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2011 1040

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2011 1040

2011 1040 Publication 547(SP) - Additional Material Prev  Up  Next   Home   More Online Publications
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The 2011 1040

2011 1040 Car Expenses Table of Contents Introduction Depreciation of CarSpecial Depreciation Allowance Depreciation Limit Amended Return Election Not To Claim Special Allowance If you purchased a car after September 10, 2001, for use in your business (or as an employee) and figure your deductible expenses using the actual car expense method, new law contains provisions that may affect your depreciation deduction for that car. 2011 1040 Publication 463, Travel, Entertainment, Gift, and Car Expenses, contains information on figuring depreciation on your car. 2011 1040 However, Publication 463 does not contain the new provisions because it was printed before the law was enacted. 2011 1040 The new provisions are in the Supplement to Publication 463, which is reprinted below. 2011 1040 Supplement to Publication 463 Travel, Entertainment, Gift, and Car Expenses   Introduction This supplemental publication is for taxpayers who purchased a car for business purposes after September 10, 2001, and figure their deductible expenses, including a deduction for depreciation, using the actual car expense method. 2011 1040 After Publication 463 was printed, the Job Creation and Worker Assistance Act of 2002 was signed into law by the President. 2011 1040 Certain provisions of this new law may reduce your taxes for 2001. 2011 1040 The new law contains the following provisions. 2011 1040 A new depreciation deduction, the special depreciation allowance. 2011 1040 An increase in the limit on depreciation for any car for which you claim the new special depreciation allowance. 2011 1040 If you have already filed your 2001 return, you may wish to file an amended return to claim any of these benefits. 2011 1040 See Amended Return, later. 2011 1040 Depreciation of Car If you used the actual car expense method to figure your deduction for a car you own and use in your business (or as an employee), you generally can claim a depreciation deduction. 2011 1040 However, there is a limit on the depreciation deduction you can take for your car each year. 2011 1040 See Depreciation Limit later. 2011 1040 Special Depreciation Allowance The new law allows you to claim a special depreciation allowance. 2011 1040 This special allowance is a deduction equal to 30% of the depreciable basis of qualified property. 2011 1040 You figure the amount of the special depreciation allowance after any section 179 deduction you choose to claim, but before figuring your regular depreciation deduction under the Modified Accelerated Cost Recovery System (MACRS). 2011 1040 See Depreciation Deduction under Actual Car Expenses in chapter 4 of Publication 463 for information about MACRS. 2011 1040 You can claim the special depreciation allowance only for the year the qualified property is placed in service. 2011 1040 Qualified property. 2011 1040   Qualified property includes a car (any four-wheeled vehicle, including a truck or van not more than 6,000 pounds, that is made primarily for use on public streets, roads, and highways) that meets all of the following requirements. 2011 1040 You bought it new. 2011 1040 You bought it after September 10, 2001. 2011 1040 (But a car is not qualified property if a binding written contract for you to buy the car was in effect before September 11, 2001. 2011 1040 ) You began using it for business after September 10, 2001, and used it more than 50% in a qualified business use. 2011 1040 Example. 2011 1040 Bob bought a new car on October 15, 2001, for $20,000 and placed it in service immediately, using it 75% for business. 2011 1040 Bob's car is qualified property. 2011 1040 Bob chooses not to take a section 179 deduction for the car. 2011 1040 He does claim the new special depreciation allowance. 2011 1040 Bob first must figure the car's depreciable basis, which is $15,000 ($20,000 × . 2011 1040 75). 2011 1040 He then figures the special depreciation allowance of $4,500 ($15,000 × . 2011 1040 30). 2011 1040 The remaining depreciable basis of $10,500 ($15,000 - $4,500) is depreciated using MACRS (200% declining balance method, half-year convention) and results in a deduction of $2,100 ($10,500 × . 2011 1040 20), for a total depreciation deduction for 2001 of $6,600 ($4,500 + $2,100). 2011 1040 However, Bob's depreciation deduction is limited to $5,745 ($7,660 × . 2011 1040 75), as discussed next. 2011 1040 Depreciation Limit The limit on your depreciation deduction for 2001 is increased to $7,660 for a car that is qualified property (defined above) and for which you claim the special depreciation allowance. 2011 1040 The limit is increased to $23,080 if the car is an electric car. 2011 1040 The section 179 deduction is treated as depreciation for purposes of this limit. 2011 1040 If you use a car less than 100% in your business or work, the limit is $7,660 (or $23,080 for an electric car) multiplied by the percentage of business and investment use during the year. 2011 1040 For cars that do not qualify for (or for which you choose not to claim) the special depreciation allowance, the limit remains $3,060 ($9,280 for electric cars). 2011 1040 Amended Return If you filed your 2001 calendar year return before June 1, 2002, and did not claim the new special depreciation allowance for a qualified car, you can claim it by filing an amended return on Form 1040X, Amended U. 2011 1040 S. 2011 1040 Individual Income Tax Return, by April 15, 2003. 2011 1040 At the top of the Form 1040X, print “Filed pursuant to Revenue Procedure 2002–33. 2011 1040 ” If you are an employee, attach Form 2106, Employee Business Expenses (revised March 2002). 2011 1040 If you are self-employed, attach Form 4562, Depreciation and Amortization (revised March 2002). 2011 1040 Or, you can claim the special depreciation allowance by filing Form 3115, Application for Change in Accounting Method, with your 2002 return. 2011 1040 For details, see Revenue Procedure 2002–33. 2011 1040 (But, filing Form 1040X for 2001 enables you to claim the special allowance earlier than attaching Form 3115 to your 2002 return. 2011 1040 ) You cannot claim the special depreciation allowance on an amended return (or by using Form 3115) if you made, or are treated as having made, the election not to claim it described later. 2011 1040 Example. 2011 1040 The facts are the same as in the previous example except that Bob filed his original 2001 income tax return on April 15, 2002, and claimed a $3,000 ($20,000 x . 2011 1040 75 x . 2011 1040 20) depreciation deduction for his new car using MACRS. 2011 1040 Bob now wishes to claim the special depreciation allowance for his new car on an amended 2001 return. 2011 1040 Bob, who is an employee, files Form 1040X, by April 15, 2003, with an updated Form 2106 (revised March 2002) attached, increasing his total depreciation deduction to $5,745, as figured in the earlier example. 2011 1040 Bob's new filled-in Form 2106 is shown later. 2011 1040 Election Not To Claim Special Allowance You can elect not to claim the special depreciation allowance for a car by making a statement attached to, or written on, your return indicating that you are electing not to claim the special depreciation allowance for 5-year property. 2011 1040 As a general rule, you must make this election by the due date (including extensions) of your return. 2011 1040 You can have an automatic extension of 6 months from the due date of your return (excluding extensions) to make the election with an amended return. 2011 1040 To get this extension, you must have filed your original return by the due date (including extensions). 2011 1040 At the top of the statement, print “Filed pursuant to section 301. 2011 1040 9100–2. 2011 1040 ” If you elect not to claim the special depreciation allowance for a car, you cannot claim it for any other 5-year property placed in service during the same year. 2011 1040 Unless you elect (or are treated as electing) not to claim the special depreciation allowance, you must reduce the car's adjusted basis by the amount of the allowance, even if the allowance was not claimed. 2011 1040 Deemed election for return filed before June 1, 2002. 2011 1040   If you did not make the election not to claim the special depreciation allowance in the time and manner described above, you will still be treated as electing not to claim it if all of the following apply. 2011 1040 You filed your 2001 return before June 1, 2002. 2011 1040 You claimed depreciation on your return but did not claim the special depreciation allowance. 2011 1040 You did not file an amended 2001 return by April 15, 2003, or a Form 3115 with your 2002 return, to claim the special depreciation allowance. 2011 1040 Form 2106, Page 1, for Bob Smith Form 2106, Page 2, for Bob Smith Prev  Up  Next   Home   More Online Publications