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1040nr ez download 11. 1040nr ez download   Social Security and Equivalent Railroad Retirement Benefits Table of Contents Introduction Useful Items - You may want to see: Are Any of Your Benefits Taxable? How To Report Your BenefitsHow Much Is Taxable? Examples Deductions Related to Your BenefitsRepayments More Than Gross Benefits Introduction This chapter explains the federal income tax rules for social security benefits and equivalent tier 1 railroad retirement benefits. 1040nr ez download It explains the following topics. 1040nr ez download How to figure whether your benefits are taxable. 1040nr ez download How to use the social security benefits worksheet (with examples). 1040nr ez download How to report your taxable benefits. 1040nr ez download How to treat repayments that are more than the benefits you received during the year. 1040nr ez download Social security benefits include monthly retirement, survivor, and disability benefits. 1040nr ez download They do not include supplemental security income (SSI) payments, which are not taxable. 1040nr ez download Equivalent tier 1 railroad retirement benefits are the part of tier 1 benefits that a railroad employee or beneficiary would have been entitled to receive under the social security system. 1040nr ez download They are commonly called the social security equivalent benefit (SSEB) portion of tier 1 benefits. 1040nr ez download If you received these benefits during 2013, you should have received a Form SSA-1099, Social Security Benefit Statement, or Form RRB-1099, Payments by the Railroad Retirement Board. 1040nr ez download These forms show the amounts received and repaid, and taxes withheld for the year. 1040nr ez download You may receive more than one of these forms for the same year. 1040nr ez download You should add the amounts shown on all the Forms SSA-1099 and Forms RRB-1099 you receive for the year to determine the total amounts received and repaid, and taxes withheld for that year. 1040nr ez download See the Appendix at the end of Publication 915 for more information. 1040nr ez download Note. 1040nr ez download When the term “benefits” is used in this chapter, it applies to both social security benefits and the SSEB portion of tier 1 railroad retirement benefits. 1040nr ez download What is not covered in this chapter. 1040nr ez download   This chapter does not cover the tax rules for the following railroad retirement benefits. 1040nr ez download Non-social security equivalent benefit (NSSEB) portion of tier 1 benefits. 1040nr ez download Tier 2 benefits. 1040nr ez download Vested dual benefits. 1040nr ez download Supplemental annuity benefits. 1040nr ez download For information on these benefits, see Publication 575, Pension and Annuity Income. 1040nr ez download   This chapter does not cover the tax rules for social security benefits reported on Form SSA-1042S, Social Security Benefit Statement, or Form RRB-1042S, Statement for Nonresident Alien Recipients of: Payments by the Railroad Retirement Board. 1040nr ez download For information about these benefits, see Publication 519, U. 1040nr ez download S. 1040nr ez download Tax Guide for Aliens, and Publication 915, Social Security and Equivalent Railroad Retirement Benefits. 1040nr ez download   This chapter also does not cover the tax rules for foreign social security benefits. 1040nr ez download These benefits are taxable as annuities, unless they are exempt from U. 1040nr ez download S. 1040nr ez download tax or treated as a U. 1040nr ez download S. 1040nr ez download social security benefit under a tax treaty. 1040nr ez download Useful Items - You may want to see: Publication 505 Tax Withholding and Estimated Tax 575 Pension and Annuity Income 590 Individual Retirement Arrangements (IRAs) 915 Social Security and Equivalent Railroad Retirement Benefits Forms (and Instructions) 1040-ES Estimated Tax for Individuals SSA-1099 Social Security Benefit Statement RRB-1099 Payments by the Railroad Retirement Board W-4V Voluntary Withholding Request Are Any of Your Benefits Taxable? To find out whether any of your benefits may be taxable, compare the base amount for your filing status with the total of: One-half of your benefits, plus All your other income, including tax-exempt interest. 1040nr ez download When making this comparison, do not reduce your other income by any exclusions for: Interest from qualified U. 1040nr ez download S. 1040nr ez download savings bonds, Employer-provided adoption benefits, Foreign earned income or foreign housing, or Income earned by bona fide residents of American Samoa or Puerto Rico. 1040nr ez download Children's benefits. 1040nr ez download   The rules in this chapter apply to benefits received by children. 1040nr ez download See Who is taxed , later. 1040nr ez download Figuring total income. 1040nr ez download   To figure the total of one-half of your benefits plus your other income, use Worksheet 11-1 later in this discussion. 1040nr ez download If the total is more than your base amount, part of your benefits may be taxable. 1040nr ez download    If you are married and file a joint return for 2013, you and your spouse must combine your incomes and your benefits to figure whether any of your combined benefits are taxable. 1040nr ez download Even if your spouse did not receive any benefits, you must add your spouse's income to yours to figure whether any of your benefits are taxable. 1040nr ez download    If the only income you received during 2013 was your social security or the SSEB portion of tier 1 railroad retirement benefits, your benefits generally are not taxable and you probably do not have to file a return. 1040nr ez download If you have income in addition to your benefits, you may have to file a return even if none of your benefits are taxable. 1040nr ez download Base amount. 1040nr ez download   Your base amount is: $25,000 if you are single, head of household, or qualifying widow(er), $25,000 if you are married filing separately and lived apart from your spouse for all of 2013, $32,000 if you are married filing jointly, or $-0- if you are married filing separately and lived with your spouse at any time during 2013. 1040nr ez download Worksheet 11-1. 1040nr ez download   You can use Worksheet 11-1 to figure the amount of income to compare with your base amount. 1040nr ez download This is a quick way to check whether some of your benefits may be taxable. 1040nr ez download Worksheet 11-1. 1040nr ez download A Quick Way To Check if Your Benefits May Be Taxable A. 1040nr ez download Enter the amount from box 5 of all your Forms SSA-1099 and RRB-1099. 1040nr ez download Include the full amount of any lump-sum benefit payments received in 2013, for 2013 and earlier years. 1040nr ez download (If you received more than one form, combine the amounts from box 5 and enter the total. 1040nr ez download ) A. 1040nr ez download   Note. 1040nr ez download If the amount on line A is zero or less, stop here; none of your benefits are taxable this year. 1040nr ez download B. 1040nr ez download Enter one-half of the amount on line A B. 1040nr ez download   C. 1040nr ez download Enter your taxable pensions, wages, interest, dividends, and other taxable income C. 1040nr ez download   D. 1040nr ez download Enter any tax-exempt interest income (such as interest on municipal bonds) plus any exclusions from income (listed earlier) D. 1040nr ez download   E. 1040nr ez download Add lines B, C, and D E. 1040nr ez download   Note. 1040nr ez download Compare the amount on line E to your base amount for your filing status. 1040nr ez download If the amount on line E equals or is less than the base amount for your filing status, none of your benefits are taxable this year. 1040nr ez download If the amount on line E is more than your base amount, some of your benefits may be taxable. 1040nr ez download You need to complete Worksheet 1 in Publication 915 (or the Social Security Benefits Worksheet in your tax form instructions). 1040nr ez download If none of your benefits are taxable, but you otherwise must file a tax return, see Benefits not taxable , later, under How To Report Your Benefits. 1040nr ez download Example. 1040nr ez download You and your spouse (both over 65) are filing a joint return for 2013 and you both received social security benefits during the year. 1040nr ez download In January 2014, you received a Form SSA-1099 showing net benefits of $7,500 in box 5. 1040nr ez download Your spouse received a Form SSA-1099 showing net benefits of $3,500 in box 5. 1040nr ez download You also received a taxable pension of $22,800 and interest income of $500. 1040nr ez download You did not have any tax-exempt interest income. 1040nr ez download Your benefits are not taxable for 2013 because your income, as figured in Worksheet 11-1, is not more than your base amount ($32,000) for married filing jointly. 1040nr ez download Even though none of your benefits are taxable, you must file a return for 2013 because your taxable gross income ($23,300) exceeds the minimum filing requirement amount for your filing status. 1040nr ez download Filled-in Worksheet 11-1. 1040nr ez download A Quick Way To Check if Your Benefits May Be Taxable A. 1040nr ez download Enter the amount from box 5 of all your Forms SSA-1099 and RRB-1099. 1040nr ez download Include the full amount of any lump-sum benefit payments received in 2013, for 2013 and earlier years. 1040nr ez download (If you received more than one form, combine the amounts from box 5 and enter the total. 1040nr ez download ) A. 1040nr ez download $11,000 Note. 1040nr ez download If the amount on line A is zero or less, stop here; none of your benefits are taxable this year. 1040nr ez download B. 1040nr ez download Enter one-half of the amount on line A B. 1040nr ez download 5,500 C. 1040nr ez download Enter your taxable pensions, wages, interest, dividends, and other taxable income C. 1040nr ez download 23,300 D. 1040nr ez download Enter any tax-exempt interest income (such as interest on municipal bonds) plus any exclusions from income (listed earlier) D. 1040nr ez download -0- E. 1040nr ez download Add lines B, C, and D E. 1040nr ez download $28,800 Note. 1040nr ez download Compare the amount on line E to your base amount for your filing status. 1040nr ez download If the amount on line E equals or is less than the base amount for your filing status, none of your benefits are taxable this year. 1040nr ez download If the amount on line E is more than your base amount, some of your benefits may be taxable. 1040nr ez download You need to complete Worksheet 1 in Publication 915 (or the Social Security Benefits Worksheet in your tax form instructions). 1040nr ez download If none of your benefits are taxable, but you otherwise must file a tax return, see Benefits not taxable , later, under How To Report Your Benefits. 1040nr ez download Who is taxed. 1040nr ez download   Benefits are included in the taxable income (to the extent they are taxable) of the person who has the legal right to receive the benefits. 1040nr ez download For example, if you and your child receive benefits, but the check for your child is made out in your name, you must use only your part of the benefits to see whether any benefits are taxable to you. 1040nr ez download One-half of the part that belongs to your child must be added to your child's other income to see whether any of those benefits are taxable to your child. 1040nr ez download Repayment of benefits. 1040nr ez download   Any repayment of benefits you made during 2013 must be subtracted from the gross benefits you received in 2013. 1040nr ez download It does not matter whether the repayment was for a benefit you received in 2013 or in an earlier year. 1040nr ez download If you repaid more than the gross benefits you received in 2013, see Repayments More Than Gross Benefits , later. 1040nr ez download   Your gross benefits are shown in box 3 of Form SSA-1099 or RRB-1099. 1040nr ez download Your repayments are shown in box 4. 1040nr ez download The amount in box 5 shows your net benefits for 2013 (box 3 minus box 4). 1040nr ez download Use the amount in box 5 to figure whether any of your benefits are taxable. 1040nr ez download Tax withholding and estimated tax. 1040nr ez download   You can choose to have federal income tax withheld from your social security benefits and/or the SSEB portion of your tier 1 railroad retirement benefits. 1040nr ez download If you choose to do this, you must complete a Form W-4V. 1040nr ez download   If you do not choose to have income tax withheld, you may have to request additional withholding from other income or pay estimated tax during the year. 1040nr ez download For details, see Publication 505 or the instructions for Form 1040-ES. 1040nr ez download How To Report Your Benefits If part of your benefits are taxable, you must use Form 1040 or Form 1040A. 1040nr ez download You cannot use Form 1040EZ. 1040nr ez download Reporting on Form 1040. 1040nr ez download   Report your net benefits (the total amount from box 5 of all your Forms SSA-1099 and Forms RRB-1099) on line 20a and the taxable part on line 20b. 1040nr ez download If you are married filing separately and you lived apart from your spouse for all of 2013, also enter “D” to the right of the word “benefits” on line 20a. 1040nr ez download Reporting on Form 1040A. 1040nr ez download   Report your net benefits (the total amount from box 5 of all your Forms SSA-1099 and Forms RRB-1099) on line 14a and the taxable part on line 14b. 1040nr ez download If you are married filing separately and you lived apart from your spouse for all of 2013, also enter “D” to the right of the word “benefits” on line 14a. 1040nr ez download Benefits not taxable. 1040nr ez download   If you are filing Form 1040EZ, do not report any benefits on your tax return. 1040nr ez download If you are filing Form 1040 or Form 1040A, report your net benefits (the total amount from box 5 of all your Forms SSA-1099 and Forms RRB-1099) on Form 1040, line 20a, or Form 1040A, line 14a. 1040nr ez download Enter -0- on Form 1040, line 20b, or Form 1040A, line 14b. 1040nr ez download If you are married filing separately and you lived apart from your spouse for all of 2013, also enter “D” to the right of the word “benefits” on Form 1040, line 20a, or Form 1040A, line 14a. 1040nr ez download How Much Is Taxable? If part of your benefits are taxable, how much is taxable depends on the total amount of your benefits and other income. 1040nr ez download Generally, the higher that total amount, the greater the taxable part of your benefits. 1040nr ez download Maximum taxable part. 1040nr ez download   Generally, up to 50% of your benefits will be taxable. 1040nr ez download However, up to 85% of your benefits can be taxable if either of the following situations applies to you. 1040nr ez download The total of one-half of your benefits and all your other income is more than $34,000 ($44,000 if you are married filing jointly). 1040nr ez download You are married filing separately and lived with your spouse at any time during 2013. 1040nr ez download Which worksheet to use. 1040nr ez download   A worksheet you can use to figure your taxable benefits is in the instructions for your Form 1040 or Form 1040A. 1040nr ez download You can use either that worksheet or Worksheet 1 in Publication 915, unless any of the following situations applies to you. 1040nr ez download You contributed to a traditional individual retirement arrangement (IRA) and you or your spouse is covered by a retirement plan at work. 1040nr ez download In this situation, you must use the special worksheets in Appendix B of Publication 590 to figure both your IRA deduction and your taxable benefits. 1040nr ez download Situation (1) does not apply and you take an exclusion for interest from qualified U. 1040nr ez download S. 1040nr ez download savings bonds (Form 8815), for adoption benefits (Form 8839), for foreign earned income or housing (Form 2555 or Form 2555-EZ), or for income earned in American Samoa (Form 4563) or Puerto Rico by bona fide residents. 1040nr ez download In this situation, you must use Worksheet 1 in Publication 915 to figure your taxable benefits. 1040nr ez download You received a lump-sum payment for an earlier year. 1040nr ez download In this situation, also complete Worksheet 2 or 3 and Worksheet 4 in Publication 915. 1040nr ez download See Lump-sum election next. 1040nr ez download Lump-sum election. 1040nr ez download   You must include the taxable part of a lump-sum (retroactive) payment of benefits received in 2013 in your 2013 income, even if the payment includes benefits for an earlier year. 1040nr ez download    This type of lump-sum benefit payment should not be confused with the lump-sum death benefit that both the SSA and RRB pay to many of their beneficiaries. 1040nr ez download No part of the lump-sum death benefit is subject to tax. 1040nr ez download   Generally, you use your 2013 income to figure the taxable part of the total benefits received in 2013. 1040nr ez download However, you may be able to figure the taxable part of a lump-sum payment for an earlier year separately, using your income for the earlier year. 1040nr ez download You can elect this method if it lowers your taxable benefits. 1040nr ez download Making the election. 1040nr ez download   If you received a lump-sum benefit payment in 2013 that includes benefits for one or more earlier years, follow the instructions in Publication 915 under Lump-Sum Election to see whether making the election will lower your taxable benefits. 1040nr ez download That discussion also explains how to make the election. 1040nr ez download    Because the earlier year's taxable benefits are included in your 2013 income, no adjustment is made to the earlier year's return. 1040nr ez download Do not file an amended return for the earlier year. 1040nr ez download Examples The following are a few examples you can use as a guide to figure the taxable part of your benefits. 1040nr ez download Example 1. 1040nr ez download George White is single and files Form 1040 for 2013. 1040nr ez download He received the following income in 2013: Fully taxable pension $18,600 Wages from part-time job 9,400 Taxable interest income 990 Total $28,990 George also received social security benefits during 2013. 1040nr ez download The Form SSA-1099 he received in January 2014 shows $5,980 in box 5. 1040nr ez download To figure his taxable benefits, George completes the worksheet shown here. 1040nr ez download Filled-in Worksheet 1. 1040nr ez download Figuring Your Taxable Benefits 1. 1040nr ez download Enter the total amount from box 5 of ALL your Forms SSA-1099 and RRB-1099. 1040nr ez download Also enter this amount on Form 1040, line 20a, or Form 1040A, line 14a $5,980 2. 1040nr ez download Enter one-half of line 1 2,990 3. 1040nr ez download Combine the amounts from:     Form 1040: Lines 7, 8a, 9a, 10 through 14, 15b, 16b, 17 through 19, and 21. 1040nr ez download     Form 1040A: Lines 7, 8a, 9a, 10, 11b, 12b, and 13 28,990 4. 1040nr ez download Enter the amount, if any, from Form 1040 or 1040A, line 8b -0-       5. 1040nr ez download Enter the total of any exclusions/adjustments for: Adoption benefits (Form 8839, line 28), Foreign earned income or housing (Form 2555, lines 45 and 50, or Form 2555-EZ, line 18), and Certain income of bona fide residents of American Samoa (Form 4563, line 15) or Puerto Rico -0-       6. 1040nr ez download Combine lines 2, 3, 4, and 5 31,980 7. 1040nr ez download Form 1040 filers: Enter the amount from Form 1040, lines 23 through 32, and any write-in adjustments you entered on the dotted line next to line 36. 1040nr ez download     Form 1040A filers: Enter the amount from Form 1040A, lines 16 and 17 -0- 8. 1040nr ez download Is the amount on line 7 less than the amount on line 6?     No. 1040nr ez download None of your social security benefits are taxable. 1040nr ez download Enter -0- on Form 1040, line 20b, or Form 1040A, line 14b. 1040nr ez download   Yes. 1040nr ez download Subtract line 7 from line 6 31,980 9. 1040nr ez download If you are: Married filing jointly, enter $32,000 Single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2013, enter $25,000 25,000   Note. 1040nr ez download If you are married filing separately and you lived with your spouse at any time in 2013, skip lines 9 through 16; multiply line 8 by 85% (. 1040nr ez download 85) and enter the result on line 17. 1040nr ez download Then go to line 18. 1040nr ez download   10. 1040nr ez download Is the amount on line 9 less than the amount on line 8?     No. 1040nr ez download None of your benefits are taxable. 1040nr ez download Enter -0- on Form 1040, line 20b, or on Form 1040A, line 14b. 1040nr ez download If you are married filing separately and you lived apart from your spouse for all of 2013, be sure you entered “D” to the right of the word “benefits” on Form 1040, line 20a, or on Form 1040A, line 14a. 1040nr ez download     Yes. 1040nr ez download Subtract line 9 from line 8 6,980 11. 1040nr ez download Enter $12,000 if married filing jointly; $9,000 if single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2013 9,000 12. 1040nr ez download Subtract line 11 from line 10. 1040nr ez download If zero or less, enter -0- -0- 13. 1040nr ez download Enter the smaller of line 10 or line 11 6,980 14. 1040nr ez download Enter one-half of line 13 3,490 15. 1040nr ez download Enter the smaller of line 2 or line 14 2,990 16. 1040nr ez download Multiply line 12 by 85% (. 1040nr ez download 85). 1040nr ez download If line 12 is zero, enter -0- -0- 17. 1040nr ez download Add lines 15 and 16 2,990 18. 1040nr ez download Multiply line 1 by 85% (. 1040nr ez download 85) 5,083 19. 1040nr ez download Taxable benefits. 1040nr ez download Enter the smaller of line 17 or line 18. 1040nr ez download Also enter this amount on Form 1040, line 20b, or Form 1040A, line 14b $2,990 The amount on line 19 of George's worksheet shows that $2,990 of his social security benefits is taxable. 1040nr ez download On line 20a of his Form 1040, George enters his net benefits of $5,980. 1040nr ez download On line 20b, he enters his taxable benefits of $2,990. 1040nr ez download Example 2. 1040nr ez download Ray and Alice Hopkins file a joint return on Form 1040A for 2013. 1040nr ez download Ray is retired and received a fully taxable pension of $15,500. 1040nr ez download He also received social security benefits, and his Form SSA-1099 for 2013 shows net benefits of $5,600 in box 5. 1040nr ez download Alice worked during the year and had wages of $14,000. 1040nr ez download She made a deductible payment to her IRA account of $1,000. 1040nr ez download Ray and Alice have two savings accounts with a total of $250 in taxable interest income. 1040nr ez download They complete Worksheet 1, entering $29,750 ($15,500 + $14,000 + $250) on line 3. 1040nr ez download They find none of Ray's social security benefits are taxable. 1040nr ez download On Form 1040A, they enter $5,600 on line 14a and -0- on line 14b. 1040nr ez download Filled-in Worksheet 1. 1040nr ez download Figuring Your Taxable Benefits 1. 1040nr ez download Enter the total amount from box 5 of ALL your Forms SSA-1099 and RRB-1099. 1040nr ez download Also enter this amount on Form 1040, line 20a, or Form 1040A, line 14a $5,600 2. 1040nr ez download Enter one-half of line 1 2,800 3. 1040nr ez download Combine the amounts from:     Form 1040: Lines 7, 8a, 9a, 10 through 14, 15b, 16b, 17 through 19, and 21. 1040nr ez download     Form 1040A: Lines 7, 8a, 9a, 10, 11b, 12b, and 13 29,750 4. 1040nr ez download Enter the amount, if any, from Form 1040 or 1040A, line 8b -0-       5. 1040nr ez download Enter the total of any exclusions/adjustments for: Adoption benefits (Form 8839, line 28), Foreign earned income or housing (Form 2555, lines 45 and 50, or Form 2555-EZ, line 18), and Certain income of bona fide residents of American Samoa (Form 4563, line 15) or Puerto Rico -0-       6. 1040nr ez download Combine lines 2, 3, 4, and 5 32,550 7. 1040nr ez download Form 1040 filers: Enter the amount from Form 1040, lines 23 through 32, and any write-in adjustments you entered on the dotted line next to line 36. 1040nr ez download     Form 1040A filers: Enter the amount from Form 1040A, lines 16 and 17 1,000 8. 1040nr ez download Is the amount on line 7 less than the amount on line 6?     No. 1040nr ez download None of your social security benefits are taxable. 1040nr ez download Enter -0- on Form 1040, line 20b, or Form 1040A, line 14b. 1040nr ez download   Yes. 1040nr ez download Subtract line 7 from line 6 31,550 9. 1040nr ez download If you are: Married filing jointly, enter $32,000 Single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2013, enter $25,000 32,000   Note. 1040nr ez download If you are married filing separately and you lived with your spouse at any time in 2013, skip lines 9 through 16; multiply line 8 by 85% (. 1040nr ez download 85) and enter the result on line 17. 1040nr ez download Then go to line 18. 1040nr ez download   10. 1040nr ez download Is the amount on line 9 less than the amount on line 8?     No. 1040nr ez download None of your benefits are taxable. 1040nr ez download Enter -0- on Form 1040, line 20b, or on Form 1040A, line 14b. 1040nr ez download If you are married filing separately and you lived apart from your spouse for all of 2013, be sure you entered “D” to the right of the word “benefits” on Form 1040, line 20a, or on Form 1040A, line 14a. 1040nr ez download     Yes. 1040nr ez download Subtract line 9 from line 8   11. 1040nr ez download Enter $12,000 if married filing jointly; $9,000 if single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2013   12. 1040nr ez download Subtract line 11 from line 10. 1040nr ez download If zero or less, enter -0-   13. 1040nr ez download Enter the smaller of line 10 or line 11   14. 1040nr ez download Enter one-half of line 13   15. 1040nr ez download Enter the smaller of line 2 or line 14   16. 1040nr ez download Multiply line 12 by 85% (. 1040nr ez download 85). 1040nr ez download If line 12 is zero, enter -0-   17. 1040nr ez download Add lines 15 and 16   18. 1040nr ez download Multiply line 1 by 85% (. 1040nr ez download 85)   19. 1040nr ez download Taxable benefits. 1040nr ez download Enter the smaller of line 17 or line 18. 1040nr ez download Also enter this amount on Form 1040, line 20b, or Form 1040A, line 14b   Example 3. 1040nr ez download Joe and Betty Johnson file a joint return on Form 1040 for 2013. 1040nr ez download Joe is a retired railroad worker and in 2013 received the social security equivalent benefit (SSEB) portion of tier 1 railroad retirement benefits. 1040nr ez download Joe's Form RRB-1099 shows $10,000 in box 5. 1040nr ez download Betty is a retired government worker and receives a fully taxable pension of $38,000. 1040nr ez download They had $2,300 in taxable interest income plus interest of $200 on a qualified U. 1040nr ez download S. 1040nr ez download savings bond. 1040nr ez download The savings bond interest qualified for the exclusion. 1040nr ez download They figure their taxable benefits by completing Worksheet 1. 1040nr ez download Because they have qualified U. 1040nr ez download S. 1040nr ez download savings bond interest, they follow the note at the beginning of the worksheet and use the amount from line 2 of their Schedule B (Form 1040A or 1040) on line 3 of the worksheet instead of the amount from line 8a of their Form 1040. 1040nr ez download On line 3 of the worksheet, they enter $40,500 ($38,000 + $2,500). 1040nr ez download Filled-in Worksheet 1. 1040nr ez download Figuring Your Taxable Benefits Before you begin: • If you are married filing separately and you lived apart from your spouse for all of 2013, enter “D” to the right of the word “benefits” on Form 1040, line 20a, or Form 1040A, line 14a. 1040nr ez download • Do not use this worksheet if you repaid benefits in 2013 and your total repayments (box 4 of Forms SSA-1099 and RRB-1099) were more than your gross benefits for 2013 (box 3 of Forms SSA-1099 and RRB-1099). 1040nr ez download None of your benefits are taxable for 2013. 1040nr ez download For more information, see Repayments More Than Gross Benefits. 1040nr ez download • If you are filing Form 8815, Exclusion of Interest From Series EE and I U. 1040nr ez download S. 1040nr ez download Savings Bonds Issued After 1989, do not include the amount from line 8a of Form 1040 or Form 1040A on line 3 of this worksheet. 1040nr ez download Instead, include the amount from Schedule B (Form 1040A or 1040), line 2. 1040nr ez download 1. 1040nr ez download Enter the total amount from box 5 of ALL your Forms SSA-1099 and RRB-1099. 1040nr ez download Also enter this amount on Form 1040, line 20a, or Form 1040A, line 14a $10,000 2. 1040nr ez download Enter one-half of line 1 5,000 3. 1040nr ez download Combine the amounts from:     Form 1040: Lines 7, 8a, 9a, 10 through 14, 15b, 16b, 17 through 19, and 21. 1040nr ez download     Form 1040A: Lines 7, 8a, 9a, 10, 11b, 12b, and 13 40,500 4. 1040nr ez download Enter the amount, if any, from Form 1040 or 1040A, line 8b -0-       5. 1040nr ez download Enter the total of any exclusions/adjustments for: Adoption benefits (Form 8839, line 28), Foreign earned income or housing (Form 2555, lines 45 and 50, or Form 2555-EZ, line 18), and Certain income of bona fide residents of American Samoa (Form 4563, line 15) or Puerto Rico -0-       6. 1040nr ez download Combine lines 2, 3, 4, and 5 45,500 7. 1040nr ez download Form 1040 filers: Enter the amount from Form 1040, lines 23 through 32, and any write-in adjustments you entered on the dotted line next to line 36. 1040nr ez download     Form 1040A filers: Enter the amount from Form 1040A, lines 16 and 17 -0- 8. 1040nr ez download Is the amount on line 7 less than the amount on line 6?     No. 1040nr ez download None of your social security benefits are taxable. 1040nr ez download Enter -0- on Form 1040, line 20b, or Form 1040A, line 14b. 1040nr ez download   Yes. 1040nr ez download Subtract line 7 from line 6 45,500 9. 1040nr ez download If you are: Married filing jointly, enter $32,000 Single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2013, enter $25,000 32,000   Note. 1040nr ez download If you are married filing separately and you lived with your spouse at any time in 2013, skip lines 9 through 16; multiply line 8 by 85% (. 1040nr ez download 85) and enter the result on line 17. 1040nr ez download Then go to line 18. 1040nr ez download   10. 1040nr ez download Is the amount on line 9 less than the amount on line 8?     No. 1040nr ez download None of your benefits are taxable. 1040nr ez download Enter -0- on Form 1040, line 20b, or on Form 1040A, line 14b. 1040nr ez download If you are married filing separately and you lived apart from your spouse for all of 2013, be sure you entered “D” to the right of the word “benefits” on Form 1040, line 20a, or on Form 1040A, line 14a. 1040nr ez download     Yes. 1040nr ez download Subtract line 9 from line 8 13,500 11. 1040nr ez download Enter $12,000 if married filing jointly; $9,000 if single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2013 12,000 12. 1040nr ez download Subtract line 11 from line 10. 1040nr ez download If zero or less, enter -0- 1,500 13. 1040nr ez download Enter the smaller of line 10 or line 11 12,000 14. 1040nr ez download Enter one-half of line 13 6,000 15. 1040nr ez download Enter the smaller of line 2 or line 14 5,000 16. 1040nr ez download Multiply line 12 by 85% (. 1040nr ez download 85). 1040nr ez download If line 12 is zero, enter -0- 1,275 17. 1040nr ez download Add lines 15 and 16 6,275 18. 1040nr ez download Multiply line 1 by 85% (. 1040nr ez download 85) 8,500 19. 1040nr ez download Taxable benefits. 1040nr ez download Enter the smaller of line 17 or line 18. 1040nr ez download Also enter this amount on Form 1040, line 20b, or Form 1040A, line 14b $6,275 More than 50% of Joe's net benefits are taxable because the income on line 8 of the worksheet ($45,500) is more than $44,000. 1040nr ez download Joe and Betty enter $10,000 on Form 1040, line 20a, and $6,275 on Form 1040, line 20b. 1040nr ez download Deductions Related to Your Benefits You may be entitled to deduct certain amounts related to the benefits you receive. 1040nr ez download Disability payments. 1040nr ez download   You may have received disability payments from your employer or an insurance company that you included as income on your tax return in an earlier year. 1040nr ez download If you received a lump-sum payment from SSA or RRB, and you had to repay the employer or insurance company for the disability payments, you can take an itemized deduction for the part of the payments you included in gross income in the earlier year. 1040nr ez download If the amount you repay is more than $3,000, you may be able to claim a tax credit instead. 1040nr ez download Claim the deduction or credit in the same way explained under Repayments More Than Gross Benefits , later. 1040nr ez download Legal expenses. 1040nr ez download   You can usually deduct legal expenses that you pay or incur to produce or collect taxable income or in connection with the determination, collection, or refund of any tax. 1040nr ez download   Legal expenses for collecting the taxable part of your benefits are deductible as a miscellaneous itemized deduction on Schedule A (Form 1040), line 23. 1040nr ez download Repayments More Than Gross Benefits In some situations, your Form SSA-1099 or Form RRB-1099 will show that the total benefits you repaid (box 4) are more than the gross benefits (box 3) you received. 1040nr ez download If this occurred, your net benefits in box 5 will be a negative figure (a figure in parentheses) and none of your benefits will be taxable. 1040nr ez download Do not use a worksheet in this case. 1040nr ez download If you receive more than one form, a negative figure in box 5 of one form is used to offset a positive figure in box 5 of another form for that same year. 1040nr ez download If you have any questions about this negative figure, contact your local SSA office or your local RRB field office. 1040nr ez download Joint return. 1040nr ez download   If you and your spouse file a joint return, and your Form SSA-1099 or RRB-1099 has a negative figure in box 5, but your spouse's does not, subtract the amount in box 5 of your form from the amount in box 5 of your spouse's form. 1040nr ez download You do this to get your net benefits when figuring if your combined benefits are taxable. 1040nr ez download Example. 1040nr ez download John and Mary file a joint return for 2013. 1040nr ez download John received Form SSA-1099 showing $3,000 in box 5. 1040nr ez download Mary also received Form SSA-1099 and the amount in box 5 was ($500). 1040nr ez download John and Mary will use $2,500 ($3,000 minus $500) as the amount of their net benefits when figuring if any of their combined benefits are taxable. 1040nr ez download Repayment of benefits received in an earlier year. 1040nr ez download   If the total amount shown in box 5 of all of your Forms SSA-1099 and RRB-1099 is a negative figure, you can take an itemized deduction for the part of this negative figure that represents benefits you included in gross income in an earlier year. 1040nr ez download Deduction $3,000 or less. 1040nr ez download   If this deduction is $3,000 or less, it is subject to the 2%-of-adjusted-gross-income limit that applies to certain miscellaneous itemized deductions. 1040nr ez download Claim it on Schedule A (Form 1040), line 23. 1040nr ez download Deduction more than $3,000. 1040nr ez download    If this deduction is more than $3,000, you should figure your tax two ways: Figure your tax for 2013 with the itemized deduction included on Schedule A, line 28. 1040nr ez download Figure your tax for 2013 in the following steps. 1040nr ez download Figure the tax without the itemized deduction included on Schedule A, line 28. 1040nr ez download For each year after 1983 for which part of the negative figure represents a repayment of benefits, refigure your taxable benefits as if your total benefits for the year were reduced by that part of the negative figure. 1040nr ez download Then refigure the tax for that year. 1040nr ez download Subtract the total of the refigured tax amounts in (b) from the total of your actual tax amounts. 1040nr ez download Subtract the result in (c) from the result in (a). 1040nr ez download Compare the tax figured in methods (1) and (2). 1040nr ez download Your tax for 2013 is the smaller of the two amounts. 1040nr ez download If method (1) results in less tax, take the itemized deduction on Schedule A (Form 1040), line 28. 1040nr ez download If method (2) results in less tax, claim a credit for the amount from step 2(c) above on Form 1040, line 71. 1040nr ez download Check box d and enter “I. 1040nr ez download R. 1040nr ez download C. 1040nr ez download 1341” in the space next to that box. 1040nr ez download If both methods produce the same tax, deduct the repayment on Schedule A (Form 1040), line 28. 1040nr ez download Prev  Up  Next   Home   More Online Publications
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Longest- and Shortest-Serving Commissioners of Internal Revenue

The office of Commissioner of Internal Revenue was created by an Act of Congress on July 1, 1862. The Commissioner is appointed by the President with the advice and consent of the Senate. With no set tenure, Commissioners served as long as they and the President chose. The IRS Restructuring and Reform Act of 1998 amended Code section 7803 to set a five-year term of office. The first such term was applied to the Commissioner serving when this Act became law, Charles Rossotti, beginning with the date of his appointment. He served the full five years, from November 1997 to November 2002.

Not counting those who served as Acting Commissioner between permanent appointees, these Commissioners served the shortest times in office, less than one year:

 

Name

Tenure

Dates

Robert E. Hannegan 3 months, 14 days 10/9/1943 — 1/22/1944 
William Orton 4 months  7/1/1865 — 10/31/1865 
Alfred Pleasonton 7 months, 6 days  1/3/1871 — 8/8/1871
George S. Boutwell 7 months, 16 days  7/17/1862 — 3/4/1863 
Shirley D. Peterson  11months, 18 days 2/3/1992 — 1/20/1993 

 

 

 

 


These Commissioners served the longest terms, five years or more:

 Name

Tenure

Dates 

Guy T. Helvering

10 years, 4 months 6/6/1933 — 10/8/1943
David H. Blair 8 years 5/27/1921 — 5/31/1929 
Joseph S. Miller 7 years, 7 months

3/20/1885 — 3/20/1889 and
4/19/1893 — 11/26/1896

Green B. Raum 6 years, 9 months 8/2/1876 — 4/30/1883
John W. Yerkes 6 years, 4 months 12/20/1900 — 4/30/1907
Roscoe L. Egger, Jr. 5 years, 1 month 3/14/1981 — 4/30/1986
Charles O. Rossotti 5 years 11/13/1997 — 11/12/2002 
Page Last Reviewed or Updated: 12-Feb-2014

The 1040nr Ez Download

1040nr ez download 4. 1040nr ez download   Figuring Depreciation Under MACRS Table of Contents Introduction Useful Items - You may want to see: Which Depreciation System (GDS or ADS) Applies? Which Property Class Applies Under GDS?Rent-to-own dealer. 1040nr ez download Rent-to-own contract. 1040nr ez download What Is the Placed in Service Date? What Is the Basis for Depreciation? Which Recovery Period Applies?Recovery Periods Under GDS Recovery Periods Under ADS Additions and Improvements Which Convention Applies? Which Depreciation Method Applies?Depreciation Methods for Farm Property Electing a Different Method How Is the Depreciation Deduction Figured?Using the MACRS Percentage Tables Figuring the Deduction Without Using the Tables Figuring the Deduction for Property Acquired in a Nontaxable Exchange Figuring the Deduction for a Short Tax Year How Do You Use General Asset Accounts?Grouping Property Figuring Depreciation for a GAA Disposing of GAA Property Terminating GAA Treatment Electing To Use a GAA When Do You Recapture MACRS Depreciation? Introduction The Modified Accelerated Cost Recovery System (MACRS) is used to recover the basis of most business and investment property placed in service after 1986. 1040nr ez download MACRS consists of two depreciation systems, the General Depreciation System (GDS) and the Alternative Depreciation System (ADS). 1040nr ez download Generally, these systems provide different methods and recovery periods to use in figuring depreciation deductions. 1040nr ez download To be sure you can use MACRS to figure depreciation for your property, see What Method Can You Use To Depreciate Your Property in chapter 1. 1040nr ez download This chapter explains how to determine which MACRS depreciation system applies to your property. 1040nr ez download It also discusses other information you need to know before you can figure depreciation under MACRS. 1040nr ez download This information includes the property's recovery class, placed in service date, and basis, as well as the applicable recovery period, convention, and depreciation method. 1040nr ez download It explains how to use this information to figure your depreciation deduction and how to use a general asset account to depreciate a group of properties. 1040nr ez download Finally, it explains when and how to recapture MACRS depreciation. 1040nr ez download Useful Items - You may want to see: Publication 225 Farmer's Tax Guide 463 Travel, Entertainment, Gift, and Car  Expenses 544 Sales and Other Dispositions of Assets 551 Basis of Assets 587 Business Use of Your Home (Including Use by Daycare Providers) Form (and Instructions) 2106 Employee Business Expenses 2106-EZ Unreimbursed Employee Business Expenses 4562 Depreciation and Amortization See chapter 6 for information about getting publications and forms. 1040nr ez download Which Depreciation System (GDS or ADS) Applies? Your use of either the General Depreciation System (GDS) or the Alternative Depreciation System (ADS) to depreciate property under MACRS determines what depreciation method and recovery period you use. 1040nr ez download You generally must use GDS unless you are specifically required by law to use ADS or you elect to use ADS. 1040nr ez download If you placed your property in service in 2013, complete Part III of Form 4562 to report depreciation using MACRS. 1040nr ez download Complete section B of Part III to report depreciation using GDS, and complete section C of Part III to report depreciation using ADS. 1040nr ez download If you placed your property in service before 2013 and are required to file Form 4562, report depreciation using either GDS or ADS on line 17 in Part III. 1040nr ez download Required use of ADS. 1040nr ez download   You must use ADS for the following property. 1040nr ez download Listed property used 50% or less in a qualified business use. 1040nr ez download See chapter 5 for information on listed property. 1040nr ez download Any tangible property used predominantly outside the United States during the year. 1040nr ez download Any tax-exempt use property. 1040nr ez download Any tax-exempt bond-financed property. 1040nr ez download All property used predominantly in a farming business and placed in service in any tax year during which an election not to apply the uniform capitalization rules to certain farming costs is in effect. 1040nr ez download Any property imported from a foreign country for which an Executive Order is in effect because the country maintains trade restrictions or engages in other discriminatory acts. 1040nr ez download If you are required to use ADS to depreciate your property, you cannot claim any special depreciation allowance (discussed in chapter 3) for the property. 1040nr ez download Electing ADS. 1040nr ez download   Although your property may qualify for GDS, you can elect to use ADS. 1040nr ez download The election generally must cover all property in the same property class that you placed in service during the year. 1040nr ez download However, the election for residential rental property and nonresidential real property can be made on a property-by-property basis. 1040nr ez download Once you make this election, you can never revoke it. 1040nr ez download   You make the election by completing line 20 in Part III of Form 4562. 1040nr ez download Which Property Class Applies Under GDS? The following is a list of the nine property classifications under GDS and examples of the types of property included in each class. 1040nr ez download These property classes are also listed under column (a) in section B, Part III, of Form 4562. 1040nr ez download For detailed information on property classes, see Appendix B, Table of Class Lives and Recovery Periods, in this publication. 1040nr ez download 3-year property. 1040nr ez download Tractor units for over-the-road use. 1040nr ez download Any race horse over 2 years old when placed in service. 1040nr ez download (All race horses placed in service after December 31, 2008, and before January 1, 2014, are deemed to be 3-year property, regardless of age. 1040nr ez download ) Any other horse (other than a race horse) over 12 years old when placed in service. 1040nr ez download Qualified rent-to-own property (defined later). 1040nr ez download 5-year property. 1040nr ez download Automobiles, taxis, buses, and trucks. 1040nr ez download Computers and peripheral equipment. 1040nr ez download Office machinery (such as typewriters, calculators, and copiers). 1040nr ez download Any property used in research and experimentation. 1040nr ez download Breeding cattle and dairy cattle. 1040nr ez download Appliances, carpets, furniture, etc. 1040nr ez download , used in a residential rental real estate activity. 1040nr ez download Certain geothermal, solar, and wind energy property. 1040nr ez download 7-year property. 1040nr ez download Office furniture and fixtures (such as desks, files, and safes). 1040nr ez download Agricultural machinery and equipment. 1040nr ez download Any property that does not have a class life and has not been designated by law as being in any other class. 1040nr ez download Certain motorsports entertainment complex property (defined later) placed in service before January 1, 2014. 1040nr ez download Any natural gas gathering line placed in service after April 11, 2005. 1040nr ez download See Natural gas gathering line and electric transmission property , later. 1040nr ez download 10-year property. 1040nr ez download Vessels, barges, tugs, and similar water transportation equipment. 1040nr ez download Any single purpose agricultural or horticultural structure. 1040nr ez download Any tree or vine bearing fruits or nuts. 1040nr ez download Qualified small electric meter and qualified smart electric grid system (defined later) placed in service on or after October 3, 2008. 1040nr ez download 15-year property. 1040nr ez download Certain improvements made directly to land or added to it (such as shrubbery, fences, roads, sidewalks, and bridges). 1040nr ez download Any retail motor fuels outlet (defined later), such as a convenience store. 1040nr ez download Any municipal wastewater treatment plant. 1040nr ez download Any qualified leasehold improvement property (defined later) placed in service before January 1, 2014. 1040nr ez download Any qualified restaurant property (defined later) placed in service before January 1, 2014. 1040nr ez download Initial clearing and grading land improvements for gas utility property. 1040nr ez download Electric transmission property (that is section 1245 property) used in the transmission at 69 or more kilovolts of electricity placed in service after April 11, 2005. 1040nr ez download See Natural gas gathering line and electric transmission property , later. 1040nr ez download Any natural gas distribution line placed in service after April 11, 2005 and before January 1, 2011. 1040nr ez download Any qualified retail improvement property placed in service before January 1, 2014. 1040nr ez download 20-year property. 1040nr ez download Farm buildings (other than single purpose agricultural or horticultural structures). 1040nr ez download Municipal sewers not classified as 25-year property. 1040nr ez download Initial clearing and grading land improvements for electric utility transmission and distribution plants. 1040nr ez download 25-year property. 1040nr ez download This class is water utility property, which is either of the following. 1040nr ez download Property that is an integral part of the gathering, treatment, or commercial distribution of water, and that, without regard to this provision, would be 20-year property. 1040nr ez download Municipal sewers other than property placed in service under a binding contract in effect at all times since June 9, 1996. 1040nr ez download Residential rental property. 1040nr ez download This is any building or structure, such as a rental home (including a mobile home), if 80% or more of its gross rental income for the tax year is from dwelling units. 1040nr ez download A dwelling unit is a house or apartment used to provide living accommodations in a building or structure. 1040nr ez download It does not include a unit in a hotel, motel, or other establishment where more than half the units are used on a transient basis. 1040nr ez download If you occupy any part of the building or structure for personal use, its gross rental income includes the fair rental value of the part you occupy. 1040nr ez download Nonresidential real property. 1040nr ez download This is section 1250 property, such as an office building, store, or warehouse, that is neither residential rental property nor property with a class life of less than 27. 1040nr ez download 5 years. 1040nr ez download Qualified rent-to-own property. 1040nr ez download   Qualified rent-to-own property is property held by a rent-to-own dealer for purposes of being subject to a rent-to-own contract. 1040nr ez download It is tangible personal property generally used in the home for personal use. 1040nr ez download It includes computers and peripheral equipment, televisions, videocassette recorders, stereos, camcorders, appliances, furniture, washing machines and dryers, refrigerators, and other similar consumer durable property. 1040nr ez download Consumer durable property does not include real property, aircraft, boats, motor vehicles, or trailers. 1040nr ez download   If some of the property you rent to others under a rent-to-own agreement is of a type that may be used by the renters for either personal or business purposes, you still can treat this property as qualified property as long as it does not represent a significant portion of your leasing property. 1040nr ez download However, if this dual-use property does represent a significant portion of your leasing property, you must prove that this property is qualified rent-to-own property. 1040nr ez download Rent-to-own dealer. 1040nr ez download   You are a rent-to-own dealer if you meet all the following requirements. 1040nr ez download You regularly enter into rent-to-own contracts (defined below) in the ordinary course of your business for the use of consumer property. 1040nr ez download A substantial portion of these contracts end with the customer returning the property before making all the payments required to transfer ownership. 1040nr ez download The property is tangible personal property of a type generally used within the home for personal use. 1040nr ez download Rent-to-own contract. 1040nr ez download   This is any lease for the use of consumer property between a rent-to-own dealer and a customer who is an individual which— Is titled “Rent-to-Own Agreement,” “Lease Agreement with Ownership Option,” or other similar language. 1040nr ez download Provides a beginning date and a maximum period of time, not to exceed 156 weeks or 36 months from the beginning date, for which the contract can be in effect (including renewals or options to extend). 1040nr ez download Provides for regular periodic (weekly or monthly) payments that can be either level or decreasing. 1040nr ez download If the payments are decreasing, no payment can be less than 40% of the largest payment. 1040nr ez download Provides for total payments that generally exceed the normal retail price of the property plus interest. 1040nr ez download Provides for total payments that do not exceed $10,000 for each item of property. 1040nr ez download Provides that the customer has no legal obligation to make all payments outlined in the contract and that, at the end of each weekly or monthly payment period, the customer can either continue to use the property by making the next payment or return the property in good working order with no further obligations and no entitlement to a return of any prior payments. 1040nr ez download Provides that legal title to the property remains with the rent-to-own dealer until the customer makes either all the required payments or the early purchase payments required under the contract to acquire legal title. 1040nr ez download Provides that the customer has no right to sell, sublease, mortgage, pawn, pledge, or otherwise dispose of the property until all contract payments have been made. 1040nr ez download Motorsports entertainment complex. 1040nr ez download   This is a racing track facility permanently situated on land that hosts one or more racing events for automobiles, trucks, or motorcycles during the 36-month period after the first day of the month in which the facility is placed in service. 1040nr ez download The events must be open to the public for the price of admission. 1040nr ez download Qualified smart electric grid system. 1040nr ez download   A qualified smart electric grid system means any smart grid property used as part of a system for electric distribution grid communications, monitoring, and management placed in service after October 3, 2008, by a taxpayer who is a supplier of electrical energy or a provider of electrical energy services. 1040nr ez download Smart grid property includes electronics and related equipment that is capable of: Sensing, collecting, and monitoring data of or from all portions of a utility's electric distribution grid, Providing real-time, two-way communications to monitor or to manage the grid, and Providing real-time analysis of an event prediction based on collected data that can be used to provide electric distribution system reliability, quality, and performance. 1040nr ez download Retail motor fuels outlet. 1040nr ez download   Real property is a retail motor fuels outlet if it is used to a substantial extent in the retail marketing of petroleum or petroleum products (whether or not it is also used to sell food or other convenience items) and meets any one of the following three tests. 1040nr ez download It is not larger than 1,400 square feet. 1040nr ez download 50% or more of the gross revenues generated from the property are derived from petroleum sales. 1040nr ez download 50% or more of the floor space in the property is devoted to petroleum marketing sales. 1040nr ez download A retail motor fuels outlet does not include any facility related to petroleum and natural gas trunk pipelines. 1040nr ez download Qualified leasehold improvement property. 1040nr ez download    Generally, this is any improvement to an interior part of a building (placed in service before January 1, 2014) that is nonresidential real property, provided all of the requirements discussed in chapter 3 under Qualified leasehold improvement property are met. 1040nr ez download   In addition, an improvement made by the lessor does not qualify as qualified leasehold improvement property to any subsequent owner unless it is acquired from the original lessor by reason of the lessor's death or in any of the following types of transactions. 1040nr ez download A transaction to which section 381(a) applies, A mere change in the form of conducting the trade or business so long as the property is retained in the trade or business as qualified leasehold improvement property and the taxpayer retains a substantial interest in the trade or business, A like-kind exchange, involuntary conversion, or reacquisition of real property to the extent that the basis in the property represents the carryover basis, or Certain nonrecognition transactions to the extent that your basis in the property is determined by reference to the transferor's or distributor's basis in the property. 1040nr ez download Examples include the following. 1040nr ez download A complete liquidation of a subsidiary. 1040nr ez download A transfer to a corporation controlled by the transferor. 1040nr ez download An exchange of property by a corporation solely for stock or securities in another corporation in a reorganization. 1040nr ez download Qualified restaurant property. 1040nr ez download   Qualified restaurant property is any section 1250 property that is a building placed in service after December 31, 2008, and before January 1, 2014. 1040nr ez download Also, more than 50% of the building's square footage must be devoted to preparation of meals and seating for on-premises consumption of prepared meals. 1040nr ez download Qualified smart electric meter. 1040nr ez download   A qualified smart electric meter is any time-based meter and related communication equipment which is placed in service by a supplier of electric energy or a provider of electric energy services and which is capable of being used by you as part of a system that: Measures and records electricity usage data on a time-differentiated basis in at least 24 separate time segments per day; Provides for the exchange of information between the supplier or provider and the customer's smart electric meter in support of time-based rates or other forms of demand response; Provides data to the supplier or provider so that the supplier or provider can provide energy usage information to customers electronically, and Provides all commercial and residential customers of such supplier or provider with net metering. 1040nr ez download Net metering means allowing a customer a credit, if any, as complies with applicable federal and state laws and regulations for providing electricity to the supplier or provider. 1040nr ez download Natural gas gathering line and electric transmission property. 1040nr ez download   Any natural gas gathering line placed in service after April 11, 2005, is treated as 7-year property, and electric transmission property (that is section 1245 property) used in the transmission at 69 or more kilovolts of electricity and any natural gas distribution line placed in service after April 11, 2005, are treated as 15-year property, if the following requirements are met. 1040nr ez download The original use of the property must have begun with you after April 11, 2005. 1040nr ez download Original use means the first use to which the property is put, whether or not by you. 1040nr ez download Therefore, property used by any person before April 12, 2005, is not original use. 1040nr ez download Original use includes additional capital expenditures you incurred to recondition or rebuild your property. 1040nr ez download However, original use does not include the cost of reconditioned or rebuilt property you acquired. 1040nr ez download Property containing used parts will not be treated as reconditioned or rebuilt if the cost of the used parts is not more than 20% of the total cost of the property. 1040nr ez download The property must not be placed in service under a binding contract in effect before April 12, 2005. 1040nr ez download The property must not be self-constructed property (property you manufacture, construct, or produce for your own use), if you began the manufacture, construction, or production of the property before April 12, 2005. 1040nr ez download Property that is manufactured, constructed, or produced for your use by another person under a written binding contract entered into by you or a related party before the manufacture, construction, or production of the property is considered to be manufactured, constructed, or produced by you. 1040nr ez download What Is the Placed in Service Date? You begin to claim depreciation when your property is placed in service for either use in a trade or business or the production of income. 1040nr ez download The placed in service date for your property is the date the property is ready and available for a specific use. 1040nr ez download It is therefore not necessarily the date it is first used. 1040nr ez download If you converted property held for personal use to use in a trade or business or for the production of income, treat the property as being placed in service on the conversion date. 1040nr ez download See Placed in Service under When Does Depreciation Begin and End in chapter 1 for examples illustrating when property is placed in service. 1040nr ez download What Is the Basis for Depreciation? The basis for depreciation of MACRS property is the property's cost or other basis multiplied by the percentage of business/investment use. 1040nr ez download For a discussion of business/investment use, see Partial business or investment use under Property Used in Your Business or Income-Producing Activity in chapter 1 . 1040nr ez download Reduce that amount by any credits and deductions allocable to the property. 1040nr ez download The following are examples of some credits and deductions that reduce basis. 1040nr ez download Any deduction for section 179 property. 1040nr ez download Any deduction under section 179B of the Internal Revenue Code for capital costs to comply with Environmental Protection Agency sulfur regulations. 1040nr ez download Any deduction under section 179C of the Internal Revenue Code for certain qualified refinery property placed in service after August 8, 2005, and before January 1, 2014. 1040nr ez download Any deduction under section 179D of the Internal Revenue Code for certain energy efficient commercial building property placed in service after December 31, 2005, and before January 1, 2014. 1040nr ez download Any deduction under section 179E of the Internal Revenue Code for qualified advanced mine safety equipment property placed in service after December 20, 2006, and before January 1, 2014 . 1040nr ez download Any deduction for removal of barriers to the disabled and the elderly. 1040nr ez download Any disabled access credit, enhanced oil recovery credit, and credit for employer-provided childcare facilities and services. 1040nr ez download Any special depreciation allowance. 1040nr ez download Basis adjustment for investment credit property under section 50(c) of the Internal Revenue Code. 1040nr ez download For additional credits and deductions that affect basis, see section 1016 of the Internal Revenue Code. 1040nr ez download Enter the basis for depreciation under column (c) in Part III of Form 4562. 1040nr ez download For information about how to determine the cost or other basis of property, see What Is the Basis of Your Depreciable Property in chapter 1 . 1040nr ez download Which Recovery Period Applies? The recovery period of property is the number of years over which you recover its cost or other basis. 1040nr ez download It is determined based on the depreciation system (GDS or ADS) used. 1040nr ez download Recovery Periods Under GDS Under GDS, property that is not qualified Indian reservation property is depreciated over one of the following recovery periods. 1040nr ez download Property Class Recovery Period 3-year property   3 years 1   5-year property   5 years     7-year property   7 years     10-year property   10 years     15-year property   15 years 2   20-year property   20 years     25-year property   25 years 3   Residential rental property   27. 1040nr ez download 5 years     Nonresidential real property   39 years 4   15 years for qualified rent-to-own property placed in service before August 6, 1997. 1040nr ez download 239 years for property that is a retail motor fuels outlet placed in service before August 20, 1996 (31. 1040nr ez download 5 years if placed in service before May 13, 1993), unless you elected to depreciate it over 15 years. 1040nr ez download 320 years for property placed in service before June 13, 1996, or under a binding contract in effect before June 10, 1996. 1040nr ez download 431. 1040nr ez download 5 years for property placed in service before May 13, 1993 (or before January 1, 1994, if the purchase or construction of the property is under a binding contract in effect before May 13, 1993, or if construction began before May 13, 1993). 1040nr ez download The GDS recovery periods for property not listed above can be found in Appendix B, Table of Class Lives and Recovery Periods. 1040nr ez download Residential rental property and nonresidential real property are defined earlier under Which Depreciation System (GDS or ADS) Applies. 1040nr ez download Enter the appropriate recovery period on Form 4562 under column (d) in section B of Part III, unless already shown (for 25-year property, residential rental property, and nonresidential real property). 1040nr ez download Office in the home. 1040nr ez download   If your home is a personal-use single family residence and you begin to use part of your home as an office, depreciate that part of your home as nonresidential real property over 39 years (31. 1040nr ez download 5 years if you began using it for business before May 13, 1993). 1040nr ez download However, if your home is an apartment in an apartment building that you own and the building is residential rental property as defined earlier under Which Depreciation System (GDS or ADS) Applies , depreciate the part used as an office as residential rental property over 27. 1040nr ez download 5 years. 1040nr ez download See Publication 587 for a discussion of the tests you must meet to claim expenses, including depreciation, for the business use of your home. 1040nr ez download Home changed to rental use. 1040nr ez download   If you begin to rent a home that was your personal home before 1987, you depreciate it as residential rental property over 27. 1040nr ez download 5 years. 1040nr ez download Indian Reservation Property The recovery periods for qualified property you placed in service on an Indian reservation after 1993 and before 2014 are shorter than those listed earlier. 1040nr ez download The following table shows these shorter recovery periods. 1040nr ez download Property Class Recovery  Period 3-year property 2 years 5-year property 3 years 7-year property 4 years 10-year property 6 years 15-year property 9 years 20-year property 12 years Nonresidential real property 22 years Nonresidential real property is defined earlier under Which Property Class Applies Under GDS . 1040nr ez download Use this chart to find the correct percentage table to use for qualified Indian reservation property. 1040nr ez download IF your recovery period is: THEN use the following table in Appendix A: 2 years A-21 3 years A-1, A-2, A-3, A-4, or A-5 4 years A-22 6 years A-23 9 years A-14, A-15, A-16, A-17, or A-18 12 years A-14, A-15, A-16, A-17, or A-18 22 years A-24 Qualified property. 1040nr ez download   Property eligible for the shorter recovery periods are 3-, 5-, 7-, 10-, 15-, and 20-year property and nonresidential real property. 1040nr ez download You must use this property predominantly in the active conduct of a trade or business within an Indian reservation. 1040nr ez download The rental of real property that is located on an Indian reservation is treated as the active conduct of a trade or business within an Indian reservation. 1040nr ez download   The following property is not qualified property. 1040nr ez download Property used or located outside an Indian reservation on a regular basis, other than qualified infrastructure property. 1040nr ez download Property acquired directly or indirectly from a related person. 1040nr ez download Property placed in service for purposes of conducting or housing class I, II, or III gaming activities. 1040nr ez download These activities are defined in section 4 of the Indian Regulatory Act (25 U. 1040nr ez download S. 1040nr ez download C. 1040nr ez download 2703). 1040nr ez download Any property you must depreciate under ADS. 1040nr ez download Determine whether property is qualified without regard to the election to use ADS and after applying the special rules for listed property not used predominantly for qualified business use (discussed in chapter 5). 1040nr ez download Qualified infrastructure property. 1040nr ez download   Item (1) above does not apply to qualified infrastructure property located outside the reservation that is used to connect with qualified infrastructure property within the reservation. 1040nr ez download Qualified infrastructure property is property that meets all the following rules. 1040nr ez download It is qualified property, as defined earlier, except that it is outside the reservation. 1040nr ez download It benefits the tribal infrastructure. 1040nr ez download It is available to the general public. 1040nr ez download It is placed in service in connection with the active conduct of a trade or business within a reservation. 1040nr ez download Infrastructure property includes, but is not limited to, roads, power lines, water systems, railroad spurs, and communications facilities. 1040nr ez download Related person. 1040nr ez download   For purposes of item (2) above, see Related persons in the discussion on property owned or used in 1986 under What Method Can You Use To Depreciate Your Property in chapter 1 for a description of related persons. 1040nr ez download Indian reservation. 1040nr ez download   The term Indian reservation means a reservation as defined in section 3(d) of the Indian Financing Act of 1974 (25 U. 1040nr ez download S. 1040nr ez download C. 1040nr ez download 1452(d)) or section 4(10) of the Indian Child Welfare Act of 1978 (25 U. 1040nr ez download S. 1040nr ez download C. 1040nr ez download 1903(10)). 1040nr ez download Section 3(d) of the Indian Financing Act of 1974 defines reservation to include former Indian reservations in Oklahoma. 1040nr ez download For a definition of the term “former Indian reservations in Oklahoma,” see Notice 98-45 in Internal Revenue Bulletin 1998-35. 1040nr ez download Recovery Periods Under ADS The recovery periods for most property generally are longer under ADS than they are under GDS. 1040nr ez download The following table shows some of the ADS recovery periods. 1040nr ez download Property Recovery  Period Rent-to-own property 4 years Automobiles and light duty trucks 5 years Computers and peripheral equipment 5 years High technology telephone station equipment installed on customer premises 5 years High technology medical equipment 5 years Personal property with no class life 12 years Natural gas gathering lines 14 years Single purpose agricultural and horticultural structures 15 years Any tree or vine bearing fruit or nuts 20 years Initial clearing and grading land  improvements for gas utility property 20 years Initial clearing and grading land  improvements for electric utility  transmission and distribution plants 25 years Electric transmission property used in the transmission at 69 or more kilovolts of electricity 30 years Natural gas distribution lines 35 years Any qualified leasehold improvement property 39 years Any qualified restaurant property 39 years Nonresidential real property 40 years Residential rental property 40 years Section 1245 real property not listed in Appendix B 40 years Railroad grading and tunnel bore 50 years The ADS recovery periods for property not listed above can be found in the tables in Appendix B. 1040nr ez download Rent-to-own property, qualified leasehold improvement property, qualified restaurant property, residential rental property, and nonresidential real property are defined earlier under Which Property Class Applies Under GDS . 1040nr ez download Tax-exempt use property subject to a lease. 1040nr ez download   The ADS recovery period for any property leased under a lease agreement to a tax-exempt organization, governmental unit, or foreign person or entity (other than a partnership) cannot be less than 125% of the lease term. 1040nr ez download Additions and Improvements An addition or improvement you make to depreciable property is treated as separate depreciable property. 1040nr ez download See How Do You Treat Repairs and Improvements in chapter 1 for a definition of improvements. 1040nr ez download Its property class and recovery period are the same as those that would apply to the original property if you had placed it in service at the same time you placed the addition or improvement in service. 1040nr ez download The recovery period begins on the later of the following dates. 1040nr ez download The date you place the addition or improvement in service. 1040nr ez download The date you place in service the property to which you made the addition or improvement. 1040nr ez download If the improvement you make is qualified leasehold improvement property, qualified restaurant property, or qualified retail improvement property, the GDS recovery period is 15 years (39 years under ADS). 1040nr ez download Example. 1040nr ez download You own a rental home that you have been renting out since 1981. 1040nr ez download If you put an addition on the home and place the addition in service this year, you would use MACRS to figure your depreciation deduction for the addition. 1040nr ez download Under GDS, the property class for the addition is residential rental property and its recovery period is 27. 1040nr ez download 5 years because the home to which the addition is made would be residential rental property if you had placed it in service this year. 1040nr ez download Which Convention Applies? Under MACRS, averaging conventions establish when the recovery period begins and ends. 1040nr ez download The convention you use determines the number of months for which you can claim depreciation in the year you place property in service and in the year you dispose of the property. 1040nr ez download The mid-month convention. 1040nr ez download   Use this convention for nonresidential real property, residential rental property, and any railroad grading or tunnel bore. 1040nr ez download   Under this convention, you treat all property placed in service or disposed of during a month as placed in service or disposed of at the midpoint of the month. 1040nr ez download This means that a one-half month of depreciation is allowed for the month the property is placed in service or disposed of. 1040nr ez download   Your use of the mid-month convention is indicated by the “MM” already shown under column (e) in Part III of Form 4562. 1040nr ez download The mid-quarter convention. 1040nr ez download   Use this convention if the mid-month convention does not apply and the total depreciable bases of MACRS property you placed in service during the last 3 months of the tax year (excluding nonresidential real property, residential rental property, any railroad grading or tunnel bore, property placed in service and disposed of in the same year, and property that is being depreciated under a method other than MACRS) are more than 40% of the total depreciable bases of all MACRS property you placed in service during the entire year. 1040nr ez download   Under this convention, you treat all property placed in service or disposed of during any quarter of the tax year as placed in service or disposed of at the midpoint of that quarter. 1040nr ez download This means that 1½ months of depreciation is allowed for the quarter the property is placed in service or disposed of. 1040nr ez download   If you use this convention, enter “MQ” under column (e) in Part III of Form 4562. 1040nr ez download    For purposes of determining whether the mid-quarter convention applies, the depreciable basis of property you placed in service during the tax year reflects the reduction in basis for amounts expensed under section 179 and the part of the basis of property attributable to personal use. 1040nr ez download However, it does not reflect any reduction in basis for any special depreciation allowance. 1040nr ez download The half-year convention. 1040nr ez download   Use this convention if neither the mid-quarter convention nor the mid-month convention applies. 1040nr ez download   Under this convention, you treat all property placed in service or disposed of during a tax year as placed in service or disposed of at the midpoint of the year. 1040nr ez download This means that a one-half year of depreciation is allowed for the year the property is placed in service or disposed of. 1040nr ez download   If you use this convention, enter “HY” under column (e) in Part III of Form 4562. 1040nr ez download Which Depreciation Method Applies? MACRS provides three depreciation methods under GDS and one depreciation method under ADS. 1040nr ez download The 200% declining balance method over a GDS recovery period. 1040nr ez download The 150% declining balance method over a GDS recovery period. 1040nr ez download The straight line method over a GDS recovery period. 1040nr ez download The straight line method over an ADS recovery period. 1040nr ez download For property placed in service before 1999, you could have elected the 150% declining balance method using the ADS recovery periods for certain property classes. 1040nr ez download If you made this election, continue to use the same method and recovery period for that property. 1040nr ez download Table 4–1 lists the types of property you can depreciate under each method. 1040nr ez download It also gives a brief explanation of the method, including any benefits that may apply. 1040nr ez download Depreciation Methods for Farm Property If you place personal property in service in a farming business after 1988, you generally must depreciate it under GDS using the 150% declining balance method unless you are a farmer who must depreciate the property under ADS using the straight line method or you elect to depreciate the property under GDS or ADS using the straight line method. 1040nr ez download You can depreciate real property using the straight line method under either GDS or ADS. 1040nr ez download Fruit or nut trees and vines. 1040nr ez download   Depreciate trees and vines bearing fruit or nuts under GDS using the straight line method over a recovery period of 10 years. 1040nr ez download ADS required for some farmers. 1040nr ez download   If you elect not to apply the uniform capitalization rules to any plant produced in your farming business, you must use ADS. 1040nr ez download You must use ADS for all property you place in service in any year the election is in effect. 1040nr ez download See the regulations under section 263A of the Internal Revenue Code for information on the uniform capitalization rules that apply to farm property. 1040nr ez download Electing a Different Method As shown in Table 4–1 , you can elect a different method for depreciation for certain types of property. 1040nr ez download You must make the election by the due date of the return (including extensions) for the year you placed the property in service. 1040nr ez download However, if you timely filed your return for the year without making the election, you still can make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). 1040nr ez download Attach the election to the amended return and write “Filed pursuant to section 301. 1040nr ez download 9100-2” on the election statement. 1040nr ez download File the amended return at the same address you filed the original return. 1040nr ez download Once you make the election, you cannot change it. 1040nr ez download If you elect to use a different method for one item in a property class, you must apply the same method to all property in that class placed in service during the year of the election. 1040nr ez download However, you can make the election on a property-by-property basis for nonresidential real and residential rental property. 1040nr ez download 150% election. 1040nr ez download   Instead of using the 200% declining balance method over the GDS recovery period for nonfarm property in the 3-, 5-, 7-, and 10-year property classes, you can elect to use the 150% declining balance method. 1040nr ez download Make the election by entering “150 DB” under column (f) in Part III of Form 4562. 1040nr ez download Straight line election. 1040nr ez download   Instead of using either the 200% or 150% declining balance methods over the GDS recovery period, you can elect to use the straight line method over the GDS recovery period. 1040nr ez download Make the election by entering  “S/L” under column (f) in Part III of Form 4562. 1040nr ez download Election of ADS. 1040nr ez download   As explained earlier under Which Depreciation System (GDS or ADS) Applies , you can elect to use ADS even though your property may come under GDS. 1040nr ez download ADS uses the straight line method of depreciation over fixed ADS recovery periods. 1040nr ez download Most ADS recovery periods are listed in Appendix B, or see the table under Recovery Periods Under ADS , earlier. 1040nr ez download   Make the election by completing line 20 in Part III of Form 4562. 1040nr ez download Farm property. 1040nr ez download   Instead of using the 150% declining balance method over a GDS recovery period for property you use in a farming business (other than real property), you can elect to depreciate it using either of the following methods. 1040nr ez download The straight line method over a GDS recovery period. 1040nr ez download The straight line method over an ADS recovery period. 1040nr ez download Table 4-1. 1040nr ez download Depreciation Methods Note. 1040nr ez download The declining balance method is abbreviated as DB and the straight line method is abbreviated as SL. 1040nr ez download Method Type of Property Benefit GDS using 200% DB • Nonfarm 3-, 5-, 7-, and 10-year property • Provides a greater deduction during the earlier recovery years • Changes to SL when that method provides an equal or greater deduction GDS using 150% DB • All farm property (except real property) • All 15- and 20-year property (except qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property placed in service before January 1, 2014) • Nonfarm 3-, 5-, 7-, and 10-year property • Provides a greater deduction during the earlier recovery years • Changes to SL when that method provides an equal or greater deduction1 GDS using SL • Nonresidential real property • Qualified leasehold improvement property placed in service before January 1, 2014 • Qualified restaurant property placed in service before January 1, 2014 • Qualified retail improvement property placed in service before January 1, 2014 • Residential rental property • Trees or vines bearing fruit or nuts • Water utility property • All 3-, 5-, 7-, 10-, 15-, and 20-year property2 • Property for which you elected section 168(k)(4) • Provides for equal yearly deductions (except for the first and last years) ADS using SL • Listed property used 50% or less for business • Property used predominantly outside the U. 1040nr ez download S. 1040nr ez download  • Tax-exempt property • Tax-exempt bond-financed property • Farm property used when an election not to apply the uniform capitalization rules is in effect • Imported property3 • Any property for which you elect to use this method4 • Provides for equal yearly deductions (except for the first and last years) 1The MACRS percentage tables in Appendix A have the switch to the straight line method built into their rates 2See section 168(b)(5) of the Internal Revenue Code. 1040nr ez download 3See section 168(g)(6) of the Internal Revenue Code 4See section 168(g)(7) of the Internal Revenue Code How Is the Depreciation Deduction Figured? To figure your depreciation deduction under MACRS, you first determine the depreciation system, property class, placed in service date, basis amount, recovery period, convention, and depreciation method that applies to your property. 1040nr ez download Then, you are ready to figure your depreciation deduction. 1040nr ez download You can figure it using a percentage table provided by the IRS, or you can figure it yourself without using the table. 1040nr ez download Using the MACRS Percentage Tables To help you figure your deduction under MACRS, the IRS has established percentage tables that incorporate the applicable convention and depreciation method. 1040nr ez download These percentage tables are in Appendix A near the end of this publication. 1040nr ez download Which table to use. 1040nr ez download    Appendix A contains the MACRS Percentage Table Guide, which is designed to help you locate the correct percentage table to use for depreciating your property. 1040nr ez download The percentage tables immediately follow the guide. 1040nr ez download Rules Covering the Use of the Tables The following rules cover the use of the percentage tables. 1040nr ez download You must apply the rates in the percentage tables to your property's unadjusted basis. 1040nr ez download You cannot use the percentage tables for a short tax year. 1040nr ez download See Figuring the Deduction for a Short Tax Year, later, for information on the short tax year rules. 1040nr ez download Once you start using the percentage tables for any item of property, you generally must continue to use them for the entire recovery period of the property. 1040nr ez download You must stop using the tables if you adjust the basis of the property for any reason other than— Depreciation allowed or allowable, or An addition or improvement to that property that is depreciated as a separate item of property. 1040nr ez download Basis adjustments other than those made due to the items listed in (4) include an increase in basis for the recapture of a clean-fuel deduction or credit and a reduction in basis for a casualty loss. 1040nr ez download Basis adjustment due to recapture of clean-fuel vehicle deduction or credit. 1040nr ez download   If you increase the basis of your property because of the recapture of part or all of a deduction for clean-fuel vehicles or the credit for clean-fuel vehicle refueling property placed in service before January 1, 2006, you cannot continue to use the percentage tables. 1040nr ez download For the year of the adjustment and the remaining recovery period, you must figure the depreciation deduction yourself using the property's adjusted basis at the end of the year. 1040nr ez download See Figuring the Deduction Without Using the Tables, later. 1040nr ez download Basis adjustment due to casualty loss. 1040nr ez download   If you reduce the basis of your property because of a casualty, you cannot continue to use the percentage tables. 1040nr ez download For the year of the adjustment and the remaining recovery period, you must figure the depreciation yourself using the property's adjusted basis at the end of the year. 1040nr ez download See Figuring the Deduction Without Using the Tables, later. 1040nr ez download Example. 1040nr ez download On October 26, 2012, Sandra Elm, a calendar year taxpayer, bought and placed in service in her business a new item of 7-year property. 1040nr ez download It cost $39,000 and she elected a section 179 deduction of $24,000. 1040nr ez download She also took a special depreciation allowance of $7,500 [50% of $15,000 ($39,000 − $24,000)]. 1040nr ez download Her unadjusted basis after the section 179 deduction and special depreciation allowance was $7,500 ($15,000 − $7,500). 1040nr ez download She figured her MACRS depreciation deduction using the percentage tables. 1040nr ez download For 2012, her MACRS depreciation deduction was $268. 1040nr ez download In July 2013, the property was vandalized and Sandra had a deductible casualty loss of $3,000. 1040nr ez download She must adjust the property's basis for the casualty loss, so she can no longer use the percentage tables. 1040nr ez download Her adjusted basis at the end of 2013, before figuring her 2013 depreciation, is $4,232. 1040nr ez download She figures that amount by subtracting the 2012 MACRS depreciation of $268 and the casualty loss of $3,000 from the unadjusted basis of $7,500. 1040nr ez download She must now figure her depreciation for 2013 without using the percentage tables. 1040nr ez download Figuring the Unadjusted Basis of Your Property You must apply the table rates to your property's unadjusted basis each year of the recovery period. 1040nr ez download Unadjusted basis is the same basis amount you would use to figure gain on a sale, but you figure it without reducing your original basis by any MACRS depreciation taken in earlier years. 1040nr ez download However, you do reduce your original basis by other amounts, including the following. 1040nr ez download Any amortization taken on the property. 1040nr ez download Any section 179 deduction claimed. 1040nr ez download Any special depreciation allowance taken on the property. 1040nr ez download For business property you purchase during the year, the unadjusted basis is its cost minus these and other applicable adjustments. 1040nr ez download If you trade property, your unadjusted basis in the property received is the cash paid plus the adjusted basis of the property traded minus these adjustments. 1040nr ez download MACRS Worksheet You can use this worksheet to help you figure your depreciation deduction using the percentage tables. 1040nr ez download Use a separate worksheet for each item of property. 1040nr ez download Then, use the information from this worksheet to prepare Form 4562. 1040nr ez download Do not use this worksheet for automobiles. 1040nr ez download Use the Depreciation Worksheet for Passenger Automobiles in chapter 5. 1040nr ez download MACRS Worksheet Part I   1. 1040nr ez download MACRS system (GDS or ADS)   2. 1040nr ez download Property class   3. 1040nr ez download Date placed in service   4. 1040nr ez download Recovery period   5. 1040nr ez download Method and convention   6. 1040nr ez download Depreciation rate (from tables)   Part II   7. 1040nr ez download Cost or other basis* $     8. 1040nr ez download Business/investment use   %   9. 1040nr ez download Multiply line 7 by line 8   $ 10. 1040nr ez download Total claimed for section 179 deduction and other items   $ 11. 1040nr ez download Subtract line 10 from line 9. 1040nr ez download This is your tentative basis for depreciation   $ 12. 1040nr ez download Multiply line 11 by . 1040nr ez download 50 if the 50% special depreciation allowance applies. 1040nr ez download This is your special depreciation allowance. 1040nr ez download Enter -0- if this is not the year you placed the property in service, the property is not qualified property, or you elected not to claim a special allowance   $ 13. 1040nr ez download Subtract line 12 from line 11. 1040nr ez download This is your basis for depreciation     14. 1040nr ez download Depreciation rate (from line 6)     15. 1040nr ez download Multiply line 13 by line 14. 1040nr ez download This is your MACRS depreciation deduction   $ *If real estate, do not include cost (basis) of land. 1040nr ez download The following example shows how to figure your MACRS depreciation deduction using the percentage tables and the MACRS worksheet. 1040nr ez download Example. 1040nr ez download You bought office furniture (7-year property) for $10,000 and placed it in service on August 11, 2013. 1040nr ez download You use the furniture only for business. 1040nr ez download This is the only property you placed in service this year. 1040nr ez download You did not elect a section 179 deduction and the property is not qualified property for purposes of claiming a special depreciation allowance so your property's unadjusted basis is its cost, $10,000. 1040nr ez download You use GDS and the half-year convention to figure your depreciation. 1040nr ez download You refer to the MACRS Percentage Table Guide in Appendix A and find that you should use Table A-1. 1040nr ez download Multiply your property's unadjusted basis each year by the percentage for 7-year property given in Table A-1. 1040nr ez download You figure your depreciation deduction using the MACRS worksheet as follows. 1040nr ez download MACRS Worksheet Part I 1. 1040nr ez download MACRS system (GDS or ADS) GDS 2. 1040nr ez download Property class 7-year 3. 1040nr ez download Date placed in service 8/11/13 4. 1040nr ez download Recovery period 7-Year 5. 1040nr ez download Method and convention 200%DB/Half-Year 6. 1040nr ez download Depreciation rate (from tables) . 1040nr ez download 1429 Part II 7. 1040nr ez download Cost or other basis* $10,000     8. 1040nr ez download Business/investment use 100 %   9. 1040nr ez download Multiply line 7 by line 8   $10,000 10. 1040nr ez download Total claimed for section 179 deduction and other items   -0- 11. 1040nr ez download Subtract line 10 from line 9. 1040nr ez download This is your tentative basis for depreciation   $10,000 12. 1040nr ez download Multiply line 11 by . 1040nr ez download 50 if the 50% special depreciation allowance applies. 1040nr ez download This is your special depreciation allowance. 1040nr ez download Enter -0- if this is not the year you placed the property in service, the property is not qualified property, or you elected not to claim a special allowance   -0- 13. 1040nr ez download Subtract line 12 from line 11. 1040nr ez download This is your basis for depreciation   $10,000 14. 1040nr ez download Depreciation rate (from line 6)   . 1040nr ez download 1429 15. 1040nr ez download Multiply line 13 by line 14. 1040nr ez download This is your MACRS depreciation deduction   $1,429 *If real estate, do not include cost (basis) of land. 1040nr ez download If there are no adjustments to the basis of the property other than depreciation, your depreciation deduction for each subsequent year of the recovery period will be as follows. 1040nr ez download Year   Basis Percentage Deduction 2014 $ 10,000 24. 1040nr ez download 49%   $2,449   2015   10,000 17. 1040nr ez download 49   1,749   2016   10,000 12. 1040nr ez download 49   1,249   2017   10,000 8. 1040nr ez download 93   893   2018   10,000 8. 1040nr ez download 92   892   2019   10,000 8. 1040nr ez download 93   893   2020   10,000 4. 1040nr ez download 46   446   Examples The following examples are provided to show you how to use the percentage tables. 1040nr ez download In both examples, assume the following. 1040nr ez download You use the property only for business. 1040nr ez download You use the calendar year as your tax year. 1040nr ez download You use GDS for all the properties. 1040nr ez download Example 1. 1040nr ez download You bought a building and land for $120,000 and placed it in service on March 8. 1040nr ez download The sales contract showed that the building cost $100,000 and the land cost $20,000. 1040nr ez download It is nonresidential real property. 1040nr ez download The building's unadjusted basis is its original cost, $100,000. 1040nr ez download You refer to the MACRS Percentage Table Guide in Appendix A and find that you should use Table A-7a. 1040nr ez download March is the third month of your tax year, so multiply the building's unadjusted basis, $100,000, by the percentages for the third month in Table A-7a. 1040nr ez download Your depreciation deduction for each of the first 3 years is as follows: Year   Basis Percentage Deduction 1st $ 100,000 2. 1040nr ez download 033%   $2,033   2nd   100,000 2. 1040nr ez download 564   2,564   3rd   100,000 2. 1040nr ez download 564   2,564   Example 2. 1040nr ez download During the year, you bought a machine (7-year property) for $4,000, office furniture (7-year property) for $1,000, and a computer (5-year property) for $5,000. 1040nr ez download You placed the machine in service in January, the furniture in September, and the computer in October. 1040nr ez download You do not elect a section 179 deduction and none of these items is qualified property for purposes of claiming a special depreciation allowance. 1040nr ez download You placed property in service during the last 3 months of the year, so you must first determine if you have to use the mid-quarter convention. 1040nr ez download The total bases of all property you placed in service during the year is $10,000. 1040nr ez download The $5,000 basis of the computer, which you placed in service during the last 3 months (the fourth quarter) of your tax year, is more than 40% of the total bases of all property ($10,000) you placed in service during the year. 1040nr ez download Therefore, you must use the mid-quarter convention for all three items. 1040nr ez download You refer to the MACRS Percentage Table Guide in Appendix A to determine which table you should use under the mid-quarter convention. 1040nr ez download The machine is 7-year property placed in service in the first quarter, so you use Table A-2. 1040nr ez download The furniture is 7-year property placed in service in the third quarter, so you use Table A-4. 1040nr ez download Finally, because the computer is 5-year property placed in service in the fourth quarter, you use Table A-6. 1040nr ez download Knowing what table to use for each property, you figure the depreciation for the first 2 years as follows. 1040nr ez download Year Property Basis Percentage Deduction 1st Machine $4,000 25. 1040nr ez download 00 $1,000   2nd Machine 4,000 21. 1040nr ez download 43 857   1st Furniture 1,000 10. 1040nr ez download 71 107   2nd Furniture 1,000 25. 1040nr ez download 51 255   1st Computer 5,000 5. 1040nr ez download 00 250   2nd Computer 5,000 38. 1040nr ez download 00 1,900   Sale or Other Disposition Before the Recovery Period Ends If you sell or otherwise dispose of your property before the end of its recovery period, your depreciation deduction for the year of the disposition will be only part of the depreciation amount for the full year. 1040nr ez download You have disposed of your property if you have permanently withdrawn it from use in your business or income-producing activity because of its sale, exchange, retirement, abandonment, involuntary conversion, or destruction. 1040nr ez download After you figure the full-year depreciation amount, figure the deductible part using the convention that applies to the property. 1040nr ez download Half-year convention used. 1040nr ez download   For property for which you used a half-year convention, the depreciation deduction for the year of the disposition is half the depreciation determined for the full year. 1040nr ez download Mid-quarter convention used. 1040nr ez download   For property for which you used the mid-quarter convention, figure your depreciation deduction for the year of the disposition by multiplying a full year of depreciation by the percentage listed below for the quarter in which you disposed of the property. 1040nr ez download Quarter Percentage First 12. 1040nr ez download 5% Second 37. 1040nr ez download 5 Third 62. 1040nr ez download 5 Fourth 87. 1040nr ez download 5 Example. 1040nr ez download On December 2, 2010, you placed in service an item of 5-year property costing $10,000. 1040nr ez download You did not claim a section 179 deduction and the property does not qualify for a special depreciation allowance. 1040nr ez download Your unadjusted basis for the property was $10,000. 1040nr ez download You used the mid-quarter convention because this was the only item of business property you placed in service in 2010 and it was placed in service during the last 3 months of your tax year. 1040nr ez download Your property is in the 5-year property class, so you used Table A-5 to figure your depreciation deduction. 1040nr ez download Your deductions for 2010, 2011, and 2012 were $500 (5% of $10,000), $3,800 (38% of $10,000), and $2,280 (22. 1040nr ez download 80% of $10,000). 1040nr ez download You disposed of the property on April 6, 2013. 1040nr ez download To determine your depreciation deduction for 2013, first figure the deduction for the full year. 1040nr ez download This is $1,368 (13. 1040nr ez download 68% of $10,000). 1040nr ez download April is in the second quarter of the year, so you multiply $1,368 by 37. 1040nr ez download 5% to get your depreciation deduction of $513 for 2013. 1040nr ez download Mid-month convention used. 1040nr ez download   If you dispose of residential rental or nonresidential real property, figure your depreciation deduction for the year of the disposition by multiplying a full year of depreciation by a fraction. 1040nr ez download The numerator of the fraction is the number of months (including partial months) in the year that the property is considered in service. 1040nr ez download The denominator is 12. 1040nr ez download Example. 1040nr ez download On July 2, 2011, you purchased and placed in service residential rental property. 1040nr ez download The property cost $100,000, not including the cost of land. 1040nr ez download You used Table A-6 to figure your MACRS depreciation for this property. 1040nr ez download You sold the property on March 2, 2013. 1040nr ez download You file your tax return based on the calendar year. 1040nr ez download A full year of depreciation for 2013 is $3,636. 1040nr ez download This is $100,000 multiplied by . 1040nr ez download 03636 (the percentage for the seventh month of the third recovery year) from Table A-6 . 1040nr ez download You then apply the mid-month convention for the 2½ months of use in 2013. 1040nr ez download Treat the month of disposition as one-half month of use. 1040nr ez download Multiply $3,636 by the fraction, 2. 1040nr ez download 5 over 12, to get your 2013 depreciation deduction of $757. 1040nr ez download 50. 1040nr ez download Figuring the Deduction Without Using the Tables Instead of using the rates in the percentage tables to figure your depreciation deduction, you can figure it yourself. 1040nr ez download Before making the computation each year, you must reduce your adjusted basis in the property by the depreciation claimed the previous year. 1040nr ez download Figuring MACRS deductions without using the tables generally will result in a slightly different amount than using the tables. 1040nr ez download Declining Balance Method When using a declining balance method, you apply the same depreciation rate each year to the adjusted basis of your property. 1040nr ez download You must use the applicable convention for the first tax year and you must switch to the straight line method beginning in the first year for which it will give an equal or greater deduction. 1040nr ez download The straight line method is explained later. 1040nr ez download You figure depreciation for the year you place property in service as follows. 1040nr ez download Multiply your adjusted basis in the property by the declining balance rate. 1040nr ez download Apply the applicable convention. 1040nr ez download You figure depreciation for all other years (before the year you switch to the straight line method) as follows. 1040nr ez download Reduce your adjusted basis in the property by the depreciation allowed or allowable in earlier years. 1040nr ez download Multiply this new adjusted basis by the same declining balance rate used in earlier years. 1040nr ez download If you dispose of property before the end of its recovery period, see Using the Applicable Convention, later, for information on how to figure depreciation for the year you dispose of it. 1040nr ez download Figuring depreciation under the declining balance method and switching to the straight line method is illustrated in Example 1 , later, under Examples. 1040nr ez download Declining balance rate. 1040nr ez download   You figure your declining balance rate by dividing the specified declining balance percentage (150% or 200% changed to a decimal) by the number of years in the property's recovery period. 1040nr ez download For example, for 3-year property depreciated using the 200% declining balance method, divide 2. 1040nr ez download 00 (200%) by 3 to get 0. 1040nr ez download 6667, or a 66. 1040nr ez download 67% declining balance rate. 1040nr ez download For 15-year property depreciated using the 150% declining balance method, divide 1. 1040nr ez download 50 (150%) by 15 to get 0. 1040nr ez download 10, or a 10% declining balance rate. 1040nr ez download   The following table shows the declining balance rate for each property class and the first year for which the straight line method gives an equal or greater deduction. 1040nr ez download Property Class Method Declining Balance Rate Year 3-year 200% DB 66. 1040nr ez download 667% 3rd 5-year 200% DB 40. 1040nr ez download 0 4th 7-year 200% DB 28. 1040nr ez download 571 5th 10-year 200% DB 20. 1040nr ez download 0 7th 15-year 150% DB 10. 1040nr ez download 0 7th 20-year 150% DB 7. 1040nr ez download 5 9th Straight Line Method When using the straight line method, you apply a different depreciation rate each year to the adjusted basis of your property. 1040nr ez download You must use the applicable convention in the year you place the property in service and the year you dispose of the property. 1040nr ez download You figure depreciation for the year you place property in service as follows. 1040nr ez download Multiply your adjusted basis in the property by the straight line rate. 1040nr ez download Apply the applicable convention. 1040nr ez download You figure depreciation for all other years (including the year you switch from the declining balance method to the straight line method) as follows. 1040nr ez download Reduce your adjusted basis in the property by the depreciation allowed or allowable in earlier years (under any method). 1040nr ez download Determine the depreciation rate for the year. 1040nr ez download Multiply the adjusted basis figured in (1) by the depreciation rate figured in (2). 1040nr ez download If you dispose of property before the end of its recovery period, see Using the Applicable Convention , later, for information on how to figure depreciation for the year you dispose of it. 1040nr ez download Straight line rate. 1040nr ez download   You determine the straight line depreciation rate for any tax year by dividing the number 1 by the years remaining in the recovery period at the beginning of that year. 1040nr ez download When figuring the number of years remaining, you must take into account the convention used in the year you placed the property in service. 1040nr ez download If the number of years remaining is less than 1, the depreciation rate for that tax year is 1. 1040nr ez download 0 (100%). 1040nr ez download Using the Applicable Convention The applicable convention (discussed earlier under Which Convention Applies ) affects how you figure your depreciation deduction for the year you place your property in service and for the year you dispose of it. 1040nr ez download It determines how much of the recovery period remains at the beginning of each year, so it also affects the depreciation rate for property you depreciate under the straight line method. 1040nr ez download See Straight line rate in the previous discussion. 1040nr ez download Use the applicable convention as explained in the following discussions. 1040nr ez download Half-year convention. 1040nr ez download   If this convention applies, you deduct a half-year of depreciation for the first year and the last year that you depreciate the property. 1040nr ez download You deduct a full year of depreciation for any other year during the recovery period. 1040nr ez download   Figure your depreciation deduction for the year you place the property in service by dividing the depreciation for a full year by 2. 1040nr ez download If you dispose of the property before the end of the recovery period, figure your depreciation deduction for the year of the disposition the same way. 1040nr ez download If you hold the property for the entire recovery period, your depreciation deduction for the year that includes the final 6 months of the recovery period is the amount of your unrecovered basis in the property. 1040nr ez download Mid-quarter convention. 1040nr ez download   If this convention applies, the depreciation you can deduct for the first year you depreciate the property depends on the quarter in which you place the property in service. 1040nr ez download   A quarter of a full 12-month tax year is a period of 3 months. 1040nr ez download The first quarter in a year begins on the first day of the tax year. 1040nr ez download The second quarter begins on the first day of the fourth month of the tax year. 1040nr ez download The third quarter begins on the first day of the seventh month of the tax year. 1040nr ez download The fourth quarter begins on the first day of the tenth month of the tax year. 1040nr ez download A calendar year is divided into the following quarters. 1040nr ez download Quarter Months First January, February, March Second April, May, June Third July, August, September Fourth October, November, December   Figure your depreciation deduction for the year you place the property in service by multiplying the depreciation for a full year by the percentage listed below for the quarter you place the property in service. 1040nr ez download Quarter Percentage First 87. 1040nr ez download 5% Second 62. 1040nr ez download 5 Third 37. 1040nr ez download 5 Fourth 12. 1040nr ez download 5   If you dispose of the property before the end of the recovery period, figure your depreciation deduction for the year of the disposition by multiplying a full year of depreciation by the percentage listed below for the quarter you dispose of the property. 1040nr ez download Quarter Percentage First 12. 1040nr ez download 5% Second 37. 1040nr ez download 5 Third 62. 1040nr ez download 5 Fourth 87. 1040nr ez download 5   If you hold the property for the entire recovery period, your depreciation deduction for the year that includes the final quarter of the recovery period is the amount of your unrecovered basis in the property. 1040nr ez download Mid-month convention. 1040nr ez download   If this convention applies, the depreciation you can deduct for the first year that you depreciate the property depends on the month in which you place the property in service. 1040nr ez download Figure your depreciation deduction for the year you place the property in service by multiplying the depreciation for a full year by a fraction. 1040nr ez download The numerator of the fraction is the number of full months in the year that the property is in service plus ½ (or 0. 1040nr ez download 5). 1040nr ez download The denominator is 12. 1040nr ez download   If you dispose of the property before the end of the recovery period, figure your depreciation deduction for the year of the disposition the same way. 1040nr ez download If you hold the property for the entire recovery period, your depreciation deduction for the year that includes the final month of the recovery period is the amount of your unrecovered basis in the property. 1040nr ez download Example. 1040nr ez download You use the calendar year and place nonresidential real property in service in August. 1040nr ez download The property is in service 4 full months (September, October, November, and December). 1040nr ez download Your numerator is 4. 1040nr ez download 5 (4 full months plus 0. 1040nr ez download 5). 1040nr ez download You multiply the depreciation for a full year by 4. 1040nr ez download 5/12, or 0. 1040nr ez download 375. 1040nr ez download Examples The following examples show how to figure depreciation under MACRS without using the percentage tables. 1040nr ez download Figures are rounded for purposes of the examples. 1040nr ez download Assume for all the examples that you use a calendar year as your tax year. 1040nr ez download Example 1—200% DB method and half-year convention. 1040nr ez download In February, you placed in service depreciable property with a 5-year recovery period and a basis of $1,000. 1040nr ez download You do not elect to take the section 179 deduction and the property does not qualify for a special depreciation allowance. 1040nr ez download You use GDS and the 200% declining balance (DB) method to figure your depreciation. 1040nr ez download When the straight line (SL) method results in an equal or larger deduction, you switch to the SL method. 1040nr ez download You did not place any property in service in the last 3 months of the year, so you must use the half-year convention. 1040nr ez download First year. 1040nr ez download You figure the depreciation rate under the 200% DB method by dividing 2 (200%) by 5 (the number of years in the recovery period). 1040nr ez download The result is 40%. 1040nr ez download You multiply the adjusted basis of the property ($1,000) by the 40% DB rate. 1040nr ez download You apply the half-year convention by dividing the result ($400) by 2. 1040nr ez download Depreciation for the first year under the 200% DB method is $200. 1040nr ez download You figure the depreciation rate under the straight line (SL) method by dividing 1 by 5, the number of years in the recovery period. 1040nr ez download The result is 20%. 1040nr ez download You multiply the adjusted basis of the property ($1,000) by the 20% SL rate. 1040nr ez download You apply the half-year convention by dividing the result ($200) by 2. 1040nr ez download Depreciation for the first year under the SL method is $100. 1040nr ez download The DB method provides a larger deduction, so you deduct the $200 figured under the 200% DB method. 1040nr ez download Second year. 1040nr ez download You reduce the adjusted basis ($1,000) by the depreciation claimed in the first year ($200). 1040nr ez download You multiply the result ($800) by the DB rate (40%). 1040nr ez download Depreciation for the second year under the 200% DB method is $320. 1040nr ez download You figure the SL depreciation rate by dividing 1 by 4. 1040nr ez download 5, the number of years remaining in the recovery period. 1040nr ez download (Based on the half-year convention, you used only half a year of the recovery period in the first year. 1040nr ez download ) You multiply the reduced adjusted basis ($800) by the result (22. 1040nr ez download 22%). 1040nr ez download Depreciation under the SL method for the second year is $178. 1040nr ez download The DB method provides a larger deduction, so you deduct the $320 figured under the 200% DB method. 1040nr ez download Third year. 1040nr ez download You reduce the adjusted basis ($800) by the depreciation claimed in the second year ($320). 1040nr ez download You multiply the result ($480) by the DB rate (40%). 1040nr ez download Depreciation for the third year under the 200% DB method is $192. 1040nr ez download You figure the SL depreciation rate by dividing 1 by 3. 1040nr ez download 5. 1040nr ez download You multiply the reduced adjusted basis ($480) by the result (28. 1040nr ez download 57%). 1040nr ez download Depreciation under the SL method for the third year is $137. 1040nr ez download The DB method provides a larger deduction, so you deduct the $192 figured under the 200% DB method. 1040nr ez download Fourth year. 1040nr ez download You reduce the adjusted basis ($480) by the de