4. Irs short form 888   8         6. Irs short form 13   4. Irs short form 522   Figuring depreciation using the straight line method and half-year convention. Irs short form   The following table has the straight line percentages for 3-, 5-, 7-, and 20-year property using the half-year convention. Irs short form The table covers only the first 8 years for 20-year property. Irs short form See Appendix A in Publication 946 for complete MACRS tables, including tables for the mid-quarter and mid-month convention. Irs short form Table 7-3. Irs short form Straight Line Method (Half-Year Convention) Year 3-Year 5-Year 7-Year 20-Year 1 16. Irs short form 67 % 10 % 7. Irs short form 14 % 2. Irs short form 5 % 2 33. Irs short form 33   20   14. Irs short form 29   5. Irs short form 0   3 33. Irs short form 33   20   14. Irs short form 29   5. Irs short form 0   4 16. Irs short form 67   20   14. Irs short form 28   5. Irs short form 0   5     20   14. Irs short form 29   5. Irs short form 0   6     10   14. Irs short form 28   5. Irs short form 0   7         14. Irs short form 29   5. Irs short form 0   8         7. Irs short form 14   5. Irs short form 0    
Español

Native American and Tribal Legal Resources

Find legal topics and resources on the Indian Trust program, NEPA, tax status, and more.

The Irs Short Form

Irs short form It is critical that business owners correctly determine whether the individuals providing services are employees or independent contractors. Irs short form Generally, you must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on wages paid to an employee. You do not generally have to withhold or pay any taxes on payments to independent contractors. Irs short form Select the Scenario that Applies to You: Irs short form I am an independent contractor or in business for myself Irs short form If you are a business owner or contractor who provides services to other businesses, then you are generally considered self-employed. For more information on your tax obligations if you are self-employed (an independent contractor), see our Self-Employed Tax Center. Irs short form I hire or contract with individuals to provide services to my business Irs short form If you are a business owner hiring or contracting with other individuals to provide services, you must determine whether the individuals providing services are employees or independent contractors. Follow the rest of this page to find out more about this topic and what your responsibilities are. Irs short form Determining Whether the Individuals Providing Services are Employees or Independent Contractors Irs short form Before you can determine how to treat payments you make for services, you must first know the business relationship that exists between you and the person performing the services. The person performing the services may be - Irs short form An independent contractor Irs short form An employee (common-law employee) Irs short form A statutory employee Irs short form A statutory nonemployee Irs short form In determining whether the person providing service is an employee or an independent contractor, all information that provides evidence of the degree of control and independence must be considered. Irs short form Common Law Rules Irs short form Facts that provide evidence of the degree of control and independence fall into three categories: Irs short form Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job? Irs short form Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.) Irs short form Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business? Irs short form Businesses must weigh all these factors when determining whether a worker is an employee or independent contractor. Some factors may indicate that the worker is an employee, while other factors indicate that the worker is an independent contractor. There is no “magic” or set number of factors that “makes” the worker an employee or an independent contractor, and no one factor stands alone in making this determination. Also, factors which are relevant in one situation may not be relevant in another. Irs short form The keys are to look at the entire relationship, consider the degree or extent of the right to direct and control, and finally, to document each of the factors used in coming up with the determination. Irs short form Form SS-8 Irs short form If, after reviewing the three categories of evidence, it is still unclear whether a worker is an employee or an independent contractor, Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding (PDF) can be filed with the IRS. The form may be filed by either the business or the worker. The IRS will review the facts and circumstances and officially determine the worker’s status. Irs short form Be aware that it can take at least six months to get a determination, but a business that continually hires the same types of workers to perform particular services may want to consider filing the Form SS-8 (PDF).