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1090ez Publication 587 - Main Content Table of Contents Qualifying for a DeductionExclusive Use Regular Use Trade or Business Use Principal Place of Business Place To Meet Patients, Clients, or Customers Separate Structure Figuring the DeductionUsing Actual Expenses Using the Simplified Method Daycare Facility Standard meal and snack rates. 1090ez Sale or Exchange of Your HomeGain on Sale Depreciation Basis Adjustment Reporting the Sale More Information Business Furniture and EquipmentListed Property Property Bought for Business Use Personal Property Converted to Business Use Recordkeeping Where To DeductSelf-Employed Persons Employees Partners How To Get Tax HelpLow Income Taxpayer Clinics Worksheet To Figure the Deduction for Business Use of Your HomeInstructions for the Worksheet Worksheets To Figure the Deduction for Business Use of Your Home (Simplified Method) Instructions for the Simplified Method Worksheet Instructions for the Daycare Facility Worksheet Instructions for the Area Adjustment Worksheet Qualifying for a Deduction Generally, you cannot deduct items related to your home, such as mortgage interest, real estate taxes, utilities, maintenance, rent, depreciation, or property insurance, as business expenses. 1090ez However, you may be able to deduct expenses related to the business use of part of your home if you meet specific requirements. 1090ez Even then, the deductible amount of these types of expenses may be limited. 1090ez Use this section and Figure A, later, to decide if you can deduct expenses for the business use of your home. 1090ez To qualify to deduct expenses for business use of your home, you must use part of your home: Exclusively and regularly as your principal place of business (defined later), Exclusively and regularly as a place where you meet or deal with patients, clients, or customers in the normal course of your trade or business, In the case of a separate structure which is not attached to your home, in connection with your trade or business, On a regular basis for certain storage use (see Storage of inventory or product samples , later), For rental use (see Publication 527), or As a daycare facility (see Daycare Facility , later). 1090ez Additional tests for employee use. 1090ez   If you are an employee and you use a part of your home for business, you may qualify for a deduction for its business use. 1090ez You must meet the tests discussed earlier plus: Your business use must be for the convenience of your employer, and You must not rent any part of your home to your employer and use the rented portion to perform services as an employee for that employer. 1090ez If the use of the home office is merely appropriate and helpful, you cannot deduct expenses for the business use of your home. 1090ez Exclusive Use To qualify under the exclusive use test, you must use a specific area of your home only for your trade or business. 1090ez The area used for business can be a room or other separately identifiable space. 1090ez The space does not need to be marked off by a permanent partition. 1090ez You do not meet the requirements of the exclusive use test if you use the area in question both for business and for personal purposes. 1090ez Example. 1090ez You are an attorney and use a den in your home to write legal briefs and prepare clients' tax returns. 1090ez Your family also uses the den for recreation. 1090ez The den is not used exclusively in your trade or business, so you cannot claim a deduction for the business use of the den. 1090ez Exceptions to Exclusive Use You do not have to meet the exclusive use test if either of the following applies. 1090ez You use part of your home for the storage of inventory or product samples (discussed next). 1090ez You use part of your home as a daycare facility, discussed later under Daycare Facility . 1090ez Note. 1090ez With the exception of these two uses, any portion of the home used for business purposes must meet the exclusive use test. 1090ez Storage of inventory or product samples. 1090ez    If you use part of your home for storage of inventory or product samples, you can deduct expenses for the business use of your home without meeting the exclusive use test. 1090ez However, you must meet all the following tests. 1090ez You sell products at wholesale or retail as your trade or business. 1090ez You keep the inventory or product samples in your home for use in your trade or business. 1090ez Your home is the only fixed location of your trade or business. 1090ez You use the storage space on a regular basis. 1090ez The space you use is a separately identifiable space suitable for storage. 1090ez Example. 1090ez Your home is the only fixed location of your business of selling mechanics' tools at retail. 1090ez You regularly use half of your basement for storage of inventory and product samples. 1090ez You sometimes use the area for personal purposes. 1090ez The expenses for the storage space are deductible even though you do not use this part of your basement exclusively for business. 1090ez Regular Use To qualify under the regular use test, you must use a specific area of your home for business on a regular basis. 1090ez Incidental or occasional business use is not regular use. 1090ez You must consider all facts and circumstances in determining whether your use is on a regular basis. 1090ez Trade or Business Use To qualify under the trade-or-business-use test, you must use part of your home in connection with a trade or business. 1090ez If you use your home for a profit-seeking activity that is not a trade or business, you cannot take a deduction for its business use. 1090ez Example. 1090ez You use part of your home exclusively and regularly to read financial periodicals and reports, clip bond coupons, and carry out similar activities related to your own investments. 1090ez You do not make investments as a broker or dealer. 1090ez So, your activities are not part of a trade or business and you cannot take a deduction for the business use of your home. 1090ez Principal Place of Business You can have more than one business location, including your home, for a single trade or business. 1090ez To qualify to deduct the expenses for the business use of your home under the principal place of business test, your home must be your principal place of business for that trade or business. 1090ez To determine whether your home is your principal place of business, you must consider: The relative importance of the activities performed at each place where you conduct business, and The amount of time spent at each place where you conduct business. 1090ez Your home office will qualify as your principal place of business if you meet the following requirements. 1090ez You use it exclusively and regularly for administrative or management activities of your trade or business. 1090ez You have no other fixed location where you conduct substantial administrative or management activities of your trade or business. 1090ez If, after considering your business locations, your home cannot be identified as your principal place of business, you cannot deduct home office expenses. 1090ez However, see the later discussions under Place To Meet Patients, Clients, or Customers and Separate Structure for other ways to qualify to deduct home office expenses. 1090ez Administrative or management activities. 1090ez   There are many activities that are administrative or managerial in nature. 1090ez The following are a few examples. 1090ez Billing customers, clients, or patients. 1090ez Keeping books and records. 1090ez Ordering supplies. 1090ez Setting up appointments. 1090ez Forwarding orders or writing reports. 1090ez Administrative or management activities performed at other locations. 1090ez   The following activities performed by you or others will not disqualify your home office from being your principal place of business. 1090ez You have others conduct your administrative or management activities at locations other than your home. 1090ez (For example, another company does your billing from its place of business. 1090ez ) You conduct administrative or management activities at places that are not fixed locations of your business, such as in a car or a hotel room. 1090ez You occasionally conduct minimal administrative or management activities at a fixed location outside your home. 1090ez You conduct substantial nonadministrative or nonmanagement business activities at a fixed location outside your home. 1090ez (For example, you meet with or provide services to customers, clients, or patients at a fixed location of the business outside your home. 1090ez ) You have suitable space to conduct administrative or management activities outside your home, but choose to use your home office for those activities instead. 1090ez Please click here for the text description of the image. 1090ez Can you deduct business use of the home expenses? Example 1. 1090ez John is a self-employed plumber. 1090ez Most of John's time is spent at customers' homes and offices installing and repairing plumbing. 1090ez He has a small office in his home that he uses exclusively and regularly for the administrative or management activities of his business, such as phoning customers, ordering supplies, and keeping his books. 1090ez John writes up estimates and records of work completed at his customers' premises. 1090ez He does not conduct any substantial administrative or management activities at any fixed location other than his home office. 1090ez John does not do his own billing. 1090ez He uses a local bookkeeping service to bill his customers. 1090ez John's home office qualifies as his principal place of business for deducting expenses for its use. 1090ez He uses the home office for the administrative or managerial activities of his plumbing business and he has no other fixed location where he conducts these administrative or managerial activities. 1090ez His choice to have his billing done by another company does not disqualify his home office from being his principal place of business. 1090ez He meets all the qualifications, including principal place of business, so he can deduct expenses (subject to certain limitations, explained later) for the business use of his home. 1090ez Example 2. 1090ez Pamela is a self-employed sales representative for several different product lines. 1090ez She has an office in her home that she uses exclusively and regularly to set up appointments and write up orders and other reports for the companies whose products she sells. 1090ez She occasionally writes up orders and sets up appointments from her hotel room when she is away on business overnight. 1090ez Pamela's business is selling products to customers at various locations throughout her territory. 1090ez To make these sales, she regularly visits customers to explain the available products and take orders. 1090ez Pamela's home office qualifies as her principal place of business for deducting expenses for its use. 1090ez She conducts administrative or management activities there and she has no other fixed location where she conducts substantial administrative or management activities. 1090ez The fact that she conducts some administrative or management activities in her hotel room (not a fixed location) does not disqualify her home office from being her principal place of business. 1090ez She meets all the qualifications, including principal place of business, so she can deduct expenses (subject to certain limitations, explained later) for the business use of her home. 1090ez Example 3. 1090ez Paul is a self-employed anesthesiologist. 1090ez He spends the majority of his time administering anesthesia and postoperative care in three local hospitals. 1090ez One of the hospitals provides him with a small shared office where he could conduct administrative or management activities. 1090ez Paul very rarely uses the office the hospital provides. 1090ez He uses a room in his home that he has converted to an office. 1090ez He uses this room exclusively and regularly to conduct all the following activities. 1090ez Contacting patients, surgeons, and hospitals regarding scheduling. 1090ez Preparing for treatments and presentations. 1090ez Maintaining billing records and patient logs. 1090ez Satisfying continuing medical education requirements. 1090ez Reading medical journals and books. 1090ez Paul's home office qualifies as his principal place of business for deducting expenses for its use. 1090ez He conducts administrative or management activities for his business as an anesthesiologist there and he has no other fixed location where he conducts substantial administrative or management activities for this business. 1090ez His choice to use his home office instead of the one provided by the hospital does not disqualify his home office from being his principal place of business. 1090ez His performance of substantial nonadministrative or nonmanagement activities at fixed locations outside his home also does not disqualify his home office from being his principal place of business. 1090ez He meets all the qualifications, including principal place of business, so he can deduct expenses (subject to certain limitations, explained later) for the business use of his home. 1090ez Example 4. 1090ez Kathleen is employed as a teacher. 1090ez She is required to teach and meet with students at the school and to grade papers and tests. 1090ez The school provides her with a small office where she can work on her lesson plans, grade papers and tests, and meet with parents and students. 1090ez The school does not require her to work at home. 1090ez Kathleen prefers to use the office she has set up in her home and does not use the one provided by the school. 1090ez She uses this home office exclusively and regularly for the administrative duties of her teaching job. 1090ez Kathleen must meet the convenience-of-the-employer test, even if her home qualifies as her principal place of business for deducting expenses for its use. 1090ez Her employer provides her with an office and does not require her to work at home, so she does not meet the convenience-of-the-employer test and cannot claim a deduction for the business use of her home. 1090ez More Than One Trade or Business The same home office can be the principal place of business for two or more separate business activities. 1090ez Whether your home office is the principal place of business for more than one business activity must be determined separately for each of your trade or business activities. 1090ez You must use the home office exclusively and regularly for one or more of the following purposes. 1090ez As the principal place of business for one or more of your trades or businesses. 1090ez As a place to meet or deal with patients, clients, or customers in the normal course of one or more of your trades or businesses. 1090ez If your home office is a separate structure, in connection with one or more of your trades or businesses. 1090ez You can use your home office for more than one business activity, but you cannot use it for any nonbusiness (i. 1090ez e. 1090ez , personal) activities. 1090ez If you are an employee, any use of the home office in connection with your employment must be for the convenience of your employer. 1090ez See Rental to employer , later, if you rent part of your home to your employer. 1090ez Example. 1090ez Tracy White is employed as a teacher. 1090ez Her principal place of work is the school, which provides her office space to do her school work. 1090ez She also has a mail order jewelry business. 1090ez All her work in the jewelry business is done in her home office and the office is used exclusively for that business. 1090ez If she meets all the other tests, she can deduct expenses for the business use of her home for the jewelry business. 1090ez If Tracy also uses the office for work related to her teaching, she must meet the exclusive use test for both businesses to qualify for the deduction. 1090ez As an employee, Tracy must also meet the convenience-of-the-employer test to qualify for the deduction. 1090ez She does not meet this test for her work as a teacher, so she cannot claim a deduction for the business use of her home for either activity. 1090ez Place To Meet Patients, Clients, or Customers If you meet or deal with patients, clients, or customers in your home in the normal course of your business, even though you also carry on business at another location, you can deduct your expenses for the part of your home used exclusively and regularly for business if you meet both the following tests. 1090ez You physically meet with patients, clients, or customers on your premises. 1090ez Their use of your home is substantial and integral to the conduct of your business. 1090ez Doctors, dentists, attorneys, and other professionals who maintain offices in their homes generally will meet this requirement. 1090ez Using your home for occasional meetings and telephone calls will not qualify you to deduct expenses for the business use of your home. 1090ez The part of your home you use exclusively and regularly to meet patients, clients, or customers does not have to be your principal place of business. 1090ez Example. 1090ez June Quill, a self-employed attorney, works 3 days a week in her city office. 1090ez She works 2 days a week in her home office used only for business. 1090ez She regularly meets clients there. 1090ez Her home office qualifies for a business deduction because she meets clients there in the normal course of her business. 1090ez Separate Structure You can deduct expenses for a separate free-standing structure, such as a studio, workshop, garage, or barn, if you use it exclusively and regularly for your business. 1090ez The structure does not have to be your principal place of business or a place where you meet patients, clients, or customers. 1090ez Example. 1090ez John Berry operates a floral shop in town. 1090ez He grows the plants for his shop in a greenhouse behind his home. 1090ez He uses the greenhouse exclusively and regularly in his business, so he can deduct the expenses for its use, subject to certain limitations, explained later. 1090ez Figuring the Deduction After you determine that you meet the tests under Qualifying for a Deduction , you can begin to figure how much you can deduct. 1090ez When figuring the amount you can deduct for the business use of your home, you will use either your actual expenses or a simplified method. 1090ez Electing to use the simplified method. 1090ez   The simplified method is an alternative to the calculation, allocation, and substantiation of actual expenses. 1090ez You choose whether or not to figure your deduction using the simplified method each taxable year. 1090ez See Using the Simplified Method , later. 1090ez Rental to employer. 1090ez   If you rent part of your home to your employer and you use the rented part in performing services for your employer as an employee, your deduction for the business use of your home is limited. 1090ez You can deduct mortgage interest, qualified mortgage insurance premiums, real estate taxes, and personal casualty losses for the rented part, subject to any limitations. 1090ez However, you cannot deduct otherwise allowable trade or business expenses, business casualty losses, or depreciation related to the use of your home (or use the simplified method as an alternative to deducting these actual expenses) in performing services for your employer. 1090ez Using Actual Expenses If you do not or cannot elect to use the simplified method for a home, you will figure your deduction for that home using your actual expenses. 1090ez You will also need to figure the percentage of your home used for business and the limit on the deduction. 1090ez If you are an employee or a partner, or you use your home in your farming business and you file Schedule F (Form 1040), you can use the Worksheet To Figure the Deduction for Business Use of Your Home, near the end of this publication, to help you figure your deduction. 1090ez If you use your home in a trade or business and you file Schedule C (Form 1040), you will use Form 8829 to figure your deduction. 1090ez Part-year use. 1090ez   You cannot deduct expenses for the business use of your home incurred during any part of the year you did not use your home for business purposes. 1090ez For example, if you begin using part of your home for business on July 1, and you meet all the tests from that date until the end of the year, consider only your expenses for the last half of the year in figuring your allowable deduction. 1090ez Expenses related to tax-exempt income. 1090ez   Generally, you cannot deduct expenses that are related to tax-exempt allowances. 1090ez However, if you receive a tax-exempt parsonage allowance or a tax-exempt military allowance, your expenses for mortgage interest and real estate taxes are deductible under the normal rules. 1090ez No deduction is allowed for other expenses related to the tax-exempt allowance. 1090ez   If your housing is provided free of charge and the value of the housing is tax exempt, you cannot deduct the rental value of any portion of the housing. 1090ez Actual Expenses You must divide the expenses of operating your home between personal and business use. 1090ez The part of a home operating expense you can use to figure your deduction depends on both of the following. 1090ez Whether the expense is direct, indirect, or unrelated. 1090ez The percentage of your home used for business. 1090ez Table 1, next, describes the types of expenses you may have and the extent to which they are deductible. 1090ez Table 1. 1090ez Types of Expenses  Expense  Description  Deductibility Direct Expenses only for  the business part  of your home. 1090ez Deductible in full. 1090ez *   Examples:  Painting or repairs  only in the area  used for business. 1090ez Exception: May be only partially  deductible in a daycare facility. 1090ez See Daycare Facility , later. 1090ez Indirect Expenses for  keeping up and running your  entire home. 1090ez Deductible based on the percentage of your home used for business. 1090ez *   Examples:  Insurance, utilities, and  general repairs. 1090ez   Unrelated Expenses only for  the parts of your  home not used  for business. 1090ez Not deductible. 1090ez   Examples:  Lawn care or painting  a room not used  for business. 1090ez   *Subject to the deduction limit, discussed later. 1090ez Form 8829 and the Worksheet To Figure the Deduction for Business Use of Your Home have separate columns for direct and indirect expenses. 1090ez Certain expenses are deductible whether or not you use your home for business. 1090ez If you qualify to deduct business use of the home expenses, use the business percentage of these expenses to figure your total business use of the home deduction. 1090ez These expenses include the following. 1090ez Real estate taxes. 1090ez Qualified mortgage insurance premiums. 1090ez Deductible mortgage interest. 1090ez Casualty losses. 1090ez Other expenses are deductible only if you use your home for business. 1090ez You can use the business percentage of these expenses to figure your total business use of the home deduction. 1090ez These expenses generally include (but are not limited to) the following. 1090ez Depreciation (covered under Depreciating Your Home , later). 1090ez Insurance. 1090ez Rent paid for the use of property you do not own but use in your trade or business. 1090ez Repairs. 1090ez Security system. 1090ez Utilities and services. 1090ez Real estate taxes. 1090ez   To figure the business part of your real estate taxes, multiply the real estate taxes paid by the percentage of your home used for business. 1090ez   For more information on the deduction for real estate taxes, see Publication 530, Tax Information for Homeowners. 1090ez Deductible mortgage interest. 1090ez   To figure the business part of your deductible mortgage interest, multiply this interest by the percentage of your home used for business. 1090ez You can include interest on a second mortgage in this computation. 1090ez If your total mortgage debt is more than $1,000,000 or your home equity debt is more than $100,000, your deduction may be limited. 1090ez For more information on what interest is deductible, see Publication 936, Home Mortgage Interest Deduction. 1090ez Qualified mortgage insurance premiums. 1090ez   To figure the business part of your qualified mortgage insurance premiums, multiply the premiums by the percentage of your home used for business. 1090ez You can include premiums for insurance on a second mortgage in this computation. 1090ez If your adjusted gross income is more than $100,000 ($50,000 if your filing status is married filing separately), your deduction may be limited. 1090ez For more information, see Publication 936, and Line 13 in the Instructions for Schedule A (Form 1040). 1090ez Casualty losses. 1090ez    If you have a casualty loss on your home that you use for business, treat the casualty loss as a direct expense, an indirect expense, or an unrelated expense, depending on the property affected. 1090ez A direct expense is the loss on the portion of the property you use only in your business. 1090ez Use the entire loss to figure the business use of the home deduction. 1090ez An indirect expense is the loss on property you use for both business and personal purposes. 1090ez Use only the business portion to figure the deduction. 1090ez An unrelated expense is the loss on property you do not use in your business. 1090ez Do not use any of the loss to figure the deduction. 1090ez Example. 1090ez You meet the rules to take a deduction for an office in your home that is 10% of the total area of your house. 1090ez A storm damages your roof. 1090ez This is an indirect expense as the roof is part of the whole house and is considered to be used both for business and personal purposes. 1090ez You would complete Form 4684, Casualties and Thefts, to report your loss. 1090ez You complete both section A (Personal Use Property) and section B (Business and Income-Producing Property) as your home is used both for business and personal purposes. 1090ez Since you use 90% of your home for personal purposes, use 90% of the cost or adjusted basis of your home, insurance or other reimbursement, and fair market value, both before and after the storm, to figure the amounts to enter on lines 2, 3, 5, and 6 of Form 4684. 1090ez Since you use 10% of your home for business purposes, use 10% of the cost or adjusted basis of your home, insurance or other reimbursement, and fair market value, both before and after the storm, to figure the amounts to enter on lines 20, 21, 23, and 24 of Form 4684. 1090ez Forms and worksheets to use. 1090ez   If you are filing Schedule C (Form 1040), get Form 8829 and follow the instructions for casualty losses. 1090ez If you are an employee or a partner, or you file Schedule F (Form 1040), use the Worksheet To Figure the Deduction for Business Use of Your Home, near the end of this publication. 1090ez You will also need to get Form 4684. 1090ez More information. 1090ez   For more information on casualty losses, see Publication 547, Casualties, Disasters, and Thefts. 1090ez Insurance. 1090ez   You can deduct the cost of insurance that covers the business part of your home. 1090ez However, if your insurance premium gives you coverage for a period that extends past the end of your tax year, you can deduct only the business percentage of the part of the premium that gives you coverage for your tax year. 1090ez You can deduct the business percentage of the part that applies to the following year in that year. 1090ez Rent. 1090ez   If you rent the home you occupy and meet the requirements for business use of the home, you can deduct part of the rent you pay. 1090ez To figure your deduction, multiply your rent payments by the percentage of your home used for business. 1090ez   If you own your home, you cannot deduct the fair rental value of your home. 1090ez However, see Depreciating Your Home , later. 1090ez Repairs. 1090ez   The cost of repairs that relate to your business, including labor (other than your own labor), is a deductible expense. 1090ez For example, a furnace repair benefits the entire home. 1090ez If you use 10% of your home for business, you can deduct 10% of the cost of the furnace repair. 1090ez   Repairs keep your home in good working order over its useful life. 1090ez Examples of common repairs are patching walls and floors, painting, wallpapering, repairing roofs and gutters, and mending leaks. 1090ez However, repairs are sometimes treated as a permanent improvement and are not deductible. 1090ez See Permanent improvements , later, under Depreciating Your Home. 1090ez Security system. 1090ez   If you install a security system that protects all the doors and windows in your home, you can deduct the business part of the expenses you incur to maintain and monitor the system. 1090ez You also can take a depreciation deduction for the part of the cost of the security system relating to the business use of your home. 1090ez Utilities and services. 1090ez   Expenses for utilities and services, such as electricity, gas, trash removal, and cleaning services, are primarily personal expenses. 1090ez However, if you use part of your home for business, you can deduct the business part of these expenses. 1090ez Generally, the business percentage for utilities is the same as the percentage of your home used for business. 1090ez Telephone. 1090ez   The basic local telephone service charge, including taxes, for the first telephone line into your home (i. 1090ez e. 1090ez , landline) is a nondeductible personal expense. 1090ez However, charges for business long-distance phone calls on that line, as well as the cost of a second line into your home used exclusively for business, are deductible business expenses. 1090ez Do not include these expenses as a cost of using your home for business. 1090ez Deduct these charges separately on the appropriate form or schedule. 1090ez For example, if you file Schedule C (Form 1040), deduct these expenses on line 25, Utilities (instead of line 30, Expenses for business use of your home). 1090ez Depreciating Your Home If you own your home and qualify to deduct expenses for its business use, you can claim a deduction for depreciation. 1090ez Depreciation is an allowance for the wear and tear on the part of your home used for business. 1090ez You cannot depreciate the cost or value of the land. 1090ez You recover its cost when you sell or otherwise dispose of the property. 1090ez Before you figure your depreciation deduction, you need to know the following information. 1090ez The month and year you started using your home for business. 1090ez The adjusted basis and fair market value of your home (excluding land) at the time you began using it for business. 1090ez The cost of any improvements before and after you began using the property for business. 1090ez The percentage of your home used for business. 1090ez See Business Percentage , later. 1090ez Adjusted basis defined. 1090ez   The adjusted basis of your home is generally its cost, plus the cost of any permanent improvements you made to it, minus any casualty losses or depreciation deducted in earlier tax years. 1090ez For a discussion of adjusted basis, see Publication 551. 1090ez Permanent improvements. 1090ez   A permanent improvement increases the value of property, adds to its life, or gives it a new or different use. 1090ez Examples of improvements are replacing electric wiring or plumbing, adding a new roof or addition, paneling, or remodeling. 1090ez    You must carefully distinguish between repairs and improvements. 1090ez See Repairs , earlier, under Actual Expenses. 1090ez You also must keep accurate records of these expenses. 1090ez These records will help you decide whether an expense is a deductible or a capital (added to the basis) expense. 1090ez However, if you make repairs as part of an extensive remodeling or restoration of your home, the entire job is an improvement. 1090ez Example. 1090ez You buy an older home and fix up two rooms as a beauty salon. 1090ez You patch the plaster on the ceilings and walls, paint, repair the floor, install an outside door, and install new wiring, plumbing, and other equipment. 1090ez Normally, the patching, painting, and floor work are repairs and the other expenses are permanent improvements. 1090ez However, because the work gives your property a new use, the entire remodeling job is a permanent improvement and its cost is added to the basis of the property. 1090ez You cannot deduct any portion of it as a repair expense. 1090ez Adjusting for depreciation deducted in earlier years. 1090ez   Decrease the basis of your property by the depreciation you deducted, or could have deducted, on your tax returns under the method of depreciation you properly selected. 1090ez If you deducted less depreciation than you could have under the method you selected, decrease the basis by the amount you could have deducted under that method. 1090ez If you did not deduct any depreciation, decrease the basis by the amount you could have deducted. 1090ez   If you deducted more depreciation than you should have, decrease your basis by the amount you should have deducted, plus the part of the excess depreciation you deducted that actually decreased your tax liability for any year. 1090ez   If you deducted the incorrect amount of depreciation, see Publication 946. 1090ez Fair market value defined. 1090ez   The fair market value of your home is the price at which the property would change hands between a buyer and a seller, neither having to buy or sell, and both having reasonable knowledge of all necessary facts. 1090ez Sales of similar property, on or about the date you begin using your home for business, may be helpful in determining the property's fair market value. 1090ez Figuring the depreciation deduction for the current year. 1090ez   If you began using your home for business before 2013, continue to use the same depreciation method you used in past tax years. 1090ez   If you began using your home for business for the first time in 2013, depreciate the business part as nonresidential real property under the modified accelerated cost recovery system (MACRS). 1090ez Under MACRS, nonresidential real property is depreciated using the straight line method over 39 years. 1090ez For more information on MACRS and other methods of depreciation, see Publication 946. 1090ez   To figure the depreciation deduction, you must first figure the part of the cost of your home that can be depreciated (depreciable basis). 1090ez The depreciable basis is figured by multiplying the percentage of your home used for business by the smaller of the following. 1090ez The adjusted basis of your home (excluding land) on the date you began using your home for business. 1090ez The fair market value of your home (excluding land) on the date you began using your home for business. 1090ez Depreciation table. 1090ez   If 2013 was the first year you used your home for business, you can figure your 2013 depreciation for the business part of your home by using the appropriate percentage from the following table. 1090ez Table 2. 1090ez MACRS Percentage Table for 39-Year Nonresidential Real Property Month First Used for Business Percentage To Use 1 2. 1090ez 461% 2 2. 1090ez 247% 3 2. 1090ez 033% 4 1. 1090ez 819% 5 1. 1090ez 605% 6 1. 1090ez 391% 7 1. 1090ez 177% 8 0. 1090ez 963% 9 0. 1090ez 749% 10 0. 1090ez 535% 11 0. 1090ez 321% 12 0. 1090ez 107%   Multiply the depreciable basis of the business part of your home by the percentage from the table for the first month you use your home for business. 1090ez See Publication 946 for the percentages for the remaining tax years of the recovery period. 1090ez Example. 1090ez In May, George Miller began to use one room in his home exclusively and regularly to meet clients. 1090ez This room is 8% of the square footage of his home. 1090ez He bought the home in 2003 for $125,000. 1090ez He determined from his property tax records that his adjusted basis in the house (exclusive of land) is $115,000. 1090ez In May, the house had a fair market value of $165,000. 1090ez He multiplies his adjusted basis of $115,000 (which is less than the fair market value) by 8%. 1090ez The result is $9,200, his depreciable basis for the business part of the house. 1090ez George files his return based on the calendar year. 1090ez May is the 5th month of his tax year. 1090ez He multiplies his depreciable basis of $9,200 by 1. 1090ez 605% (. 1090ez 01605), the percentage from the table for the 5th month. 1090ez His depreciation deduction is $147. 1090ez 66. 1090ez Depreciating permanent improvements. 1090ez   Add the costs of permanent improvements made before you began using your home for business to the basis of your property. 1090ez Depreciate these costs as part of the cost of your home as explained earlier. 1090ez The costs of improvements made after you begin using your home for business (that affect the business part of your home, such as a new roof) are depreciated separately. 1090ez Multiply the cost of the improvement by the business-use percentage and depreciate the result over the recovery period that would apply to your home if you began using it for business at the same time as the improvement. 1090ez For improvements made this year, the recovery period is 39 years. 1090ez For the percentage to use for the first year, see Table 2, earlier. 1090ez For more information on recovery periods, see Publication 946. 1090ez Business Percentage To find the business percentage, compare the size of the part of your home that you use for business to your whole house. 1090ez Use the resulting percentage to figure the business part of the expenses for operating your entire home. 1090ez You can use any reasonable method to determine the business percentage. 1090ez The following are two commonly used methods for figuring the percentage. 1090ez Divide the area (length multiplied by the width) used for business by the total area of your home. 1090ez If the rooms in your home are all about the same size, you can divide the number of rooms used for business by the total number of rooms in your home. 1090ez Example 1. 1090ez Your office is 240 square feet (12 feet × 20 feet). 1090ez Your home is 1,200 square feet. 1090ez Your office is 20% (240 ÷ 1,200) of the total area of your home. 1090ez Your business percentage is 20%. 1090ez Example 2. 1090ez You use one room in your home for business. 1090ez Your home has 10 rooms, all about equal size. 1090ez Your office is 10% (1 ÷ 10) of the total area of your home. 1090ez Your business percentage is 10%. 1090ez Use lines 1-7 of Form 8829, or lines 1-3 on the Worksheet To Figure the Deduction for Business Use of Your Home (near the end of this publication) to figure your business percentage. 1090ez Deduction Limit If your gross income from the business use of your home equals or exceeds your total business expenses (including depreciation), you can deduct all your business expenses related to the use of your home. 1090ez If your gross income from the business use of your home is less than your total business expenses, your deduction for certain expenses for the business use of your home is limited. 1090ez Your deduction of otherwise nondeductible expenses, such as insurance, utilities, and depreciation of your home (with depreciation of your home taken last), that are allocable to the business, is limited to the gross income from the business use of your home minus the sum of the following. 1090ez The business part of expenses you could deduct even if you did not use your home for business (such as mortgage interest, real estate taxes, and casualty and theft losses that are allowable as itemized deductions on Schedule A (Form 1040)). 1090ez These expenses are discussed in detail under Actual Expenses , earlier. 1090ez The business expenses that relate to the business activity in the home (for example, business phone, supplies, and depreciation on equipment), but not to the use of the home itself. 1090ez If you are self-employed, do not include in (2) above your deduction for one-half of your self-employment tax. 1090ez Carryover of unallowed expenses. 1090ez   If your deductions are greater than the current year's limit, you can carry over the excess to the next year in which you use actual expenses. 1090ez They are subject to the deduction limit for that year, whether or not you live in the same home during that year. 1090ez Figuring the deduction limit and carryover. 1090ez   If you are an employee or a partner, or you file Schedule F (Form 1040), use the Worksheet To Figure the Deduction for Business Use of Your Home, near the end of this publication. 1090ez If you file Schedule C (Form 1040), figure your deduction limit and carryover on Form 8829. 1090ez Example. 1090ez You meet the requirements for deducting expenses for the business use of your home. 1090ez You use 20% of your home for business. 1090ez In 2013, your business expenses and the expenses for the business use of your home are deducted from your gross income in the following order. 1090ez    Gross income from business $6,000 Minus:   Deductible mortgage interest and real estate taxes (20%) 3,000 Business expenses not related to the use of your home (100%) (business phone, supplies, and depreciation on equipment) 2,000 Deduction limit $1,000 Minus other expenses allocable to business use of home:   Maintenance, insurance, and utilities (20%) 800 Depreciation allowed (20% = $1,600 allowable, but subject to balance of deduction limit) 200 Other expenses up to the deduction limit $1,000 Depreciation carryover to 2014 ($1,600 − $200) (subject to deduction limit in 2014) $1,400   You can deduct all of the business part of your deductible mortgage interest and real estate taxes ($3,000). 1090ez You also can deduct all of your business expenses not related to the use of your home ($2,000). 1090ez Additionally, you can deduct all of the business part of your expenses for maintenance, insurance, and utilities, because the total ($800) is less than the $1,000 deduction limit. 1090ez Your deduction for depreciation for the business use of your home is limited to $200 ($1,000 minus $800) because of the deduction limit. 1090ez You can carry over the $1,400 balance and add it to your depreciation for 2014, subject to your deduction limit in 2014. 1090ez More than one place of business. 1090ez   If part of the gross income from your trade or business is from the business use of part of your home and part is from a place other than your home, you must determine the part of your gross income from the business use of your home before you figure the deduction limit. 1090ez In making this determination, consider the time you spend at each location, the business investment in each location, and any other relevant facts and circumstances. 1090ez If your home office qualifies as your principal place of business, you can deduct your daily transportation costs between your home and another work location in the same trade or business. 1090ez For more information on transportation costs, see Publication 463, Travel, Entertainment, Gift, and Car Expenses. 1090ez Using the Simplified Method The simplified method is an alternative to the calculation, allocation, and substantiation of actual expenses. 1090ez In most cases, you will figure your deduction by multiplying $5, the prescribed rate, by the area of your home used for a qualified business use. 1090ez The area you use to figure your deduction is limited to 300 square feet. 1090ez See Simplified Amount , later, for information about figuring the amount of the deduction. 1090ez For more information about the simplified method, see Revenue Procedure 2013-13, 2013-06 I. 1090ez R. 1090ez B. 1090ez 478, available at www. 1090ez irs. 1090ez gov/irb/2013-06_IRB/ar09. 1090ez html. 1090ez Actual expenses and depreciation of your home. 1090ez   If you elect to use the simplified method, you cannot deduct any actual expenses for the business except for business expenses that are not related to the use of the home. 1090ez You also cannot deduct any depreciation (including any additional first-year depreciation) or section 179 expense for the portion of the home that is used for a qualified business use. 1090ez The depreciation deduction allowable for that portion of the home is deemed to be zero for a year you use the simplified method. 1090ez If you figure your deduction for business use of the home using actual expenses in a subsequent year, you will have to use the appropriate optional depreciation table for MACRS to figure your depreciation. 1090ez More information. 1090ez   For more information about claiming depreciation in a subsequent year, see Revenue Procedure 2013-13, 2013-06 I. 1090ez R. 1090ez B. 1090ez 478, available at www. 1090ez irs. 1090ez gov/irb/2013-06_IRB/ar09. 1090ez html. 1090ez See Publication 946 for the optional depreciation tables Although you cannot deduct any depreciation or section 179 expense for the portion of your home used for a qualified business use, you may still claim depreciation or the section 179 expense deduction on other assets used in the business (for example, furniture and equipment). 1090ez Expenses deductible without regard to business use. 1090ez   When using the simplified method, treat as personal expenses those business expenses related to the use of the home that are deductible without regard to whether there is a qualified business use of the home. 1090ez These expenses include mortgage interest, real estate taxes, and casualty losses, subject to any limitations. 1090ez See Where To Deduct , later. 1090ez If you also rent part of your home, you must still allocate these expenses between rental use and personal use (for this purpose, personal use includes business use reported using the simplified method). 1090ez No deduction of carryover of actual expenses. 1090ez   If you used actual expenses to figure your deduction for business use of the home in a prior year and your deduction was limited, you cannot deduct the disallowed amount carried over from the prior year during a year you figure your deduction using the simplified method. 1090ez Instead, you will continue to carry over the disallowed amount to the next year that you use actual expenses to figure your deduction. 1090ez Electing the Simplified Method You choose whether or not to figure your deduction using the simplified method each taxable year. 1090ez Make the election for a home by using the simplified method to figure the deduction for the qualified business use of that home on a timely filed, original federal income tax return. 1090ez An election for a taxable year, once made, is irrevocable. 1090ez A change from using the simplified method in one year to actual expenses in a succeeding taxable year, or vice-versa, is not a change in method of accounting and does not require the consent of the Commissioner. 1090ez Shared use. 1090ez   If you share your home with someone else who also uses the home in a business that qualifies for this deduction, each of you make your own election. 1090ez More than one qualified business use. 1090ez   If you conduct more than one business that qualifies for this deduction in your home, your election to use the simplified method applies to all your qualified business uses of that home. 1090ez More than one home. 1090ez   If you used more than one home during the year (for example, you moved during the year), you can elect to use the simplified method for only one of the homes. 1090ez You must figure the deduction for any other home using actual expenses. 1090ez Simplified Amount Your deduction for the qualified business use of a home is the sum of each amount you figure for a separate qualified business use of your home. 1090ez To figure your deduction for the business use of a home using the simplified method, you will need to know the following information for each qualified business use of the home. 1090ez The allowable area of your home used in conducting the business. 1090ez If you did not conduct the business for the entire year in the home or the area changed during the year, you will need to know the allowable area you used and the number of days you conducted the business for each month. 1090ez The gross income from the business use of your home. 1090ez The amount of the business expenses that are not related to the use of your home. 1090ez If the qualified business use is for a daycare facility that uses space in your home on a regular (but not exclusive) basis, you will also need to know the percentage of time that part of your home is used for daycare. 1090ez To figure the amount you can deduct for qualified business use of your home using the simplified method, follow these 3 steps. 1090ez Multiply the allowable area by $5 (or less than $5 if the qualified business use is for a daycare that uses space in your home on a regular, but not exclusive, basis). 1090ez See Allowable area and Space used regularly for daycare , later. 1090ez Subtract the expenses from the business that are not related to the use of the home from the gross income related to the business use of the home. 1090ez If these expenses are greater than the gross income from the business use of the home, then you cannot take a deduction for this business use of the home. 1090ez See Gross income limitation , later. 1090ez Take the smaller of the amounts from (1) and (2). 1090ez This is the amount you can deduct for this qualified business use of your home using the simplified method. 1090ez If you are an employee or a partner, or you use your home in your farming business and file Schedule F (Form 1040), you can use the Simplified Method Worksheet, near the end of this publication, to help you figure your deduction. 1090ez If you use your home in a trade or business and you file Schedule C (Form 1040), you will use the Simplified Method Worksheet in your Instructions for Schedule C to figure your deduction. 1090ez Allowable area. 1090ez   In most cases, the allowable area is the smaller of the actual area (in square feet) of your home used in conducting the business and 300 square feet. 1090ez Your allowable area may be smaller if you conducted the business as a qualified joint venture with your spouse, the area used by the business was shared with another qualified business use, you used the home for the business for only part of the year, or the area used by the business changed during the year. 1090ez You can use the Area Adjustment Worksheet (for simplified method), near the end of this publication, to help you figure your allowable area for a qualified business use. 1090ez Area used by a qualified joint venture. 1090ez   If the qualified business use of the home is also a qualified joint venture, you and your spouse will figure the deduction for the business use separately. 1090ez Split the actual area used in conducting business between you and your spouse in the same manner you split your other tax attributes. 1090ez Then, each spouse will figure the allowable area separately. 1090ez For more information about qualified joint ventures, see Qualified Joint Venture in the Instructions for Schedule C. 1090ez Shared use. 1090ez   If you share your home with someone else who uses the home to conduct business that also qualifies for this deduction, you may not include the same square feet to figure your deduction as the other person. 1090ez You must allocate the shared space between you and the other person in a reasonable manner. 1090ez Example. 1090ez Kristin and Lindsey are roommates. 1090ez Kristin uses 300 square feet of their home for a qualified business use. 1090ez Lindsey uses 200 square feet of their home for a separate qualified business use. 1090ez The qualified business uses share 100 square feet. 1090ez In addition to the portion that they do not share, Kristin and Lindsey can both claim 50 of the 100 square feet or divide the 100 square feet between them in any reasonable manner. 1090ez If divided evenly, Kristin could claim 250 square feet using the simplified method and Lindsey could claim 150 square feet. 1090ez More than one qualified business use. 1090ez   If you conduct more than one business qualifying for the deduction, you are limited to a maximum of 300 square feet for all of the businesses. 1090ez Allocate the actual square footage used (up to the maximum of 300 square feet) among your qualified business uses in a reasonable manner. 1090ez However, do not allocate more square feet to a qualified business use than you actually use for that business. 1090ez Rental use. 1090ez   The simplified method does not apply to rental use. 1090ez A rental use that qualifies for the deduction must be figured using actual expenses. 1090ez If the rental use and a qualified business use share the same area, you will have to allocate the actual area used between the two uses. 1090ez You cannot use the same area to figure a deduction for the qualified business use as you are using to figure the deduction for the rental use. 1090ez Part-year use or area changes. 1090ez   If your qualified business use was for a portion of the taxable year (for example, a seasonal business or a business that begins during the taxable year) or you changed the square footage of your qualified business use, your deduction is limited to the average monthly allowable square footage. 1090ez You calculate the average monthly allowable square footage by adding the amount of allowable square feet you used in each month and dividing the sum by 12. 1090ez When determining the average monthly allowable square footage, you cannot take more than 300 square feet into account for any one month. 1090ez Additionally, if your qualified business use was less than 15 days in a month, you must use -0- for that month. 1090ez Example 1. 1090ez Andy files his federal income tax return on a calendar year basis. 1090ez On July 20, he began using 420 square feet of his home for a qualified business use. 1090ez He continued to use the 420 square feet until the end of the year. 1090ez His average monthly allowable square footage is 125 square feet, which is figured using 300 square feet for each month August through December divided by the number of months in the taxable year ((0 + 0 + 0 + 0 + 0 + 0 + 0 + 300 + 300 + 300 + 300 + 300)/12). 1090ez Example 2. 1090ez Amy files her federal income tax return on a calendar year basis. 1090ez On April 20, she began using 100 square feet of her home for a qualified business use. 1090ez On August 5, she expanded the area of her qualified use to 330 square feet. 1090ez Amy continued to use the 330 square feet until the end of the year. 1090ez Her average monthly allowable square footage is 150 square feet, which is figured using 100 square feet for May through July and 300 square feet for August through December divided by the number of months in the taxable year ((0 + 0 + 0 + 0 + 100 + 100 +100 + 300 + 300 + 300 + 300 + 300)/12). 1090ez Gross income limitation. 1090ez   Your deduction for business use of the home is limited to an amount equal to the gross income derived from the qualified business use of the home reduced by the business deductions that are unrelated to the use of your home. 1090ez If the business deductions that are unrelated to the use of your home are greater than the gross income derived from the qualified business use of your home, then you cannot take a deduction for this qualified business use of your home. 1090ez Business expenses not related to use of the home. 1090ez   These expenses relate to the business activity in the home, but not to the use of the home itself. 1090ez You can still deduct business expenses that are unrelated to the use of the home. 1090ez See Where To Deduct , later. 1090ez Examples of business expenses that are unrelated to the use of the home are advertising, wages, supplies, dues, and depreciation for equipment. 1090ez Space used regularly for daycare. 1090ez   If you do not use the area of your home exclusively for daycare, you must reduce the prescribed rate (maximum $5 per square foot) before figuring your deduction. 1090ez The reduced rate will equal the prescribed rate times a fraction. 1090ez The numerator of the fraction is the number of hours that the space was used during the year for daycare and the denominator is the total number of hours during the year that the space was available for all uses. 1090ez You can use the Daycare Facility Worksheet (for simplified method), near the end of this publication, to help you figure the reduced rate. 1090ez    If you used at least 300 square feet for daycare regularly and exclusively during the year, then you do not need to reduce the prescribed rate or complete the Daycare Facility Worksheet. 1090ez Daycare Facility If you use space in your home on a regular basis for providing daycare, you may be able to claim a deduction for that part of your home even if you use the same space for nonbusiness purposes. 1090ez To qualify for this exception to the exclusive use rule, you must meet both of the following requirements. 1090ez You must be in the trade or business of providing daycare for children, persons age 65 or older, or persons who are physically or mentally unable to care for themselves. 1090ez You must have applied for, been granted, or be exempt from having, a license, certification, registration, or approval as a daycare center or as a family or group daycare home under state law. 1090ez You do not meet this requirement if your application was rejected or your license or other authorization was revoked. 1090ez Figuring the deduction. 1090ez   If you elect to use the simplified method for your home, figure your deduction as described earlier in Using the Simplified Method under Figuring the Deduction. 1090ez    If you are figuring your deduction using actual expenses and you regularly use part of your home for daycare, figure what part is used for daycare, as explained in Business Percentage , earlier, under Figuring the Deduction. 1090ez If you also use that part exclusively for daycare, deduct all the allocable expenses, subject to the deduction limit, as explained earlier. 1090ez   If the use of part of your home as a daycare facility is regular, but not exclusive, you must figure the percentage of time that part of your home is used for daycare. 1090ez A room that is available for use throughout each business day and that you regularly use in your business is considered to be used for daycare throughout each business day. 1090ez You do not have to keep records to show the specific hours the area was used for business. 1090ez You can use the area occasionally for personal reasons. 1090ez However, a room you use only occasionally for business does not qualify for the deduction. 1090ez To find the percentage of time you actually use your home for business, compare the total time used for business to the total time that part of your home can be used for all purposes. 1090ez You can compare the hours of business use in a week with the number of hours in a week (168). 1090ez Or you can compare the hours of business use for the year with the number of hours in the year (8,760 in 2013). 1090ez If you started or stopped using your home for daycare in 2013, you must prorate the number of hours based on the number of days the home was available for daycare. 1090ez Example 1. 1090ez Mary Lake used her basement to operate a daycare business for children. 1090ez She figures the business percentage of the basement as follows. 1090ez Square footage of the basement Square footage of her home = 1,600 3,200 = 50%           She used the basement for daycare an average of 12 hours a day, 5 days a week, for 50 weeks a year. 1090ez During the other 12 hours a day, the family could use the basement. 1090ez She figures the percentage of time the basement was used for daycare as follows. 1090ez Number of hours used for daycare (12 x 5 x 50) Total number of hours in the year (24 x 365) = 3,000 8,760 = 34. 1090ez 25%           Mary can deduct 34. 1090ez 25% of any direct expenses for the basement. 1090ez However, because her indirect expenses are for the entire house, she can deduct only 17. 1090ez 13% of the indirect expenses. 1090ez She figures the percentage for her indirect expenses as follows. 1090ez Business percentage of the basement 50% Multiplied by: Percentage of time used for daycare × 34. 1090ez 25% Percentage for indirect expenses 17. 1090ez 13% Mary completes Form 8829, Part I, figuring the percentage of her home used for business, including the percentage of time the basement was used. 1090ez In Part II, Mary figures her deductible expenses. 1090ez She uses the following information to complete Part II. 1090ez Gross income from her daycare business $50,000 Expenses not related to the business use of the home $25,000 Tentative profit $25,000 Rent $8,400 Utilities $850 Painting the basement $500 Mary enters her tentative profit, $25,000, on line 8. 1090ez (This figure is the same as the amount on line 29 of her Schedule C (Form 1040). 1090ez ) The expenses she paid for rent and utilities relate to her entire home. 1090ez Therefore, she enters the amount paid for rent on line 18, column (b), and the amount paid for utilities on line 20, column (b). 1090ez She shows the total of these expenses on line 22, column (b). 1090ez For line 23, she multiplies the amount on line 22, column (b) by the percentage on line 7 and enters the result, $1,585. 1090ez Mary paid $500 to have the basement painted. 1090ez The painting is a direct expense. 1090ez However, because she did not use the basement exclusively for daycare, she must multiply $500 by the percentage of time the basement was used for daycare (34. 1090ez 25% – line 6). 1090ez She enters $171 (34. 1090ez 25% × $500) on line 19, column (a). 1090ez She adds line 22, column (a), and line 23 and enters $1,756 ($171 + $1,585) on line 25. 1090ez This is less than her deduction limit (line 15), so she can deduct the entire amount. 1090ez She follows the instructions to complete the rest of Part II and enters $1,756 on lines 33 and 35. 1090ez She then carries the $1,756 to line 30 of her Schedule C (Form 1040). 1090ez Example 2. 1090ez Assume the same facts as in Example 1 except that Mary also has another room that was available each business day for children to take naps in. 1090ez Although she did not keep a record of the number of hours the room was actually used for naps, it was used for part of each business day. 1090ez Since the room was available for business use during regular operating hours each business day and was used regularly in the business, it is considered used for daycare throughout each business day. 1090ez The basement and room are 60% of the total area of her home. 1090ez In figuring her expenses, 34. 1090ez 25% of any direct expenses for the basement and room are deductible. 1090ez In addition, 20. 1090ez 55% (34. 1090ez 25% × 60%) of her indirect expenses are deductible. 1090ez Example 3. 1090ez Assume the same facts as in Example 1 except that Mary stopped using her home for a daycare facility on June 24, 2013. 1090ez She used the basement for daycare an average of 12 hours a day, 5 days a week, but for only 25 weeks of the year. 1090ez During the other 12 hours a day, the family could still use the basement. 1090ez She figures the percentage of time the basement was used for business as follows. 1090ez Number of hours used for daycare (12 x 5 x 25) Total number of hours during period used (24 x 175) = 1,500 4,200 = 35. 1090ez 71%           Mary can deduct 35. 1090ez 71% of any direct expenses for the basement. 1090ez However, because her indirect expenses are for the entire house, she can deduct only 17. 1090ez 86% of the indirect expenses. 1090ez She figures the percentage for her indirect expenses as follows. 1090ez Business percentage of the basement 50% Multiplied by: Percentage of time used for daycare × 35. 1090ez 71% Percentage for indirect expenses 17. 1090ez 86% Meals. 1090ez   If you provide food for your daycare recipients, do not include the expense as a cost of using your home for business. 1090ez Claim it as a separate deduction on your Schedule C (Form 1040). 1090ez You can never deduct the cost of food consumed by you or your family. 1090ez You can deduct as a business expense 100% of the actual cost of food consumed by your daycare recipients (see Standard meal and snack rates , later, for an optional method for eligible children) and generally only 50% of the cost of food consumed by your employees. 1090ez However, you can deduct 100% of the cost of food consumed by your employees if its value can be excluded from their wages as a de minimis fringe benefit. 1090ez For more information on meals that meet these requirements, see Meals in chapter 2 of Publication 15-B, Employer's Tax Guide to Fringe Benefits. 1090ez   If you deduct the actual cost of food for your daycare business, keep a separate record (with receipts) of your family's food costs. 1090ez   Reimbursements you receive from a sponsor under the Child and Adult Care Food Program of the Department of Agriculture are taxable only to the extent they exceed your expenses for food for eligible children. 1090ez If your reimbursements are more than your expenses for food, show the difference as income in Part I of Schedule C (Form 1040). 1090ez If your food expenses are greater than the reimbursements, show the difference as an expense in Part V of Schedule C (Form 1040). 1090ez Do not include payments or expenses for your own children if they are eligible for the program. 1090ez Follow this procedure even if you receive a Form 1099-MISC, Miscellaneous Income, reporting a payment from the sponsor. 1090ez Standard meal and snack rates. 1090ez   If you qualify as a family daycare provider, you can use the standard meal and snack rates, instead of actual costs, to compute the deductible cost of meals and snacks provided to eligible children. 1090ez For these purposes: A family daycare provider is a person engaged in the business of providing family daycare. 1090ez Family daycare is childcare provided to eligible children in the home of the family daycare provider. 1090ez The care must be non-medical, not involve a transfer of legal custody, and generally last less than 24 hours each day. 1090ez Eligible children are minor children receiving family daycare in the home of the family daycare provider. 1090ez Eligible children do not include children who are full-time or part-time residents in the home where the childcare is provided or children whose parents or guardians are residents of the same home. 1090ez Eligible children do not include children who receive daycare services for personal reasons of the provider. 1090ez For example, if a provider provides daycare services for a relative as a favor to that relative, that child is not an eligible child. 1090ez   You can compute the deductible cost of each meal and snack you actually purchased and served to an eligible child during the time period you provided family daycare using the standard meal and snack rates shown in Table 3, later. 1090ez You can use the standard meal and snack rates for a maximum of one breakfast, one lunch, one dinner, and three snacks per eligible child per day. 1090ez If you receive reimbursement for a particular meal or snack, you can deduct only the portion of the applicable standard meal or snack rate that is more than the amount of the reimbursement. 1090ez   You can use either the standard meal and snack rates or actual costs to calculate the deductible cost of food provided to eligible children in the family daycare for any particular tax year. 1090ez If you choose to use the standard meal and snack rates for a particular tax year, you must use the rates for all your deductible food costs for eligible children during that tax year. 1090ez However, if you use the standard meal and snack rates in any tax year, you can use actual costs to compute the deductible cost of food in any other tax year. 1090ez   If you use the standard meal and snack rates, you must maintain records to substantiate the computation of the total amount deducted for the cost of food provided to eligible children. 1090ez The records kept should include the name of each child, dates and hours of attendance in the daycare, and the type and quantity of meals and snacks served. 1090ez This information can be recorded in a log similar to the one shown in Exhibit A, near the end of this publication. 1090ez   The standard meal and snack rates include beverages, but do not include non-food supplies used for food preparation, service, or storage, such as containers, paper products, or utensils. 1090ez These expenses can be claimed as a separate deduction on your Schedule C (Form 1040). 1090ez     Table 3. 1090ez Standard Meal and Snack Rates1 Location of Family Daycare Provider Breakfast Lunch Dinner Snack States other than Alaska an
 
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Understanding Your IRS Notice or Letter

About Your Notice

If you receive a letter or notice from the IRS, it will explain the reason for the correspondence and provide instructions. Many of these letters and notices can be dealt with simply, without having to call or visit an IRS office.

The notice you receive covers a very specific issue about your account or tax return. Generally, the IRS will send a notice if it believes you owe additional tax, are due a larger refund, if there is a question about your tax return or a need for additional information.

IRS Notice Redesign

Currently, the IRS is in the process of redesigning and revising its correspondence with taxpayers for clarity, effectiveness and efficiency. The new format includes a plain language explanation of the nature of the correspondence, clearly states what action the taxpayer must take and presents a clear, clean design.    

Redesigned Notices

Notice Number Description Topic
CP01 We received the information that you provided and have verified your claim of identity theft. We have placed an identity theft indicator on your account. Identity Theft
CP01A This notice tells you about the Identity Protection Personal Identification Number (IP PIN) we sent you. Identity Theft
CP01H You received a CP 01H notice because we were unable to process your tax return. The IRS has locked your account because the Social Security Administration informed us that the Social Security number (SSN) of the primary or secondary taxpayer on the return belongs to someone who was deceased prior to the current tax year (before January 1, 2010 for a 2010 tax return).  
CP01S We received your Form 14039 or similar statement for your identity theft claim. We'll contact you when we finish processing your case or if we need additional information  
CP02H You owe a balance due as a result of amending your tax return to show receipt of a grant received as a result of Hurricane Katrina, Rita or Wilma. Balance Due
CP03C You received a tax credit (called the First-Time Homebuyer Credit) for a house you purchased. You may need to file a form to report a change in ownership to the house you purchased.  
CP04 Our records show that you or your spouse served in a combat zone, a qualified contingency operation, or a hazardous duty station during the tax year specified on your notice. As a result, you may be eligible for tax deferment.  
CP05 We’re reviewing your tax return.  
CP05A We are examining your return and we need documentation.  
CP07 We received your tax return and are holding your refund until we complete a more thorough review of the benefits you claimed under a treaty and/or the deductions claimed on Schedule A.  
CP08 You may qualify for the Additional Child Tax Credit and be entitled to some additional money. Additional Child Tax Credit
CP09 We've sent you this notice because our records indicate you may be eligible for the Earned Income Credit (EIC), but didn't claim it on your tax return.  
CP10 We made a change(s) to your return because we believe there's a miscalculation. This change(s) affected the estimated tax payment you wanted applied to your taxes for next year. Change To Your Estimated Tax Credit Amount
CP10A We made a change(s) to your return because we believe there's a miscalculation involving your Earned Income Credit. This change(s) affected the estimated tax payment you wanted applied to your taxes for next year. Change To Your Estimated Tax Credit Amount
CP11 We made changes to your return because we believe there’s a miscalculation. You owe money on your taxes as a result of these changes. Balance Due
CP11A We made changes to your return because we believe there's a miscalculation involving your Earned Income Credit. You owe money on your taxes as a result of these changes. Balance Due
CP11M We made changes to your return involving the Making Work Pay and Government Retiree Credit. You owe money on your taxes as a result of these changes. Balance Due
CP12 We made changes to correct a miscalculation on your return.  
CP12A We made changes to correct the Earned Income Credit (EIC) claimed on your tax return.  
CP12E We made changes to correct a miscalculation on your return.  
CP12M We made changes to the computation of the Making Work Pay and/or Government Retiree Credits on your return.  
CP12R We made changes to the computation of the Rebate Recovery Credit on your return.  
CP13 We made changes to your return because we believe there's a miscalculation. You're not due a refund nor do you owe an additional amount because of our changes. Your account balance is zero.  
CP13A We made changes to your return because we found an error involving your Earned Income Credit. You're not due a refund nor do you owe an additional amount because of our changes. Your account balance is zero.  
CP13M We made changes to your return involving the Making Work Pay credit or the Government Retiree Credit. You're not due a refund nor do you owe an additional amount because of our changes. Your account balance is zero.  
CP13R We made changes to your return involving the Recovery Rebate Credit. You're not due a refund nor do you owe an additional amount because of our changes. Your account balance is zero.  
CP14 We sent you this notice because you owe money on unpaid taxes.  
CP14I You owe taxes and penalties because you didn't take out the minimum amount you had to from your traditional individual retirement arrangement (IRA). Or, you put into a tax-sheltered account more than you can legally.  
CP15B We charged you a Trust Fund Recovery Penalty (TFRP) for not paying employment or excise taxes.  
CP16 We sent you this notice to tell you about changes we made to your return that affect your refund. We made these changes because we believe there was a miscalculation. Our records show you owe other tax debts and we applied all or part of your refund to them.  
CP18 We believe you incorrectly claimed one or more deductions or credits. As a result, your refund is less than you expected.  
CP19 We have increased the amount of tax you owe because we believe you incorrectly claimed one or more deductions or credits.  
CP20 We believe you incorrectly claimed one or more deductions or credits. As a result, your refund is less than you expected.  
CP21A We made the change(s) you requested to your tax return for the tax year specified on the notice. You owe money on your taxes as a result of the change(s). Balance Due
CP21B We made the change(s) you requested to your tax return for the tax year specified on the notice. You should receive your refund within 2-3 weeks of your notice. Refund
CP21C We made the change(s) you requested to your tax return for the tax year specified on the notice. You're not due a refund nor do you owe any additional amount. Your account balance for this tax form and tax year is zero. Even Balance
CP21E As a result of your recent audit, we made changes to your tax return for the tax year specified on the notice. You owe money on your taxes as a result of these changes. Balance Due
CP21I We made changes to your tax return for the tax year specified on the notice for Individual Retirement Arrangement (IRA) taxes. You owe money on your taxes as a result of these changes. Balance Due
CP22A We made the change(s) you requested to your tax return for the tax year specified on the notice. You owe money on your taxes as a result of the change(s). Balance Due
CP22E As a result of your recent audit, we made changes to your tax return for the tax year specified on the notice. You owe money on your taxes as a result of these changes. Balance Due
CP22I We made changes to your tax return for the tax year specified on the notice for Individual Retirement Arrangement (IRA) taxes. You owe money on your taxes as a result of these changes. Balance Due
CP23 We made changes to your return because we found a difference between the amount of estimated tax payments on your tax return and the amount we posted to your account. You have a balance due because of these changes.  
CP24 We made changes to your return because we found a difference between the amount of estimated tax payments on your tax return and the amount we posted to your account. You have a potential overpayment credit because of these changes.  
CP24E We made changes to your return because we found a difference between the amount of estimated tax payments on your tax return and the amount we posted to your account. You have a potential overpayment credit because of these changes.  
CP25 We made changes to your return because we found a difference between the amount of estimated tax payments on your tax return and the amount we posted to your account. You're not due a refund nor do you owe an additional amount because of our changes. Your account balance is zero.  
LT26 You were previously asked information regarding the filing of your tax return for a specific tax period.  
ST26 Antes le pedían información referente a la manera que fue presentada su declaración de impuestos para un período tributario específico.  
CP27 We've sent you this notice because our records indicate you may be eligible for the Earned Income Credit (EIC), but didn't claim it on your tax return.  
CP30 We charged you a penalty for not pre-paying enough of your tax either by having taxes withheld from your income, or by making timely estimated tax payments.  
CP30A We reduced or removed the penalty for underpayment of estimated tax reported on your tax return.  
CP31 Your refund check was returned to us, so you need to update your address. Refund
CP32 We sent you a replacement refund check.  
CP32A Call us to request your refund check.  
CP39 We used a refund from your spouse or former spouse to pay your past due tax debt. You may still owe money.  
CP42 The amount of your refund has changed because we used it to pay your spouse's past due tax debt.  
CP44 There is a delay processing your refund because you may owe other federal taxes.  
CP45 We were unable to apply your overpayment to your estimated tax as you requested. Overpayment
CP49 We sent you this notice to tell you we used all or part of your refund to pay a tax debt. Overpayment
CP51A We computed the tax on your Form 1040, 1040A or 1040EZ. You owe taxes.  
CP51B We computed the tax on your Form 1040, 1040A or 1040EZ. You owe taxes.  
CP51C We computed the tax on your Form 1040, 1040A or 1040EZ. You owe taxes.  
CP53 We can't provide your refund through direct deposit, so we're sending you a refund check by mail. Direct Deposits
CP53A We tried to direct deposit your refund, but the financial institution couldn’t process it.  We are researching your account, but it will take 8 to 10 weeks to reissue your refund.  
CP53B We tried to direct deposit your refund, but the financial institution couldn’t process it. We are researching your account, but it will take 8 to 10 weeks to complete our review and verify this refund.  
CP53C We tried to direct deposit your refund, but the financial institution couldn’t process it. When refund payments are questionable, we review related returns to ensure the return is valid. We are researching your account, but it will take 8 to 10 weeks to complete our review and verify this refund.  
CP54B Your tax return shows a different name and/or ID number from the information we have for your account. Please provide more information to us in order to receive your refund.  
CP54E Your tax return shows a different name and/or ID number from the information we have for your account. Please provide the requested information.  
CP54G Your tax return shows a different name and/or ID number from the information we have for your account. Please provide the requested information.  
CP54Q Your tax return shows a different name and/or ID number from the information we have on file for you or from the information from the Social Security Administration (SSA).We previously sent you a notice asking you to provide us some updated information. We still haven’t received a response from you.  
CP59 We sent you this notice because we have no record that you filed your prior personal tax return or returns.  
CP60 We removed a payment erroneously applied to your account.  
CP62 We applied a payment to your account.  
CP63 We are holding your refund because you have not filed one or more tax returns and we believe you will owe tax.  
CP71 You received this notice to remind you of the amount you owe in tax, penalty and interest.  
CP71A You received this notice to remind you of the amount you owe in tax, penalty and interest.  
CP71C You received this notice to remind you of the amount you owe in tax, penalty and interest.  
CP71D You received this notice to remind you of the amount you owe in tax, penalty and interest.  
CP72 You may have claimed a frivolous position on your tax return. A frivolous return is identified when some information on the return has no basis in the law.  
CP74 You are recertified for EITC. You don't have to fill out Form 8862, Information To Claim Earned Income Credit After Disallowance, in the future. You'll receive your EIC refund within 6 weeks as long as you don't owe other tax or debts we're required to collect.  
CP75 We’re auditing your tax return and we need documentation to verify the Earned Income Credit (EIC) that you claimed.  The Earned Income Credit and/or the Additional Child Tax Credit (ACTC) portion(s) of your refund is being held pending the results of the audit.  
CP75A We’re auditing your tax return and need documentation to verify the Earned Income Credit (EIC), dependent exemption(s) and filing status you claimed.  
CP75C You were banned from claiming the Earned Income Credit (EIC) in a prior tax year due to your intentional disregard of the rules or a fraudulent claim. Since your ban is still in effect, we disallowed the EIC for your current tax year.  
CP75D We’re auditing your tax return and we need documentation to verify the income and withholding you reported on your tax return. This may affect your eligibility for the Earned Income Credit (EIC), dependent exemption(s) and other refundable credits that you claimed. We are holding your refund pending the results of the audit.  
CP76 We are allowing your Earned Income Credit as claimed on your tax return. You will receive any expected refund in 8 weeks provided you owe no other taxes or legal debts we are required to collect.  
CP80 We credited payments and/or other credits to your tax account for the tax period shown on your notice. However, we haven't received your tax return.  
CP080 We credited payments and/or other credits to your tax account for the form and tax period shown on your notice. However, we haven't received your tax return.  
CP81 We haven’t received your tax return for a specific tax year. The statute of limitations to claim a refund of your credit or payment for that tax year is about to expire.  
CP081 We haven’t received your tax return for a specific tax year. The statute of limitations to claim a refund of your credit or payment for that tax year is about to expire.  
CP88 We are holding your refund because you have not filed one or more tax returns and we believe you will owe tax.  
CP90C We levied you for unpaid taxes. You have the right to a Collection Due Process hearing.  
CP102 We made changes to your return because we believe there’s a miscalculation.  You owe money on your taxes as a result of these changes.  
CP103 We made changes to your railroad retirement tax return because we believe there was a miscalculation. As a result of these changes, you have a balance due.  
CP104 We made changes to your excise tax return because we believe there was a miscalculation. As a result of these changes, there is a balance due.  
CP108 You are receiving this notice because you made a payment of $XXXXX on XXXXX, and we can’t determine the correct form or tax year to apply it to.  
CP112 We made changes to your return because we believe there’s a miscalculation. As a result, you are due a refund.  
CP113 We made changes to your railroad retirement tax return because we believe there was a miscalculation. As a result of these changes, you have an overpayment on your account.  
CP114 We made changes to your excise tax return because we believe there was a miscalculation. As a result of these changes, there is an overpayment on your account.  
CP120 You need to send us documentation of your tax-exempt status. Tax Exemptions
CP120A Your organization's tax-exempt status has been revoked for failure to file a Form 990 series return for three consecutive years. In addition, you are no longer eligible to sponsor a tax-sheltered annuity plan (Internal Revenue Code section 403(b) retirement plan).  
CP123 We made changes to your excise tax return because we believe there was a miscalculation. As a result of these changes, you have a balance due of less than $1.  
CP124 We made changes to your excise tax return because we believe there was a miscalculation. As a result of these changes, there is a balance due of less than $1.  
CP130 Your tax return filing requirements may have changed: You may no longer need to pay the Alternative Minimum Tax. Filing Requirements
CP138 This notice tells you that all or part of the overpayment on a return you filed was applied to other federal taxes you owe.  
CP141C You are receiving this notice because you did not respond to a previous request for missing or incomplete information on your return and your return is late.  
CP141I You are receiving this notice because you did not respond to a previous request for missing or incomplete information on your return.  
CP141L You are receiving this notice because you didn’t file your return by the due date.  
CP142 We sent you this notice because you filed your information returns late.  
CP143 We accepted your explanation for filing your information return late. We will continue processing your returns.  
CP145 We were unable to credit the full amount you requested to the succeeding tax period.  
CP152 We have received your return. Confirmation of Return Receipt
CP152A We received your Form 8038-CP, Return for Credit Payments to Issuers of Qualified Bonds and provides an explanation for the reduced credit payment amount.  
CP153 We can't provide you with your refund through a direct deposit, so we're sending you a refund check/credit payment by mail. Refund
CP156 We received your Form 990-T, Exempt Organization Business Income Tax Return and Form 8941, Credit for Small Employer Health Premiums.  
CP160 You received this notice to remind you of the amount you owe in tax, penalty and interest.  
CP161 You received this notice because of the money you owe from your tax return.  
CP163 You received this notice to remind you of the amount you owe in tax, penalty and interest.  
CP166 We were unable to process your monthly payment because there were insufficient funds in your bank account. Payment Process
CP169 You received this notice because we couldn't locate the return you said was previously filed.  
CP171 You received this notice to remind you of the amount you owe in tax, penalty and interest.  
CP178 Your tax return filing requirements may have changed: You may no longer owe excise tax. Filing Requirements
CP180/CP181 We sent you this notice because your tax return is missing a schedule or form.  
CP182 We sent you this notice because your tax return is missing Form 3468.  
CP187 You received this notice to remind you of the amount you owe in tax, penalty and interest.  
CP188 We are holding your refund until we determine you owe no other taxes.  
CP210/CP220 We made change(s) for the tax year specified on the notice.  
CP211A We approved your Form 8868, Application for Extension of Time To File an Exempt Organization Return.  
CP211B We denied your request to extend the time to file your Exempt Organization Return because your Form 8868, Application for Extension of Time To File an Exempt Organization Return, wasn't signed or was signed by someone who wasn’t authorized.  
CP211C We denied your request to extend the time to file your Exempt Organization Return because your Form 8868, Application for Extension of Time To File an Exempt Organization Return, wasn't received on time. A request for an extension of the time to file your Exempt Organization Return must be received on or before the due date of your return.  
CP211D We denied your request to extend the time to file your Exempt Organization Return for an additional three months because your Form 8868, Application for Extension of Time To File an Exempt Organization Return, Part II, Line 7 didn’t explain the need for addtional time OR establish reasons that prevented you from filing by the extended due date.  
CP211E We denied your request to extend the time to file your Exempt Organization Return because your Form 8868, Application for Extension of Time To File an Exempt Organization Return, didn’t meet one or more of the requirements.  
CP231 Your refund or credit payment was returned to us and we need you to update your current address. Address Update Needed
CP232A We approved your request for an extension to file your Form 5330.  
CP232B We denied your request to extend the time to file Form 5330 because your Form 5558, Application for Extension of Time To File Certain Employee Plan Returns, wasn't received on time. A request for an extension of the time to file Form 5330 must be received on or before the due date of your return.  
CP232C We denied your request to extend the time to file Form 5330 because your Form 5558, Application for Extension of Time To File Certain Employee Plan Returns, wasn't signed or was signed by someone who wasn’t authorized.  
CP232D We denied your request to extend the time to file Form 5330 because your Form 5558, Application for Extension of Time To File Certain Employee Plan Returns, didn’t state a reason why you need the extension.  
CP237 We sent you a replacement refund check.  
CP237A Call us to request your refund check.  
CP254 Your organization submitted a paper return for the tax period in question.  Because our records show that you must file electronically, the paper return doesn’t satisfy your filing obligation.  
CP255 We need information to complete the termination of your private foundation status.  
CP259 We've sent you this notice because our records indicate you didn't file the required business tax return identified in the notice.  
CP259A We sent you this notice because our records indicate you did not file a required Form 990/990-EZ, Return of Organization Exempt From Income Tax.  
CP259B We sent you this notice because our records indicate you didn't file a required Form 990-PF, Return of Private Foundation or Section 4947(a)(1) Nonexempt Charitable Trust Treated as a Private Foundation.  
CP259C We sent you this notice because our records indicate you are presumed to be a private foundation and you didn't file a required Form 990-PF, Return of Private Foundation or Section 4947(a)(1) Nonexempt Charitable Trust Treated as a Private Foundation.  
CP259D We sent you this notice because our records indicate you did not file a required Form 990-T, Exempt Organization Business Income Tax Return.  
CP259E We sent you this notice because our records indicate you did not file a required Form 990-N, e-Postcard.  
CP259F We're sending you this notice because our records indicate you did not file a required Form 5227, Split-Interest Trust information Return.  
CP259G We sent you this notice because our records indicate you did not file a required Form 1120-POL, U.S. Income Tax Return for Certain Political Organizations.  
CP259H We sent you this notice because our records indicate you are a tax-exempt political organization and you did not file a required Form 990/990-EZ, Return of Organization Exempt From Income Tax.  
CP261 CP261 is the approval notice for Form 2553, Election by a Small Business Corporation.  
CP264 CP264 is the notice for denial of Form 2553, Election by a Small Business Corporation.  
CP267A You received a CP267A Notice because you’ve overpaid the Branded Prescription Drug Fee.  
CP267B You received a CP267B notice because you overpaid your Insurance Provider Fee under Section 9010 of ACA.  
CP268 We made changes to your return because we believe there is a miscalculation on your return. You have a potential overpayment credit because of this miscalculation.  
CP276A We didn't receive a correctly completed tax liability schedule. We normally charge a Federal Tax Deposit (FTD) penalty when this happens. We decided not to do so this time. FTD Penalty
CP276B We didn't receive the correct amount of tax deposits. We normally charge a Federal Tax Deposit penalty when this happens. We decided not to do so this time. FTD Penalty
CP279 CP279 is the notice of acceptance to the parent corporation of a Qualified Subchapter S Subsidiary (QSub) from Form 8869, Qualified Subchapter S Subsidiary Election.  
CP279A CP279A is the notice of acceptance for a Qualified Subchapter S Subsidiary.  
CP282 You received this notice because you indicated on your Form 1065, U.S. Return of Partnership Income, or Form1065-B, U.S. Return of Income for Electing Large Partnerships, that you have foreign partners.  
CP283C We charged you a penalty for filing a late or incomplete Form 8955-SSA, Annual Registration Statement Identifying Separated Participants with Deferred Vested Benefits.  
CP284 We approved your Form 1128, Application to Adopt, Change, or Retain a Tax Year.  
CP285 CP285 notifies BMF taxpayers the reason their Form 1128, Application To Adopt, Change, or Retain a Tax Year, was denied.  
CP286 We send this notice when we approve Form 8716, Election To Have a Tax Year Other Than a Required Tax Year.  
CP288 We accepted your election to be treated as a Qualified Subchapter S Trust (QSST).  
CP290 We're approving your Electing Small Business Trust (ESBT) election.  
CP291 We're revoking your Electing Small Business Trust (ESBT) election.  
CP292 We're revoking your Qualified Subchapter S Trust (QSST) election.  
CP295 We charged you a penalty on your Form 5500.  
CP295A We charged you a penalty on your Form 5500.  
CP297C We levied you for unpaid taxes. You have the right to a Collection Due Process hearing.  
CP299 Your organization may be required to file an annual electronic notice (e-Postcard), Form 990-N.  
CP301 We sent you this notice to inform that you visited IRS online services website and went through Identity Verification process.  
CP501 You have a balance due (money you owe the IRS) on one of your tax accounts.  
CP503 We have not heard from you and you still have an unpaid balance on one of your tax accounts.  
CP504 You have an unpaid amount due on your account. If you do not pay the amount due immediately, the IRS will seize (levy) your state income tax refund and apply it to pay the amount you owe.  
CP504B You have an unpaid amount due on your account. If you do not pay the amount due immediately, the IRS will seize (levy) certain property or rights to property and apply it to pay the amount you owe.  
CP515I This is a reminder notice that we still have no record that you filed your prior tax return or returns.  
CP515B You received this reminder notice because our records indicate you didn't file a business tax return.  
CP516 This is a reminder notice that we still have no record that you filed your prior tax return or returns.  
CP518I This is a final reminder notice that we still have no record that you filed your prior tax return(s).  
CP518B This is a final reminder notice that our records still indicate you haven't filed a business tax return.  
CP521 This notice is to remind you that you have an installment agreement payment due. Please send your payment immediately.  
CP523 This notice informs you of our intent to terminate your installment agreement and seize (levy) your assets. You have defaulted on your agreement.  
CP547 We received your Form 2848, 8821, or 706, and we assigned you a Centralized Authorization File (CAF) number.  
CP563 We reviewed your Form W-7A, Application for Taxpayer Identification Number for Pending U.S. Adoptions, and we need additional information in order to process it.  
CP565 We gave you an Individual Taxpayer Identification Number (ITIN).  
CP565 (SP) Nosotros le asignamos un Número de Identificación Personal del Contribuyente (ITIN, por sus siglas en inglés).  
CP566 We need more information to process your application for an Individual Taxpayer Identification Number (ITIN). You may have sent us an incomplete form. You may have sent us the wrong documents.  
CP566 (SP) Necesitamos más información para poder tramitar su solicitud para un Número de Identificación Personal del Contribuyente (ITIN, por sus siglas en inglés). Usted quizá nos envió un formulario incompleto. O, quizá nos envió los documentos incorrectos.  
CP567 We rejected your application for an Individual Taxpayer Identification Number (ITIN). You may not be eligible for an ITIN. Your documents may be invalid. We may not have received a reply when we asked for more information.  
CP567 (SP) Hemos rechazado su solicitud para un Número de Identificación Personal de Contribuyente (ITIN, por sus siglas en inglés). Es posible que no reúna los requisitos para un ITIN o que sus documentos no sean válidos. O es posible que no hayamos recibido una contestación de su parte cuando solicitamos más información.  
CP601 Usted tiene un saldo pendiente de pago (dinero que le debe al IRS) en una de sus cuentas contributivas.  
CP603 No hemos recibido respuesta de parte de usted y todavía tiene un saldo sin pagar en una de sus cuentas contributivas.  
CP604 Usted tiene un saldo sin pagar en su cuenta. De no pagar esta cantidad inmediatemente, el IRS embargará cualquier reembolso de impuestos estatales al que tenga derecho y aplicarlo al pago de su deuda.  
CP604B Usted tiene un saldo sin pagar en su cuenta. De no pagar esta cantidad inmediatemente, el IRS embargará ciertas propiedades o derechos de propiedad y lo aplicará al pago de su deuda.  
CP615I Este aviso es un recordatorio, que según nuestros registros, todavía no tenemos información de que usted haya presentado su anterior declaración o declaraciones de impuestos.  
CP615B Este aviso es un recordatorio,  que según nuestros registros, usted todavía no ha presentado una declaración de impuestos del negocio.  
CP616 Este es un recordatorio que todavía no tenemos un registro de que usted presentó su anterior declaración o declaraciones de impuestos.  
CP618I Lo presente, es el aviso final para recordarle que según nuestros registros, usted todavía no ha presentado su(s) declaración(es) anterior(es) de impuestos.  
CP618B Lo presente, es el aviso final para recordarle que según nuestros registros, usted todavía no ha presentado una declaración de impuestos del negocio.  
CP621 Este aviso es para notificarle que usted tiene un plan de pagos a plazos vencido. Por favor, envíe el pago inmediatamente.  
CP623 Este aviso es para informarle nuestra intención de cancelar su plan de pagos a plazos y confiscar (embargar) sus bienes. Usted incumplió en su acuerdo.  
CP701 Recibimos su Formulario 14039 (SP) o declaración similar sobre su reclamo de robo de identidad. Nos comunicaremos con usted cuando completemos el procesamiento de su caso o en caso de necesitar información adicional.  
CP711 Nosotros realizamos cambios a su planilla debido a que entendemos que hubo un cálculo erróneo. Como resultado de estos cambios, usted adeuda dinero por sus contribuciones.  
CP712 Hemos realizado cambios para corregir un error de cálculo en su planilla.  
CP713 Hemos realizado cambios para corregir un error de cálculo en su planilla. No se le debe un reembolso y no adeuda una cantidad de dinero adicional a causa de estos cambios. El saldo de su cuenta es cero.  
CP714 Le enviamos este aviso porque usted adeuda contribuciones pendientes de pago.  
CP721 Hicimos el(los) cambio(s) que usted solicitó a su declaración de impuestos para el año tributario que aparece en su aviso. Como resultado de éste(estos) cambio(s) usted debe dinero en sus impuestos.  
CP722 Hicimos el(los) cambio(s) que usted solicitó a su declaración de impuestos para el año tributario que aparece en su aviso. Como resultado de éste(estos) cambio(s) usted debe dinero en sus impuestos.  
CP749 Le enviamos este aviso para informarle que hemos utilizado todo o parte de su reintegro para pagar una deuda contributiva.  
CP759 Le enviamos este aviso porque no tenemos registro que indique que usted radicó su planilla o planillas de contribuciones personales para uno o varios años anteriores.  
CP771 Usted recibió este aviso para recordarle sobre la cantidad que adeuda en contribuciones, multas e intereses.  
CP772 Usted recibió este aviso para recordarle sobre la cantidad que adeuda en contribuciones, multas e intereses.  
CP773 Usted recibió este aviso para recordarle sobre la cantidad que adeuda en contribuciones, multas e intereses.  
CP774 Usted recibió este aviso para recordarle sobre la cantidad que adeuda en contribuciones, multas e intereses.  
CP802 Hemos hecho cambios a su declaración ya que creemos que hay un cálculo erróneo.  Usted adeuda dinero por sus impuestos como resultado de estos cambios.  
CP812 Hemos hecho cambios a su declaración ya que creemos que hay un cálculo erróneo.  Como resultado, a usted se le adeuda un reembolso.  
CP838 Este aviso le informa a usted, que parte o todo su pago en exceso en la declaración que usted presentó, fue acreditado a otros impuestos federales que usted adeuda.  
CP861 Usted recibió este aviso debido al dinero que adeuda de su planilla de contribuciones.  
CP910/CP920 Hicimos cambio(s) para el año tributario indicado en el aviso.  
CP959 Usted no radicó su planilla de contribución de negocios identificada en este aviso.  
CP2000 The income and/or payment information we have on file doesn’t match the information you reported on your tax return. This could affect your tax return; it may cause an increase or decrease in your tax, or may not change it at all.  
CP2005 We accepted the information you sent us. We're not going to change your tax return. We've closed our review of it.  
CP2006 We received your information. We'll look at it and let you know what we're going to do.  
CP2030 We are proposing changes in income, credits, and deductions reported on your U.S. Corporation Income Tax Return. We compared your information with items reported to us by banks, businesses and other payers.  
CP2057 You need to file an amended return. We've received information not reported on your tax return.  
CP2501 You need to contact us. We've received information not reported on your tax return.  
CP2531 Your Tax Return does not match the information we have on file.  
CP2566 We didn't receive your tax return. We have calculated your tax, penalty and interest based on wages and other income reported to us by employers, financial institutions and others.  
CP2566R We previously sent you a CP63 notice informing you we are holding your refund until we receive one or more unfiled tax returns. Because we received no reply to our previous notice, we have calculated your tax, penalty and interest based on wages and other income reported to us by employers, financial institutions and others.  
CP3219A We've received information that is different from what you reported on your tax return. This may result in an increase or decrease in your tax. The notice explains how the amount was calculated and how you can challenge it in U.S. Tax Court.  
CP3219B This Statutory Notice of Deficiency notifies you of the IRS’s intent to assess a tax deficiency and informs you of your right to petition the United States Tax Court to dispute the proposed adjustments. .  
CP3219N We didn't receive your tax return. We have calculated your tax, penalty and interest based on wages and other income reported to us by employers, financial institutions and others.  

Other Notices and Letters

Notice or Letter Number Title
CP 57 Notice of Insufficient Funds
CP 90 / CP 297 Final Notice - Notice of Intent to Levy and Notice of Your Right to a Hearing
CP 297A Notice of Levy and Notice of Your Right to a Hearing
CP 91 / CP 298 Final Notice Before Levy on Social Security Benefits
Letter 0484C Collection Information Statement Requested (Form 433F/433D); Inability to Pay/Transfer
Letter 0549C Balance Due on Account is Paid
Letter 668D(LP 68) We released the taxpayer's levy.
Letter 0681C Proposal to Pay Accepted
Letter 0757C Installment Privilege Terminated
Letter 1058 (LT 11) Final Notice prior to levy; your right to a hearing
Letter 1615 (LT 18) Mail us your overdue tax returns.
Letter 1731 (LP 64) Please help us locate a taxpayer.
Letter 1737 (LT 27) Please complete and site Form 433F, Collection Information Statement.
Letter 1961C Installment Agreement for Direct Debit 433-G
Letter 1962C Installment Agreement Reply to Taxpayer
Letter 2050 (LT 16) Please call us about your overdue taxes or tax return.
Letter 2257C Balance Due Total to Taxpayer
Letter 2271C Installment Agreement for Direct Debit Revisions
Letter 2272C Installment Agreement Cannot be Considered
Letter 2273C Installment Agreement Accepted: Terms Explained
Letter 2318C Installment Agreement: Payroll Deduction (F2159) Incomplete
Letter 2357C Abatement of Penalties and Interest
Letter 2603C Installment Agreement Accepted - Notice of Federal Tax Lien Will be Filed
Letter 2604C Pre-assessed Installment Agreement
Letter 2761C Request for Combat Zone Service Dates
Letter 2789C Taxpayer Response to Reminder of Balance Due
Letter 2800C Incorrect Form W-4, Employee's Withholding Allowance Certificate.
Letter 2801C Exempt Status May not be Allowed
Letter 2840C CC IAPND Installment Agreement Confirmation
Letter 3030C Balance Due Explained:Tax/Interest Not Paid
Letter 3127C Revision to Installment Agreement
Letter 3217C Installment Agreement Accepted: Terms Explained
Letter 3228 (LT 39) Reminder notice.
Letter 4883C We received your federal income tax return; however, we need more information from you to process it.
Letter 5071C We received your federal income tax return; however, we need more information from you to process it.
Letter LP 47 Address Information Request
Letter LP 59 Please contact us about the taxpayer levy.

Eight Things to Know If You Receive an IRS Notice or Letter

Read about eight things every taxpayer should know about IRS notices.

How To Identify Your Notice

The notice number prints on the top right-hand side of each page of all our notices and on the lower right-hand side of the tear-off stub included with most of them. That number identifies the message we deliver in every notice. While the contents may vary somewhat, every notice with the same number has the same basic purpose.

What If My Notice Isn't Listed

You'll find useful information here about many of the notices we send, including the purpose of the notice, the reason we send it, and a list of enclosures we might include with it. There's also sample content for each. Since parts of our notices vary depending on account conditions, the samples may not exactly match the notices we mail. The basic message, though, will be the same.

  • Individual Filer Notices
    Notices we send about Form 1040, 1040A, or 1040EZ, or any schedules, forms, or attachments included with it are Individual Filer Notice.
  • Business Filer Notices
    Notices we send about business-related tax forms such as Forms 941, 1065, and 1120, are Business Filer Notices.

Get More Information

  • Look in the upper right-hand corner to find your notice number.
  • Select your notice number from one of the tables to the left to find additional information about your notice. (Please note that not all notices are on the list.)
  • Call 1-800-829-1040 or visit a local IRS office if you suspect that you have received a fraudulent notice or that you are a victim of identity theft.

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Page Last Reviewed or Updated: 24-Feb-2014

The 1090ez

1090ez Publication 600 - Main Contents Table of Contents Actual Expenses Optional Sales Tax Tables Instructions for the State and Local General Sales Tax Deduction WorksheetWhat if you lived in more than one state? What if you lived in more than one locality? What if your local general sales tax rate changed during 2006? What if you lived in more than one locality in the same state during 2006? Actual Expenses Generally, you can deduct the actual state and local general sales taxes (including compensating use taxes) you paid in 2006 if the tax rate was the same as the general sales tax rate. 1090ez However, sales taxes on food, clothing, medical supplies, and motor vehicles are deductible as a general sales tax even if the tax rate was less than the general sales tax rate. 1090ez If you paid sales tax on a motor vehicle at a rate higher than the general sales tax rate, you can deduct only the amount of tax that you would have paid at the general sales tax rate on that vehicle. 1090ez Motor vehicles include cars, motorcycles, motor homes, recreational vehicles, sport utility vehicles, trucks, vans, and off-road vehicles. 1090ez Also include any state and local general sales taxes paid for a leased motor vehicle. 1090ez Do not include sales taxes paid on items used in your trade or business. 1090ez To deduct your actual expenses, enter the amount on Schedule A, line 5, and enter “ST” on the dotted line to the left of the line 5 entry space. 1090ez You must keep your actual receipts showing general sales taxes paid to use this method. 1090ez Refund of general sales taxes. 1090ez   If you received a refund of state or local general sales taxes in 2006 for amounts paid in 2006, reduce your actual 2006 state and local general sales taxes by this amount. 1090ez If you received a refund of state or local general sales taxes in 2006 for prior year purchases, do not reduce your 2006 state and local general sales taxes by this amount. 1090ez But if you deducted your actual state and local general sales taxes in the earlier year and the deduction reduced your tax, you may have to include the refund in income on Form 1040, line 21. 1090ez See Recoveries in Pub. 1090ez 525 for details. 1090ez Optional Sales Tax Tables Instead of using your actual expenses, you can use the tables on pages 5 through 7 to figure your state and local general sales tax deduction. 1090ez You may also be able to add the state and local general sales taxes paid on certain specified items. 1090ez To figure your state and local general sales tax deduction using the tables, complete the worksheet below. 1090ez If your filing status is married filing separately, both you and your spouse elect to deduct sales taxes, and your spouse elects to use the optional sales tax tables, you also must use the tables to figure your state and local general sales tax deduction. 1090ez State and Local General Sales Tax Deduction Worksheet (See the instructions that begin on page 3. 1090ez ) Before you begin: See the instructions for line 1 on page 3 if: You lived in more than one state during 2006, or You had any nontaxable income in 2006. 1090ez   1. 1090ez Enter your state general sales taxes from the applicable table on page 5 or 6 (see page 3 of the instructions) 1. 1090ez $     Next. 1090ez If, for all of 2006, you lived only in Connecticut, the District of Columbia, Hawaii, Indiana, Kentucky, Maine, Maryland, Massachusetts, Michigan, Mississippi, New Jersey, Rhode Island, Virginia, or West Virginia, skip lines 2 through 5, enter -0- on line 6, and go to line 7. 1090ez Otherwise, go to line 2       2. 1090ez Did you live in Alaska, Arizona, Arkansas (Texarkana only), California (Los Angeles County only), Colorado, Georgia, Illinois, Louisiana, New York State, or North Carolina in 2006?         No. 1090ez Enter -0-                   Yes. 1090ez Enter your local general sales taxes from the applicable table on page 7 (see page 3 of the instructions)     2. 1090ez $       3. 1090ez Did your locality impose a local general sales tax in 2006? Residents of California, Nevada, and Texarkana, Arkansas, see page 3 of the instructions             No. 1090ez Skip lines 3 through 5, enter -0- on line 6, and go to line 7             Yes. 1090ez Enter your local general sales tax rate, but omit the percentage sign. 1090ez For example, if your local general sales tax rate was 2. 1090ez 5%, enter 2. 1090ez 5. 1090ez If your local general sales tax rate changed or you lived in more than one locality in the same state during 2006, see page 3 of the instructions. 1090ez (If you do not know your local general sales tax rate, contact your local government. 1090ez ) 3. 1090ez . 1090ez       4. 1090ez Did you enter -0- on line 2 above?             No. 1090ez Skip lines 4 and 5 and go to line 6             Yes. 1090ez Enter your state general sales tax rate (shown in the table heading for your state), but omit the percentage sign. 1090ez For example, if your state general sales tax rate is 6%, enter 6. 1090ez 0 4. 1090ez . 1090ez       5. 1090ez Divide line 3 by line 4. 1090ez Enter the result as a decimal (rounded to at least three places) 5. 1090ez . 1090ez       6. 1090ez Did you enter -0- on line 2 above?             No. 1090ez Multiply line 2 by line 3   6. 1090ez $     Yes. 1090ez Multiply line 1 by line 5. 1090ez If you lived in more than one locality in the same state during 2006, see page 4 of the instructions           7. 1090ez Enter your state and local general sales taxes paid on specified items, if any (see page 4 of the instructions) 7. 1090ez $   8. 1090ez Deduction for general sales taxes. 1090ez Add lines 1, 6, and 7. 1090ez Enter the result here and the total from all your state and local general sales tax deduction worksheets, if you completed more than one, on Schedule A, line 5. 1090ez Be sure to enter “ST” on the dotted line to the left of the entry space 8. 1090ez $     Instructions for the State and Local General Sales Tax Deduction Worksheet Line 1. 1090ez    If you lived in the same state for all of 2006, enter the applicable amount, based on your 2006 income and exemptions, from the optional state sales tax table for your state on page 5 or 6. 1090ez Read down the “At least-But less than” columns for your state and find the line that includes your 2006 income. 1090ez If married filing separately, do not include your spouse's income. 1090ez Your 2006 income is the amount shown on your Form 1040, line 38, plus any nontaxable items, such as the following. 1090ez Tax-exempt interest. 1090ez Veterans' benefits. 1090ez Nontaxable combat pay. 1090ez Workers' compensation. 1090ez Nontaxable part of social security and railroad retirement benefits. 1090ez Nontaxable part of IRA, pension, or annuity distributions. 1090ez Do not include rollovers. 1090ez Public assistance payments. 1090ez The exemptions column refers to the number of exemptions claimed on Form 1040, line 6d. 1090ez Do not include any additional exemptions you listed on Form 8914 for individuals displaced by Hurricane Katrina. 1090ez What if you lived in more than one state?    If you lived in more than one state during 2006, look up the table amount for each state using the above rules. 1090ez If there is no table for your state, the table amount is considered to be zero. 1090ez Multiply the table amount for each state you lived in by a fraction. 1090ez The numerator of the fraction is the number of days you lived in the state during 2006 and the denominator is the total number of days in the year (365). 1090ez Enter the total of the prorated table amounts for each state on line 1. 1090ez However, if you also lived in a locality during 2006 that imposed a local general sales tax, do not enter the total on line 1. 1090ez Instead, complete a separate worksheet for each state you lived in and enter the prorated amount for that state on line 1. 1090ez Example. 1090ez You lived in State A from January 1 through August 31, 2006 (243 days), and in State B from September 1 through December 31, 2006 (122 days). 1090ez The table amount for State A is $500. 1090ez The table amount for State B is $400. 1090ez You would figure your state general sales tax as follows. 1090ez State A: $500 x 243/365 = $333   State B: $400 x 122/365 = 134   Total = $467   If none of the localities in which you lived during 2006 imposed a local general sales tax, enter $467 on line 1 of your worksheet. 1090ez Otherwise, complete a separate worksheet for State A and State B. 1090ez Enter $333 on line 1 of the State A worksheet and $134 on line 1 of the State B worksheet. 1090ez Line 2. 1090ez   If you checked the “No” box, enter -0- on line 2, and go to line 3. 1090ez If you checked the “Yes” box and lived in the same locality for all of 2006, enter the applicable amount, based on your 2006 income and exemptions, from the optional local sales tax table for your locality on page 7. 1090ez Read down the “At least-But less than” columns for your locality and find the line that includes your 2006 income. 1090ez See the line 1 instructions on this page to figure your 2006 income. 1090ez The exemptions column refers to the number of exemptions claimed on Form 1040, line 6d. 1090ez Do not include any additional exemptions you listed on Form 8914 for individuals displaced by Hurricane Katrina. 1090ez What if you lived in more than one locality?   If you lived in more than one locality during 2006, look up the table amount for each locality using the above rules. 1090ez If there is no table for your locality, the table amount is considered to be zero. 1090ez Multiply the table amount for each locality you lived in by a fraction. 1090ez The numerator of the fraction is the number of days you lived in the locality during 2006 and the denominator is the total number of days in the year (365). 1090ez If you lived in more than one locality in the same state and the local general sales tax rate was the same for each locality, enter the total of the prorated table amounts for each locality in that state on line 2. 1090ez Otherwise, complete a separate worksheet for lines 2 through 6 for each locality and enter each prorated table amount on line 2 of the applicable worksheet. 1090ez Example. 1090ez You lived in Locality 1 from January 1 through August 31, 2006 (243 days), and in Locality 2 from September 1 through December 31, 2006 (122 days). 1090ez The table amount for Locality 1 is $100. 1090ez The table amount for Locality 2 is $150. 1090ez You would figure the amount to enter on line 2 as follows. 1090ez Note that this amount may not equal your local sales tax deduction, which is figured on line 6 of the worksheet. 1090ez Locality 1: $100 x 243/365 = $67   Locality 2: $150 x 122/365 = 50   Total = $117   Line 3. 1090ez   If you lived in California, check the “No” box if your combined state and local general sales tax rate is 7. 1090ez 25%. 1090ez Otherwise, check the “Yes” box and include on line 3 only the part of the combined rate that is more than 7. 1090ez 25%. 1090ez   If you lived in Nevada, check the “No” box if your combined state and local general sales tax rate is 6. 1090ez 5%. 1090ez Otherwise, check the “Yes” box and include on line 3 only the part of the combined rate that is more than 6. 1090ez 5%. 1090ez   If you lived in Texarkana, Arkansas, check the “Yes” box and enter “4. 1090ez 0” on line 3. 1090ez Your local general sales tax rate of 4. 1090ez 0% includes the additional 1. 1090ez 0% Arkansas state sales tax rate for Texarkana and the 1. 1090ez 5% sales tax rate for Miller County. 1090ez What if your local general sales tax rate changed during 2006?    If you checked the “Yes” box and your local general sales tax rate changed during 2006, figure the rate to enter on line 3 as follows. 1090ez Multiply each tax rate for the period it was in effect by a fraction. 1090ez The numerator of the fraction is the number of days the rate was in effect during 2006 and the denominator is the total number of days in the year (365). 1090ez Enter the total of the prorated tax rates on line 3. 1090ez Example. 1090ez Locality 1 imposed a 1% local general sales tax from January 1 through September 30, 2006 (273 days). 1090ez The rate increased to 1. 1090ez 75% for the period from October 1 through December 31, 2006 (92 days). 1090ez You would enter “1. 1090ez 189” on line 3, figured as follows. 1090ez January 1 - September 30: 1. 1090ez 00 x 273/365 = 0. 1090ez 748   October 1 - December 31: 1. 1090ez 75 x 92/365 = 0. 1090ez 441   Total = 1. 1090ez 189   What if you lived in more than one locality in the same state during 2006?    Complete a separate worksheet for lines 2 through 6 for each locality in your state if you lived in more than one locality in the same state during 2006 and either of the following applies. 1090ez Each locality did not have the same local general sales tax rate. 1090ez You lived in Texarkana, AR, or Los Angeles County, CA. 1090ez   To figure the amount to enter on line 3 of the worksheet for each locality in which you lived (except a locality for which you used the table on page 7 to figure your local general sales tax deduction), multiply the local general sales tax rate by a fraction. 1090ez The numerator of the fraction is the number of days you lived in the locality during 2006 and the denominator is the total number of days in the year (365). 1090ez Example. 1090ez You lived in Locality 1 from January 1 through August 31, 2006 (243 days), and in Locality 2 from September 1 through December 31, 2006 (122 days). 1090ez The local general sales tax rate for Locality 1 is 1%. 1090ez The rate for Locality 2 is 1. 1090ez 75%. 1090ez You would enter “0. 1090ez 666” on line 3 for the Locality 1 worksheet and “0. 1090ez 585” for the Locality 2 worksheet, figured as follows. 1090ez Locality 1: 1. 1090ez 00 x 243/365 = 0. 1090ez 666   Locality 2: 1. 1090ez 75 x 122/365 = 0. 1090ez 585   Line 6. 1090ez   If you lived in more than one locality in the same state during 2006, you should have completed line 1 only on the first worksheet for that state and separate worksheets for lines 2 through 6 for any other locality within that state in which you lived during 2006. 1090ez If you checked the “Yes” box on line 6 of any of those worksheets, multiply line 5 of that worksheet by the amount that you entered on line 1 for that state on the first worksheet. 1090ez Line 7. 1090ez    Enter on line 7 any state and local general sales taxes paid on the following specified items. 1090ez If you are completing more than one worksheet, include the total for line 7 on only one of the worksheets. 1090ez A motor vehicle (including a car, motorcycle, motor home, recreational vehicle, sport utility vehicle, truck, van, and off-road vehicle). 1090ez Also include any state and local general sales taxes paid for a leased motor vehicle. 1090ez If the state sales tax rate on these items is higher than the general sales tax rate, only include the amount of tax you would have paid at the general sales tax rate. 1090ez An aircraft or boat, if the tax rate was the same as the general sales tax rate. 1090ez A home (including a mobile home or prefabricated home) or substantial addition to or major renovation of a home, but only if the tax rate was the same as the general sales tax rate and any of the following applies. 1090ez Your state or locality imposes a general sales tax directly on the sale of a home or on the cost of a substantial addition or major renovation. 1090ez You purchased the materials to build a home or substantial addition or to perform a major renovation and paid the sales tax directly. 1090ez Under your state law, your contractor is considered your agent in the construction of the home or substantial addition or the performance of a major renovation. 1090ez The contract must state that the contractor is authorized to act in your name and must follow your directions on construction decisions. 1090ez In this case, you will be considered to have purchased any items subject to a sales tax and to have paid the sales tax directly. 1090ez   Do not include sales taxes paid on items used in your trade or business. 1090ez If you received a refund of state or local general sales taxes in 2006, see Refund of general sales taxes on page 1. 1090ez Prev  Up  Next   Home   More Online Publications