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1040ez tax forms to print Publication 587 - Main Content Table of Contents Qualifying for a DeductionExclusive Use Regular Use Trade or Business Use Principal Place of Business Place To Meet Patients, Clients, or Customers Separate Structure Figuring the DeductionUsing Actual Expenses Using the Simplified Method Daycare Facility Standard meal and snack rates. 1040ez tax forms to print Sale or Exchange of Your HomeGain on Sale Depreciation Basis Adjustment Reporting the Sale More Information Business Furniture and EquipmentListed Property Property Bought for Business Use Personal Property Converted to Business Use Recordkeeping Where To DeductSelf-Employed Persons Employees Partners How To Get Tax HelpLow Income Taxpayer Clinics Worksheet To Figure the Deduction for Business Use of Your HomeInstructions for the Worksheet Worksheets To Figure the Deduction for Business Use of Your Home (Simplified Method) Instructions for the Simplified Method Worksheet Instructions for the Daycare Facility Worksheet Instructions for the Area Adjustment Worksheet Qualifying for a Deduction Generally, you cannot deduct items related to your home, such as mortgage interest, real estate taxes, utilities, maintenance, rent, depreciation, or property insurance, as business expenses. 1040ez tax forms to print However, you may be able to deduct expenses related to the business use of part of your home if you meet specific requirements. 1040ez tax forms to print Even then, the deductible amount of these types of expenses may be limited. 1040ez tax forms to print Use this section and Figure A, later, to decide if you can deduct expenses for the business use of your home. 1040ez tax forms to print To qualify to deduct expenses for business use of your home, you must use part of your home: Exclusively and regularly as your principal place of business (defined later), Exclusively and regularly as a place where you meet or deal with patients, clients, or customers in the normal course of your trade or business, In the case of a separate structure which is not attached to your home, in connection with your trade or business, On a regular basis for certain storage use (see Storage of inventory or product samples , later), For rental use (see Publication 527), or As a daycare facility (see Daycare Facility , later). 1040ez tax forms to print Additional tests for employee use. 1040ez tax forms to print   If you are an employee and you use a part of your home for business, you may qualify for a deduction for its business use. 1040ez tax forms to print You must meet the tests discussed earlier plus: Your business use must be for the convenience of your employer, and You must not rent any part of your home to your employer and use the rented portion to perform services as an employee for that employer. 1040ez tax forms to print If the use of the home office is merely appropriate and helpful, you cannot deduct expenses for the business use of your home. 1040ez tax forms to print Exclusive Use To qualify under the exclusive use test, you must use a specific area of your home only for your trade or business. 1040ez tax forms to print The area used for business can be a room or other separately identifiable space. 1040ez tax forms to print The space does not need to be marked off by a permanent partition. 1040ez tax forms to print You do not meet the requirements of the exclusive use test if you use the area in question both for business and for personal purposes. 1040ez tax forms to print Example. 1040ez tax forms to print You are an attorney and use a den in your home to write legal briefs and prepare clients' tax returns. 1040ez tax forms to print Your family also uses the den for recreation. 1040ez tax forms to print The den is not used exclusively in your trade or business, so you cannot claim a deduction for the business use of the den. 1040ez tax forms to print Exceptions to Exclusive Use You do not have to meet the exclusive use test if either of the following applies. 1040ez tax forms to print You use part of your home for the storage of inventory or product samples (discussed next). 1040ez tax forms to print You use part of your home as a daycare facility, discussed later under Daycare Facility . 1040ez tax forms to print Note. 1040ez tax forms to print With the exception of these two uses, any portion of the home used for business purposes must meet the exclusive use test. 1040ez tax forms to print Storage of inventory or product samples. 1040ez tax forms to print    If you use part of your home for storage of inventory or product samples, you can deduct expenses for the business use of your home without meeting the exclusive use test. 1040ez tax forms to print However, you must meet all the following tests. 1040ez tax forms to print You sell products at wholesale or retail as your trade or business. 1040ez tax forms to print You keep the inventory or product samples in your home for use in your trade or business. 1040ez tax forms to print Your home is the only fixed location of your trade or business. 1040ez tax forms to print You use the storage space on a regular basis. 1040ez tax forms to print The space you use is a separately identifiable space suitable for storage. 1040ez tax forms to print Example. 1040ez tax forms to print Your home is the only fixed location of your business of selling mechanics' tools at retail. 1040ez tax forms to print You regularly use half of your basement for storage of inventory and product samples. 1040ez tax forms to print You sometimes use the area for personal purposes. 1040ez tax forms to print The expenses for the storage space are deductible even though you do not use this part of your basement exclusively for business. 1040ez tax forms to print Regular Use To qualify under the regular use test, you must use a specific area of your home for business on a regular basis. 1040ez tax forms to print Incidental or occasional business use is not regular use. 1040ez tax forms to print You must consider all facts and circumstances in determining whether your use is on a regular basis. 1040ez tax forms to print Trade or Business Use To qualify under the trade-or-business-use test, you must use part of your home in connection with a trade or business. 1040ez tax forms to print If you use your home for a profit-seeking activity that is not a trade or business, you cannot take a deduction for its business use. 1040ez tax forms to print Example. 1040ez tax forms to print You use part of your home exclusively and regularly to read financial periodicals and reports, clip bond coupons, and carry out similar activities related to your own investments. 1040ez tax forms to print You do not make investments as a broker or dealer. 1040ez tax forms to print So, your activities are not part of a trade or business and you cannot take a deduction for the business use of your home. 1040ez tax forms to print Principal Place of Business You can have more than one business location, including your home, for a single trade or business. 1040ez tax forms to print To qualify to deduct the expenses for the business use of your home under the principal place of business test, your home must be your principal place of business for that trade or business. 1040ez tax forms to print To determine whether your home is your principal place of business, you must consider: The relative importance of the activities performed at each place where you conduct business, and The amount of time spent at each place where you conduct business. 1040ez tax forms to print Your home office will qualify as your principal place of business if you meet the following requirements. 1040ez tax forms to print You use it exclusively and regularly for administrative or management activities of your trade or business. 1040ez tax forms to print You have no other fixed location where you conduct substantial administrative or management activities of your trade or business. 1040ez tax forms to print If, after considering your business locations, your home cannot be identified as your principal place of business, you cannot deduct home office expenses. 1040ez tax forms to print However, see the later discussions under Place To Meet Patients, Clients, or Customers and Separate Structure for other ways to qualify to deduct home office expenses. 1040ez tax forms to print Administrative or management activities. 1040ez tax forms to print   There are many activities that are administrative or managerial in nature. 1040ez tax forms to print The following are a few examples. 1040ez tax forms to print Billing customers, clients, or patients. 1040ez tax forms to print Keeping books and records. 1040ez tax forms to print Ordering supplies. 1040ez tax forms to print Setting up appointments. 1040ez tax forms to print Forwarding orders or writing reports. 1040ez tax forms to print Administrative or management activities performed at other locations. 1040ez tax forms to print   The following activities performed by you or others will not disqualify your home office from being your principal place of business. 1040ez tax forms to print You have others conduct your administrative or management activities at locations other than your home. 1040ez tax forms to print (For example, another company does your billing from its place of business. 1040ez tax forms to print ) You conduct administrative or management activities at places that are not fixed locations of your business, such as in a car or a hotel room. 1040ez tax forms to print You occasionally conduct minimal administrative or management activities at a fixed location outside your home. 1040ez tax forms to print You conduct substantial nonadministrative or nonmanagement business activities at a fixed location outside your home. 1040ez tax forms to print (For example, you meet with or provide services to customers, clients, or patients at a fixed location of the business outside your home. 1040ez tax forms to print ) You have suitable space to conduct administrative or management activities outside your home, but choose to use your home office for those activities instead. 1040ez tax forms to print Please click here for the text description of the image. 1040ez tax forms to print Can you deduct business use of the home expenses? Example 1. 1040ez tax forms to print John is a self-employed plumber. 1040ez tax forms to print Most of John's time is spent at customers' homes and offices installing and repairing plumbing. 1040ez tax forms to print He has a small office in his home that he uses exclusively and regularly for the administrative or management activities of his business, such as phoning customers, ordering supplies, and keeping his books. 1040ez tax forms to print John writes up estimates and records of work completed at his customers' premises. 1040ez tax forms to print He does not conduct any substantial administrative or management activities at any fixed location other than his home office. 1040ez tax forms to print John does not do his own billing. 1040ez tax forms to print He uses a local bookkeeping service to bill his customers. 1040ez tax forms to print John's home office qualifies as his principal place of business for deducting expenses for its use. 1040ez tax forms to print He uses the home office for the administrative or managerial activities of his plumbing business and he has no other fixed location where he conducts these administrative or managerial activities. 1040ez tax forms to print His choice to have his billing done by another company does not disqualify his home office from being his principal place of business. 1040ez tax forms to print He meets all the qualifications, including principal place of business, so he can deduct expenses (subject to certain limitations, explained later) for the business use of his home. 1040ez tax forms to print Example 2. 1040ez tax forms to print Pamela is a self-employed sales representative for several different product lines. 1040ez tax forms to print She has an office in her home that she uses exclusively and regularly to set up appointments and write up orders and other reports for the companies whose products she sells. 1040ez tax forms to print She occasionally writes up orders and sets up appointments from her hotel room when she is away on business overnight. 1040ez tax forms to print Pamela's business is selling products to customers at various locations throughout her territory. 1040ez tax forms to print To make these sales, she regularly visits customers to explain the available products and take orders. 1040ez tax forms to print Pamela's home office qualifies as her principal place of business for deducting expenses for its use. 1040ez tax forms to print She conducts administrative or management activities there and she has no other fixed location where she conducts substantial administrative or management activities. 1040ez tax forms to print The fact that she conducts some administrative or management activities in her hotel room (not a fixed location) does not disqualify her home office from being her principal place of business. 1040ez tax forms to print She meets all the qualifications, including principal place of business, so she can deduct expenses (subject to certain limitations, explained later) for the business use of her home. 1040ez tax forms to print Example 3. 1040ez tax forms to print Paul is a self-employed anesthesiologist. 1040ez tax forms to print He spends the majority of his time administering anesthesia and postoperative care in three local hospitals. 1040ez tax forms to print One of the hospitals provides him with a small shared office where he could conduct administrative or management activities. 1040ez tax forms to print Paul very rarely uses the office the hospital provides. 1040ez tax forms to print He uses a room in his home that he has converted to an office. 1040ez tax forms to print He uses this room exclusively and regularly to conduct all the following activities. 1040ez tax forms to print Contacting patients, surgeons, and hospitals regarding scheduling. 1040ez tax forms to print Preparing for treatments and presentations. 1040ez tax forms to print Maintaining billing records and patient logs. 1040ez tax forms to print Satisfying continuing medical education requirements. 1040ez tax forms to print Reading medical journals and books. 1040ez tax forms to print Paul's home office qualifies as his principal place of business for deducting expenses for its use. 1040ez tax forms to print He conducts administrative or management activities for his business as an anesthesiologist there and he has no other fixed location where he conducts substantial administrative or management activities for this business. 1040ez tax forms to print His choice to use his home office instead of the one provided by the hospital does not disqualify his home office from being his principal place of business. 1040ez tax forms to print His performance of substantial nonadministrative or nonmanagement activities at fixed locations outside his home also does not disqualify his home office from being his principal place of business. 1040ez tax forms to print He meets all the qualifications, including principal place of business, so he can deduct expenses (subject to certain limitations, explained later) for the business use of his home. 1040ez tax forms to print Example 4. 1040ez tax forms to print Kathleen is employed as a teacher. 1040ez tax forms to print She is required to teach and meet with students at the school and to grade papers and tests. 1040ez tax forms to print The school provides her with a small office where she can work on her lesson plans, grade papers and tests, and meet with parents and students. 1040ez tax forms to print The school does not require her to work at home. 1040ez tax forms to print Kathleen prefers to use the office she has set up in her home and does not use the one provided by the school. 1040ez tax forms to print She uses this home office exclusively and regularly for the administrative duties of her teaching job. 1040ez tax forms to print Kathleen must meet the convenience-of-the-employer test, even if her home qualifies as her principal place of business for deducting expenses for its use. 1040ez tax forms to print Her employer provides her with an office and does not require her to work at home, so she does not meet the convenience-of-the-employer test and cannot claim a deduction for the business use of her home. 1040ez tax forms to print More Than One Trade or Business The same home office can be the principal place of business for two or more separate business activities. 1040ez tax forms to print Whether your home office is the principal place of business for more than one business activity must be determined separately for each of your trade or business activities. 1040ez tax forms to print You must use the home office exclusively and regularly for one or more of the following purposes. 1040ez tax forms to print As the principal place of business for one or more of your trades or businesses. 1040ez tax forms to print As a place to meet or deal with patients, clients, or customers in the normal course of one or more of your trades or businesses. 1040ez tax forms to print If your home office is a separate structure, in connection with one or more of your trades or businesses. 1040ez tax forms to print You can use your home office for more than one business activity, but you cannot use it for any nonbusiness (i. 1040ez tax forms to print e. 1040ez tax forms to print , personal) activities. 1040ez tax forms to print If you are an employee, any use of the home office in connection with your employment must be for the convenience of your employer. 1040ez tax forms to print See Rental to employer , later, if you rent part of your home to your employer. 1040ez tax forms to print Example. 1040ez tax forms to print Tracy White is employed as a teacher. 1040ez tax forms to print Her principal place of work is the school, which provides her office space to do her school work. 1040ez tax forms to print She also has a mail order jewelry business. 1040ez tax forms to print All her work in the jewelry business is done in her home office and the office is used exclusively for that business. 1040ez tax forms to print If she meets all the other tests, she can deduct expenses for the business use of her home for the jewelry business. 1040ez tax forms to print If Tracy also uses the office for work related to her teaching, she must meet the exclusive use test for both businesses to qualify for the deduction. 1040ez tax forms to print As an employee, Tracy must also meet the convenience-of-the-employer test to qualify for the deduction. 1040ez tax forms to print She does not meet this test for her work as a teacher, so she cannot claim a deduction for the business use of her home for either activity. 1040ez tax forms to print Place To Meet Patients, Clients, or Customers If you meet or deal with patients, clients, or customers in your home in the normal course of your business, even though you also carry on business at another location, you can deduct your expenses for the part of your home used exclusively and regularly for business if you meet both the following tests. 1040ez tax forms to print You physically meet with patients, clients, or customers on your premises. 1040ez tax forms to print Their use of your home is substantial and integral to the conduct of your business. 1040ez tax forms to print Doctors, dentists, attorneys, and other professionals who maintain offices in their homes generally will meet this requirement. 1040ez tax forms to print Using your home for occasional meetings and telephone calls will not qualify you to deduct expenses for the business use of your home. 1040ez tax forms to print The part of your home you use exclusively and regularly to meet patients, clients, or customers does not have to be your principal place of business. 1040ez tax forms to print Example. 1040ez tax forms to print June Quill, a self-employed attorney, works 3 days a week in her city office. 1040ez tax forms to print She works 2 days a week in her home office used only for business. 1040ez tax forms to print She regularly meets clients there. 1040ez tax forms to print Her home office qualifies for a business deduction because she meets clients there in the normal course of her business. 1040ez tax forms to print Separate Structure You can deduct expenses for a separate free-standing structure, such as a studio, workshop, garage, or barn, if you use it exclusively and regularly for your business. 1040ez tax forms to print The structure does not have to be your principal place of business or a place where you meet patients, clients, or customers. 1040ez tax forms to print Example. 1040ez tax forms to print John Berry operates a floral shop in town. 1040ez tax forms to print He grows the plants for his shop in a greenhouse behind his home. 1040ez tax forms to print He uses the greenhouse exclusively and regularly in his business, so he can deduct the expenses for its use, subject to certain limitations, explained later. 1040ez tax forms to print Figuring the Deduction After you determine that you meet the tests under Qualifying for a Deduction , you can begin to figure how much you can deduct. 1040ez tax forms to print When figuring the amount you can deduct for the business use of your home, you will use either your actual expenses or a simplified method. 1040ez tax forms to print Electing to use the simplified method. 1040ez tax forms to print   The simplified method is an alternative to the calculation, allocation, and substantiation of actual expenses. 1040ez tax forms to print You choose whether or not to figure your deduction using the simplified method each taxable year. 1040ez tax forms to print See Using the Simplified Method , later. 1040ez tax forms to print Rental to employer. 1040ez tax forms to print   If you rent part of your home to your employer and you use the rented part in performing services for your employer as an employee, your deduction for the business use of your home is limited. 1040ez tax forms to print You can deduct mortgage interest, qualified mortgage insurance premiums, real estate taxes, and personal casualty losses for the rented part, subject to any limitations. 1040ez tax forms to print However, you cannot deduct otherwise allowable trade or business expenses, business casualty losses, or depreciation related to the use of your home (or use the simplified method as an alternative to deducting these actual expenses) in performing services for your employer. 1040ez tax forms to print Using Actual Expenses If you do not or cannot elect to use the simplified method for a home, you will figure your deduction for that home using your actual expenses. 1040ez tax forms to print You will also need to figure the percentage of your home used for business and the limit on the deduction. 1040ez tax forms to print If you are an employee or a partner, or you use your home in your farming business and you file Schedule F (Form 1040), you can use the Worksheet To Figure the Deduction for Business Use of Your Home, near the end of this publication, to help you figure your deduction. 1040ez tax forms to print If you use your home in a trade or business and you file Schedule C (Form 1040), you will use Form 8829 to figure your deduction. 1040ez tax forms to print Part-year use. 1040ez tax forms to print   You cannot deduct expenses for the business use of your home incurred during any part of the year you did not use your home for business purposes. 1040ez tax forms to print For example, if you begin using part of your home for business on July 1, and you meet all the tests from that date until the end of the year, consider only your expenses for the last half of the year in figuring your allowable deduction. 1040ez tax forms to print Expenses related to tax-exempt income. 1040ez tax forms to print   Generally, you cannot deduct expenses that are related to tax-exempt allowances. 1040ez tax forms to print However, if you receive a tax-exempt parsonage allowance or a tax-exempt military allowance, your expenses for mortgage interest and real estate taxes are deductible under the normal rules. 1040ez tax forms to print No deduction is allowed for other expenses related to the tax-exempt allowance. 1040ez tax forms to print   If your housing is provided free of charge and the value of the housing is tax exempt, you cannot deduct the rental value of any portion of the housing. 1040ez tax forms to print Actual Expenses You must divide the expenses of operating your home between personal and business use. 1040ez tax forms to print The part of a home operating expense you can use to figure your deduction depends on both of the following. 1040ez tax forms to print Whether the expense is direct, indirect, or unrelated. 1040ez tax forms to print The percentage of your home used for business. 1040ez tax forms to print Table 1, next, describes the types of expenses you may have and the extent to which they are deductible. 1040ez tax forms to print Table 1. 1040ez tax forms to print Types of Expenses  Expense  Description  Deductibility Direct Expenses only for  the business part  of your home. 1040ez tax forms to print Deductible in full. 1040ez tax forms to print *   Examples:  Painting or repairs  only in the area  used for business. 1040ez tax forms to print Exception: May be only partially  deductible in a daycare facility. 1040ez tax forms to print See Daycare Facility , later. 1040ez tax forms to print Indirect Expenses for  keeping up and running your  entire home. 1040ez tax forms to print Deductible based on the percentage of your home used for business. 1040ez tax forms to print *   Examples:  Insurance, utilities, and  general repairs. 1040ez tax forms to print   Unrelated Expenses only for  the parts of your  home not used  for business. 1040ez tax forms to print Not deductible. 1040ez tax forms to print   Examples:  Lawn care or painting  a room not used  for business. 1040ez tax forms to print   *Subject to the deduction limit, discussed later. 1040ez tax forms to print Form 8829 and the Worksheet To Figure the Deduction for Business Use of Your Home have separate columns for direct and indirect expenses. 1040ez tax forms to print Certain expenses are deductible whether or not you use your home for business. 1040ez tax forms to print If you qualify to deduct business use of the home expenses, use the business percentage of these expenses to figure your total business use of the home deduction. 1040ez tax forms to print These expenses include the following. 1040ez tax forms to print Real estate taxes. 1040ez tax forms to print Qualified mortgage insurance premiums. 1040ez tax forms to print Deductible mortgage interest. 1040ez tax forms to print Casualty losses. 1040ez tax forms to print Other expenses are deductible only if you use your home for business. 1040ez tax forms to print You can use the business percentage of these expenses to figure your total business use of the home deduction. 1040ez tax forms to print These expenses generally include (but are not limited to) the following. 1040ez tax forms to print Depreciation (covered under Depreciating Your Home , later). 1040ez tax forms to print Insurance. 1040ez tax forms to print Rent paid for the use of property you do not own but use in your trade or business. 1040ez tax forms to print Repairs. 1040ez tax forms to print Security system. 1040ez tax forms to print Utilities and services. 1040ez tax forms to print Real estate taxes. 1040ez tax forms to print   To figure the business part of your real estate taxes, multiply the real estate taxes paid by the percentage of your home used for business. 1040ez tax forms to print   For more information on the deduction for real estate taxes, see Publication 530, Tax Information for Homeowners. 1040ez tax forms to print Deductible mortgage interest. 1040ez tax forms to print   To figure the business part of your deductible mortgage interest, multiply this interest by the percentage of your home used for business. 1040ez tax forms to print You can include interest on a second mortgage in this computation. 1040ez tax forms to print If your total mortgage debt is more than $1,000,000 or your home equity debt is more than $100,000, your deduction may be limited. 1040ez tax forms to print For more information on what interest is deductible, see Publication 936, Home Mortgage Interest Deduction. 1040ez tax forms to print Qualified mortgage insurance premiums. 1040ez tax forms to print   To figure the business part of your qualified mortgage insurance premiums, multiply the premiums by the percentage of your home used for business. 1040ez tax forms to print You can include premiums for insurance on a second mortgage in this computation. 1040ez tax forms to print If your adjusted gross income is more than $100,000 ($50,000 if your filing status is married filing separately), your deduction may be limited. 1040ez tax forms to print For more information, see Publication 936, and Line 13 in the Instructions for Schedule A (Form 1040). 1040ez tax forms to print Casualty losses. 1040ez tax forms to print    If you have a casualty loss on your home that you use for business, treat the casualty loss as a direct expense, an indirect expense, or an unrelated expense, depending on the property affected. 1040ez tax forms to print A direct expense is the loss on the portion of the property you use only in your business. 1040ez tax forms to print Use the entire loss to figure the business use of the home deduction. 1040ez tax forms to print An indirect expense is the loss on property you use for both business and personal purposes. 1040ez tax forms to print Use only the business portion to figure the deduction. 1040ez tax forms to print An unrelated expense is the loss on property you do not use in your business. 1040ez tax forms to print Do not use any of the loss to figure the deduction. 1040ez tax forms to print Example. 1040ez tax forms to print You meet the rules to take a deduction for an office in your home that is 10% of the total area of your house. 1040ez tax forms to print A storm damages your roof. 1040ez tax forms to print This is an indirect expense as the roof is part of the whole house and is considered to be used both for business and personal purposes. 1040ez tax forms to print You would complete Form 4684, Casualties and Thefts, to report your loss. 1040ez tax forms to print You complete both section A (Personal Use Property) and section B (Business and Income-Producing Property) as your home is used both for business and personal purposes. 1040ez tax forms to print Since you use 90% of your home for personal purposes, use 90% of the cost or adjusted basis of your home, insurance or other reimbursement, and fair market value, both before and after the storm, to figure the amounts to enter on lines 2, 3, 5, and 6 of Form 4684. 1040ez tax forms to print Since you use 10% of your home for business purposes, use 10% of the cost or adjusted basis of your home, insurance or other reimbursement, and fair market value, both before and after the storm, to figure the amounts to enter on lines 20, 21, 23, and 24 of Form 4684. 1040ez tax forms to print Forms and worksheets to use. 1040ez tax forms to print   If you are filing Schedule C (Form 1040), get Form 8829 and follow the instructions for casualty losses. 1040ez tax forms to print If you are an employee or a partner, or you file Schedule F (Form 1040), use the Worksheet To Figure the Deduction for Business Use of Your Home, near the end of this publication. 1040ez tax forms to print You will also need to get Form 4684. 1040ez tax forms to print More information. 1040ez tax forms to print   For more information on casualty losses, see Publication 547, Casualties, Disasters, and Thefts. 1040ez tax forms to print Insurance. 1040ez tax forms to print   You can deduct the cost of insurance that covers the business part of your home. 1040ez tax forms to print However, if your insurance premium gives you coverage for a period that extends past the end of your tax year, you can deduct only the business percentage of the part of the premium that gives you coverage for your tax year. 1040ez tax forms to print You can deduct the business percentage of the part that applies to the following year in that year. 1040ez tax forms to print Rent. 1040ez tax forms to print   If you rent the home you occupy and meet the requirements for business use of the home, you can deduct part of the rent you pay. 1040ez tax forms to print To figure your deduction, multiply your rent payments by the percentage of your home used for business. 1040ez tax forms to print   If you own your home, you cannot deduct the fair rental value of your home. 1040ez tax forms to print However, see Depreciating Your Home , later. 1040ez tax forms to print Repairs. 1040ez tax forms to print   The cost of repairs that relate to your business, including labor (other than your own labor), is a deductible expense. 1040ez tax forms to print For example, a furnace repair benefits the entire home. 1040ez tax forms to print If you use 10% of your home for business, you can deduct 10% of the cost of the furnace repair. 1040ez tax forms to print   Repairs keep your home in good working order over its useful life. 1040ez tax forms to print Examples of common repairs are patching walls and floors, painting, wallpapering, repairing roofs and gutters, and mending leaks. 1040ez tax forms to print However, repairs are sometimes treated as a permanent improvement and are not deductible. 1040ez tax forms to print See Permanent improvements , later, under Depreciating Your Home. 1040ez tax forms to print Security system. 1040ez tax forms to print   If you install a security system that protects all the doors and windows in your home, you can deduct the business part of the expenses you incur to maintain and monitor the system. 1040ez tax forms to print You also can take a depreciation deduction for the part of the cost of the security system relating to the business use of your home. 1040ez tax forms to print Utilities and services. 1040ez tax forms to print   Expenses for utilities and services, such as electricity, gas, trash removal, and cleaning services, are primarily personal expenses. 1040ez tax forms to print However, if you use part of your home for business, you can deduct the business part of these expenses. 1040ez tax forms to print Generally, the business percentage for utilities is the same as the percentage of your home used for business. 1040ez tax forms to print Telephone. 1040ez tax forms to print   The basic local telephone service charge, including taxes, for the first telephone line into your home (i. 1040ez tax forms to print e. 1040ez tax forms to print , landline) is a nondeductible personal expense. 1040ez tax forms to print However, charges for business long-distance phone calls on that line, as well as the cost of a second line into your home used exclusively for business, are deductible business expenses. 1040ez tax forms to print Do not include these expenses as a cost of using your home for business. 1040ez tax forms to print Deduct these charges separately on the appropriate form or schedule. 1040ez tax forms to print For example, if you file Schedule C (Form 1040), deduct these expenses on line 25, Utilities (instead of line 30, Expenses for business use of your home). 1040ez tax forms to print Depreciating Your Home If you own your home and qualify to deduct expenses for its business use, you can claim a deduction for depreciation. 1040ez tax forms to print Depreciation is an allowance for the wear and tear on the part of your home used for business. 1040ez tax forms to print You cannot depreciate the cost or value of the land. 1040ez tax forms to print You recover its cost when you sell or otherwise dispose of the property. 1040ez tax forms to print Before you figure your depreciation deduction, you need to know the following information. 1040ez tax forms to print The month and year you started using your home for business. 1040ez tax forms to print The adjusted basis and fair market value of your home (excluding land) at the time you began using it for business. 1040ez tax forms to print The cost of any improvements before and after you began using the property for business. 1040ez tax forms to print The percentage of your home used for business. 1040ez tax forms to print See Business Percentage , later. 1040ez tax forms to print Adjusted basis defined. 1040ez tax forms to print   The adjusted basis of your home is generally its cost, plus the cost of any permanent improvements you made to it, minus any casualty losses or depreciation deducted in earlier tax years. 1040ez tax forms to print For a discussion of adjusted basis, see Publication 551. 1040ez tax forms to print Permanent improvements. 1040ez tax forms to print   A permanent improvement increases the value of property, adds to its life, or gives it a new or different use. 1040ez tax forms to print Examples of improvements are replacing electric wiring or plumbing, adding a new roof or addition, paneling, or remodeling. 1040ez tax forms to print    You must carefully distinguish between repairs and improvements. 1040ez tax forms to print See Repairs , earlier, under Actual Expenses. 1040ez tax forms to print You also must keep accurate records of these expenses. 1040ez tax forms to print These records will help you decide whether an expense is a deductible or a capital (added to the basis) expense. 1040ez tax forms to print However, if you make repairs as part of an extensive remodeling or restoration of your home, the entire job is an improvement. 1040ez tax forms to print Example. 1040ez tax forms to print You buy an older home and fix up two rooms as a beauty salon. 1040ez tax forms to print You patch the plaster on the ceilings and walls, paint, repair the floor, install an outside door, and install new wiring, plumbing, and other equipment. 1040ez tax forms to print Normally, the patching, painting, and floor work are repairs and the other expenses are permanent improvements. 1040ez tax forms to print However, because the work gives your property a new use, the entire remodeling job is a permanent improvement and its cost is added to the basis of the property. 1040ez tax forms to print You cannot deduct any portion of it as a repair expense. 1040ez tax forms to print Adjusting for depreciation deducted in earlier years. 1040ez tax forms to print   Decrease the basis of your property by the depreciation you deducted, or could have deducted, on your tax returns under the method of depreciation you properly selected. 1040ez tax forms to print If you deducted less depreciation than you could have under the method you selected, decrease the basis by the amount you could have deducted under that method. 1040ez tax forms to print If you did not deduct any depreciation, decrease the basis by the amount you could have deducted. 1040ez tax forms to print   If you deducted more depreciation than you should have, decrease your basis by the amount you should have deducted, plus the part of the excess depreciation you deducted that actually decreased your tax liability for any year. 1040ez tax forms to print   If you deducted the incorrect amount of depreciation, see Publication 946. 1040ez tax forms to print Fair market value defined. 1040ez tax forms to print   The fair market value of your home is the price at which the property would change hands between a buyer and a seller, neither having to buy or sell, and both having reasonable knowledge of all necessary facts. 1040ez tax forms to print Sales of similar property, on or about the date you begin using your home for business, may be helpful in determining the property's fair market value. 1040ez tax forms to print Figuring the depreciation deduction for the current year. 1040ez tax forms to print   If you began using your home for business before 2013, continue to use the same depreciation method you used in past tax years. 1040ez tax forms to print   If you began using your home for business for the first time in 2013, depreciate the business part as nonresidential real property under the modified accelerated cost recovery system (MACRS). 1040ez tax forms to print Under MACRS, nonresidential real property is depreciated using the straight line method over 39 years. 1040ez tax forms to print For more information on MACRS and other methods of depreciation, see Publication 946. 1040ez tax forms to print   To figure the depreciation deduction, you must first figure the part of the cost of your home that can be depreciated (depreciable basis). 1040ez tax forms to print The depreciable basis is figured by multiplying the percentage of your home used for business by the smaller of the following. 1040ez tax forms to print The adjusted basis of your home (excluding land) on the date you began using your home for business. 1040ez tax forms to print The fair market value of your home (excluding land) on the date you began using your home for business. 1040ez tax forms to print Depreciation table. 1040ez tax forms to print   If 2013 was the first year you used your home for business, you can figure your 2013 depreciation for the business part of your home by using the appropriate percentage from the following table. 1040ez tax forms to print Table 2. 1040ez tax forms to print MACRS Percentage Table for 39-Year Nonresidential Real Property Month First Used for Business Percentage To Use 1 2. 1040ez tax forms to print 461% 2 2. 1040ez tax forms to print 247% 3 2. 1040ez tax forms to print 033% 4 1. 1040ez tax forms to print 819% 5 1. 1040ez tax forms to print 605% 6 1. 1040ez tax forms to print 391% 7 1. 1040ez tax forms to print 177% 8 0. 1040ez tax forms to print 963% 9 0. 1040ez tax forms to print 749% 10 0. 1040ez tax forms to print 535% 11 0. 1040ez tax forms to print 321% 12 0. 1040ez tax forms to print 107%   Multiply the depreciable basis of the business part of your home by the percentage from the table for the first month you use your home for business. 1040ez tax forms to print See Publication 946 for the percentages for the remaining tax years of the recovery period. 1040ez tax forms to print Example. 1040ez tax forms to print In May, George Miller began to use one room in his home exclusively and regularly to meet clients. 1040ez tax forms to print This room is 8% of the square footage of his home. 1040ez tax forms to print He bought the home in 2003 for $125,000. 1040ez tax forms to print He determined from his property tax records that his adjusted basis in the house (exclusive of land) is $115,000. 1040ez tax forms to print In May, the house had a fair market value of $165,000. 1040ez tax forms to print He multiplies his adjusted basis of $115,000 (which is less than the fair market value) by 8%. 1040ez tax forms to print The result is $9,200, his depreciable basis for the business part of the house. 1040ez tax forms to print George files his return based on the calendar year. 1040ez tax forms to print May is the 5th month of his tax year. 1040ez tax forms to print He multiplies his depreciable basis of $9,200 by 1. 1040ez tax forms to print 605% (. 1040ez tax forms to print 01605), the percentage from the table for the 5th month. 1040ez tax forms to print His depreciation deduction is $147. 1040ez tax forms to print 66. 1040ez tax forms to print Depreciating permanent improvements. 1040ez tax forms to print   Add the costs of permanent improvements made before you began using your home for business to the basis of your property. 1040ez tax forms to print Depreciate these costs as part of the cost of your home as explained earlier. 1040ez tax forms to print The costs of improvements made after you begin using your home for business (that affect the business part of your home, such as a new roof) are depreciated separately. 1040ez tax forms to print Multiply the cost of the improvement by the business-use percentage and depreciate the result over the recovery period that would apply to your home if you began using it for business at the same time as the improvement. 1040ez tax forms to print For improvements made this year, the recovery period is 39 years. 1040ez tax forms to print For the percentage to use for the first year, see Table 2, earlier. 1040ez tax forms to print For more information on recovery periods, see Publication 946. 1040ez tax forms to print Business Percentage To find the business percentage, compare the size of the part of your home that you use for business to your whole house. 1040ez tax forms to print Use the resulting percentage to figure the business part of the expenses for operating your entire home. 1040ez tax forms to print You can use any reasonable method to determine the business percentage. 1040ez tax forms to print The following are two commonly used methods for figuring the percentage. 1040ez tax forms to print Divide the area (length multiplied by the width) used for business by the total area of your home. 1040ez tax forms to print If the rooms in your home are all about the same size, you can divide the number of rooms used for business by the total number of rooms in your home. 1040ez tax forms to print Example 1. 1040ez tax forms to print Your office is 240 square feet (12 feet × 20 feet). 1040ez tax forms to print Your home is 1,200 square feet. 1040ez tax forms to print Your office is 20% (240 ÷ 1,200) of the total area of your home. 1040ez tax forms to print Your business percentage is 20%. 1040ez tax forms to print Example 2. 1040ez tax forms to print You use one room in your home for business. 1040ez tax forms to print Your home has 10 rooms, all about equal size. 1040ez tax forms to print Your office is 10% (1 ÷ 10) of the total area of your home. 1040ez tax forms to print Your business percentage is 10%. 1040ez tax forms to print Use lines 1-7 of Form 8829, or lines 1-3 on the Worksheet To Figure the Deduction for Business Use of Your Home (near the end of this publication) to figure your business percentage. 1040ez tax forms to print Deduction Limit If your gross income from the business use of your home equals or exceeds your total business expenses (including depreciation), you can deduct all your business expenses related to the use of your home. 1040ez tax forms to print If your gross income from the business use of your home is less than your total business expenses, your deduction for certain expenses for the business use of your home is limited. 1040ez tax forms to print Your deduction of otherwise nondeductible expenses, such as insurance, utilities, and depreciation of your home (with depreciation of your home taken last), that are allocable to the business, is limited to the gross income from the business use of your home minus the sum of the following. 1040ez tax forms to print The business part of expenses you could deduct even if you did not use your home for business (such as mortgage interest, real estate taxes, and casualty and theft losses that are allowable as itemized deductions on Schedule A (Form 1040)). 1040ez tax forms to print These expenses are discussed in detail under Actual Expenses , earlier. 1040ez tax forms to print The business expenses that relate to the business activity in the home (for example, business phone, supplies, and depreciation on equipment), but not to the use of the home itself. 1040ez tax forms to print If you are self-employed, do not include in (2) above your deduction for one-half of your self-employment tax. 1040ez tax forms to print Carryover of unallowed expenses. 1040ez tax forms to print   If your deductions are greater than the current year's limit, you can carry over the excess to the next year in which you use actual expenses. 1040ez tax forms to print They are subject to the deduction limit for that year, whether or not you live in the same home during that year. 1040ez tax forms to print Figuring the deduction limit and carryover. 1040ez tax forms to print   If you are an employee or a partner, or you file Schedule F (Form 1040), use the Worksheet To Figure the Deduction for Business Use of Your Home, near the end of this publication. 1040ez tax forms to print If you file Schedule C (Form 1040), figure your deduction limit and carryover on Form 8829. 1040ez tax forms to print Example. 1040ez tax forms to print You meet the requirements for deducting expenses for the business use of your home. 1040ez tax forms to print You use 20% of your home for business. 1040ez tax forms to print In 2013, your business expenses and the expenses for the business use of your home are deducted from your gross income in the following order. 1040ez tax forms to print    Gross income from business $6,000 Minus:   Deductible mortgage interest and real estate taxes (20%) 3,000 Business expenses not related to the use of your home (100%) (business phone, supplies, and depreciation on equipment) 2,000 Deduction limit $1,000 Minus other expenses allocable to business use of home:   Maintenance, insurance, and utilities (20%) 800 Depreciation allowed (20% = $1,600 allowable, but subject to balance of deduction limit) 200 Other expenses up to the deduction limit $1,000 Depreciation carryover to 2014 ($1,600 − $200) (subject to deduction limit in 2014) $1,400   You can deduct all of the business part of your deductible mortgage interest and real estate taxes ($3,000). 1040ez tax forms to print You also can deduct all of your business expenses not related to the use of your home ($2,000). 1040ez tax forms to print Additionally, you can deduct all of the business part of your expenses for maintenance, insurance, and utilities, because the total ($800) is less than the $1,000 deduction limit. 1040ez tax forms to print Your deduction for depreciation for the business use of your home is limited to $200 ($1,000 minus $800) because of the deduction limit. 1040ez tax forms to print You can carry over the $1,400 balance and add it to your depreciation for 2014, subject to your deduction limit in 2014. 1040ez tax forms to print More than one place of business. 1040ez tax forms to print   If part of the gross income from your trade or business is from the business use of part of your home and part is from a place other than your home, you must determine the part of your gross income from the business use of your home before you figure the deduction limit. 1040ez tax forms to print In making this determination, consider the time you spend at each location, the business investment in each location, and any other relevant facts and circumstances. 1040ez tax forms to print If your home office qualifies as your principal place of business, you can deduct your daily transportation costs between your home and another work location in the same trade or business. 1040ez tax forms to print For more information on transportation costs, see Publication 463, Travel, Entertainment, Gift, and Car Expenses. 1040ez tax forms to print Using the Simplified Method The simplified method is an alternative to the calculation, allocation, and substantiation of actual expenses. 1040ez tax forms to print In most cases, you will figure your deduction by multiplying $5, the prescribed rate, by the area of your home used for a qualified business use. 1040ez tax forms to print The area you use to figure your deduction is limited to 300 square feet. 1040ez tax forms to print See Simplified Amount , later, for information about figuring the amount of the deduction. 1040ez tax forms to print For more information about the simplified method, see Revenue Procedure 2013-13, 2013-06 I. 1040ez tax forms to print R. 1040ez tax forms to print B. 1040ez tax forms to print 478, available at www. 1040ez tax forms to print irs. 1040ez tax forms to print gov/irb/2013-06_IRB/ar09. 1040ez tax forms to print html. 1040ez tax forms to print Actual expenses and depreciation of your home. 1040ez tax forms to print   If you elect to use the simplified method, you cannot deduct any actual expenses for the business except for business expenses that are not related to the use of the home. 1040ez tax forms to print You also cannot deduct any depreciation (including any additional first-year depreciation) or section 179 expense for the portion of the home that is used for a qualified business use. 1040ez tax forms to print The depreciation deduction allowable for that portion of the home is deemed to be zero for a year you use the simplified method. 1040ez tax forms to print If you figure your deduction for business use of the home using actual expenses in a subsequent year, you will have to use the appropriate optional depreciation table for MACRS to figure your depreciation. 1040ez tax forms to print More information. 1040ez tax forms to print   For more information about claiming depreciation in a subsequent year, see Revenue Procedure 2013-13, 2013-06 I. 1040ez tax forms to print R. 1040ez tax forms to print B. 1040ez tax forms to print 478, available at www. 1040ez tax forms to print irs. 1040ez tax forms to print gov/irb/2013-06_IRB/ar09. 1040ez tax forms to print html. 1040ez tax forms to print See Publication 946 for the optional depreciation tables Although you cannot deduct any depreciation or section 179 expense for the portion of your home used for a qualified business use, you may still claim depreciation or the section 179 expense deduction on other assets used in the business (for example, furniture and equipment). 1040ez tax forms to print Expenses deductible without regard to business use. 1040ez tax forms to print   When using the simplified method, treat as personal expenses those business expenses related to the use of the home that are deductible without regard to whether there is a qualified business use of the home. 1040ez tax forms to print These expenses include mortgage interest, real estate taxes, and casualty losses, subject to any limitations. 1040ez tax forms to print See Where To Deduct , later. 1040ez tax forms to print If you also rent part of your home, you must still allocate these expenses between rental use and personal use (for this purpose, personal use includes business use reported using the simplified method). 1040ez tax forms to print No deduction of carryover of actual expenses. 1040ez tax forms to print   If you used actual expenses to figure your deduction for business use of the home in a prior year and your deduction was limited, you cannot deduct the disallowed amount carried over from the prior year during a year you figure your deduction using the simplified method. 1040ez tax forms to print Instead, you will continue to carry over the disallowed amount to the next year that you use actual expenses to figure your deduction. 1040ez tax forms to print Electing the Simplified Method You choose whether or not to figure your deduction using the simplified method each taxable year. 1040ez tax forms to print Make the election for a home by using the simplified method to figure the deduction for the qualified business use of that home on a timely filed, original federal income tax return. 1040ez tax forms to print An election for a taxable year, once made, is irrevocable. 1040ez tax forms to print A change from using the simplified method in one year to actual expenses in a succeeding taxable year, or vice-versa, is not a change in method of accounting and does not require the consent of the Commissioner. 1040ez tax forms to print Shared use. 1040ez tax forms to print   If you share your home with someone else who also uses the home in a business that qualifies for this deduction, each of you make your own election. 1040ez tax forms to print More than one qualified business use. 1040ez tax forms to print   If you conduct more than one business that qualifies for this deduction in your home, your election to use the simplified method applies to all your qualified business uses of that home. 1040ez tax forms to print More than one home. 1040ez tax forms to print   If you used more than one home during the year (for example, you moved during the year), you can elect to use the simplified method for only one of the homes. 1040ez tax forms to print You must figure the deduction for any other home using actual expenses. 1040ez tax forms to print Simplified Amount Your deduction for the qualified business use of a home is the sum of each amount you figure for a separate qualified business use of your home. 1040ez tax forms to print To figure your deduction for the business use of a home using the simplified method, you will need to know the following information for each qualified business use of the home. 1040ez tax forms to print The allowable area of your home used in conducting the business. 1040ez tax forms to print If you did not conduct the business for the entire year in the home or the area changed during the year, you will need to know the allowable area you used and the number of days you conducted the business for each month. 1040ez tax forms to print The gross income from the business use of your home. 1040ez tax forms to print The amount of the business expenses that are not related to the use of your home. 1040ez tax forms to print If the qualified business use is for a daycare facility that uses space in your home on a regular (but not exclusive) basis, you will also need to know the percentage of time that part of your home is used for daycare. 1040ez tax forms to print To figure the amount you can deduct for qualified business use of your home using the simplified method, follow these 3 steps. 1040ez tax forms to print Multiply the allowable area by $5 (or less than $5 if the qualified business use is for a daycare that uses space in your home on a regular, but not exclusive, basis). 1040ez tax forms to print See Allowable area and Space used regularly for daycare , later. 1040ez tax forms to print Subtract the expenses from the business that are not related to the use of the home from the gross income related to the business use of the home. 1040ez tax forms to print If these expenses are greater than the gross income from the business use of the home, then you cannot take a deduction for this business use of the home. 1040ez tax forms to print See Gross income limitation , later. 1040ez tax forms to print Take the smaller of the amounts from (1) and (2). 1040ez tax forms to print This is the amount you can deduct for this qualified business use of your home using the simplified method. 1040ez tax forms to print If you are an employee or a partner, or you use your home in your farming business and file Schedule F (Form 1040), you can use the Simplified Method Worksheet, near the end of this publication, to help you figure your deduction. 1040ez tax forms to print If you use your home in a trade or business and you file Schedule C (Form 1040), you will use the Simplified Method Worksheet in your Instructions for Schedule C to figure your deduction. 1040ez tax forms to print Allowable area. 1040ez tax forms to print   In most cases, the allowable area is the smaller of the actual area (in square feet) of your home used in conducting the business and 300 square feet. 1040ez tax forms to print Your allowable area may be smaller if you conducted the business as a qualified joint venture with your spouse, the area used by the business was shared with another qualified business use, you used the home for the business for only part of the year, or the area used by the business changed during the year. 1040ez tax forms to print You can use the Area Adjustment Worksheet (for simplified method), near the end of this publication, to help you figure your allowable area for a qualified business use. 1040ez tax forms to print Area used by a qualified joint venture. 1040ez tax forms to print   If the qualified business use of the home is also a qualified joint venture, you and your spouse will figure the deduction for the business use separately. 1040ez tax forms to print Split the actual area used in conducting business between you and your spouse in the same manner you split your other tax attributes. 1040ez tax forms to print Then, each spouse will figure the allowable area separately. 1040ez tax forms to print For more information about qualified joint ventures, see Qualified Joint Venture in the Instructions for Schedule C. 1040ez tax forms to print Shared use. 1040ez tax forms to print   If you share your home with someone else who uses the home to conduct business that also qualifies for this deduction, you may not include the same square feet to figure your deduction as the other person. 1040ez tax forms to print You must allocate the shared space between you and the other person in a reasonable manner. 1040ez tax forms to print Example. 1040ez tax forms to print Kristin and Lindsey are roommates. 1040ez tax forms to print Kristin uses 300 square feet of their home for a qualified business use. 1040ez tax forms to print Lindsey uses 200 square feet of their home for a separate qualified business use. 1040ez tax forms to print The qualified business uses share 100 square feet. 1040ez tax forms to print In addition to the portion that they do not share, Kristin and Lindsey can both claim 50 of the 100 square feet or divide the 100 square feet between them in any reasonable manner. 1040ez tax forms to print If divided evenly, Kristin could claim 250 square feet using the simplified method and Lindsey could claim 150 square feet. 1040ez tax forms to print More than one qualified business use. 1040ez tax forms to print   If you conduct more than one business qualifying for the deduction, you are limited to a maximum of 300 square feet for all of the businesses. 1040ez tax forms to print Allocate the actual square footage used (up to the maximum of 300 square feet) among your qualified business uses in a reasonable manner. 1040ez tax forms to print However, do not allocate more square feet to a qualified business use than you actually use for that business. 1040ez tax forms to print Rental use. 1040ez tax forms to print   The simplified method does not apply to rental use. 1040ez tax forms to print A rental use that qualifies for the deduction must be figured using actual expenses. 1040ez tax forms to print If the rental use and a qualified business use share the same area, you will have to allocate the actual area used between the two uses. 1040ez tax forms to print You cannot use the same area to figure a deduction for the qualified business use as you are using to figure the deduction for the rental use. 1040ez tax forms to print Part-year use or area changes. 1040ez tax forms to print   If your qualified business use was for a portion of the taxable year (for example, a seasonal business or a business that begins during the taxable year) or you changed the square footage of your qualified business use, your deduction is limited to the average monthly allowable square footage. 1040ez tax forms to print You calculate the average monthly allowable square footage by adding the amount of allowable square feet you used in each month and dividing the sum by 12. 1040ez tax forms to print When determining the average monthly allowable square footage, you cannot take more than 300 square feet into account for any one month. 1040ez tax forms to print Additionally, if your qualified business use was less than 15 days in a month, you must use -0- for that month. 1040ez tax forms to print Example 1. 1040ez tax forms to print Andy files his federal income tax return on a calendar year basis. 1040ez tax forms to print On July 20, he began using 420 square feet of his home for a qualified business use. 1040ez tax forms to print He continued to use the 420 square feet until the end of the year. 1040ez tax forms to print His average monthly allowable square footage is 125 square feet, which is figured using 300 square feet for each month August through December divided by the number of months in the taxable year ((0 + 0 + 0 + 0 + 0 + 0 + 0 + 300 + 300 + 300 + 300 + 300)/12). 1040ez tax forms to print Example 2. 1040ez tax forms to print Amy files her federal income tax return on a calendar year basis. 1040ez tax forms to print On April 20, she began using 100 square feet of her home for a qualified business use. 1040ez tax forms to print On August 5, she expanded the area of her qualified use to 330 square feet. 1040ez tax forms to print Amy continued to use the 330 square feet until the end of the year. 1040ez tax forms to print Her average monthly allowable square footage is 150 square feet, which is figured using 100 square feet for May through July and 300 square feet for August through December divided by the number of months in the taxable year ((0 + 0 + 0 + 0 + 100 + 100 +100 + 300 + 300 + 300 + 300 + 300)/12). 1040ez tax forms to print Gross income limitation. 1040ez tax forms to print   Your deduction for business use of the home is limited to an amount equal to the gross income derived from the qualified business use of the home reduced by the business deductions that are unrelated to the use of your home. 1040ez tax forms to print If the business deductions that are unrelated to the use of your home are greater than the gross income derived from the qualified business use of your home, then you cannot take a deduction for this qualified business use of your home. 1040ez tax forms to print Business expenses not related to use of the home. 1040ez tax forms to print   These expenses relate to the business activity in the home, but not to the use of the home itself. 1040ez tax forms to print You can still deduct business expenses that are unrelated to the use of the home. 1040ez tax forms to print See Where To Deduct , later. 1040ez tax forms to print Examples of business expenses that are unrelated to the use of the home are advertising, wages, supplies, dues, and depreciation for equipment. 1040ez tax forms to print Space used regularly for daycare. 1040ez tax forms to print   If you do not use the area of your home exclusively for daycare, you must reduce the prescribed rate (maximum $5 per square foot) before figuring your deduction. 1040ez tax forms to print The reduced rate will equal the prescribed rate times a fraction. 1040ez tax forms to print The numerator of the fraction is the number of hours that the space was used during the year for daycare and the denominator is the total number of hours during the year that the space was available for all uses. 1040ez tax forms to print You can use the Daycare Facility Worksheet (for simplified method), near the end of this publication, to help you figure the reduced rate. 1040ez tax forms to print    If you used at least 300 square feet for daycare regularly and exclusively during the year, then you do not need to reduce the prescribed rate or complete the Daycare Facility Worksheet. 1040ez tax forms to print Daycare Facility If you use space in your home on a regular basis for providing daycare, you may be able to claim a deduction for that part of your home even if you use the same space for nonbusiness purposes. 1040ez tax forms to print To qualify for this exception to the exclusive use rule, you must meet both of the following requirements. 1040ez tax forms to print You must be in the trade or business of providing daycare for children, persons age 65 or older, or persons who are physically or mentally unable to care for themselves. 1040ez tax forms to print You must have applied for, been granted, or be exempt from having, a license, certification, registration, or approval as a daycare center or as a family or group daycare home under state law. 1040ez tax forms to print You do not meet this requirement if your application was rejected or your license or other authorization was revoked. 1040ez tax forms to print Figuring the deduction. 1040ez tax forms to print   If you elect to use the simplified method for your home, figure your deduction as described earlier in Using the Simplified Method under Figuring the Deduction. 1040ez tax forms to print    If you are figuring your deduction using actual expenses and you regularly use part of your home for daycare, figure what part is used for daycare, as explained in Business Percentage , earlier, under Figuring the Deduction. 1040ez tax forms to print If you also use that part exclusively for daycare, deduct all the allocable expenses, subject to the deduction limit, as explained earlier. 1040ez tax forms to print   If the use of part of your home as a daycare facility is regular, but not exclusive, you must figure the percentage of time that part of your home is used for daycare. 1040ez tax forms to print A room that is available for use throughout each business day and that you regularly use in your business is considered to be used for daycare throughout each business day. 1040ez tax forms to print You do not have to keep records to show the specific hours the area was used for business. 1040ez tax forms to print You can use the area occasionally for personal reasons. 1040ez tax forms to print However, a room you use only occasionally for business does not qualify for the deduction. 1040ez tax forms to print To find the percentage of time you actually use your home for business, compare the total time used for business to the total time that part of your home can be used for all purposes. 1040ez tax forms to print You can compare the hours of business use in a week with the number of hours in a week (168). 1040ez tax forms to print Or you can compare the hours of business use for the year with the number of hours in the year (8,760 in 2013). 1040ez tax forms to print If you started or stopped using your home for daycare in 2013, you must prorate the number of hours based on the number of days the home was available for daycare. 1040ez tax forms to print Example 1. 1040ez tax forms to print Mary Lake used her basement to operate a daycare business for children. 1040ez tax forms to print She figures the business percentage of the basement as follows. 1040ez tax forms to print Square footage of the basement Square footage of her home = 1,600 3,200 = 50%           She used the basement for daycare an average of 12 hours a day, 5 days a week, for 50 weeks a year. 1040ez tax forms to print During the other 12 hours a day, the family could use the basement. 1040ez tax forms to print She figures the percentage of time the basement was used for daycare as follows. 1040ez tax forms to print Number of hours used for daycare (12 x 5 x 50) Total number of hours in the year (24 x 365) = 3,000 8,760 = 34. 1040ez tax forms to print 25%           Mary can deduct 34. 1040ez tax forms to print 25% of any direct expenses for the basement. 1040ez tax forms to print However, because her indirect expenses are for the entire house, she can deduct only 17. 1040ez tax forms to print 13% of the indirect expenses. 1040ez tax forms to print She figures the percentage for her indirect expenses as follows. 1040ez tax forms to print Business percentage of the basement 50% Multiplied by: Percentage of time used for daycare × 34. 1040ez tax forms to print 25% Percentage for indirect expenses 17. 1040ez tax forms to print 13% Mary completes Form 8829, Part I, figuring the percentage of her home used for business, including the percentage of time the basement was used. 1040ez tax forms to print In Part II, Mary figures her deductible expenses. 1040ez tax forms to print She uses the following information to complete Part II. 1040ez tax forms to print Gross income from her daycare business $50,000 Expenses not related to the business use of the home $25,000 Tentative profit $25,000 Rent $8,400 Utilities $850 Painting the basement $500 Mary enters her tentative profit, $25,000, on line 8. 1040ez tax forms to print (This figure is the same as the amount on line 29 of her Schedule C (Form 1040). 1040ez tax forms to print ) The expenses she paid for rent and utilities relate to her entire home. 1040ez tax forms to print Therefore, she enters the amount paid for rent on line 18, column (b), and the amount paid for utilities on line 20, column (b). 1040ez tax forms to print She shows the total of these expenses on line 22, column (b). 1040ez tax forms to print For line 23, she multiplies the amount on line 22, column (b) by the percentage on line 7 and enters the result, $1,585. 1040ez tax forms to print Mary paid $500 to have the basement painted. 1040ez tax forms to print The painting is a direct expense. 1040ez tax forms to print However, because she did not use the basement exclusively for daycare, she must multiply $500 by the percentage of time the basement was used for daycare (34. 1040ez tax forms to print 25% – line 6). 1040ez tax forms to print She enters $171 (34. 1040ez tax forms to print 25% × $500) on line 19, column (a). 1040ez tax forms to print She adds line 22, column (a), and line 23 and enters $1,756 ($171 + $1,585) on line 25. 1040ez tax forms to print This is less than her deduction limit (line 15), so she can deduct the entire amount. 1040ez tax forms to print She follows the instructions to complete the rest of Part II and enters $1,756 on lines 33 and 35. 1040ez tax forms to print She then carries the $1,756 to line 30 of her Schedule C (Form 1040). 1040ez tax forms to print Example 2. 1040ez tax forms to print Assume the same facts as in Example 1 except that Mary also has another room that was available each business day for children to take naps in. 1040ez tax forms to print Although she did not keep a record of the number of hours the room was actually used for naps, it was used for part of each business day. 1040ez tax forms to print Since the room was available for business use during regular operating hours each business day and was used regularly in the business, it is considered used for daycare throughout each business day. 1040ez tax forms to print The basement and room are 60% of the total area of her home. 1040ez tax forms to print In figuring her expenses, 34. 1040ez tax forms to print 25% of any direct expenses for the basement and room are deductible. 1040ez tax forms to print In addition, 20. 1040ez tax forms to print 55% (34. 1040ez tax forms to print 25% × 60%) of her indirect expenses are deductible. 1040ez tax forms to print Example 3. 1040ez tax forms to print Assume the same facts as in Example 1 except that Mary stopped using her home for a daycare facility on June 24, 2013. 1040ez tax forms to print She used the basement for daycare an average of 12 hours a day, 5 days a week, but for only 25 weeks of the year. 1040ez tax forms to print During the other 12 hours a day, the family could still use the basement. 1040ez tax forms to print She figures the percentage of time the basement was used for business as follows. 1040ez tax forms to print Number of hours used for daycare (12 x 5 x 25) Total number of hours during period used (24 x 175) = 1,500 4,200 = 35. 1040ez tax forms to print 71%           Mary can deduct 35. 1040ez tax forms to print 71% of any direct expenses for the basement. 1040ez tax forms to print However, because her indirect expenses are for the entire house, she can deduct only 17. 1040ez tax forms to print 86% of the indirect expenses. 1040ez tax forms to print She figures the percentage for her indirect expenses as follows. 1040ez tax forms to print Business percentage of the basement 50% Multiplied by: Percentage of time used for daycare × 35. 1040ez tax forms to print 71% Percentage for indirect expenses 17. 1040ez tax forms to print 86% Meals. 1040ez tax forms to print   If you provide food for your daycare recipients, do not include the expense as a cost of using your home for business. 1040ez tax forms to print Claim it as a separate deduction on your Schedule C (Form 1040). 1040ez tax forms to print You can never deduct the cost of food consumed by you or your family. 1040ez tax forms to print You can deduct as a business expense 100% of the actual cost of food consumed by your daycare recipients (see Standard meal and snack rates , later, for an optional method for eligible children) and generally only 50% of the cost of food consumed by your employees. 1040ez tax forms to print However, you can deduct 100% of the cost of food consumed by your employees if its value can be excluded from their wages as a de minimis fringe benefit. 1040ez tax forms to print For more information on meals that meet these requirements, see Meals in chapter 2 of Publication 15-B, Employer's Tax Guide to Fringe Benefits. 1040ez tax forms to print   If you deduct the actual cost of food for your daycare business, keep a separate record (with receipts) of your family's food costs. 1040ez tax forms to print   Reimbursements you receive from a sponsor under the Child and Adult Care Food Program of the Department of Agriculture are taxable only to the extent they exceed your expenses for food for eligible children. 1040ez tax forms to print If your reimbursements are more than your expenses for food, show the difference as income in Part I of Schedule C (Form 1040). 1040ez tax forms to print If your food expenses are greater than the reimbursements, show the difference as an expense in Part V of Schedule C (Form 1040). 1040ez tax forms to print Do not include payments or expenses for your own children if they are eligible for the program. 1040ez tax forms to print Follow this procedure even if you receive a Form 1099-MISC, Miscellaneous Income, reporting a payment from the sponsor. 1040ez tax forms to print Standard meal and snack rates. 1040ez tax forms to print   If you qualify as a family daycare provider, you can use the standard meal and snack rates, instead of actual costs, to compute the deductible cost of meals and snacks provided to eligible children. 1040ez tax forms to print For these purposes: A family daycare provider is a person engaged in the business of providing family daycare. 1040ez tax forms to print Family daycare is childcare provided to eligible children in the home of the family daycare provider. 1040ez tax forms to print The care must be non-medical, not involve a transfer of legal custody, and generally last less than 24 hours each day. 1040ez tax forms to print Eligible children are minor children receiving family daycare in the home of the family daycare provider. 1040ez tax forms to print Eligible children do not include children who are full-time or part-time residents in the home where the childcare is provided or children whose parents or guardians are residents of the same home. 1040ez tax forms to print Eligible children do not include children who receive daycare services for personal reasons of the provider. 1040ez tax forms to print For example, if a provider provides daycare services for a relative as a favor to that relative, that child is not an eligible child. 1040ez tax forms to print   You can compute the deductible cost of each meal and snack you actually purchased and served to an eligible child during the time period you provided family daycare using the standard meal and snack rates shown in Table 3, later. 1040ez tax forms to print You can use the standard meal and snack rates for a maximum of one breakfast, one lunch, one dinner, and three snacks per eligible child per day. 1040ez tax forms to print If you receive reimbursement for a particular meal or snack, you can deduct only the portion of the applicable standard meal or snack rate that is more than the amount of the reimbursement. 1040ez tax forms to print   You can use either the standard meal and snack rates or actual costs to calculate the deductible cost of food provided to eligible children in the family daycare for any particular tax year. 1040ez tax forms to print If you choose to use the standard meal and snack rates for a particular tax year, you must use the rates for all your deductible food costs for eligible children during that tax year. 1040ez tax forms to print However, if you use the standard meal and snack rates in any tax year, you can use actual costs to compute the deductible cost of food in any other tax year. 1040ez tax forms to print   If you use the standard meal and snack rates, you must maintain records to substantiate the computation of the total amount deducted for the cost of food provided to eligible children. 1040ez tax forms to print The records kept should include the name of each child, dates and hours of attendance in the daycare, and the type and quantity of meals and snacks served. 1040ez tax forms to print This information can be recorded in a log similar to the one shown in Exhibit A, near the end of this publication. 1040ez tax forms to print   The standard meal and snack rates include beverages, but do not include non-food supplies used for food preparation, service, or storage, such as containers, paper products, or utensils. 1040ez tax forms to print These expenses can be claimed as a separate deduction on your Schedule C (Form 1040). 1040ez tax forms to print     Table 3. 1040ez tax forms to print Standard Meal and Snack Rates1 Location of Family Daycare Provider Breakfast Lunch Dinner Snack States other than Alaska an
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Understanding Tax Return Preparer Credentials

For 2014, any tax professional with an IRS Preparer Tax Identification Number is authorized to prepare federal tax returns. Tax professionals, however, have differing levels of skills, education and expertise. There are several different types of return preparers with credentials.

An important difference in the types of practitioners is “representation rights”. Here is guidance on each credential:

UNLIMITED REPRESENTATION RIGHTS: Enrolled agents, certified public accountants, and attorneys have unlimited representation rights before the IRS and may represent their clients on any matters including audits, payment/collection issues, and appeals.

Enrolled Agents – People with this credential are licensed by the IRS and specifically trained in federal tax planning, preparation and representation. Enrolled agents hold the most expansive license IRS grants and must pass a suitability check, as well as a three-part Special Enrollment Examination, a comprehensive exam that covers individual tax, business tax and representation issues. They complete 72 hours of continuing education every 3 years. For more information on enrolled agents, see Publication 4693-A, A Guide to the Enrolled Agent Program.

Certified Public Accountants – People with this credential are licensed by state boards of accountancy, the District of Columbia, and U.S. territories, and have passed the Uniform CPA Examination. They also must meet education, experience, and good character requirements established by their boards of accountancy. In addition, CPAs must comply with ethical requirements as well as complete specified levels of continuing education in order to maintain an active CPA license. CPAs can offer a range of services; some CPAs specialize in tax preparation and planning.

Attorneys – People with this credential are licensed by state courts or their designees, such as the state bar. Generally, requirements include completion of a degree in law, passage of an ethics and bar exam and on-going continuing education. Attorneys can offer a range of services; some attorneys specialize in tax preparation and planning.

LIMITED REPRESENTATION RIGHTS: Preparers without any of the above credentials (also known as “unenrolled preparers”) have limited practice rights and may only represent clients whose returns they prepared and signed and only at the initial audit level.

NOTE: Registered Tax Return Preparers – Certain preparers became RTRPs under an IRS program that IRS is no longer able to enforce due to a District Court injunction. RTRPs passed an IRS competency test on Form 1040 tax preparation.

REMINDER: Everyone described above must have an IRS issued preparer tax identification number (PTIN) in order to legally prepare your tax return for compensation. Make certain your preparer has one and enters it on your return filed with the IRS. They are not required to enter it on the copy they provide you.

Page Last Reviewed or Updated: 10-Feb-2014

The 1040ez Tax Forms To Print

1040ez tax forms to print 4. 1040ez tax forms to print   Transportation Table of Contents Parking fees. 1040ez tax forms to print Advertising display on car. 1040ez tax forms to print Car pools. 1040ez tax forms to print Hauling tools or instruments. 1040ez tax forms to print Union members' trips from a union hall. 1040ez tax forms to print Car ExpensesStandard Mileage Rate Actual Car Expenses Leasing a Car Disposition of a Car This chapter discusses expenses you can deduct for business transportation when you are not traveling away from home as defined in chapter 1. 1040ez tax forms to print These expenses include the cost of transportation by air, rail, bus, taxi, etc. 1040ez tax forms to print , and the cost of driving and maintaining your car. 1040ez tax forms to print Transportation expenses include the ordinary and necessary costs of all of the following. 1040ez tax forms to print Getting from one workplace to another in the course of your business or profession when you are traveling within the city or general area that is your tax home. 1040ez tax forms to print Tax home is defined in chapter 1. 1040ez tax forms to print Visiting clients or customers. 1040ez tax forms to print Going to a business meeting away from your regular workplace. 1040ez tax forms to print Getting from your home to a temporary workplace when you have one or more regular places of work. 1040ez tax forms to print These temporary workplaces can be either within the area of your tax home or outside that area. 1040ez tax forms to print Transportation expenses do not include expenses you have while traveling away from home overnight. 1040ez tax forms to print Those expenses are travel expenses discussed in chapter 1 . 1040ez tax forms to print However, if you use your car while traveling away from home overnight, use the rules in this chapter to figure your car expense deduction. 1040ez tax forms to print See Car Expenses , later. 1040ez tax forms to print Daily transportation expenses you incur while traveling from home to one or more regular places of business are generally nondeductible commuting expenses. 1040ez tax forms to print However, there may be exceptions to this general rule. 1040ez tax forms to print You can deduct daily transportation expenses incurred going between your residence and a temporary work station outside the metropolitan area where you live. 1040ez tax forms to print Also, daily transportation expenses can be deducted if: (1) you have one or more regular work locations away from your residence or (2) your residence is your principal place of business and you incur expenses going between the residence and another work location in the same trade or business, regardless of whether the work is temporary or permanent and regardless of the distance. 1040ez tax forms to print Illustration of transportation expenses. 1040ez tax forms to print    Figure B , earlier, illustrates the rules that apply for deducting transportation expenses when you have a regular or main job away from your home. 1040ez tax forms to print You may want to refer to it when deciding whether you can deduct your transportation expenses. 1040ez tax forms to print Temporary work location. 1040ez tax forms to print   If you have one or more regular work locations away from your home and you commute to a temporary work location in the same trade or business, you can deduct the expenses of the daily round-trip transportation between your home and the temporary location, regardless of distance. 1040ez tax forms to print   If your employment at a work location is realistically expected to last (and does in fact last) for 1 year or less, the employment is temporary unless there are facts and circumstances that would indicate otherwise. 1040ez tax forms to print   If your employment at a work location is realistically expected to last for more than 1 year or if there is no realistic expectation that the employment will last for 1 year or less, the employment is not temporary, regardless of whether it actually lasts for more than 1 year. 1040ez tax forms to print   If employment at a work location initially is realistically expected to last for 1 year or less, but at some later date the employment is realistically expected to last more than 1 year, that employment will be treated as temporary (unless there are facts and circumstances that would indicate otherwise) until your expectation changes. 1040ez tax forms to print It will not be treated as temporary after the date you determine it will last more than 1 year. 1040ez tax forms to print   If the temporary work location is beyond the general area of your regular place of work and you stay overnight, you are traveling away from home. 1040ez tax forms to print You may have deductible travel expenses as discussed in chapter 1 . 1040ez tax forms to print No regular place of work. 1040ez tax forms to print   If you have no regular place of work but ordinarily work in the metropolitan area where you live, you can deduct daily transportation costs between home and a temporary work site outside that metropolitan area. 1040ez tax forms to print   Generally, a metropolitan area includes the area within the city limits and the suburbs that are considered part of that metropolitan area. 1040ez tax forms to print   You cannot deduct daily transportation costs between your home and temporary work sites within your metropolitan area. 1040ez tax forms to print These are nondeductible commuting expenses. 1040ez tax forms to print Two places of work. 1040ez tax forms to print   If you work at two places in one day, whether or not for the same employer, you can deduct the expense of getting from one workplace to the other. 1040ez tax forms to print However, if for some personal reason you do not go directly from one location to the other, you cannot deduct more than the amount it would have cost you to go directly from the first location to the second. 1040ez tax forms to print   Transportation expenses you have in going between home and a part-time job on a day off from your main job are commuting expenses. 1040ez tax forms to print You cannot deduct them. 1040ez tax forms to print Armed Forces reservists. 1040ez tax forms to print   A meeting of an Armed Forces reserve unit is a second place of business if the meeting is held on a day on which you work at your regular job. 1040ez tax forms to print You can deduct the expense of getting from one workplace to the other as just discussed under Two places of work . 1040ez tax forms to print   You usually cannot deduct the expense if the reserve meeting is held on a day on which you do not work at your regular job. 1040ez tax forms to print In this case, your transportation generally is a nondeductible commuting expense. 1040ez tax forms to print However, you can deduct your transportation expenses if the location of the meeting is temporary and you have one or more regular places of work. 1040ez tax forms to print   If you ordinarily work in a particular metropolitan area but not at any specific location and the reserve meeting is held at a temporary location outside that metropolitan area, you can deduct your transportation expenses. 1040ez tax forms to print   If you travel away from home overnight to attend a guard or reserve meeting, you can deduct your travel expenses. 1040ez tax forms to print These expenses are discussed in chapter 1 . 1040ez tax forms to print   If you travel more than 100 miles away from home in connection with your performance of services as a member of the reserves, you may be able to deduct some of your reserve-related travel costs as an adjustment to gross income rather than as an itemized deduction. 1040ez tax forms to print For more information, see Armed Forces Reservists Traveling More Than 100 Miles From Home under Special Rules, in chapter 6. 1040ez tax forms to print Commuting expenses. 1040ez tax forms to print   You cannot deduct the costs of taking a bus, trolley, subway, or taxi, or of driving a car between your home and your main or regular place of work. 1040ez tax forms to print These costs are personal commuting expenses. 1040ez tax forms to print You cannot deduct commuting expenses no matter how far your home is from your regular place of work. 1040ez tax forms to print You cannot deduct commuting expenses even if you work during the commuting trip. 1040ez tax forms to print Example. 1040ez tax forms to print You sometimes use your cell phone to make business calls while commuting to and from work. 1040ez tax forms to print Sometimes business associates ride with you to and from work, and you have a business discussion in the car. 1040ez tax forms to print These activities do not change the trip from personal to business. 1040ez tax forms to print You cannot deduct your commuting expenses. 1040ez tax forms to print Parking fees. 1040ez tax forms to print    Fees you pay to park your car at your place of business are nondeductible commuting expenses. 1040ez tax forms to print You can, however, deduct business-related parking fees when visiting a customer or client. 1040ez tax forms to print Advertising display on car. 1040ez tax forms to print   Putting display material that advertises your business on your car does not change the use of your car from personal use to business use. 1040ez tax forms to print If you use this car for commuting or other personal uses, you still cannot deduct your expenses for those uses. 1040ez tax forms to print Car pools. 1040ez tax forms to print   You cannot deduct the cost of using your car in a nonprofit car pool. 1040ez tax forms to print Do not include payments you receive from the passengers in your income. 1040ez tax forms to print These payments are considered reimbursements of your expenses. 1040ez tax forms to print However, if you operate a car pool for a profit, you must include payments from passengers in your income. 1040ez tax forms to print You can then deduct your car expenses (using the rules in this publication). 1040ez tax forms to print Hauling tools or instruments. 1040ez tax forms to print   Hauling tools or instruments in your car while commuting to and from work does not make your car expenses deductible. 1040ez tax forms to print However, you can deduct any additional costs you have for hauling tools or instruments (such as for renting a trailer you tow with your car). 1040ez tax forms to print Union members' trips from a union hall. 1040ez tax forms to print   If you get your work assignments at a union hall and then go to your place of work, the costs of getting from the union hall to your place of work are nondeductible commuting expenses. 1040ez tax forms to print Although you need the union to get your work assignments, you are employed where you work, not where the union hall is located. 1040ez tax forms to print Office in the home. 1040ez tax forms to print   If you have an office in your home that qualifies as a principal place of business, you can deduct your daily transportation costs between your home and another work location in the same trade or business. 1040ez tax forms to print (See Publication 587, Business Use of Your Home, for information on determining if your home office qualifies as a principal place of business. 1040ez tax forms to print ) Examples of deductible transportation. 1040ez tax forms to print   The following examples show when you can deduct transportation expenses based on the location of your work and your home. 1040ez tax forms to print Example 1. 1040ez tax forms to print You regularly work in an office in the city where you live. 1040ez tax forms to print Your employer sends you to a 1-week training session at a different office in the same city. 1040ez tax forms to print You travel directly from your home to the training location and return each day. 1040ez tax forms to print You can deduct the cost of your daily round-trip transportation between your home and the training location. 1040ez tax forms to print Example 2. 1040ez tax forms to print Your principal place of business is in your home. 1040ez tax forms to print You can deduct the cost of round-trip transportation between your qualifying home office and your client's or customer's place of business. 1040ez tax forms to print Example 3. 1040ez tax forms to print You have no regular office, and you do not have an office in your home. 1040ez tax forms to print In this case, the location of your first business contact inside the metropolitan area is considered your office. 1040ez tax forms to print Transportation expenses between your home and this first contact are nondeductible commuting expenses. 1040ez tax forms to print Transportation expenses between your last business contact and your home are also nondeductible commuting expenses. 1040ez tax forms to print While you cannot deduct the costs of these trips, you can deduct the costs of going from one client or customer to another. 1040ez tax forms to print Car Expenses If you use your car for business purposes, you ordinarily can deduct car expenses. 1040ez tax forms to print You generally can use one of the two following methods to figure your deductible expenses. 1040ez tax forms to print Standard mileage rate. 1040ez tax forms to print Actual car expenses. 1040ez tax forms to print If you use actual expenses to figure your deduction for a car you lease, there are rules that affect the amount of your lease payments you can deduct. 1040ez tax forms to print See Leasing a Car , later. 1040ez tax forms to print In this publication, “car” includes a van, pickup, or panel truck. 1040ez tax forms to print For the definition of “car” for depreciation purposes, see Car defined under Actual Car Expenses, later. 1040ez tax forms to print Rural mail carriers. 1040ez tax forms to print   If you are a rural mail carrier, you may be able to treat the qualified reimbursement you received as your allowable expense. 1040ez tax forms to print Because the qualified reimbursement is treated as paid under an accountable plan, your employer should not include the reimbursement in your income. 1040ez tax forms to print   If your vehicle expenses are more than the amount of your reimbursement, you can deduct the unreimbursed expenses as an itemized deduction on Schedule A (Form 1040). 1040ez tax forms to print You must complete Form 2106 and attach it to your Form 1040, U. 1040ez tax forms to print S. 1040ez tax forms to print Individual Income Tax Return. 1040ez tax forms to print   A “qualified reimbursement” is the reimbursement you receive that meets both of the following conditions. 1040ez tax forms to print It is given as an equipment maintenance allowance (EMA) to employees of the U. 1040ez tax forms to print S. 1040ez tax forms to print Postal Service. 1040ez tax forms to print It is at the rate contained in the 1991 collective bargaining agreement. 1040ez tax forms to print Any later agreement cannot increase the qualified reimbursement amount by more than the rate of inflation. 1040ez tax forms to print See your employer for information on your reimbursement. 1040ez tax forms to print    If you are a rural mail carrier and received a qualified reimbursement, you cannot use the standard mileage rate. 1040ez tax forms to print Standard Mileage Rate You may be able to use the standard mileage rate to figure the deductible costs of operating your car for business purposes. 1040ez tax forms to print For 2013, the standard mileage rate for the cost of operating your car for business use is 56½ cents per mile. 1040ez tax forms to print If you use the standard mileage rate for a year, you cannot deduct your actual car expenses for that year. 1040ez tax forms to print You cannot deduct depreciation, lease payments, maintenance and repairs, gasoline (including gasoline taxes), oil, insurance, or vehicle registration fees. 1040ez tax forms to print See Choosing the standard mileage rate and Standard mileage rate not allowed, later. 1040ez tax forms to print You generally can use the standard mileage rate whether or not you are reimbursed and whether or not any reimbursement is more or less than the amount figured using the standard mileage rate. 1040ez tax forms to print See chapter 6 for more information on reimbursements . 1040ez tax forms to print Choosing the standard mileage rate. 1040ez tax forms to print   If you want to use the standard mileage rate for a car you own, you must choose to use it in the first year the car is available for use in your business. 1040ez tax forms to print Then, in later years, you can choose to use either the standard mileage rate or actual expenses. 1040ez tax forms to print   If you want to use the standard mileage rate for a car you lease, you must use it for the entire lease period. 1040ez tax forms to print For leases that began on or before December 31, 1997, the standard mileage rate must be used for the entire portion of the lease period (including renewals) that is after 1997. 1040ez tax forms to print   You must make the choice to use the standard mileage rate by the due date (including extensions) of your return. 1040ez tax forms to print You cannot revoke the choice. 1040ez tax forms to print However, in later years, you can switch from the standard mileage rate to the actual expenses method. 1040ez tax forms to print If you change to the actual expenses method in a later year, but before your car is fully depreciated, you have to estimate the remaining useful life of the car and use straight line depreciation. 1040ez tax forms to print Example. 1040ez tax forms to print Larry is an employee who occasionally uses his own car for business purposes. 1040ez tax forms to print He purchased the car in 2011, but he did not claim any unreimbursed employee expenses on his 2011 tax return. 1040ez tax forms to print Because Larry did not use the standard mileage rate the first year the car was available for business use, he cannot use the standard mileage rate in 2013 to claim unreimbursed employee business expenses. 1040ez tax forms to print   For more information about depreciation included in the standard mileage rate, see Exception under Methods of depreciation, later. 1040ez tax forms to print Standard mileage rate not allowed. 1040ez tax forms to print   You cannot use the standard mileage rate if you: Use five or more cars at the same time (such as in fleet operations), Claimed a depreciation deduction for the car using any method other than straight line, for example, MACRS (as discussed later under Depreciation Deduction), Claimed a section 179 deduction (discussed later) on the car, Claimed the special depreciation allowance on the car, Claimed actual car expenses after 1997 for a car you leased, or Are a rural mail carrier who received a qualified reimbursement. 1040ez tax forms to print (See Rural mail carriers , earlier. 1040ez tax forms to print ) Note. 1040ez tax forms to print You can elect to use the standard mileage rate if you used a car for hire (such as a taxi) unless the standard mileage rate is otherwise not allowed, as discussed above. 1040ez tax forms to print Five or more cars. 1040ez tax forms to print   If you own or lease five or more cars that are used for business at the same time, you cannot use the standard mileage rate for the business use of any car. 1040ez tax forms to print However, you may be able to deduct your actual expenses for operating each of the cars in your business. 1040ez tax forms to print See Actual Car Expenses , later, for information on how to figure your deduction. 1040ez tax forms to print   You are not using five or more cars for business at the same time if you alternate using (use at different times) the cars for business. 1040ez tax forms to print   The following examples illustrate the rules for when you can and cannot use the standard mileage rate for five or more cars. 1040ez tax forms to print Example 1. 1040ez tax forms to print Marcia, a salesperson, owns three cars and two vans that she alternates using for calling on her customers. 1040ez tax forms to print She can use the standard mileage rate for the business mileage of the three cars and the two vans because she does not use them at the same time. 1040ez tax forms to print Example 2. 1040ez tax forms to print Tony and his employees use his four pickup trucks in his landscaping business. 1040ez tax forms to print During the year, he traded in two of his old trucks for two newer ones. 1040ez tax forms to print Tony can use the standard mileage rate for the business mileage of all six of the trucks he owned during the year. 1040ez tax forms to print Example 3. 1040ez tax forms to print Chris owns a repair shop and an insurance business. 1040ez tax forms to print He and his employees use his two pickup trucks and van for the repair shop. 1040ez tax forms to print Chris alternates using his two cars for the insurance business. 1040ez tax forms to print No one else uses the cars for business purposes. 1040ez tax forms to print Chris can use the standard mileage rate for the business use of the pickup trucks, van, and the cars because he never has more than four vehicles used for business at the same time. 1040ez tax forms to print Example 4. 1040ez tax forms to print Maureen owns a car and four vans that are used in her housecleaning business. 1040ez tax forms to print Her employees use the vans, and she uses the car to travel to various customers. 1040ez tax forms to print Maureen cannot use the standard mileage rate for the car or the vans. 1040ez tax forms to print This is because all five vehicles are used in Maureen's business at the same time. 1040ez tax forms to print She must use actual expenses for all vehicles. 1040ez tax forms to print Interest. 1040ez tax forms to print   If you are an employee, you cannot deduct any interest paid on a car loan. 1040ez tax forms to print This applies even if you use the car 100% for business as an employee. 1040ez tax forms to print   However, if you are self-employed and use your car in your business, you can deduct that part of the interest expense that represents your business use of the car. 1040ez tax forms to print For example, if you use your car 60% for business, you can deduct 60% of the interest on Schedule C (Form 1040). 1040ez tax forms to print You cannot deduct the part of the interest expense that represents your personal use of the car. 1040ez tax forms to print    If you use a home equity loan to purchase your car, you may be able to deduct the interest. 1040ez tax forms to print See Publication 936, Home Mortgage Interest Deduction, for more information. 1040ez tax forms to print Personal property taxes. 1040ez tax forms to print   If you itemize your deductions on Schedule A (Form 1040), you can deduct on line 7 state and local personal property taxes on motor vehicles. 1040ez tax forms to print You can take this deduction even if you use the standard mileage rate or if you do not use the car for business. 1040ez tax forms to print   If you are self-employed and use your car in your business, you can deduct the business part of state and local personal property taxes on motor vehicles on Schedule C (Form 1040), Schedule C-EZ (Form 1040), or Schedule F (Form 1040). 1040ez tax forms to print If you itemize your deductions, you can include the remainder of your state and local personal property taxes on the car on Schedule A (Form 1040). 1040ez tax forms to print Parking fees and tolls. 1040ez tax forms to print   In addition to using the standard mileage rate, you can deduct any business-related parking fees and tolls. 1040ez tax forms to print (Parking fees you pay to park your car at your place of work are nondeductible commuting expenses. 1040ez tax forms to print ) Sale, trade-in, or other disposition. 1040ez tax forms to print   If you sell, trade in, or otherwise dispose of your car, you may have a gain or loss on the transaction or an adjustment to the basis of your new car. 1040ez tax forms to print See Disposition of a Car , later. 1040ez tax forms to print Actual Car Expenses If you do not use the standard mileage rate, you may be able to deduct your actual car expenses. 1040ez tax forms to print If you qualify to use both methods, you may want to figure your deduction both ways to see which gives you a larger deduction. 1040ez tax forms to print Actual car expenses include: Depreciation Licenses Lease  payments Registration  fees Gas Insurance Repairs Oil Garage rent Tires Tolls Parking fees   If you have fully depreciated a car that you still use in your business, you can continue to claim your other actual car expenses. 1040ez tax forms to print Continue to keep records, as explained later in chapter 5 . 1040ez tax forms to print Business and personal use. 1040ez tax forms to print   If you use your car for both business and personal purposes, you must divide your expenses between business and personal use. 1040ez tax forms to print You can divide your expense based on the miles driven for each purpose. 1040ez tax forms to print Example. 1040ez tax forms to print You are a sales representative for a clothing firm and drive your car 20,000 miles during the year: 12,000 miles for business and 8,000 miles for personal use. 1040ez tax forms to print You can claim only 60% (12,000 ÷ 20,000) of the cost of operating your car as a business expense. 1040ez tax forms to print Employer-provided vehicle. 1040ez tax forms to print   If you use a vehicle provided by your employer for business purposes, you can deduct your actual unreimbursed car expenses. 1040ez tax forms to print You cannot use the standard mileage rate. 1040ez tax forms to print See Vehicle Provided by Your Employer in chapter 6. 1040ez tax forms to print Interest on car loans. 1040ez tax forms to print   If you are an employee, you cannot deduct any interest paid on a car loan. 1040ez tax forms to print This interest is treated as personal interest and is not deductible. 1040ez tax forms to print If you are self-employed and use your car in that business, see Interest , earlier, under Standard Mileage Rate. 1040ez tax forms to print Taxes paid on your car. 1040ez tax forms to print   If you are an employee, you can deduct personal property taxes paid on your car if you itemize deductions. 1040ez tax forms to print Enter the amount paid on line 7 of Schedule A (Form 1040). 1040ez tax forms to print Sales taxes. 1040ez tax forms to print   Generally, sales taxes on your car are part of your car's basis and are recovered through depreciation, discussed later. 1040ez tax forms to print Fines and collateral. 1040ez tax forms to print   You cannot deduct fines you pay or collateral you forfeit for traffic violations. 1040ez tax forms to print Casualty and theft losses. 1040ez tax forms to print   If your car is damaged, destroyed, or stolen, you may be able to deduct part of the loss not covered by insurance. 1040ez tax forms to print See Publication 547, Casualties, Disasters, and Thefts, for information on deducting a loss on your car. 1040ez tax forms to print Depreciation and section 179 deductions. 1040ez tax forms to print   Generally, the cost of a car, plus sales tax and improvements, is a capital expense. 1040ez tax forms to print Because the benefits last longer than 1 year, you generally cannot deduct a capital expense. 1040ez tax forms to print However, you can recover this cost through the section 179 deduction (the deduction allowed by section 179 of the Internal Revenue Code), special depreciation allowance, and depreciation deductions. 1040ez tax forms to print Depreciation allows you to recover the cost over more than 1 year by deducting part of it each year. 1040ez tax forms to print The section 179 deduction , special depreciation allowance , and depreciation deductions are discussed later. 1040ez tax forms to print   Generally, there are limits on these deductions. 1040ez tax forms to print Special rules apply if you use your car 50% or less in your work or business. 1040ez tax forms to print   You can claim a section 179 deduction and use a depreciation method other than straight line only if you do not use the standard mileage rate to figure your business-related car expenses in the year you first place a car in service. 1040ez tax forms to print   If, in the year you first place a car in service, you claim either a section 179 deduction or use a depreciation method other than straight line for its estimated useful life, you cannot use the standard mileage rate on that car in any future year. 1040ez tax forms to print Car defined. 1040ez tax forms to print   For depreciation purposes, a car is any four-wheeled vehicle (including a truck or van) made primarily for use on public streets, roads, and highways. 1040ez tax forms to print Its unloaded gross vehicle weight must not be more than 6,000 pounds. 1040ez tax forms to print A car includes any part, component, or other item physically attached to it or usually included in the purchase price. 1040ez tax forms to print   A car does not include: An ambulance, hearse, or combination ambulance-hearse used directly in a business, A vehicle used directly in the business of transporting persons or property for pay or hire, or A truck or van that is a qualified nonpersonal use vehicle. 1040ez tax forms to print Qualified nonpersonal use vehicles. 1040ez tax forms to print   These are vehicles that by their nature are not likely to be used more than a minimal amount for personal purposes. 1040ez tax forms to print They include trucks and vans that have been specially modified so that they are not likely to be used more than a minimal amount for personal purposes, such as by installation of permanent shelving and painting the vehicle to display advertising or the company's name. 1040ez tax forms to print Delivery trucks with seating only for the driver, or only for the driver plus a folding jump seat, are qualified nonpersonal use vehicles. 1040ez tax forms to print More information. 1040ez tax forms to print   See Depreciation Deduction , later, for more information on how to depreciate your vehicle. 1040ez tax forms to print Section 179 Deduction The section 179 deduction allows you to treat a portion or all of the cost of a car as a current expense. 1040ez tax forms to print If you choose to deduct all or part of the cost as a current expense, you must reduce your depreciable basis in the car by the amount of the section 179 deduction. 1040ez tax forms to print There is a limit on the total section 179 deduction, special depreciation allowance, and depreciation deduction for cars, trucks, and vans that may reduce or eliminate any benefit from claiming the section 179 deduction. 1040ez tax forms to print See Depreciation Limits, later. 1040ez tax forms to print You can claim the section 179 deduction only in the year you place the car in service. 1040ez tax forms to print For this purpose, a car is placed in service when it is ready and available for a specifically assigned use, whether in a trade or business, a tax-exempt activity, a personal activity, or for the production of income. 1040ez tax forms to print Even if you are not using the property, it is in service when it is ready and available for its specifically assigned use. 1040ez tax forms to print A car first used for personal purposes cannot qualify for the deduction in a later year when its use changes to business. 1040ez tax forms to print Example. 1040ez tax forms to print In 2012, you bought a new car and used it for personal purposes. 1040ez tax forms to print In 2013, you began to use it for business. 1040ez tax forms to print Changing its use to business use does not qualify the cost of your car for a section 179 deduction in 2013. 1040ez tax forms to print However, you can claim a depreciation deduction for the business use of the car starting in 2013. 1040ez tax forms to print See Depreciation Deduction , later. 1040ez tax forms to print More than 50% business use requirement. 1040ez tax forms to print   You must use the property more than 50% for business to claim any section 179 deduction. 1040ez tax forms to print If you used the property more than 50% for business, multiply the cost of the property by the percentage of business use. 1040ez tax forms to print The result is the cost of the property that can qualify for the section 179 deduction. 1040ez tax forms to print Example. 1040ez tax forms to print Peter purchased a car in April 2013 for $24,500 and used it 60% for business. 1040ez tax forms to print Based on his business usage, the total cost of Peter's car that qualifies for the section 179 deduction is $14,700 ($24,500 cost × 60% business use). 1040ez tax forms to print But see Limit on total section 179, special depreciation allowance, and depreciation deduction , discussed later. 1040ez tax forms to print Limits. 1040ez tax forms to print   There are limits on: The amount of the section 179 deduction, The section 179 deduction for sport utility and certain other vehicles, and The total amount of the section 179 deduction, special depreciation allowance, and depreciation deduction (discussed later ) you can claim for a qualified property. 1040ez tax forms to print Limit on the amount of the section 179 deduction. 1040ez tax forms to print   For 2013, the total amount you can choose to deduct under section 179 generally cannot be more than $500,000. 1040ez tax forms to print   If the cost of your section 179 property placed in service in 2013 is over $2,000,000, you must reduce the $500,000 dollar limit (but not below zero) by the amount of cost over $2,000,000. 1040ez tax forms to print 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 deduction. 1040ez tax forms to print   The total amount you can deduct under section 179 each year after you apply the limits listed above cannot be more than the taxable income from the active conduct of any trade or business during the year. 1040ez tax forms to print   If you are married and 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. 1040ez tax forms to print   If you and your spouse file separate returns, you are treated as one taxpayer for the dollar limit. 1040ez tax forms to print You must allocate the dollar limit (after any reduction) between you. 1040ez tax forms to print   For more information on the above section 179 deduction limits, see Publication 946. 1040ez tax forms to print Limit for sport utility and certain other vehicles. 1040ez tax forms to print   For sport utility and certain other vehicles placed in service in 2013, the portion of the vehicle's cost taken into account in figuring your section 179 deduction is limited to $25,000. 1040ez tax forms to print This rule applies to any four-wheeled vehicle primarily designed or used to carry passengers over public streets, roads, or highways, that is not subject to any of the passenger automobile limits explained under Depreciation Limits , later, and that is rated at no more than 14,000 pounds gross vehicle weight. 1040ez tax forms to print However, the $25,000 limit does not apply to any vehicle: Designed to have a seating capacity of more than nine persons behind the driver's seat, Equipped with a cargo area of at least 6 feet in interior length that is an open area or is designed for use as an open area but is enclosed by a cap and is not readily accessible directly from the passenger compartment, or That has an integral enclosure, fully enclosing the driver compartment and load carrying device, does not have seating rearward of the driver's seat, and has no body section protruding more than 30 inches ahead of the leading edge of the windshield. 1040ez tax forms to print    Limit on total section 179, special depreciation allowance, and depreciation deduction. 1040ez tax forms to print   Generally, the total amount of section 179, special depreciation allowance, and depreciation deduction you can claim for a car that is qualified property and that you placed in service in 2013 is $11,160. 1040ez tax forms to print The limit is reduced if your business use of the car is less than 100%. 1040ez tax forms to print See Depreciation Limits , later, for more information. 1040ez tax forms to print Example. 1040ez tax forms to print In the earlier example under More than 50% business use requirement, Peter had a car with a cost (for purposes of the section 179 deduction) of $14,700. 1040ez tax forms to print However, based on Peter's business usage of his car, the total of his section 179, special depreciation allowance, and depreciation deductions is limited to $6,696 ($11,160 limit x 60% business use). 1040ez tax forms to print Cost of car. 1040ez tax forms to print   For purposes of the section 179 deduction, the cost of the car does not include any amount figured by reference to any other property held by you at any time. 1040ez tax forms to print For example, if you buy (for cash and a trade-in) a new car to use in your business, your cost for purposes of the section 179 deduction does not include your adjusted basis in the car you trade in for the new car. 1040ez tax forms to print Your cost includes only the cash you paid. 1040ez tax forms to print Basis of car for depreciation. 1040ez tax forms to print   The amount of the section 179 deduction reduces your basis in your car. 1040ez tax forms to print If you choose the section 179 deduction, you must subtract the amount of the deduction from the cost of your car. 1040ez tax forms to print The resulting amount is the basis in your car you use to figure your depreciation deduction. 1040ez tax forms to print When to choose. 1040ez tax forms to print   If you want to take the section 179 deduction, you must make the choice in the tax year you place the car in service for business or work. 1040ez tax forms to print How to choose. 1040ez tax forms to print    Employees use Form 2106 to make this choice and report the section 179 deduction. 1040ez tax forms to print All others use Form 4562. 1040ez tax forms to print   File the appropriate form with either of the following. 1040ez tax forms to print Your original tax return filed for the year the property was placed in service (whether or not you file it timely). 1040ez tax forms to print An amended return filed within the time prescribed by law. 1040ez tax forms to print 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. 1040ez tax forms to print The amended return must also include any resulting adjustments to taxable income. 1040ez tax forms to print    You must keep records that show the specific identification of each piece of qualifying section 179 property. 1040ez tax forms to print These records must show how you acquired the property, the person you acquired it from, and when you placed it in service. 1040ez tax forms to print Revoking an election. 1040ez tax forms to print   An election (or any specification made in the election) to take a section 179 deduction for 2013 can only be revoked with the Commissioner's approval. 1040ez tax forms to print Recapture of section 179 deduction. 1040ez tax forms to print   To be eligible to claim the section 179 deduction, you must use your car more than 50% for business or work in the year you acquired it. 1040ez tax forms to print If your business use of the car is 50% or less in a later tax year during the recovery period, you have to recapture (include in income) in that later year any excess depreciation. 1040ez tax forms to print Any section 179 deduction claimed on the car is included in calculating the excess depreciation. 1040ez tax forms to print For information on this calculation, see Excess depreciation , later in this chapter under Car Used 50% or Less for Business. 1040ez tax forms to print Dispositions. 1040ez tax forms to print   If you dispose of a car on which you had claimed the section 179 deduction, the amount of that deduction is treated as a depreciation deduction for recapture purposes. 1040ez tax forms to print You treat any gain on the disposition of the property as ordinary income up to the amount of the section 179 deduction and any allowable depreciation (unless you establish the amount actually allowed). 1040ez tax forms to print For information on the disposition of a car, see Disposition of a Car , later. 1040ez tax forms to print Special Depreciation Allowance You may be able to claim the special depreciation allowance for your car, truck, or van, if it is qualified property and was placed in service in 2013. 1040ez tax forms to print The allowance is an additional depreciation deduction of 50% of the car's depreciable basis (after any section 179 deduction, but before figuring your regular depreciation deduction under MACRS). 1040ez tax forms to print The special depreciation allowance applies only for the first year the car is placed in service. 1040ez tax forms to print To qualify for the allowance more than 50% of the use of the car must be in a qualified business use (as defined under Depreciation Deduction, later). 1040ez tax forms to print Combined depreciation. 1040ez tax forms to print   Your combined section 179 deduction, special depreciation allowance, and regular MACRS depreciation deduction is limited to the maximum allowable depreciation deduction for cars of $11,160 ($3,160 if you elect not to claim the special depreciation allowance). 1040ez tax forms to print For trucks and vans, the first-year limit remains at $11,360 ($3,360 if you elect not to claim the special depreciation allowance). 1040ez tax forms to print See Depreciation Limits , later in this chapter. 1040ez tax forms to print Qualified car. 1040ez tax forms to print   To be a qualified car (including trucks and vans), the car must meet all of the following tests. 1040ez tax forms to print You purchased the car new on or after January 1, 2008, but only if no binding written contract to acquire the car existed before January 1, 2008, You placed the car in service in your trade or business before January 1, 2014, You used the car more than 50% in a qualified business use. 1040ez tax forms to print Election not to claim the special depreciation allowance. 1040ez tax forms to print   You can elect not to claim the special depreciation allowance for your car, truck, or van, that is qualified property. 1040ez tax forms to print If you make this election, it applies to all 5-year property placed in service during the year. 1040ez tax forms to print   To make the election, attach a statement to your timely filed return (including extensions) indicating the class of property (5-year for cars) for which you are making the election and that you are electing not to claim the special depreciation allowance for qualified property acquired on or after January 1, 2008. 1040ez tax forms to print    Unless you elect not to claim the special depreciation allowance, you must reduce the car's adjusted basis by the amount of the allowance, even if the allowance was not claimed. 1040ez tax forms to print Depreciation Deduction If you use actual car expenses to figure your deduction for a car you own and use in your business, you can claim a depreciation deduction. 1040ez tax forms to print This means you can deduct a certain amount each year as a recovery of your cost or other basis in your car. 1040ez tax forms to print You generally need to know the following things about the car you intend to depreciate. 1040ez tax forms to print Your basis in the car. 1040ez tax forms to print The date you place the car in service. 1040ez tax forms to print The method of depreciation and recovery period you will use. 1040ez tax forms to print Basis. 1040ez tax forms to print   Your basis in a car for figuring depreciation is generally its cost. 1040ez tax forms to print This includes any amount you borrow or pay in cash, other property, or services. 1040ez tax forms to print   Generally, you figure depreciation on your car, truck, or van using your unadjusted basis (see Unadjusted basis , later). 1040ez tax forms to print However, in some situations you will use your adjusted basis (your basis reduced by depreciation allowed or allowable in earlier years). 1040ez tax forms to print For one of these situations see Exception under Methods of depreciation, later. 1040ez tax forms to print   If you change the use of a car from personal to business, your basis for depreciation is the lesser of the fair market value or your adjusted basis in the car on the date of conversion. 1040ez tax forms to print Additional rules concerning basis are discussed later in this chapter under Unadjusted basis . 1040ez tax forms to print Placed in service. 1040ez tax forms to print   You generally place a car in service when it is available for use in your work or business, in an income-producing activity, or in a personal activity. 1040ez tax forms to print Depreciation begins when the car is placed in service for use in your work or business or for the production of income. 1040ez tax forms to print   For purposes of computing depreciation, if you first start using the car only for personal use and later convert it to business use, you place the car in service on the date of conversion. 1040ez tax forms to print Car placed in service and disposed of in the same year. 1040ez tax forms to print   If you place a car in service and dispose of it in the same tax year, you cannot claim any depreciation deduction for that car. 1040ez tax forms to print Methods of depreciation. 1040ez tax forms to print   Generally, you figure depreciation on cars using the Modified Accelerated Cost Recovery System (MACRS). 1040ez tax forms to print MACRS is discussed later in this chapter. 1040ez tax forms to print Exception. 1040ez tax forms to print   If you used the standard mileage rate in the first year of business use and change to the actual expenses method in a later year, you cannot depreciate your car under the MACRS rules. 1040ez tax forms to print You must use straight line depreciation over the estimated remaining useful life of the car. 1040ez tax forms to print   To figure depreciation under the straight line method, you must reduce your basis in the car (but not below zero) by a set rate per mile for all miles for which you used the standard mileage rate. 1040ez tax forms to print The rate per mile varies depending on the year(s) you used the standard mileage rate. 1040ez tax forms to print For the rate(s) to use, see Depreciation adjustment when you used the standard mileage rate under Disposition of a Car, later. 1040ez tax forms to print   This reduction of basis is in addition to those basis adjustments described later under Unadjusted basis . 1040ez tax forms to print You must use your adjusted basis in your car to figure your depreciation deduction. 1040ez tax forms to print For additional information on the straight line method of depreciation, see Publication 946. 1040ez tax forms to print More-than-50%-use test. 1040ez tax forms to print   Generally, you must use your car more than 50% for qualified business use (defined next) during the year to use MACRS. 1040ez tax forms to print You must meet this more-than-50%-use test each year of the recovery period (6 years under MACRS) for your car. 1040ez tax forms to print   If your business use is 50% or less, you must use the straight line method to depreciate your car. 1040ez tax forms to print This is explained later under Car Used 50% or Less for Business . 1040ez tax forms to print Qualified business use. 1040ez tax forms to print   A qualified business use is any use in your trade or business. 1040ez tax forms to print It does not include use for the production of income (investment use). 1040ez tax forms to print However, you do combine your business and investment use to compute your depreciation deduction for the tax year. 1040ez tax forms to print Use of your car by another person. 1040ez tax forms to print   Do not treat any use of your car by another person as use in your trade or business unless that use meets one of the following conditions. 1040ez tax forms to print It is directly connected with your business. 1040ez tax forms to print It is properly reported by you as income to the other person (and, if you have to, you withhold tax on the income). 1040ez tax forms to print It results in a payment of fair market rent. 1040ez tax forms to print This includes any payment to you for the use of your car. 1040ez tax forms to print Business use changes. 1040ez tax forms to print   If you used your car more than 50% in qualified business use in the year you placed it in service, but 50% or less in a later year (including the year of disposition), you have to change to the straight line method of depreciation. 1040ez tax forms to print See Qualified business use 50% or less in a later year under Car Used 50% or Less for Business, later. 1040ez tax forms to print    Property does not cease to be used more than 50% in qualified business use by reason of a transfer at death. 1040ez tax forms to print Use for more than one purpose. 1040ez tax forms to print   If you use your car for more than one purpose during the tax year, you must allocate the use to the various purposes. 1040ez tax forms to print You do this on the basis of mileage. 1040ez tax forms to print Figure the percentage of qualified business use by dividing the number of miles you drive your car for business purposes during the year by the total number of miles you drive the car during the year for any purpose. 1040ez tax forms to print Change from personal to business use. 1040ez tax forms to print   If you change the use of a car from 100% personal use to business use during the tax year, you may not have mileage records for the time before the change to business use. 1040ez tax forms to print In this case, you figure the percentage of business use for the year as follows. 1040ez tax forms to print Determine the percentage of business use for the period following the change. 1040ez tax forms to print Do this by dividing business miles by total miles driven during that period. 1040ez tax forms to print Multiply the percentage in (1) by a fraction. 1040ez tax forms to print The numerator (top number) is the number of months the car is used for business and the denominator (bottom number) is 12. 1040ez tax forms to print Example. 1040ez tax forms to print You use a car only for personal purposes during the first 6 months of the year. 1040ez tax forms to print During the last 6 months of the year, you drive the car a total of 15,000 miles of which 12,000 miles are for business. 1040ez tax forms to print This gives you a business use percentage of 80% (12,000 ÷ 15,000) for that period. 1040ez tax forms to print Your business use for the year is 40% (80% × 6/12). 1040ez tax forms to print Limits. 1040ez tax forms to print   The amount you can claim for section 179, special depreciation allowance, and depreciation deductions may be limited. 1040ez tax forms to print The maximum amount you can claim depends on the year in which you placed your car in service. 1040ez tax forms to print You have to reduce the maximum amount if you did not use the car exclusively for business. 1040ez tax forms to print See Depreciation Limits , later. 1040ez tax forms to print Unadjusted basis. 1040ez tax forms to print   You use your unadjusted basis (often referred to as your basis or your basis for depreciation) to figure your depreciation using the MACRS depreciation chart, explained later under Modified Accelerated Cost Recovery System (MACRS) . 1040ez tax forms to print Your unadjusted basis for figuring depreciation is your original basis increased or decreased by certain amounts. 1040ez tax forms to print   To figure your unadjusted basis, begin with your car's original basis, which generally is its cost. 1040ez tax forms to print Cost includes sales taxes (see Sales taxes , earlier), destination charges, and dealer preparation. 1040ez tax forms to print Increase your basis by any substantial improvements you make to your car, such as adding air conditioning or a new engine. 1040ez tax forms to print Decrease your basis by any section 179 deduction, special depreciation allowance, gas guzzler tax, clean-fuel vehicle deduction (for vehicles placed in service before Jan. 1040ez tax forms to print 1, 2006), and alternative motor vehicle credit. 1040ez tax forms to print   See Form 8910 for information on the alternative motor vehicle credit. 1040ez tax forms to print If your business use later falls to 50% or less, you may have to recapture (include in your income) any excess depreciation. 1040ez tax forms to print See Car Used 50% or Less for Business, later, for more information. 1040ez tax forms to print If you acquired the car by gift or inheritance, see Publication 551, Basis of Assets, for information on your basis in the car. 1040ez tax forms to print Improvements. 1040ez tax forms to print   A major improvement to a car is treated as a new item of 5-year recovery property. 1040ez tax forms to print It is treated as placed in service in the year the improvement is made. 1040ez tax forms to print It does not matter how old the car is when the improvement is added. 1040ez tax forms to print Follow the same steps for depreciating the improvement as you would for depreciating the original cost of the car. 1040ez tax forms to print However, you must treat the improvement and the car as a whole when applying the limits on the depreciation deductions. 1040ez tax forms to print Your car's depreciation deduction for the year (plus any section 179 deduction, special depreciation allowance, and depreciation on any improvements) cannot be more than the depreciation limit that applies for that year. 1040ez tax forms to print See Depreciation Limits , later. 1040ez tax forms to print Car trade-in. 1040ez tax forms to print   If you traded one car (the “old car”) for another car (the “new car”) in 2013, there are two ways you can treat the transaction. 1040ez tax forms to print You can elect to treat the transaction as a tax-free disposition of the old car and the purchase of the new car. 1040ez tax forms to print If you make this election, you treat the old car as disposed of at the time of the trade-in. 1040ez tax forms to print The depreciable basis of the new car is the adjusted basis of the old car (figured as if 100% of the car's use had been for business purposes) plus any additional amount you paid for the new car. 1040ez tax forms to print You then figure your depreciation deduction for the new car beginning with the date you placed it in service. 1040ez tax forms to print You make this election by completing Form 2106, Part II, Section D. 1040ez tax forms to print This method is explained later, beginning at Effect of trade-in on basis . 1040ez tax forms to print If you do not make the election described in (1), you must figure depreciation separately for the remaining basis of the old car and for any additional amount you paid for the new car. 1040ez tax forms to print You must apply two depreciation limits (see Depreciation Limits , later). 1040ez tax forms to print The limit that applies to the remaining basis of the old car generally is the amount that would have been allowed had you not traded in the old car. 1040ez tax forms to print The limit that applies to the additional amount you paid for the new car generally is the limit that applies for the tax year, reduced by the depreciation allowance for the remaining basis of the old car. 1040ez tax forms to print You must use Form 4562 to compute your depreciation deduction. 1040ez tax forms to print You cannot use Form 2106, Part II, Section D. 1040ez tax forms to print This method is explained in Publication 946. 1040ez tax forms to print   If you elect to use the method described in (1), you must do so on a timely filed tax return (including extensions). 1040ez tax forms to print Otherwise, you must use the method described in (2). 1040ez tax forms to print Effect of trade-in on basis. 1040ez tax forms to print   The discussion that follows applies to trade-ins of cars in 2013, where the election was made to treat the transaction as a tax-free disposition of the old car and the purchase of the new car. 1040ez tax forms to print For information on how to figure depreciation for cars involved in a like-kind exchange (trade-in) in 2013, for which the election was not made, see Publication 946 and Regulations section 1. 1040ez tax forms to print 168(i)-6(d)(3). 1040ez tax forms to print Traded car used only for business. 1040ez tax forms to print   If you trade in a car you used only in your business for another car that will be used only in your business, your original basis in the new car is your adjusted basis in the old car, plus any additional amount you pay for the new car. 1040ez tax forms to print Example. 1040ez tax forms to print Paul trades in a car that has an adjusted basis of $5,000 for a new car. 1040ez tax forms to print In addition, he pays cash of $20,000 for the new car. 1040ez tax forms to print His original basis of the new car is $25,000 (his $5,000 adjusted basis in the old car plus the $20,000 cash paid). 1040ez tax forms to print Paul's unadjusted basis is $25,000 unless he claims the section 179 deduction, special depreciation allowance, or has other increases or decreases to his original basis, discussed under Unadjusted basis , earlier. 1040ez tax forms to print Traded car used partly in business. 1040ez tax forms to print   If you trade in a car you used partly in your business for a new car you will use in your business, you must make a “trade-in” adjustment for the personal use of the old car. 1040ez tax forms to print This adjustment has the effect of reducing your basis in your old car, but not below zero, for purposes of figuring your depreciation deduction for the new car. 1040ez tax forms to print (This adjustment is not used, however, when you determine the gain or loss on the later disposition of the new car. 1040ez tax forms to print See Publication 544, Sales and Other Dispositions of Assets, for information on how to report the disposition of your car. 1040ez tax forms to print )   To figure the unadjusted basis of your new car for depreciation, first add to your adjusted basis in the old car any additional amount you pay for the new car. 1040ez tax forms to print Then subtract from that total the excess, if any, of: The total of the amounts that would have been allowable as depreciation during the tax years before the trade if 100% of the use of the car had been business and investment use, over The total of the amounts actually allowed as depreciation during those years. 1040ez tax forms to print For information about figuring depreciation, see Modified Accelerated Cost Recovery System (MACRS) , which follows Example 2, later. 1040ez tax forms to print Modified Accelerated Cost Recovery System (MACRS). 1040ez tax forms to print   The Modified Accelerated Cost Recovery System (MACRS) is the name given to the tax rules for getting back (recovering) through depreciation deductions the cost of property used in a trade or business or to produce income. 1040ez tax forms to print   The maximum amount you can deduct is limited, depending on the year you placed your car in service. 1040ez tax forms to print See Depreciation Limits , later. 1040ez tax forms to print Recovery period. 1040ez tax forms to print   Under MACRS, cars are classified as 5-year property. 1040ez tax forms to print You actually depreciate the cost of a car, truck, or van over a period of 6 calendar years. 1040ez tax forms to print This is because your car is generally treated as placed in service in the middle of the year, and you claim depreciation for one-half of both the first year and the sixth year. 1040ez tax forms to print Depreciation deduction for certain Indian reservation property. 1040ez tax forms to print   Shorter recovery periods are provided under MACRS for qualified Indian reservation property placed in service on Indian reservations after 1993 and before 2014. 1040ez tax forms to print The recovery that applies for a business-use car is 3 years instead of 5 years. 1040ez tax forms to print However, the depreciation limits, discussed later, will still apply. 1040ez tax forms to print   For more information on the qualifications for this shorter recovery period and the percentages to use in figuring the depreciation deduction, see chapter 4 of Publication 946. 1040ez tax forms to print Depreciation methods. 1040ez tax forms to print   You can use one of the following methods to depreciate your car. 1040ez tax forms to print The 200% declining balance method (200% DB) over a 5-year recovery period that switches to the straight line method when that method provides an equal or greater deduction. 1040ez tax forms to print The 150% declining balance method (150% DB) over a 5-year recovery period that switches to the straight line method when that method provides an equal or greater deduction. 1040ez tax forms to print The straight line method (SL) over a 5-year recovery period. 1040ez tax forms to print    If you use Table 4-1 (discussed later under MACRS depreciation chart) to determine your depreciation rate for 2013, you do not need to determine in what year using the straight line method provides an equal or greater deduction. 1040ez tax forms to print This is because the chart has the switch to the straight line method built into its rates. 1040ez tax forms to print   Before choosing a method, you may wish to consider the following facts. 1040ez tax forms to print Using the straight line method provides equal yearly deductions throughout the recovery period. 1040ez tax forms to print Using the declining balance methods provides greater deductions during the earlier recovery years with the deductions generally getting smaller each year. 1040ez tax forms to print MACRS depreciation chart. 1040ez tax forms to print   A 2013 MACRS Depreciation Chart and instructions are included in this chapter as Table 4-1 . 1040ez tax forms to print Using this table will make it easy for you to figure the 2013 depreciation deduction for your car. 1040ez tax forms to print A similar chart appears in the Instructions for Form 2106. 1040ez tax forms to print    You may have to use the tables in Publication 946 instead of using this MACRS Depreciation Chart. 1040ez tax forms to print   You must use the Depreciation Tables in Publication 946 rather than the 2013 MACRS Depreciation Chart in this publication if any one of the following four conditions applies to you. 1040ez tax forms to print You file your return on a fiscal year basis. 1040ez tax forms to print You file your return for a short tax year (less than 12 months). 1040ez tax forms to print During the year, all of the following conditions apply. 1040ez tax forms to print You placed some property in service from January through September. 1040ez tax forms to print You placed some property in service from October through December. 1040ez tax forms to print Your basis in the property you placed in service from October through December (excluding nonresidential real property, residential rental property, and property placed in service and disposed of in the same year) was more than 40% of your total bases in all property you placed in service during the year. 1040ez tax forms to print   You placed qualified property in service on an Indian reservation. 1040ez tax forms to print Depreciation in future years. 1040ez tax forms to print   If you use the percentages from the chart, you generally must continue to use them for the entire recovery period of your car. 1040ez tax forms to print However, you cannot continue to use the chart if your basis in your car is adjusted because of a casualty. 1040ez tax forms to print In that case, for the year of the adjustment and the remaining recovery period, figure the depreciation without the chart using your adjusted basis in the car at the end of the year of the adjustment and over the remaining recovery period. 1040ez tax forms to print See Figuring the Deduction Without Using the Tables in chapter 4 of Publication 946. 1040ez tax forms to print    In future years, do not use the chart in this edition of the publication. 1040ez tax forms to print Instead, use the chart in the publication or the form instructions for those future years. 1040ez tax forms to print Disposition of car during recovery period. 1040ez tax forms to print   If you dispose of the car before the end of the recovery period, you are generally allowed a half year of depreciation in the year of disposition unless you purchased the car during the last quarter of a year. 1040ez tax forms to print See Depreciation deduction for the year of disposition under Disposition of a Car, later, for information on how to figure the depreciation allowed in the year of disposition. 1040ez tax forms to print How to use the 2013 chart. 1040ez tax forms to print   To figure your depreciation deduction for 2013, find the percentage in the column of Table 4-1 based on the date that you first placed the car in service and the depreciation method that you are using. 1040ez tax forms to print Multiply the unadjusted basis of your car (defined earlier) by that percentage to determine the amount of your depreciation deduction. 1040ez tax forms to print If you prefer to figure your depreciation deduction without the help of the chart, see Publication 946. 1040ez tax forms to print    Your deduction cannot be more than the maximum depreciation limit for cars. 1040ez tax forms to print See Depreciation Limits, later. 1040ez tax forms to print Example. 1040ez tax forms to print Phil bought a used truck in February 2012 to use exclusively in his landscape business. 1040ez tax forms to print He paid $9,200 for the truck with no trade-in. 1040ez tax forms to print Phil did not claim any section 179 deduction, the truck did not qualify for the special depreciation allowance, and he chose to use the 200% DB method to get the largest depreciation deduction in the early years. 1040ez tax forms to print Phil used the MACRS depreciation chart in 2012 to find his percentage. 1040ez tax forms to print The unadjusted basis of his truck equals its cost because Phil used it exclusively for business. 1040ez tax forms to print He multiplied the unadjusted basis of his truck, $9,200, by the percentage that applied, 20%, to figure his 2012 depreciation deduction of $1,840. 1040ez tax forms to print In 2013, Phil used the truck for personal purposes when he repaired his father's cabin. 1040ez tax forms to print His records show that the business use of his truck was 90% in 2013. 1040ez tax forms to print Phil used Table 4-1 to find his percentage. 1040ez tax forms to print Reading down the first column for the date placed in service and across to the 200% DB column, he locates his percentage, 32%. 1040ez tax forms to print He multiplies the unadjusted basis of his truck, $8,280 ($9,200 cost × 90% business use), by 32% to figure his 2013 depreciation deduction of $2,650. 1040ez tax forms to print Depreciation Limits There are limits on the amount you can deduct for depreciation of your car, truck, or van. 1040ez tax forms to print The section 179 deduction and special depreciation allowance are treated as depreciation for purposes of the limits. 1040ez tax forms to print The maximum amount you can deduct each year depends on the year you place the car in service. 1040ez tax forms to print These limits are shown in the following tables. 1040ez tax forms to print   Maximum Depreciation Deduction for Cars Date       4th & Placed 1st 2nd 3rd Later In Service Year Year Year Years 2012–2013 $11,1601 $5,100 $3,050 $1,875 2010–2011 11,0602 4,900 2,950 1,775 2008–2009 10,9603 4,800 2,850 1,775 2007 3,060 4,900 2,850 1,775 2006 2,960 4,800 2,850 1,775 2005 2,960 4,700 2,850 1,675 2004 10,6103 4,800 2,850 1,675 5/06/2003– 12/31/2003 10,7104 4,900 2,950 1,775 1/01/2003– 5/05/2003 7,6605 4,900 2,950 1,775 2001–2002 7,6605 4,900 2,950 1,775 2000 3,060 4,900 2,950 1,775 1$3,160 if the car is not qualified property or if you elect not to claim the special depreciation allowance. 1040ez tax forms to print 2$3,060 if the car is not qualified property or if you elect not to claim the special depreciation allowance. 1040ez tax forms to print 3$2,960 if the car is not qualified property or if you elect not to claim the special depreciation allowance. 1040ez tax forms to print 4$7,660 if you acquired the car before 5/6/2003. 1040ez tax forms to print $3,060 if the car is not qualified property or if you elect not to claim any special depreciation allowance. 1040ez tax forms to print 5$3,060 if you acquired the car before 9/11/2001, the car is not qualified property, or you elect not to claim the special depreciation allowance. 1040ez tax forms to print Trucks and vans. 1040ez tax forms to print   For 2013, the maximum depreciation deductions for trucks and vans are generally higher than those for cars. 1040ez tax forms to print A truck or van is a passenger automobile that is classified by the manufacturer as a truck or van and rated at 6,000 pounds gross vehicle weight or less. 1040ez tax forms to print For trucks and vans placed in service before 2003, use the Maximum Depreciation Deduction for Cars table. 1040ez tax forms to print Maximum Depreciation Deduction for Trucks and Vans Date       4th & Placed 1st 2nd 3rd Later In Service Year Year Year Years 2013 $11,3601 $5,400 $3,250 $1,975 2012 $11,3601 $5,300 $3,150 $1,875 2011 11,2601 5,200 3,150 1,875 2010 11,1601 5,100 3,050 1,875 2009 11,0601 4,900 2,950 1,775 2008 11,1601 5,100 3,050 1,875 2007 3,260 5,200 3,050 1,875 2005–2006 3,260 5,200 3,150 1,875 2004 10,9101 5,300 3,150 1,875 2003 11,0101,2 5,400 3,250 1,975 1If the special depreciation allowance does not apply or you make the election not to claim the special depreciation allowance, the first-year limit is $3,360 for 2012 and 2013, $3,260 for 2011, $3,160 for 2010, $3,060 for 2009, $3,160 for 2008, $3,260 for 2004, and $3,360 for 2003. 1040ez tax forms to print 2If the truck or van was acquired before 5/06/2003, the truck or van is qualified property, and you claim the special depreciation allowance for the truck or van, the maximum deduction is $7,960. 1040ez tax forms to print Car used less than full year. 1040ez tax forms to print   The depreciation limits are not reduced if you use a car for less than a full year. 1040ez tax forms to print This means that you do not reduce the limit when you either place a car in service or dispose of a car during the year. 1040ez tax forms to print However, the depreciation limits are reduced if you do not use the car exclusively for business and investment purposes. 1040ez tax forms to print See Reduction for personal use , next. 1040ez tax forms to print Reduction for personal use. 1040ez tax forms to print   The depreciation limits are reduced based on your percentage of personal use. 1040ez tax forms to print If you use a car less than 100% in your business or work, you must determine the depreciation deduction limit by multiplying the limit amount by the percentage of business and investment use during the tax year. 1040ez tax forms to print Section 179 deduction. 1040ez tax forms to print   The section 179 deduction is treated as a depreciation deduction. 1040ez tax forms to print If you place a car that is not a truck or van in service in 2013, use it only for business, and choose the section 179 deduction, the special depreciation allowance, and the depreciation deduction for that car for 2013 is limited to $11,160. 1040ez tax forms to print Example. 1040ez tax forms to print On September 4, 2013, Jack bought a used car for $10,000 and placed it in service. 1040ez tax forms to print He used it 80% for his business, and he chooses to take a section 179 deduction for the car. 1040ez tax forms to print The car is not qualified property for purposes of the special depreciation allowance. 1040ez tax forms to print Before applying the limit, Jack figures his maximum section 179 deduction to be $8,000. 1040ez tax forms to print This is the cost of his qualifying property (up to the maximum $500,000 amount) multiplied by his business use ($10,000 × 80%). 1040ez tax forms to print Jack then figures that his section 179 deduction for 2013 is limited to $2,528 (80% of $3,160). 1040ez tax forms to print He then figures his unadjusted basis of $5,472 (($10,000 × 80%) − $2,528) for determining his depreciation deduction. 1040ez tax forms to print Jack has reached his maximum depreciation deduction for 2013. 1040ez tax forms to print For 2014, Jack will use his unadjusted basis of $5,472 to figure his depreciation deduction. 1040ez tax forms to print Deductions in years after the recovery period. 1040ez tax forms to print   If the depreciation deductions for your car are reduced under the passenger automobile limits (discussed earlier), you will have unrecovered basis in your car at the end of the recovery period. 1040ez tax forms to print If you continue to use your car for business, you can deduct that unrecovered basis (subject to depreciation limits) after the recovery period ends. 1040ez tax forms to print Unrecovered basis. 1040ez tax forms to print   This is your cost or other basis in the car reduced by any clean-fuel vehicle deduction (for vehicles placed in service before January 1, 2006), alternative motor vehicle credit, electric vehicle credit, gas guzzler tax, and depreciation (including any special depreciation allowance , discussed earlier, unless you elect not to claim it) and section 179 deductions that would have been allowable if you had used the car 100% for business and investment use. 1040ez tax forms to print The recovery period. 1040ez tax forms to print   For 5-year property, your recovery period is 6 calendar years. 1040ez tax forms to print A part year's depreciation is allowed in the first calendar year, a full year's depreciation is allowed in each of the next 4 calendar years, and a part year's depreciation is allowed in the 6th calendar year. 1040ez tax forms to print   Under MACRS, your recovery period is the same whether you use declining balance or straight line depreciation. 1040ez tax forms to print You determine your unrecovered basis in the 7th year after you placed the car in service. 1040ez tax forms to print How to treat unrecovered basis. 1040ez tax forms to print   If you continue to use your car for business after the recovery period, you can claim a depreciation deduction in each succeeding tax year until you recover your basis in the car. 1040ez tax forms to print The maximum amount you can deduct each year is determined by the date you placed the car in service and your business-use percentage. 1040ez tax forms to print For example, no deduction is allowed for a year you use your car 100% for personal purposes. 1040ez tax forms to print Example. 1040ez tax forms to print In April 2007, Bob bought and placed in service a car he used exclusively in his business. 1040ez tax forms to print The car cost $31,500. 1040ez tax forms to print Bob did not claim a section 179 deduction or the special depreciation allowance for the car. 1040ez tax forms to print He continued to use the car 100% in his business throughout the recovery period (2007 through 2012). 1040ez tax forms to print For those years, Bob used the MACRS Depreciation Chart (200% declining balance method) and the Maximum Depreciation Deduction for Cars table, earlier, for the applicable tax year to compute his depreciation deductions during the recovery period. 1040ez tax forms to print Bob's depreciation deductions were subject to the depreciation limits so he will have unrecovered basis at the end of the recovery period as shown in the following table. 1040ez tax forms to print      MACRS     Deprec. 1040ez tax forms to print Year % Amount Limit Allowed 2007 20. 1040ez tax forms to print 00 $6,300 $3,060 $ 3,060 2008 32. 1040ez tax forms to print 00 10,080 4,900 4,900 2009 19. 1040ez tax forms to print 20 6,048 2,850 2,850 2010 11. 1040ez tax forms to print 52 3,629 1,775 1,775 2011 11. 1040ez tax forms to print 52 3,629 1,775 1,775 2012 5. 1040ez tax forms to print 76 1,814 1,775 1,775 Total $31,500   16,135 For the correct limit, see Maximum Depreciation Deduction for Cars under “Depreciation Limits,” earlier, for the maximum amount of depreciation allowed each year. 1040ez tax forms to print   At the end of 2012, Bob had an unrecovered basis in the car of $15,365 ($31,500 – $16,135). 1040ez tax forms to print If Bob continued to use the car 100% for business in 2013 and later years, he can claim a depreciation deduction equal to the lesser of $1,775 or his remaining unrecovered basis. 1040ez tax forms to print   If Bob's business use of the car was less than 100% during any year, his depreciation deduction would be less than the maximum amount allowable for that year. 1040ez tax forms to print However, in determining his unrecovered basis in the car, he would still reduce his original basis by the maximum amount allowable as if the business use had been 100%. 1040ez tax forms to print For example, if Bob had used his car 60% for business instead of 100%, his allowable depreciation deductions would have been $9,681 ($16,135 × 60%), but he still would have to reduce his basis by $16,135 to determine his unrecovered basis. 1040ez tax forms to print Table 4-1. 1040ez tax forms to print 2013 MACRS Depreciation Chart (Use to Figure Depreciation for 2013. 1040ez tax forms to print ) If you claim actual expenses for your car, use the chart below to find the depreciation method and percentage to use for your 2013 return for cars placed in service in 2013. 1040ez tax forms to print   First, using the left column, find the date you first placed the car in service in 2013. 1040ez tax forms to print Then select the depreciation method and percentage from column (a), (b), or (c) following the rules explained in this chapter. 1040ez tax forms to print For cars placed in service before 2013, you must use the same method you used on last year's return unless a decline in your business use requires you to change to the straight line method. 1040ez tax forms to print Refer back to the MACRS Depreciation Chart for the year you placed the car in service. 1040ez tax forms to print (See Car Used 50% or Less for Business . 1040ez tax forms to print )  Multiply the unadjusted basis of your car by your business use percentage. 1040ez tax forms to print Multiply the result by the percentage you found in the chart to find the amount of your depreciation deduction for 2013. 1040ez tax forms to print (Also see Depreciation Limits . 1040ez tax forms to print )   If you placed your car in service after September of any year and you placed other business property in service during the same year, you may have to use the Jan. 1040ez tax forms to print 1—Sept. 1040ez tax forms to print 30 percentage instead of the Oct. 1040ez tax forms to print 1—Dec. 1040ez tax forms to print 31 percentage for your car. 1040ez tax forms to print               To find out if this applies to you, determine: 1) the basis of all business property you placed in service after September of that year and 2) the basis of all business property you placed in service during that entire year. 1040ez tax forms to print If the basis of the property placed in service after September is not more than 40% of the basis of all property (certain property is excluded) placed in service for the entire year, use the percentage for Jan. 1040ez tax forms to print 1—Sept. 1040ez tax forms to print 30 for figuring depreciation for your car. 1040ez tax forms to print See Which Convention Applies? in chapter 4 of Publication 946 for more details. 1040ez tax forms to print               Example. 1040ez tax forms to print You buy machinery (basis of $32,000) in May 2013 and a new van (basis of $20,000) in October 2013, both used 100% in your business. 1040ez tax forms to print You