**2011 Taxes Due**

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2011 taxes due Index A Archer MSAs, Archer MSAs, Employment taxes. 2011 taxes due Assistance (see Tax help) C Contributions to FSA, Contributions to an FSA HRA, Contributions to an HRA HSA, Contributions to an HSA MSA, Contributions to an MSA D Death of HSA holder, Death of HSA Holder MSA holder, Death of the Archer MSA Holder Distributions from FSA, Distributions From an FSA HRA, Distributions From an HRA HSA, Distributions From an HSA MSA, Distributions From an MSA E Employer participation FSA, Employer Participation HRA, Employer Participation HSA, Employer Participation MSA, Employer Participation F Flexible Spending Arrangements Grace Period, Health FSA – grace period. 2011 taxes due Flexible spending arrangements, Flexible Spending Arrangements (FSAs), Employer Participation Balance in, Balance in an FSA Contributions to, Contributions to an FSA Distributions from, Distributions From an FSA Qualifying for, Qualifying for an FSA When to contribute, When To Contribute Form 5329, Excess contributions. 2011 taxes due , Excess contributions. 2011 taxes due 5498–SA, Form 8889. 2011 taxes due , Reporting Contributions on Your Return 8853, Additional tax. 2011 taxes due , Filing Form 8853 8889, Form 8889. 2011 taxes due , Additional tax. 2011 taxes due , Filing Form 8889 Free tax services, Free help with your tax return. 2011 taxes due H Health plans, high deductible, High deductible health plan (HDHP). 2011 taxes due , High deductible health plan (HDHP). 2011 taxes due Health reimbursement arrangements, Health Reimbursement Arrangements (HRAs), Employer Participation Balance in, Balance in an HRA Contributions to, Contributions to an HRA Distributions from, Distributions From an HRA Qualifying for, Qualifying for an HRA Health savings accounts, Health Savings Accounts (HSAs), Employment taxes. 2011 taxes due Balance in, Balance in an HSA Contributions to, Contributions to an HSA Deemed distributions, Deemed distributions from HSAs. 2011 taxes due Distributions from, Distributions From an HSA Last-month rule, Last-month rule. 2011 taxes due Partnerships, Reporting Contributions on Your Return Qualifying for, Qualifying for an HSA Rollovers, Rollovers S corporations, Reporting Contributions on Your Return When to contribute, When To Contribute Help (see Tax help) High deductible health plan, High deductible health plan (HDHP). 2011 taxes due , High deductible health plan (HDHP). 2011 taxes due M Medical expenses, qualified, Qualified medical expenses. 2011 taxes due , Qualified medical expenses. 2011 taxes due , Qualified medical expenses. 2011 taxes due , Qualified medical expenses. 2011 taxes due Medical savings accounts, Medical Savings Accounts (MSAs), Medicare Advantage MSAs Balance in, Balance in an Archer MSA Contributions to, Contributions to an MSA Deemed distributions, Deemed distributions from Archer MSAs. 2011 taxes due Distributions from, Distributions From an MSA Medicare Advantage MSAs, Medicare Advantage MSAs Qualifying for, Qualifying for an Archer MSA When to contribute, When To Contribute Medicare Advantage MSAs, Medicare Advantage MSAs P Preventive care, High deductible health plan (HDHP). 2011 taxes due Publications (see Tax help) Q Qualified HSA funding distribution, Qualified HSA funding distribution. 2011 taxes due T Tax help, How To Get Tax Help Testing period Last-month rule, Testing period. 2011 taxes due Qualified HSA funding distribution, Funding distribution – testing period. 2011 taxes due TTY/TDD information, How To Get Tax Help Prev Up Home More Online Publications

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Official information and services from the U.S. government

## The 2011 Taxes Due

2011 taxes due Other Methods of Depreciation Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: How To Figure the DeductionBasis Useful Life Salvage Value Methods To UseStraight Line Method Declining Balance Method Income Forecast Method How To Change Methods DispositionsSale or exchange. 2011 taxes due Property not disposed of or abandoned. 2011 taxes due Special rule for normal retirements from item accounts. 2011 taxes due Abandoned property. 2011 taxes due Single item accounts. 2011 taxes due Multiple property account. 2011 taxes due Topics - This chapter discusses: How to figure the deduction Methods to use How to change methods Dispositions Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets 551 Basis of Assets 583 Starting a Business and Keeping Records 946 How To Depreciate Property Form (and Instructions) 3115 Application for Change in Accounting Method 4562 Depreciation and Amortization Schedule C (Form 1040) Profit or Loss From Business If your property is being depreciated under ACRS, you must continue to use rules for depreciation that applied when you placed the property in service. 2011 taxes due If your property qualified for MACRS, you must depreciate it under MACRS. 2011 taxes due See Publication 946. 2011 taxes due However, you cannot use MACRS for certain property because of special rules that exclude it from MACRS. 2011 taxes due Also, you can elect to exclude certain property from being depreciated under MACRS. 2011 taxes due Property that you cannot depreciate using MACRS includes: Intangible property, Property you can elect to exclude from MACRS that you properly depreciate under a method that is not based on a term of years, Certain public utility property, Any motion picture film or video tape, Any sound recording, and Certain real and personal property placed in service before 1987. 2011 taxes due Intangible property. 2011 taxes due You cannot depreciate intangible property under ACRS or MACRS. 2011 taxes due You depreciate intangible property using any other reasonable method, usually, the straight line method. 2011 taxes due Note. 2011 taxes due The cost of certain intangible property that you acquire after August 10, 1993, must be amortized over a 15-year period. 2011 taxes due For more information, see chapter 12 of Publication 535. 2011 taxes due Public utility property. 2011 taxes due The law excludes from MACRS any public utility property for which the taxpayer does not use a normalization method of accounting. 2011 taxes due This type of property is subject to depreciation under a special rule. 2011 taxes due Videocassettes. 2011 taxes due If you are in the videocassette rental business, you can depreciate those videocassettes purchased for rental. 2011 taxes due You can depreciate the cost less salvage value of those videocassettes that have a useful life over one year using either: The straight line method, or The income forecast method. 2011 taxes due The straight line method, salvage value, and useful life are discussed later under Methods To Use. 2011 taxes due You can deduct in the year of purchase as a business expense the cost of any cassette that has a useful life of one year or less. 2011 taxes due How To Figure the Deduction Two other reasonable methods can be used to figure your deduction for property not covered under ACRS or MACRS. 2011 taxes due These methods are straight line and declining balance. 2011 taxes due To figure depreciation using these methods, you must generally determine three things about the property you intend to depreciate. 2011 taxes due They are: The basis, The useful life, and The estimated salvage value at the end of its useful life. 2011 taxes due The amount of the deduction in any year also depends on which method of depreciation you choose. 2011 taxes due Basis To deduct the proper amount of depreciation each year, first determine your basis in the property you intend to depreciate. 2011 taxes due The basis used for figuring depreciation is the same as the basis that would be used for figuring the gain on a sale. 2011 taxes due Your original basis is usually the purchase price. 2011 taxes due However, if you acquire property in some other way, such as inheriting it, getting it as a gift, or building it yourself, you have to figure your original basis in a different way. 2011 taxes due Adjusted basis. 2011 taxes due Events will often change the basis of property. 2011 taxes due When this occurs, the changed basis is called the adjusted basis. 2011 taxes due Some events, such as improvements you make, increase basis. 2011 taxes due Events such as deducting casualty losses and depreciation decrease basis. 2011 taxes due If basis is adjusted, the depreciation deduction may also have to be changed, depending on the reason for the adjustment and the method of depreciation you are using. 2011 taxes due Publication 551 explains how to figure basis for property acquired in different ways. 2011 taxes due It also discusses what items increase and decrease basis, how to figure adjusted basis, and how to allocate cost if you buy several pieces of property at one time. 2011 taxes due Useful Life The useful life of a piece of property is an estimate of how long you can expect to use it in your trade or business, or to produce income. 2011 taxes due It is the length of time over which you will make yearly depreciation deductions of your basis in the property. 2011 taxes due It is how long it will continue to be useful to you, not how long the property will last. 2011 taxes due Many things affect the useful life of property, such as: Frequency of use, Age when acquired, Your repair policy, and Environmental conditions. 2011 taxes due The useful life can also be affected by technological improvements, progress in the arts, reasonably foreseeable economic changes, shifting of business centers, prohibitory laws, and other causes. 2011 taxes due Consider all these factors before you arrive at a useful life for your property. 2011 taxes due The useful life of the same type of property varies from user to user. 2011 taxes due When you determine the useful life of your property, keep in mind your own experience with similar property. 2011 taxes due You can use the general experience of the industry you are in until you are able to determine a useful life of your property from your own experience. 2011 taxes due Change in useful life. 2011 taxes due You base your estimate of useful life on certain facts. 2011 taxes due If these facts change significantly, you can adjust your estimate of the remaining useful life. 2011 taxes due However, you redetermine the estimated useful life only when the change is substantial and there is a clear reason for making the change. 2011 taxes due Salvage Value It is important for you to accurately determine the correct salvage value of the property you want to depreciate. 2011 taxes due You generally cannot depreciate property below a reasonable salvage value. 2011 taxes due Determining salvage value. 2011 taxes due Salvage value is the estimated value of property at the end of its useful life. 2011 taxes due It is what you expect to get for the property if you sell it after you can no longer use it productively. 2011 taxes due You must estimate the salvage value of a piece of property when you first acquire it. 2011 taxes due Salvage value is affected both by how you use the property and how long you use it. 2011 taxes due If it is your policy to dispose of property that is still in good operating condition, the salvage value can be relatively large. 2011 taxes due However, if your policy is to use property until it is no longer usable, its salvage value can be its junk value. 2011 taxes due Changing salvage value. 2011 taxes due Once you determine the salvage value for property, you should not change it merely because prices have changed. 2011 taxes due However, if you redetermine the useful life of property, as discussed earlier under Change in useful life, you can also redetermine the salvage value. 2011 taxes due When you redetermine the salvage value, take into account the facts that exist at the time. 2011 taxes due Net salvage. 2011 taxes due Net salvage is the salvage value of property minus what it costs to remove it when you dispose of it. 2011 taxes due You can choose either salvage value or net salvage when you figure depreciation. 2011 taxes due You must consistently use the one you choose and the treatment of the costs of removal must be consistent with the practice adopted. 2011 taxes due However, if the cost to remove the property is more than the estimated salvage value, then net salvage is zero. 2011 taxes due Your salvage value can never be less than zero. 2011 taxes due Ten percent rule. 2011 taxes due If you acquire personal property that has a useful life of 3 years or more, you can use an amount for salvage value that is less than your actual estimate. 2011 taxes due You can subtract from your estimate of salvage value an amount equal to 10% of your basis in the property. 2011 taxes due If salvage value is less than 10% of basis, you can ignore salvage value when you figure depreciation. 2011 taxes due Methods To Use Two methods of depreciation are the straight line and declining balance methods. 2011 taxes due If ACRS or MACRS does not apply, you can use one of these methods. 2011 taxes due The straight line and declining balance methods discussed in this section are not figured in the same way as straight line or declining balance methods under MACRS. 2011 taxes due Straight Line Method Before 1981, you could use any reasonable method for every kind of depreciable property. 2011 taxes due One of these methods was the straight line method. 2011 taxes due This method was also used for intangible property. 2011 taxes due It lets you deduct the same amount of depreciation each year. 2011 taxes due To figure your deduction, determine the adjusted basis of your property, its salvage value, and its estimated useful life. 2011 taxes due Subtract the salvage value, if any, from the adjusted basis. 2011 taxes due The balance is the total amount of depreciation you can take over the useful life of the property. 2011 taxes due Divide the balance by the number of years remaining in the useful life. 2011 taxes due This gives you the amount of your yearly depreciation deduction. 2011 taxes due Unless there is a big change in adjusted basis, or useful life, this amount will stay the same throughout the time you depreciate the property. 2011 taxes due If, in the first year, you use the property for less than a full year, you must prorate your depreciation deduction for the number of months in use. 2011 taxes due Example. 2011 taxes due In April 1994, Frank bought a franchise for $5,600. 2011 taxes due It expires in 10 years. 2011 taxes due This property is intangible property that cannot be depreciated under MACRS. 2011 taxes due Frank depreciates the franchise under the straight line method, using a 10-year useful life and no salvage value. 2011 taxes due He takes the $5,600 basis and divides that amount by 10 years ($5,600 ÷ 10 = $560, a full year's use). 2011 taxes due He must prorate the $560 for his 9 months of use in 1994. 2011 taxes due This gives him a deduction of $420 ($560 ÷ 9/12). 2011 taxes due In 1995, Frank can deduct $560 for the full year. 2011 taxes due Declining Balance Method The declining balance method allows you to recover a larger amount of the cost of the property in the early years of your use of the property. 2011 taxes due The rate cannot be more than twice the straight line rate. 2011 taxes due Rate of depreciation. 2011 taxes due Under this method, you must determine your declining balance rate of depreciation. 2011 taxes due The initial step is to: Divide the number 1 by the useful life of your property to get a straight line rate. 2011 taxes due (For example, if property has a useful life of 5 years, its normal straight line rate of depreciation is ⅕, or 20%. 2011 taxes due ) Multiply this straight line rate by a number that is more than 1 but not more than 2 to determine the declining balance rate. 2011 taxes due Unless there is a change in the useful life during the time you depreciate the property, the rate of depreciation generally will not change. 2011 taxes due Depreciation deductions. 2011 taxes due After you determine the rate of depreciation, multiply the adjusted basis of the property by it. 2011 taxes due This gives you the amount of your deduction. 2011 taxes due For example, if your adjusted basis at the beginning of the first year is $10,000, and your declining balance rate is 20%, your depreciation deduction for the first year is $2,000 ($10,000 ÷ 20%). 2011 taxes due To figure your depreciation deduction in the second year, you must first adjust the basis for the amount of depreciation you deducted in the first year. 2011 taxes due Subtract the previous year's depreciation from your basis ($10,000 - $2,000 = $8,000). 2011 taxes due Multiply this amount by the rate of depreciation ($8,000 ÷ 20% = $1,600). 2011 taxes due Your depreciation deduction for the second year is $1,600. 2011 taxes due As you can see from this example, your adjusted basis in the property gets smaller each year. 2011 taxes due Also, under this method, deductions are larger in the earlier years and smaller in the later years. 2011 taxes due You can make a change to the straight line method without consent. 2011 taxes due Salvage value. 2011 taxes due Do not subtract salvage value when you figure your yearly depreciation deductions under the declining balance method. 2011 taxes due However, you cannot depreciate the property below its reasonable salvage value. 2011 taxes due Determine salvage value using the rules discussed earlier, including the special 10% rule. 2011 taxes due Example. 2011 taxes due If your adjusted basis has been decreased to $1,000 and the rate of depreciation is 20%, your depreciation deduction should be $200. 2011 taxes due But if your estimate of salvage value was $900, you can only deduct $100. 2011 taxes due This is because $100 is the amount that would lower your adjusted basis to equal salvage value. 2011 taxes due Income Forecast Method The income forecast method requires income projections for each videocassette or group of videocassettes. 2011 taxes due You can group the videocassettes by title for making this projection. 2011 taxes due You determine the depreciation by applying a fraction to the cost less salvage value of the cassette. 2011 taxes due The numerator is the income from the videocassette for the tax year and the denominator is the total projected income for the cassette. 2011 taxes due For more information on the income forecast method, see Revenue Ruling 60-358 in Cumulative Bulletin 1960, Volume 2, on page 68. 2011 taxes due How To Change Methods In some cases, you may change your method of depreciation for property depreciated under a reasonable method. 2011 taxes due If you change your method of depreciation, it is generally a change in your method of accounting. 2011 taxes due You must get IRS consent before making the change. 2011 taxes due However, you do not need permission for certain changes in your method of depreciation. 2011 taxes due The rules discussed in this section do not apply to property depreciated under ACRS or MACRS. 2011 taxes due For information on ACRS elections,see Revocation of election, in chapter 1 under Alternate ACRS Method. 2011 taxes due Change to the straight line method. 2011 taxes due You can change from the declining balance method to the straight line method at any time during the useful life of your property without IRS consent. 2011 taxes due However, if you have a written agreement with the IRS that prohibits a change, you must first get IRS permission. 2011 taxes due When the change is made, figure depreciation based on your adjusted basis in the property at that time. 2011 taxes due Your adjusted basis takes into account all previous depreciation deductions. 2011 taxes due Use the estimated remaining useful life of your property at the time of change and its estimated salvage value. 2011 taxes due You can change from the declining balance method to straight line only on the original tax return for the year you first use the straight line method. 2011 taxes due You cannot make the change on an amended return filed after the due date of the original return (including extensions). 2011 taxes due When you make the change, attach a statement to your tax return showing: When you acquired the property, Its original cost or other original basis, The total amount claimed for depreciation and other allowances since you acquired it, Its salvage value and remaining useful life, and A description of the property and its use. 2011 taxes due After you change to straight line, you cannot change back to the declining balance method or to any other method for a period of 10 years without written permission from the IRS. 2011 taxes due Changes that require permission. 2011 taxes due For most other changes in method of depreciation, you must get permission from the IRS. 2011 taxes due To request a change in method of depreciation, file Form 3115. 2011 taxes due File the application within the first 180 days of the tax year the change is to become effective. 2011 taxes due In most cases, there is a user fee that must accompany Form 3115. 2011 taxes due See the instructions for Form 3115 to determine if a fee is required. 2011 taxes due Changes granted automatically. 2011 taxes due The IRS automatically approves certain changes of a method of depreciation. 2011 taxes due But, you must file Form 3115 for these automatic changes. 2011 taxes due However, IRS can deny permission if Form 3115 is not filed on time. 2011 taxes due For more information on automatic changes, see Revenue Procedure 74-11, 1974-1 C. 2011 taxes due B. 2011 taxes due 420. 2011 taxes due Changes for which approval is not automatic. 2011 taxes due The automatic change procedures do not apply to: Property or an account where you made a change in depreciation within the last 10 tax years (unless the change was made under the Class Life System), Class Life Asset Depreciation Range System, and Public utility property. 2011 taxes due You must request and receive permission for these changes. 2011 taxes due To make the request, file Form 3115 during the first 180 days of the tax year for which you want the change to be effective. 2011 taxes due Change from an improper method. 2011 taxes due If the IRS disallows the method you are using, you do not need permission to change to a proper method. 2011 taxes due You can adopt the straight line method, or any other method that would have been permitted if you had used it from the beginning. 2011 taxes due If you file your tax return using an improper method, but later file an amended return, you can use a proper method on the amended return without getting IRS permission. 2011 taxes due However, you must file the amended return before the filing date for the next tax year. 2011 taxes due Dispositions Retirement is the permanent withdrawal of depreciable property from use in your trade or business or for the production of income. 2011 taxes due You can do this by selling, exchanging, or abandoning the item of property. 2011 taxes due You can also withdraw it from use without disposing of it. 2011 taxes due For example, you could place it in a supplies or scrap account. 2011 taxes due Retirements can be either normal or abnormal depending on all facts and circumstances. 2011 taxes due The rules discussed next do not apply to MACRS and ACRS property. 2011 taxes due Normal retirement. 2011 taxes due A normal retirement is a permanent withdrawal of depreciable property from use if the following apply: The retirement is made within the useful life you estimated originally, and The property has reached a condition at which you customarily retire or would retire similar property from use. 2011 taxes due A retirement is generally considered normal unless you can show that you retired the property because of a reason you did not consider when you originally estimated the useful life of the property. 2011 taxes due Abnormal retirement. 2011 taxes due A retirement can be abnormal if you withdraw the property early or under other circumstances. 2011 taxes due For example, if the property is damaged by a fire or suddenly becomes obsolete and is now useless. 2011 taxes due Gain or loss on retirement. 2011 taxes due There are special rules for figuring the gain or loss on retirement of property. 2011 taxes due The gain or loss will depend on several factors. 2011 taxes due These include the type of withdrawal, if the withdrawal was from a single property or multiple property account, and if the retirement was normal or abnormal. 2011 taxes due A single property account contains only one item of property. 2011 taxes due A multiple property account is one in which several items have been combined with a single rate of depreciation assigned to the entire account. 2011 taxes due Sale or exchange. 2011 taxes due If property is retired by sale or exchange, you figure gain or loss by the usual rules that apply to sales or other dispositions of property. 2011 taxes due See Publication 544. 2011 taxes due Property not disposed of or abandoned. 2011 taxes due If property is retired permanently, but not disposed of or physically abandoned, you do not recognize gain. 2011 taxes due You are allowed a loss in such a case, but only if the retirement is: An abnormal retirement, A normal retirement from a single property account in which you determined the life of each item of property separately, or A normal retirement from a multiple property account in which the depreciation rate is based on the maximum expected life of the longest lived item of property and the loss occurs before the expiration of the full useful life. 2011 taxes due However, you are not allowed a loss if the depreciation rate is based on the average useful life of the items of property in the account. 2011 taxes due To figure your loss, subtract the estimated salvage or fair market value of the property at the date of retirement, whichever is more, from its adjusted basis. 2011 taxes due Special rule for normal retirements from item accounts. 2011 taxes due You can generally deduct losses upon retirement of a few depreciable items of property with similar useful lives, if: You account for each one in a separate account, and You use the average useful life to figure depreciation. 2011 taxes due However, you cannot deduct losses if you use the average useful life to figure depreciation and they have a wide range of useful lives. 2011 taxes due If you have a large number of depreciable property items and use average useful lives to figure depreciation, you cannot deduct the losses upon normal retirements from these accounts. 2011 taxes due Abandoned property. 2011 taxes due If you physically abandon property, you can deduct as a loss the adjusted basis of the property at the time of its abandonment. 2011 taxes due However, your intent must be to discard the property so that you will not use it again or retrieve it for sale, exchange, or other disposition. 2011 taxes due Basis of property retired. 2011 taxes due The basis for figuring gain or loss on the retirement of property is its adjusted basis at the time of retirement, as determined in the following discussions. 2011 taxes due Single item accounts. 2011 taxes due If an item of property is accounted for in a single item account, the adjusted basis is the basis you would use to figure gain or loss for a sale or exchange of the property. 2011 taxes due This is generally the cost or other basis of the item of property less depreciation. 2011 taxes due See Publication 551. 2011 taxes due Multiple property account. 2011 taxes due For a normal retirement from a multiple property account, if you figured depreciation using the average expected useful life, the adjusted basis is the salvage value estimated for the item of property when it was originally acquired. 2011 taxes due If you figured depreciation using the maximum expected useful life of the longest lived item of property in the account, you must use the depreciation method used for the multiple property account and a rate based on the maximum expected useful life of the item of property retired. 2011 taxes due You make the adjustment for depreciation for an abnormal retirement from a multiple property account at the rate that would be proper if the item of property was depreciated in a single property account. 2011 taxes due The method of depreciation used for the multiple property account is used. 2011 taxes due You base the rate on either the average expected useful life or the maximum expected useful life of the retired item of property, depending on the method used to determine the depreciation rate for the multiple property account. 2011 taxes due Prev Up Next Home More Online Publications