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File taxes free Publication 4492 - Main Contents Table of Contents DefinitionsHurricane Katrina Disaster Area Katrina Covered Disaster Area Gulf Opportunity (GO) Zone (Core Disaster Area) Hurricane Rita Disaster Area (Rita Covered Disaster Area) Rita GO Zone Hurricane Wilma Disaster Area Wilma Covered Disaster Area Wilma GO Zone Extended Tax Deadlines Charitable Giving IncentivesTemporary Suspension of Limits on Charitable Contributions Standard Mileage Rate for Charitable Use of Vehicles Mileage Reimbursements to Charitable Volunteers Charitable Deduction for Contributions of Food Inventory Charitable Deduction for Contributions of Book Inventories to Public Schools Casualty and Theft LossesTime limit for making election. File taxes free Replacement Period for Nonrecognition of Gain Net Operating Losses IRAs and Other Retirement PlansDefinitions Taxation of Qualified Hurricane Distributions Repayment of Qualified Hurricane Distributions Repayment of Qualified Distributions for the Purchase or Construction of a Main Home Loans From Qualified Plans Additional Tax Relief for IndividualsEarned Income Credit and Child Tax Credit Additional Exemption for Housing Individuals Displaced by Hurricane Katrina Education Credits Recapture of Federal Mortgage Subsidy Exclusion of Certain Cancellations of Indebtedness by Reason of Hurricane Katrina Tax Relief for Temporary Relocation Additional Tax Relief for BusinessesSpecial Depreciation Allowance Increased Section 179 Deduction Work Opportunity Credit Employee Retention Credit Hurricane Katrina Housing Credit Reforestation Costs Demolition and Clean-up Costs Increase in Rehabilitation Tax Credit Request for Copy or Transcript of Tax Return How To Get Tax Help Definitions The following definitions are used throughout this publication. File taxes free Hurricane Katrina Disaster Area The Hurricane Katrina disaster area covers the area for which the President declared a major disaster before September 14, 2005, because of Hurricane Katrina. File taxes free The Hurricane Katrina disaster area covers the entire states of Alabama, Florida, Louisiana, and Mississippi. File taxes free Katrina Covered Disaster Area A portion of the Hurricane Katrina disaster area has been designated by the IRS as a covered disaster area. File taxes free The Katrina covered disaster area covers the following areas in four states. File taxes free Alabama. File taxes free   The counties of Baldwin, Bibb, Choctaw, Clarke, Colbert, Cullman, Greene, Hale, Jefferson, Lamar, Lauderdale, Marengo, Marion, Mobile, Monroe, Perry, Pickens, Sumter, Tuscaloosa, Washington, Wilcox, and Winston. File taxes free Florida. File taxes free   The counties of Bay, Broward, Collier, Escambia, Franklin, Gulf, Miami-Dade, Monroe, Okaloosa, Santa Rosa, and Walton. File taxes free Louisiana. File taxes free   All parishes. File taxes free Mississippi. File taxes free   All counties. File taxes free Gulf Opportunity (GO) Zone (Core Disaster Area) The GO Zone (also called the core disaster area) covers the portion of the Hurricane Katrina disaster area determined by the Federal Emergency Management Agency (FEMA) to be eligible for either individual only or both individual and public assistance from the Federal Government. File taxes free The GO Zone covers the following areas in three states. File taxes free Alabama. File taxes free   The counties of Baldwin, Choctaw, Clarke, Greene, Hale, Marengo, Mobile, Pickens, Sumter, Tuscaloosa, and Washington. File taxes free Louisiana. File taxes free   The parishes of Acadia, Ascension, Assumption, Calcasieu, Cameron, East Baton Rouge, East Feliciana, Iberia, Iberville, Jefferson, Jefferson Davis, Lafayette, Lafourche, Livingston, Orleans, Plaquemines, Pointe Coupee, St. File taxes free Bernard, St. File taxes free Charles, St. File taxes free Helena, St. File taxes free James, St. File taxes free John the Baptist, St. File taxes free Martin, St. File taxes free Mary, St. File taxes free Tammany, Tangipahoa, Terrebonne, Vermilion, Washington, West Baton Rouge, and West Feliciana. File taxes free Mississippi. File taxes free   The counties of Adams, Amite, Attala, Choctaw, Claiborne, Clarke, Copiah, Covington, Forrest, Franklin, George, Greene, Hancock, Harrison, Hinds, Holmes, Humphreys, Jackson, Jasper, Jefferson, Jefferson Davis, Jones, Kemper, Lamar, Lauderdale, Lawrence, Leake, Lincoln, Lowndes, Madison, Marion, Neshoba, Newton, Noxubee, Oktibbeha, Pearl River, Perry, Pike, Rankin, Scott, Simpson, Smith, Stone, Walthall, Warren, Wayne, Wilkinson, Winston, and Yazoo. File taxes free Hurricane Rita Disaster Area (Rita Covered Disaster Area) The Hurricane Rita disaster area (also designated by the IRS as the Rita covered disaster area) covers the area for which the President declared a major disaster before October 6, 2005, because of Hurricane Rita. File taxes free This area covers the entire states of Louisiana and Texas. File taxes free Rita GO Zone The Rita GO Zone covers the portion of the Hurricane Rita disaster area determined by FEMA to be eligible for either individual only or both individual and public assistance from the Federal Government. File taxes free The Rita GO Zone covers the following areas in two states. File taxes free Louisiana. File taxes free   The parishes of Acadia, Allen, Ascension, Beauregard, Calcasieu, Cameron, Evangeline, Iberia, Jefferson, Jefferson Davis, Lafayette, Lafourche, Livingston, Plaquemines, Sabine, St. File taxes free Landry, St. File taxes free Martin, St. File taxes free Mary, St. File taxes free Tammany, Terrebonne, Vermilion, Vernon, and West Baton Rouge. File taxes free Texas. File taxes free   The counties of Angelina, Brazoria, Chambers, Fort Bend, Galveston, Hardin, Harris, Jasper, Jefferson, Liberty, Montgomery, Nacogdoches, Newton, Orange, Polk, Sabine, San Augustine, San Jacinto, Shelby, Trinity, Tyler, and Walker. File taxes free Hurricane Wilma Disaster Area The Hurricane Wilma disaster area covers the area for which the President declared a major disaster before November 14, 2005, because of Hurricane Wilma. File taxes free The Hurricane Wilma disaster area covers the entire state of Florida. File taxes free Wilma Covered Disaster Area A portion of the Hurricane Wilma disaster area has been designated by the IRS as a covered disaster area. File taxes free The Wilma covered disaster area covers the following counties. File taxes free Florida. File taxes free   Brevard, Broward, Charlotte, Collier, DeSoto, Glades, Hardee, Hendry, Highlands, Indian River, Lee, Martin, Miami-Dade, Monroe, Okeechobee, Osceola, Palm Beach, Polk, St. File taxes free Lucie, and Sarasota. File taxes free Wilma GO Zone The Wilma GO Zone covers the portion of the Hurricane Wilma disaster area determined by FEMA to be eligible for either individual only or both individual and public assistance from the Federal Government. File taxes free The Wilma GO Zone covers the following counties. File taxes free Florida. File taxes free   Brevard, Broward, Collier, Glades, Hendry, Indian River, Lee, Martin, Miami-Dade, Monroe, Okeechobee, Palm Beach, and St. File taxes free Lucie. File taxes free Extended Tax Deadlines The IRS has extended deadlines that apply to filing returns, paying taxes, and performing certain other time-sensitive acts for certain taxpayers affected by Hurricane Katrina, Rita, or Wilma, until February 28, 2006. File taxes free The extension applies to deadlines (either an original or extended due date) that occur during the following periods. File taxes free After August 28, 2005 (August 23, 2005, for Florida affected taxpayers), and before February 28, 2006, for taxpayers affected by Hurricane Katrina. File taxes free After September 22, 2005, and before February 28, 2006, for taxpayers affected by Hurricane Rita. File taxes free After October 22, 2005, and before February 28, 2006, for taxpayers affected by Hurricane Wilma. File taxes free Affected taxpayer. File taxes free   The following taxpayers are eligible for the extension. File taxes free Any individual whose main home is located in a covered disaster area. File taxes free Any business entity or sole proprietor whose principal place of business is located in a covered disaster area. File taxes free Any individual, business entity, or sole proprietor whose records needed to meet a postponed deadline are maintained or whose tax professional's office is in a covered disaster area. File taxes free The main home or principal place of business does not have to be located in the covered area. File taxes free Any individual visiting a county or parish in the Hurricane Katrina or Hurricane Rita covered disaster area that was injured or killed (and the estate of an individual killed) as a result of the hurricane or its aftermath. File taxes free Any estate or trust whose tax records needed to meet a filing or payment deadline are maintained in a covered disaster area. File taxes free Generally, any individual who is a worker assisting in the relief activities in a covered disaster area. File taxes free However, a relief worker assisting in the Wilma covered disaster area is not an affected taxpayer unless the worker is affiliated with a recognized government or philanthropic organization assisting in the relief activities. File taxes free The spouse of an affected taxpayer, solely with regard to a joint income tax return with that taxpayer. File taxes free   To ensure correct processing, affected taxpayers should write the assigned disaster designation (for example, “Hurricane Katrina”) in red ink at the top of any forms or documents filed with the IRS. File taxes free Affected taxpayers can also identify themselves to the IRS or ask hurricane-related questions by calling the special IRS disaster hotline at 1-866-562-5227. File taxes free Acts extended. File taxes free   Deadlines for performing the following acts are extended. File taxes free Filing any return of income, estate, gift, generation-skipping transfer, excise, or employment tax. File taxes free Paying any income, estate, gift, generation-skipping transfer, excise, or employment tax. File taxes free This includes making estimated tax payments. File taxes free Making certain contributions, distributions, recharacterizing contributions, or making a rollover to or from a qualified retirement plan. File taxes free Filing certain petitions with the Tax Court. File taxes free Filing a claim for credit or refund of any tax. File taxes free Bringing suit upon a claim for credit or refund. File taxes free Certain other acts described in Revenue Procedure 2005-27. File taxes free You can find Revenue Procedure 2005-27 on page 1050 of Internal Revenue Bulletin 2005-20 at www. File taxes free irs. File taxes free gov/pub/irs-irbs/irb05-20. File taxes free pdf. File taxes free Forgiveness of interest and penalties. File taxes free   The IRS may forgive the interest and penalties on any underpaid income, estate, gift, employment, or excise tax for the length of any extension. File taxes free Charitable Giving Incentives Temporary Suspension of Limits on Charitable Contributions Individuals. File taxes free   Qualified contributions are not subject to the overall limit on itemized deductions or the 50% adjusted gross income (AGI) limit. File taxes free A qualified contribution is a charitable contribution paid in cash or by check after August 27, 2005, and before January 1, 2006, to a 50% limit organization (other than certain private foundations described in section 509(a)(3)) if you make an election to have the 50% limit not apply to these contributions. File taxes free   Your deduction for qualified contributions is limited to your AGI minus your deduction for all other charitable contributions. File taxes free You can carry over any contributions you are not able to deduct for 2005 because of this limit. File taxes free In 2006, treat the carryover of your unused qualified contributions as a carryover of contributions subject to the 50% limit. File taxes free Exception. File taxes free   Qualified contributions do not include a contribution to a segregated fund or account for which you (or any person you appoint or designate) have or expect to have advisory privileges with respect to distributions or investments based on your contribution. File taxes free Corporations. File taxes free   A corporation may elect to deduct qualified cash contributions without regard to the 10% taxable income limit if the contributions were made after August 27, 2005, and before January 1, 2006, to a qualified charitable organization (other than certain private foundations described in section 509(a)(3)), for Hurricane Katrina, Rita, or Wilma relief efforts. File taxes free The corporation's deduction for these qualified contributions is limited to 100% of taxable income (as modified for the 10% limit) minus the corporation's deduction for all other charitable contributions. File taxes free Any qualified contributions over this limit can be carried over to the next 5 years, subject to the 10% limit. File taxes free Partners and shareholders. File taxes free   Each partner in a partnership and each shareholder in an S corporation makes a separate election to have the appropriate limit not apply. File taxes free More information. File taxes free   For more information, see Publication 526 or Publication 542, Corporations. File taxes free Publication 526 includes a worksheet you can use to figure your deduction if any limits apply to your charitable contributions. File taxes free Standard Mileage Rate for Charitable Use of Vehicles The following are special standard mileage rates in effect in 2005 and 2006 for the cost of operating your automobile for providing charitable services solely related to Hurricane Katrina. File taxes free 29 cents per mile for the period August 25 through August 31, 2005. File taxes free 34 cents per mile for the period September 1 through December 31, 2005. File taxes free 32 cents per mile for the period January 1 through December 31, 2006. File taxes free Mileage Reimbursements to Charitable Volunteers You can exclude from income amounts you receive as mileage reimbursements for the use of a private passenger automobile for the benefit of a qualified charitable organization in providing relief related to Hurricane Katrina during the period beginning on August 25, 2005, and ending on December 31, 2006. File taxes free You cannot claim a deduction or credit for amounts you receive as a mileage reimbursement. File taxes free You must keep records of miles driven, time, place (or use), and purpose of the mileage. File taxes free The amount you can exclude from income cannot exceed the standard business mileage rate (shown below) for expenses incurred during the following periods. File taxes free 40. File taxes free 5 cents per mile for the period August 25 through August 31, 2005. File taxes free 48. File taxes free 5 cents per mile for the period September 1 through December 31, 2005. File taxes free 44. File taxes free 5 cents per mile for the period January 1 through December 31, 2006. File taxes free Charitable Deduction for Contributions of Food Inventory Any taxpayer engaged in a trade or business is eligible to claim a deduction for a contribution of “apparently wholesome food” inventory to a qualified charitable organization described in section 501(c)(3) (except for private nonoperating foundations) after August 27, 2005, and before January 1, 2006. File taxes free “Apparently wholesome food” is food that meets all quality and labeling standards imposed by federal, state, and local laws and regulations even though the food may not be readily marketable due to appearance, age, freshness, grade, size, surplus, or other conditions. File taxes free The deduction is equal to the lesser of: The basis of the donated food plus one-half of the gain that would have been realized if the donated food had been sold at fair market value on the date of the donation, or Two times the basis of the donated food. File taxes free The taxpayer must receive written certification from the donee stating: The donated food is related to the purpose or function of the donee's basis for exemption under section 501(c)(3) and is to be used solely for the care of the ill, the needy, or infants; and The food was not given in exchange for money, other property, or services. File taxes free For a taxpayer other than a C corporation, the deduction is limited to 10% of the taxpayer's total net income from all trades or businesses from which the food contributions were made (figured without regard to the deduction for charitable contributions). File taxes free For example, if a taxpayer is a sole proprietor, a shareholder in an S corporation, and a partner in a partnership, and each made a contribution of apparently wholesome food inventory, the taxpayer's deduction is limited to 10% of the taxpayer's total net income from the sole proprietorship, S corporation, and partnership (figured without regard to the deduction for charitable contributions). File taxes free Charitable Deduction for Contributions of Book Inventories to Public Schools A corporation (other than an S corporation) may be allowed a charitable deduction for a qualified book contribution made after August 27, 2005, and before January 1, 2006, to a public school that: Provides elementary or secondary education (kindergarten through grade 12), and Normally maintains a regular faculty and curriculum and has a regular enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on. File taxes free . File taxes free The deduction is equal to the lesser of: The basis of the donated books plus one-half of the gain that would have been realized if the donated books had been sold at fair market value on the date of the donation, or Two times the basis of the donated books. File taxes free The corporation must receive written certification from the school stating that the donated books are suitable for the organization's educational programs and will be used for such programs. File taxes free Casualty and Theft Losses The following paragraphs explain changes to casualty and theft losses that were caused by Hurricane Katrina, Rita, or Wilma. File taxes free For more information, see Publication 547. File taxes free Limits on personal casualty or theft losses caused by Hurricane Katrina, Rita, or Wilma. File taxes free   The following losses to personal use property are not subject to the $100 or 10% of adjusted gross income limits. File taxes free Losses that arose in the Hurricane Katrina disaster area after August 24, 2005, and that were caused by Hurricane Katrina. File taxes free Losses that arose in the Hurricane Rita disaster area after September 22, 2005, and that were caused by Hurricane Rita. File taxes free Losses that arose in the Hurricane Wilma disaster area after October 22, 2005, and that were caused by Hurricane Wilma. File taxes free Qualifying losses include losses from flooding or other casualty, and from theft, that arose in the hurricane disaster area and that were caused by the hurricane. File taxes free Special instructions for individuals who elect to claim a Hurricane Katrina, Rita, or Wilma casualty or theft loss for 2004. File taxes free   Casualty and theft losses are generally deductible only in the year the casualty occurred or theft was discovered. File taxes free However, Hurricane Katrina, Rita, and Wilma are Presidentially declared disasters. File taxes free Therefore, you can elect to deduct losses from these hurricanes on your tax return for the previous year. File taxes free If you make this election, use the following additional instructions to complete your forms. File taxes free   Individuals filing or amending their 2004 tax return whose only casualty or theft losses to personal use property claimed on that return were caused by Hurricane Katrina, Rita, or Wilma should write “Hurricane Katrina,” “Hurricane Rita,” or “Hurricane Wilma” at the top of Form 1040 or 1040X. File taxes free They must also complete and attach the 2004 Form 4684 and write “Hurricane Katrina,”“Hurricane Rita,” or “Hurricane Wilma” on the dotted line next to line 11 and enter -0- on lines 11 and 17. File taxes free   Individuals filing or amending their 2004 tax return who also have casualty or theft losses to personal use property not related to Hurricane Katrina, Rita, or Wilma should disregard the caution directing taxpayers to use only one Form 4684, located above line 13, and complete lines 13 through 18 on two Forms 4684. File taxes free The Form 1040 or 1040X and the first Form 4684 should be prepared as explained above for Hurricane Katrina, Rita, or Wilma losses only. File taxes free The second Form 4684 should be prepared in the normal manner for all gains and non-Hurricane Katrina, Rita or Wilma losses. File taxes free If both Forms 4684 have a loss on line 18, they should carry the combined losses from that line to Schedule A (Form 1040), line 19. File taxes free If there is a gain on line 15 of the second Form 4684, disregard the instruction to enter it on Schedule D (Form 1040), and instead enter on Schedule A (Form 1040), line 19, the excess of the loss from the first Form 4684 over the gain on line 15 of the second Form 4684. File taxes free , Time limit for making election. File taxes free   You must make this election to claim your casualty or theft loss in 2004 by the later of the following dates. File taxes free The due date (without extensions) for filing your 2005 income tax return. File taxes free The due date (with extensions) for filing your 2004 income tax return. File taxes free Example. File taxes free If you are a calendar year individual taxpayer, you have until April 17, 2006, to amend your 2004 tax return to claim a casualty or theft loss that occurred during 2005. File taxes free Replacement Period for Nonrecognition of Gain Generally, an involuntary conversion occurs when property is damaged, destroyed, stolen, seized, requisitioned, or condemned, and you receive other property or money in payment, such as insurance or a condemnation award. File taxes free Generally, you do not have to report a gain (if any) if you replace the property within 2 years (4 years for a main home in a Presidentially declared disaster area). File taxes free However, for property that was involuntarily converted after August 24, 2005, as a result of Hurricane Katrina, a 5-year replacement period applies if substantially all of the use of the replacement property is in the Hurricane Katrina disaster area. File taxes free For more information, see the Instructions for Form 4684. File taxes free Net Operating Losses Qualified GO Zone loss. File taxes free   Generally, you can carry a net operating loss (NOL) back to the 2 tax years before the NOL year. File taxes free However, the portion of an NOL that is a qualified GO Zone loss can be carried back to the 5 tax years before the NOL year. File taxes free In addition, the 90% limit on the alternative tax NOL deduction (ATNOLD) does not apply to such portion of the ATNOLD. File taxes free   A qualified GO Zone loss is the smaller of: The excess of the NOL for the year over the specified liability loss for the year to which a 10-year carryback applies, or The total of the following deductions (to the extent they are taken into account in computing the NOL for the tax year): Qualified GO Zone casualty loss (as defined below), Moving expenses paid or incurred after August 27, 2005, and before January 1, 2008, for the employment of an individual whose main home was in the GO Zone before August 28, 2005, who was unable to remain in that home because of Hurricane Katrina, and whose main job location (after the move) is in the GO Zone, Temporary housing expenses paid or incurred after August 27, 2005, and before January 1, 2008, to house employees of the taxpayer whose main job location is in the GO Zone, Depreciation or amortization allowable for any qualified GO Zone property (even if you elected not to claim the special GO Zone depreciation allowance for such property) for the year placed in service, and Repair expenses (including expenses for the removal of debris) paid or incurred after August 27, 2005, and before January 1, 2008, for any damage from Hurricane Katrina to property located in the GO Zone. File taxes free Qualified GO Zone casualty loss. File taxes free   A qualified GO Zone casualty loss is any deductible section 1231 loss of property located in the GO Zone if the loss was caused by Hurricane Katrina. File taxes free For this purpose, the amount of the loss is reduced by any recognized gain from an involuntary conversion caused by Hurricane Katrina of property located in the GO Zone. File taxes free Any such loss taken into account in figuring your qualified GO Zone loss is not eligible for the election to be treated as having occurred in the previous tax year. File taxes free 5-year NOL carryback of certain timber losses. File taxes free   Generally, you can carry the portion of an NOL due to income and deductions attributable to a farming business back to the 5 tax years before the NOL year. File taxes free You can treat income and deductions attributable to qualified timber property as attributable to a farming business if any portion of the property is located in the GO Zone, Rita GO Zone, or Wilma GO Zone, and the income and deductions are allocable to the part of your tax year which is after the applicable date below. File taxes free August 27, 2005, if any portion of the property is located in the GO Zone. File taxes free September 22, 2005, if any portion of the property is located in the Rita GO Zone (but not in the GO Zone). File taxes free October 22, 2005, if any portion of the property is located in the Wilma GO Zone (but not in the GO Zone or the RITA GO Zone). File taxes free   These rules will not apply after 2006. File taxes free   However, these rules apply only to a timber producer who: Held qualified timber property (defined in Publication 535, Business Expenses) on the applicable date below: August 28, 2005, if any portion of the property is located in the GO Zone, September 23, 2005, if any portion of the property is located in the Rita GO Zone (but not in the GO Zone), or October 23, 2005, if any portion of the property is located in the Wilma GO Zone (but not in the GO Zone or the Rita GO Zone); Is not a corporation with stock publicly traded on an established securities market; Is not a real estate investment trust; and Did not hold more than 500 acres of qualified timber property on the applicable date above. File taxes free More information. File taxes free   For more information on NOLs, see Publication 536 or Publication 542, Corporations. File taxes free IRAs and Other Retirement Plans New rules provide for tax-favored withdrawals, repayments, and loans from certain retirement plans for taxpayers who suffered economic losses as a result of Hurricane Katrina, Rita, or Wilma. File taxes free Definitions Qualified hurricane distribution. File taxes free   A qualified hurricane distribution is any distribution you received from an eligible retirement plan if all of the following apply. File taxes free The distribution was made: After August 24, 2005, and before January 1, 2007, for Hurricane Katrina; After September 22, 2005, and before January 1, 2007, for Hurricane Rita; or After October 22, 2005, and before January 1, 2007, for Hurricane Wilma. File taxes free Your main home was located in a hurricane disaster area listed below on the date shown for that area. File taxes free August 28, 2005, for the Hurricane Katrina disaster area. File taxes free September 23, 2005, for the Hurricane Rita disaster area. File taxes free October 23, 2005, for the Hurricane Wilma disaster area. File taxes free You sustained an economic loss because of Hurricane Katrina, Rita, or Wilma and your main home was in that hurricane disaster area on the date shown in (2) above for that hurricane. File taxes free Examples of an economic loss include, but are not limited to: Loss, damage to, or destruction of real or personal property from fire, flooding, looting, vandalism, theft, wind, or other cause; Loss related to displacement from your home; or Loss of livelihood due to temporary or permanent layoffs. File taxes free   If (1) through (3) above apply, you can generally designate any distribution (including periodic payments and required minimum distributions) from an eligible retirement plan as a qualified hurricane distribution, regardless of whether the distribution was made on account of Hurricane Katrina, Rita, or Wilma. File taxes free Qualified hurricane distributions are permitted without regard to your need or the actual amount of your economic loss. File taxes free   The total of your qualified hurricane distributions from all plans is limited to $100,000. File taxes free If you have distributions in excess of $100,000 from more than one type of plan, such as a 401(k) plan and an IRA, you may allocate the $100,000 limit among the plans any way you choose. File taxes free   A reduction or offset (after August 24, 2005, for Katrina; after September 22, 2005, for Rita; or after October 22, 2005, for Wilma) of your account balance in an eligible retirement plan in order to repay a loan can also be designated as a qualified hurricane distribution. File taxes free Eligible retirement plan. File taxes free   An eligible retirement plan can be any of the following. File taxes free A qualified pension, profit-sharing, or stock bonus plan (including a 401(k) plan). File taxes free A qualified annuity plan. File taxes free A tax-sheltered annuity contract. File taxes free A governmental section 457 deferred compensation plan. File taxes free A traditional, SEP, SIMPLE, or Roth IRA. File taxes free Main home. File taxes free   Generally, your main home is the home where you live most of the time. File taxes free A temporary absence due to special circumstances, such as illness, education, business, military service, evacuation, or vacation, will not change your main home. File taxes free Taxation of Qualified Hurricane Distributions Qualified hurricane distributions are included in income in equal amounts over three years. File taxes free However, if you elect, you can include the entire distribution in your income in the year it was received. File taxes free Qualified hurricane distributions are not subject to the additional 10% tax (or the additional 25% tax for certain distributions from SIMPLE IRAs) on early distributions from qualified retirement plans (including IRAs). File taxes free However, any distributions you receive in excess of the $100,000 qualified hurricane distribution limit may be subject to the additional tax on early distributions. File taxes free For more information, see Form 8915. File taxes free Repayment of Qualified Hurricane Distributions If you choose, you generally can repay any portion of a qualified hurricane distribution that is eligible for tax-free rollover treatment to an eligible retirement plan. File taxes free Also, you can repay a qualified hurricane distribution made on account of a hardship from a retirement plan. File taxes free However, see Exceptions below for qualified hurricane distributions you cannot repay. File taxes free You have three years from the day after the date you received the distribution to make a repayment. File taxes free Amounts that are repaid are treated as a qualified rollover and are not included in income. File taxes free Also, for purposes of the one-rollover-per-year limitation for IRAs, a repayment to an IRA is not considered a qualified rollover. File taxes free See Form 8915 for more information on how to report repayments. File taxes free Exceptions. File taxes free   You cannot repay the following types of distributions. File taxes free Qualified hurricane distributions received as a beneficiary (other than a surviving spouse). File taxes free Required minimum distributions. File taxes free Periodic payments (other than from an IRA) that are for: A period of 10 years or more, Your life or life expectancy, or The joint lives or joint life expectancies of you and your beneficiary. File taxes free Repayment of Qualified Distributions for the Purchase or Construction of a Main Home If you received a qualified distribution to purchase or construct a main home in the Hurricane Katrina, Rita, or Wilma disaster area, you can repay that distribution before March 1, 2006, to an eligible retirement plan after August 24, 2005 (Katrina); after September 22, 2005 (Rita); or after October 22, 2005 (Wilma). File taxes free For this purpose, an eligible retirement plan is any plan, annuity, or IRA to which a qualified rollover can be made. File taxes free To be a qualified distribution, the distribution must meet all of the following requirements. File taxes free The distribution is a hardship distribution from a 401(k) plan, a hardship distribution from a tax-sheltered annuity contract, or a qualified first-time homebuyer distribution from an IRA. File taxes free The distribution was received in 2005 after February 28 and before: August 29 for Hurricane Katrina; September 24 for Hurricane Rita; or October 24 for Hurricane Wilma. File taxes free The distribution was to be used to purchase or construct a main home in the Hurricane Katrina, Rita, or Wilma disaster area that was not purchased or constructed because of Hurricane Katrina, Rita, or Wilma. File taxes free Amounts that are repaid before March 1, 2006, are treated as a qualified rollover and are not included in income. File taxes free Also, for purposes of the one-rollover-per-year limitation for IRAs, a repayment to an IRA is not considered a qualified rollover. File taxes free A qualified distribution not repaid before March 1, 2006, may be taxable for 2005 and subject to the additional 10% tax (or the additional 25% tax for certain SIMPLE IRAs) on early distributions. File taxes free You must file Form 8915 if you received a qualified distribution that you repaid, in whole or in part, before March 1, 2006. File taxes free Loans From Qualified Plans The following benefits are available to qualified individuals. File taxes free Increases to the limits for distributions treated as loans from employer plans. File taxes free A 1-year suspension for payments due on plan loans. File taxes free Qualified individual. File taxes free   You are a qualified individual if any of the following apply. File taxes free Your main home on August 28, 2005, was located in the Hurricane Katrina disaster area and you had an economic loss because of Hurricane Katrina. File taxes free Your main home on September 23, 2005, was located in the Hurricane Rita disaster area and you had an economic loss because of Hurricane Rita. File taxes free Your main home on October 23, 2005, was located in the Hurricane Wilma disaster area and you had an economic loss because of Hurricane Wilma. File taxes free Examples of an economic loss include, but are not limited to: Loss, damage to, or destruction of real or personal property from fire, flooding, looting, vandalism, theft, wind, or other cause; Loss related to displacement from your home; or Loss of livelihood due to temporary or permanent layoffs. File taxes free Limits on plan loans. File taxes free   The $50,000 limit for distributions treated as plan loans is increased to $100,000. File taxes free In addition, the limit based on 50% of your vested accrued benefit is increased to 100% of that benefit. File taxes free The higher limits apply only to loans received during the following period. File taxes free If your main home was located in the Hurricane Katrina disaster area, the period began on September 24, 2005, and ends on December 31, 2006. File taxes free If your main home was located in the Hurricane Rita or Wilma disaster area, the period began on December 21, 2005, and ends on December 31, 2006. File taxes free If you are a qualified individual based on Hurricane Katrina and another hurricane, use the period based on Hurricane Katrina. File taxes free One-year suspension of loan payments. File taxes free   Payments on plan loans due before 2007 may be suspended for 1 year by the plan administrator. File taxes free To qualify for the suspension, the due date for any loan payment must occur during the period beginning on: August 28, 2005, if your main home was located in the Hurricane Katrina disaster area. File taxes free September 23, 2005, if your main home was located in the Hurricane Rita disaster area. File taxes free October 23, 2005, if your main home was located in the Hurricane Wilma disaster area. File taxes free If you are a qualified individual based on more than one hurricane, use the period with the earliest beginning date. File taxes free Additional Tax Relief for Individuals Earned Income Credit and Child Tax Credit You can elect to use your 2004 earned income to figure your earned income credit (EIC) and additional child tax credit for 2005 if: Your 2005 earned income is less than your 2004 earned income, and At least one of the following statements is true. File taxes free Your main home on August 25, 2005, was in the Gulf Opportunity (GO) Zone. File taxes free Your main home on August 25, 2005, was in the Hurricane Katrina disaster area and you were displaced from that home because of Hurricane Katrina. File taxes free Your main home on September 23, 2005, was in the Rita GO Zone. File taxes free Your main home on September 23, 2005, was in the Hurricane Rita disaster area and you were displaced from that home because of Hurricane Rita. File taxes free Your main home on October 23, 2005, was in the Wilma GO Zone. File taxes free Your main home on October 23, 2005, was in the Hurricane Wilma disaster area and you were displaced from that home because of Hurricane Wilma. File taxes free Earned income. File taxes free    For the purpose of this election, your earned income for both the EIC and the additional child tax credit is the amount of earned income used to figure your EIC, even if you did not take the EIC and even if that amount is different than your earned income for the additional child tax credit. File taxes free If you are claiming only the additional child tax credit, you must figure the amount of your earned income for EIC purposes to determine your eligibility to make the election and the amount of the credit. File taxes free Joint returns. File taxes free   If you file a joint return, you qualify to make this election even if only one spouse meets the requirements. File taxes free If you make the election, your 2004 earned income is the sum of your 2004 earned income and your spouse's 2004 earned income. File taxes free Making the election. File taxes free   If you make the election to use your 2004 earned income, the election applies for figuring both the EIC and the additional child tax credit. File taxes free However, you can make the election for the additional child tax credit even if you do not take the EIC. File taxes free   Electing to use your 2004 earned income may increase or decrease your EIC. File taxes free Take the following steps to decide whether to make the election. File taxes free Figure your 2005 EIC using your 2004 earned income. File taxes free Figure your 2005 additional child tax credit using your 2004 earned income for EIC purposes. File taxes free Add the results of (1) and (2). File taxes free Figure your 2005 EIC using your 2005 earned income. File taxes free Figure your 2005 additional child tax credit using your 2005 earned income for additional child tax credit purposes. File taxes free Add the results of (4) and (5). File taxes free Compare the results of (3) and (6). File taxes free If (3) is larger than (6), it is to your benefit to make the election. File taxes free If (3) is equal to or smaller than (6), making the election will not help you. File taxes free   If you elect to use your 2004 earned income and you are claiming the EIC, enter “PYEI” and the amount of your 2004 earned income on the dotted line next to line 66a of Form 1040, on the line next to line 41a of Form 1040A, or in the space to the left of line 8a of Form 1040EZ. File taxes free   If you elect to use your 2004 earned income and you are claiming the additional child tax credit, enter your 2004 earned income for EIC purposes (even if you did not claim the EIC) on Form 8812, Additional Child Tax Credit, line 4a, and check the box on that line. File taxes free   Because Form 8812 was released before the GO Zone legislation was enacted, the instructions refer only to individuals whose main home was in the Hurricane Katrina disaster area. File taxes free When completing Form 8812, line 4a, use the above rules to determine your eligibility to make the election (instead of the Form 8812 instructions). File taxes free Getting your 2004 tax return information. File taxes free   If you do not have your 2004 tax records, you can get the amount of earned income used to figure your 2004 EIC by calling 1-866-562-5227. File taxes free You can also get this information by visiting the IRS website at www. File taxes free irs. File taxes free gov. File taxes free   If you prefer to figure your 2004 earned income yourself, copies or transcripts of your filed and processed tax returns can help you reconstruct your tax records. File taxes free See Request for Copy or Transcript of Tax Return on page 16. File taxes free Additional Exemption for Housing Individuals Displaced by Hurricane Katrina You may be able to claim an additional exemption amount of $500 for providing housing in your main home for each individual displaced by Hurricane Katrina. File taxes free The additional exemption amount is claimed on new Form 8914. File taxes free The additional exemption amount is allowable once per taxpayer for a specific individual in 2005 or 2006, but not in both years. File taxes free The maximum additional exemption amount you can claim for all displaced individuals is $2,000 ($1,000 if married filing separately). File taxes free The additional exemption amount you claim for displaced individuals in 2005 will reduce the $2,000 maximum for 2006. File taxes free If two or more taxpayers share the same main home, only one taxpayer in that main home can claim the additional exemption amount for a specific displaced individual. File taxes free If married filing separately, only one spouse may claim the additional exemption amount for a specific displaced individual. File taxes free In order for you to be considered to have provided housing, you must have a legal interest in the main home (that is, own or rent the home). File taxes free To qualify as a displaced individual, the individual: Must have had his or her main home in the Hurricane Katrina disaster area on August 28, 2005, and he or she must have been displaced from that home. File taxes free If the individual's main home was located outside the core disaster area, that home must have been damaged by Hurricane Katrina or the individual must have been evacuated from that home because of Hurricane Katrina, Must have been provided housing in your main home for a period of at least 60 consecutive days ending in the tax year in which the exemption is claimed, and Cannot be your spouse or dependent. File taxes free You cannot claim the additional exemption amount if you received rent (or any other amount) from any source for providing the housing. File taxes free You are permitted to receive payments or reimbursements that do not relate to normal housing costs, including the following. File taxes free Food, clothing, or personal items consumed or used by the displaced individual. File taxes free Reimbursement for the cost of any long distance telephone calls made by the displaced individual. File taxes free Reimbursement for the cost of gasoline for the displaced individual's use of your vehicle. File taxes free However, you cannot claim the additional exemption amount if you received any reimbursement for the extra costs of heat, electricity, or water used by the displaced individual. File taxes free Also, you must report on Form 8914 the displaced individual's social security number or individual taxpayer identification number to claim an additional exemption amount. File taxes free For more information, see Form 8914. File taxes free Education Credits The education credits have been expanded for students attending an eligible educational institution located in the Gulf Opportunity Zone (GOZ students) for any tax year beginning in 2005 or 2006. File taxes free The Hope credit for a GOZ student is increased to 100% of the first $2,000 in qualified education expenses and 50% of the next $2,000 of qualified education expenses for a maximum credit of $3,000 per student. File taxes free The lifetime learning credit rate for a GOZ student is increased from 20% to 40%. File taxes free The definition of qualified education expenses for a GOZ student also has been expanded. File taxes free In addition to tuition and fees required for the student's enrollment or attendance at an eligible educational institution, qualified education expenses for a GOZ student include the following. File taxes free Books, supplies, and equipment required for enrollment or attendance at an eligible educational institution. File taxes free For a special needs student, expenses that are necessary for that person's enrollment or attendance at an eligible educational institution. File taxes free For a student who is at least a half-time student, the reasonable costs of room and board, but only to the extent that the costs are not more than the greater of the following two amounts. File taxes free The allowance for room and board, as determined by the eligible educational institution, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student. File taxes free The actual amount charged if the student is residing in housing owned or operated by the eligible educational institution. File taxes free You will need to contact the eligible educational institution for qualified room and board costs. File taxes free For more information, see Form 8863. File taxes free Recapture of Federal Mortgage Subsidy Generally, if you financed your home under a federally subsidized program (loans from tax-exempt qualified mortgage bonds or loans with mortgage credit certificates), you may have to recapture all or part of the benefit you received from that program when you sell or otherwise dispose of your home. File taxes free However, you do not have to recapture any benefit if your mortgage loan was a qualified home improvement loan of not more than $15,000. File taxes free This amount is increased to $150,000 if the loan was provided before 2011 and was used to: Repair damage caused by Hurricane Katrina to a residence in the Hurricane Katrina disaster area, or Alter, repair, or improve an existing owner-occupied residence in the GO Zone, Rita GO Zone, or Wilma GO Zone. File taxes free Exclusion of Certain Cancellations of Indebtedness by Reason of Hurricane Katrina Generally, discharges of nonbusiness debts (such as mortgages) made after August 24, 2005, and before January 1, 2007, are excluded from income for individuals whose main home was in the Hurricane Katrina disaster area on August 25, 2005. File taxes free If the individual's main home was located outside the core disaster area, the individual also must have had an economic loss because of Hurricane Katrina. File taxes free Examples of an economic loss include, but are not limited to: Loss, damage to, or destruction of real or personal property from fire, flooding, looting, vandalism, theft, wind, or other cause; Loss related to displacement from your home; or Loss of livelihood due to temporary or permanent layoffs. File taxes free This relief does not apply to any debt secured by real property located outside the Hurricane Katrina disaster area. File taxes free You may also have to reduce certain tax attributes by the amount excluded. File taxes free For more information, see Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment). File taxes free Tax Relief for Temporary Relocation Under the Gulf Opportunity Zone Act of 2005, the IRS may adjust the internal revenue laws to ensure that taxpayers do not lose a deduction or credit or experience a change of filing status in 2005 or 2006 as a result of a temporary relocation caused by Hurricane Katrina, Rita, or Wilma. File taxes free However, any such adjustment must ensure that an individual is not taken into account by more than one taxpayer for the same tax benefit. File taxes free The IRS has exercised this authority as follows. File taxes free In determining whether you furnished over one-half of the cost of maintaining a household, you can exclude from total household costs any assistance received from the government or charitable organizations because you were temporarily relocated as a result of Hurricane Katrina, Rita, or Wilma. File taxes free In determining whether you provided more than one-half of an individual's support, you can disregard any assistance received from the government or charitable organizations because you were temporarily relocated as a result of Hurricane Katrina, Rita, or Wilma. File taxes free You can treat as a student an individual who enrolled in school before August 25, 2005, and who is unable to attend classes because of Hurricane Katrina, for each month of the enrollment period that individual is prevented by Hurricane Katrina from attending school as planned. File taxes free You can treat as a student an individual who enrolled in school before September 23, 2005, and who is unable to attend classes because of Hurricane Rita, for each month of the enrollment period that individual is prevented by Hurricane Rita from attending school as planned. File taxes free You can treat as a student an individual who enrolled in school before October 23, 2005, and who is unable to attend classes because of Hurricane Wilma, for each month of the enrollment period that individual is prevented by Hurricane Wilma from attending school as planned. File taxes free Additional Tax Relief for Businesses Special Depreciation Allowance You can take a special depreciation allowance for qualified Gulf Opportunity (GO) Zone property (as defined below) you place in service after August 27, 2005. File taxes free The allowance is an additional deduction of 50% of the property's depreciable basis (after any section 179 deduction and before figuring your regular depreciation deduction). File taxes free The special allowance applies only for the first year the property is placed in service. File taxes free The allowance is deductible for both the regular tax and the alternative minimum tax (AMT). File taxes free There is no AMT adjustment required for any depreciation figured on the remaining basis of the property. File taxes free You can elect not to deduct the special GO Zone depreciation allowance for qualified property. File taxes free If you make this election for any property, it applies to all property in the same class placed in service during the year. File taxes free Qualified GO Zone property. File taxes free   Property that qualifies for the special GO Zone depreciation allowance includes the following. File taxes free Tangible property depreciated under the modified accelerated cost recovery system (MACRS) with a recovery period of 20 years or less. File taxes free Water utility property. File taxes free Computer software that is readily available for purchase by the general public, is subject to a nonexclusive license, and has not been substantially modified. File taxes free (The cost of some computer software is treated as part of the cost of hardware and is depreciated under MACRS. File taxes free ) Qualified leasehold improvement property. File taxes free Nonresidential real property and residential rental property. File taxes free   For more information on this property, see Publication 946. File taxes free Other tests to be met. File taxes free   To be qualified GO Zone property, the property must also meet all of the following tests. File taxes free You must have acquired the property, by purchase, after August 27, 2005, but only if no binding written contract for the acquisition was in effect before August 28, 2005. File taxes free The property must be placed in service before 2008 (2009 in the case of nonresidential real property and residential rental property). File taxes free Substantially all of the use of the property must be in the GO Zone and in the active conduct of your trade or business in the GO Zone. File taxes free The original use of the property in the GO Zone must begin with you after August 27, 2005. File taxes free Used property can be qualified GO Zone property if it has not previously been used within the GO Zone. File taxes free Also, additional capital expenditures you incurred after August 27, 2005, to recondition or rebuild your property meet the original use test if the original use of the property in the GO Zone began with you. File taxes free Excepted property. File taxes free   Qualified GO Zone property does not include any of the following. File taxes free Property required to be depreciated using the Alternative Depreciation System (ADS). File taxes free Property any portion of which is financed with the proceeds of a tax-exempt obligation under section 103. File taxes free Property for which you are claiming a commercial revitalization deduction. File taxes free Any property used in connection with any private or commercial golf course, country club, massage parlor, hot tub facility, suntan facility, or any store, the principal business of which is the sale of alcoholic beverages for consumption off premises. File taxes free Any gambling or animal racing property (as defined below). File taxes free Property in the same class as that for which you elected not to claim the special GO Zone depreciation allowance. File taxes free   Gambling or animal racing property is: Any equipment, furniture, software, or other property used directly in connection with gambling, the racing of animals, or the on-site viewing of such racing, and The portion of any real property (determined by square footage) that is dedicated to gambling, the racing of animals, or the on-site viewing of such racing, unless this portion is less than 100 square feet. File taxes free Recapture of special allowance. File taxes free   If, in any year after the year you claim the special allowance, the property ceases to be qualified GO Zone property, you may have to recapture as ordinary income any excess benefit you received from claiming the special allowance. File taxes free Increased Section 179 Deduction An increased section 179 deduction is allowable for qualified section 179 Gulf Opportunity (GO) Zone property (as defined later) placed in service in the GO Zone. File taxes free Increased dollar limit. File taxes free   The limit on the section 179 deduction ($105,000 for 2005, $108,000 for 2006) for qualified section 179 GO Zone property acquired after August 27, 2005, is increased by the smaller of: $100,000, or The cost of qualified section 179 GO Zone property placed in service during the year (including such property placed in service by your spouse, even if you are filing a separate return). File taxes free   The amount for which you can make the election is reduced if the cost of all qualified section 179 GO Zone property you placed in service during the year exceeds $420,000 for 2005 ($430,000 for 2006) increased by the smaller of: $600,000, or The cost of qualified section 179 GO Zone property placed in service during the year. File taxes free Qualified section 179 GO Zone property. File taxes free   Qualified section 179 GO Zone property is section 179 property that is qualified GO Zone property (explained earlier under Special Depreciation Allowance). File taxes free Section 179 property does not include nonresidential real property or residential rental property. File taxes free For more information, including the requirements that must be met for property to qualify for the section 179 deduction, see chapter 2 of Publication 946. File taxes free Work Opportunity Credit For the work opportunity credit, the definition of “targeted group employee” has been expanded to include a Hurricane Katrina employee. File taxes free Hurricane Katrina employee. File taxes free   A Hurricane Katrina employee is: A person who, on August 28, 2005, had a main home in the core disaster area and, within a two-year period beginning on that date, is hired to perform services principally in the core disaster area; or A person who, on August 28, 2005, had a main home in the core disaster area, was displaced from that main home as a result of Hurricane Katrina, and was hired during the period beginning on August 28, 2005, and ending on December 31, 2005. File taxes free Qualified wages. File taxes free   Generally, qualified wages do not include wages you paid to a targeted group employee who worked for you previously. File taxes free However, wages will qualify if: You paid them to an employee who is a Hurricane Katrina employee, The employee was not in your employment on August 28, 2005, and This is your first hire of the employee as a Hurricane Katrina employee after August 28, 2005. File taxes free   For more information, see Form 5884. File taxes free Certification requirements. File taxes free   An employee must provide to the employer reasonable evidence that he or she is a Hurricane Katrina employee. File taxes free An employer may accept a completed Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity and Welfare-to-Work Credits, as such evidence. File taxes free The certification requirements described in Form 8850 do not apply to a Hurricane Katrina employee. File taxes free Do not send any Forms 8850 that have only box 1 checked to the state employment security agency. File taxes free Instead, the employer should keep these Forms 8850 with the employer's other records. File taxes free For more information, see Form 8850 and its instructions. File taxes free Employee Retention Credit An eligible employer who conducted an active trade or business in the Gulf Opportunity (GO) Zone, the Rita GO Zone, or the Wilma GO Zone can claim the employee retention credit. File taxes free The credit is 40% of qualified wages for each eligible employee (up to a maximum of $6,000 in qualified wages per employee). File taxes free Generally, you must reduce your deduction for salaries and wages by the amount of this credit (before the tax liability limit). File taxes free Use Form 5884-A to claim the credit. File taxes free See the following rules and definitions for each hurricane. File taxes free Employers affected by Hurricane Katrina. File taxes free   The following definitions apply to employers affected by Hurricane Katrina. File taxes free Eligible employer. File taxes free   For this purpose, an eligible employer is any employer who conducted an active trade or business on August 28, 2005, in the GO Zone and whose trade or business was inoperable on any day after August 28, 2005, and before January 1, 2006, because of damage caused by Hurricane Katrina. File taxes free Eligible employee. File taxes free   For this purpose, an eligible employee is an employee whose principal place of employment on August 28, 2005, with such eligible employer was in the GO Zone. File taxes free An employee is not an eligible employee for purposes of Hurricane Katrina if the employee is treated as an eligible employee for the work opportunity credit. File taxes free Employers affected by Hurricane Rita. File taxes free   The following definitions apply to employers affected by Hurricane Rita. File taxes free Eligible employer. File taxes free   For this purpose, an eligible employer is any employer who conducted an active trade or business on September 23, 2005, in the Rita GO Zone and whose trade or business was inoperable on any day after September 23, 2005, and before January 1, 2006, because of damage caused by Hurricane Rita. File taxes free Eligible employee. File taxes free   For this purpose, an eligible employee is an employee whose principal place of employment on September 23, 2005, with such eligible employer was in the Rita GO Zone. File taxes free An employee is not an eligible employee for purposes of Hurricane Rita if the employee is treated as an eligible employee for the work opportunity credit or the Hurricane Katrina employee retention credit. File taxes free Employers affected by Hurricane Wilma. File taxes free   The following definitions apply to employers affected by Hurricane Wilma. File taxes free Eligible employer. File taxes free   For this purpose, an eligible employer is any employer who conducted an active trade or business on October 23, 2005, in the Wilma GO Zone and whose trade or business was inoperable on any day after October 23, 2005, and before January 1, 2006, because of damage caused by Hurricane Wilma. File taxes free Eligible employee. File taxes free   For this purpose, an eligible employee is an employee whose principal place of employment on October 23, 2005, with such eligible employer was in the Wilma GO Zone. File taxes free An employee is not an eligible employee for purposes of Hurricane Wilma if the employee is treated as an eligible employee for the work opportunity credit or the Hurricane Katrina or Rita employee retention credit. File taxes free Qualified wages. File taxes free   Qualified wages are wages you paid or incurred before January 1, 2006, (up to $6,000 per employee) for an eligible employee beginning on the date your trade or business first became inoperable at the employee's principal place of employment immediately before the applicable hurricane, and ending on the date your trade or business resumed significant operations at that place. File taxes free In addition, the wages must have been paid or incurred after the following date. File taxes free August 28, 2005, for Hurricane Katrina. File taxes free September 23, 2005, for Hurricane Rita. File taxes free October 23, 2005, for Hurricane Wilma. File taxes free    This includes wages paid even if the employee performed no services, performed services at a place of employment other than the principal place of employment, or performed services at the principal place of employment before significant operations resumed. File taxes free    Wages qualifying for the credit generally have the same meaning as wages subject to the Federal Unemployment Tax Act (FUTA). File taxes free Qualified wages also include amounts you paid for medical or hospitalization expenses in connection with sickness or accident disability. File taxes free Qualified wages for any employee must be reduced by the amount of any work supplementation payment you received under the Social Security Act. File taxes free   For agricultural employees, if the work performed by any employee during more than half of any pay period qualified under FUTA as agricultural labor, that employee's wages subject to social security and Medicare taxes are qualified wages. File taxes free For a special rule that applies to railroad employees, see section 51(h)(1)(B). File taxes free   Qualified wages do not include the following. File taxes free Wages paid to your dependent or a related individual. File taxes free See section 51(i)(1). File taxes free Wages paid to any employee during the period for which you received payment for the employee from a federally funded on-the-job training program. File taxes free Wages for services of replacement workers during a strike or lockout. File taxes free   For more information, see Form 5884-A. File taxes free Hurricane Katrina Housing Credit An employer who conducted an active trade or business in the Gulf Opportunity (GO) Zone can claim the Hurricane Katrina housing credit. File taxes free The credit is equal to 30% of the value (up to $600 per month per employee) of in-kind lodging furnished to a qualified employee (and the employee's spouse or dependents) from January 1, 2006, through July 1, 2006. File taxes free The value of the lodging is excluded from the income of the qualified employee but is treated as wages for purposes of taxes imposed under the Federal Insurance Contributions Act (FICA) and the Federal Unemployment Tax Act (FUTA). File taxes free Generally, you must reduce your deduction for salaries and wages by the amount of this credit (before the tax liability limit). File taxes free The employer must use Form 5884-A to claim the credit. File taxes free A qualified employee is an individual who had a main home in the GO Zone on August 28, 2005, and who performs substantially all employment services in the GO Zone for the employer furnishing the lodging. File taxes free The employee cannot be your dependent or a related individual. File taxes free See section 51(i)(1). File taxes free For more information, see Form 5884-A. File taxes free Reforestation Costs You may be able to elect to deduct a limited amount of reforestation costs for each qualified timber property. File taxes free The deduction for any tax year generally is limited to $10,000 ($5,000 if married filing separately, $0 for a trust). File taxes free However, this limit is increased if you paid or incurred reforestation costs after the applicable date below and any portion of the qualified timber property is located in one of the following areas. File taxes free August 27, 2005, if any portion of the property is located in the GO Zone. File taxes free September 22, 2005, if any portion of the property is located in the Rita GO Zone (but not in the GO Zone). File taxes free October 22, 2005, if any portion of the property is located in the Wilma GO Zone. File taxes free The limit for each qualified timber property is increased by the smaller of: $10,000 ($5,000 if married filing separately, $0 for a trust), or The amount of reforestation costs you paid or incurred after the applicable date for the qualified timber property, any portion of which is located in the zone described above. File taxes free The increase in the limit applies only to costs paid or incurred before 2008. File taxes free However, these rules do not apply to any timber producer who: Held more than 500 acres of qualified timber property at any time during the tax year, Is a corporation with stock publicly traded on an established securities market, or Is a real estate investment trust. File taxes free For more information about the election to deduct reforestation costs, see chapter 8 in Publication 535, Business Expenses. File taxes free Demolition and Clean-up Costs You can elect to deduct 50% of any qualified GO Zone clean-up costs for the tax year in which the costs are paid or incurred, instead of capitalizing them. File taxes free Qualified GO Zone clean-up costs are any amounts paid or incurred after August 27, 2005, and before January 1, 2008, for the removal of debris from, or the demolition of structures on, real property located in the GO Zone that is: Held by you for use in a trade or business or for the production of income, or Inventory or other property held primarily for sale to customers in the ordinary course of your trade or business. File taxes free Increase in Rehabilitation Tax Credit The rehabilitation credit is increased for qualified rehabilitation expenditures paid or incurred after August 27, 2005, and before January 1, 2009, on buildings located in the GO Zone as follows. File taxes free For pre-1936 buildings (other than certified historic structures), the credit percentage is increased from 10% to 13%. File taxes free For certified historic structures, the credit percentage is increased from 20% to 26%. File taxes free For more information, see Form 3468, Investment Credit. File taxes free Request for Copy or Transcript of Tax Return Request for copy of tax return. File taxes free   You can use Form 4506 to order a copy of your tax return. File taxes free Generally, there is a $39. File taxes free 00 fee for requesting each copy of a tax return. File taxes free If your main home, principal place of business, or tax records are located in a Presidentially declared disaster area, the fee will be waived if the assigned disaster designation (for example, “Hurricane Katrina”) is written in red across the top of the form when filed. File taxes free Request for transcript of tax return. File taxes free   You can use Form 4506-T to order a free transcript of your tax return. File taxes free A transcript provides most of the line entries from a tax return and usually contains the information that a third party requires. File taxes free You can also call 1-800-829-1040 to order a transcript. File taxes free How To Get Tax Help Special IRS assistance. File taxes free   The IRS is providing special help for those affected by Hurricane Katrina, Rita, or Wilma, as well as survivors and personal representatives of the victims. File taxes free We have set up a special toll-free number for people who may have trouble filing or paying their taxes because they were affected by Hurricane Katrina, Rita, or Wilma, or who have other tax issues related to the hurricanes. File taxes free Call 1-866-562-5227 Monday through Friday In English-7 a. File taxes free m. File taxes free to 10 p. File taxes free m. File taxes free local time In Spanish-8 a. File taxes free m. File taxes free to 9:30 p. File taxes free m. File taxes free local time   The IRS website at www. File taxes free irs. File taxes free gov has notices and other tax relief information. File taxes free Check it periodically for any new guidance. File taxes free Other help from the IRS. File taxes free   You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get more information from the IRS in several ways. File taxes free By selecting the method that is best for you, you will have quick and easy access to tax help. File taxes free Contacting your Taxpayer Advocate. File taxes free   If you have attempted to deal with an IRS problem unsuccessfully, you should contact your Taxpayer Advocate. File taxes free   The Taxpayer Advocate independently represents your interests and concerns within the IRS by protecting your rights and resolving problems that have not been fixed through normal channels. File taxes free While Taxpayer Advocates cannot change the tax law or make a technical tax decision, they can clear up problems that resulted from previous contacts and ensure that your case is given a complete and impartial review. File taxes free   To contact your Taxpayer Advocate: Call the Taxpayer Advocate toll free at 1-877-777-4778. File taxes free Call, write, or fax the Taxpayer Advocate office in your area. File taxes free Call 1-800-829-4059 if you are a TTY/TDD user. File taxes free Visit www. File taxes free irs. File taxes free gov/advocate. File taxes free   For more information, see Publication 1546, How To Get Help With Unresolved Tax Problems (now available in Chinese, Korean, Russian, and Vietnamese, in addition to English and Spanish). File taxes free Free tax services. File taxes free   To find out what services are available, get Publication 910, IRS Guide to Free Tax Services. File taxes free It contains a list of free tax publications and an index of tax topics. File taxes free It also describes other free tax information services, including tax education and assistance programs and a list of TeleTax topics. File taxes free Internet. File taxes free You can access the IRS website 24 hours a day, 7 days a week, at www. File taxes free irs. File taxes free gov to: E-file your return. File taxes free Find out about commercial tax preparation and e-file services available free to eligible taxpayers. File taxes free Check the status of your refund. File taxes free Click on Where's My Refund. File taxes free Be sure to wait at least 6 weeks from the date you filed your return (3 weeks if you filed electronically). File taxes free Have your tax return available because you will need to know your social security number, your filing status, and the exact whole dollar amount of your refund. File taxes free Download forms, instructions, and publications. File taxes free Order IRS products online. File taxes free Research your tax questions online. File taxes free Search publications online by topic or keyword. File taxes free View Internal Revenue Bulletins (IRBs) published in the last few years. File taxes free Figure your withholdin
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IRS - Issuing Refunds

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Every year, the IRS issues refunds to millions of taxpayers. Refund data are reported in multiple ways, including by the number issued and refund amounts. Historical refund data are also available from 1987 to 2007.

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Fiscal Year Data

The tables below were originally published in the IRS Data Book, which is IRS Publication 55B, and are complied by various divisions throughout the IRS. The IRS's fiscal year runs from October 1 to September 30.

Refunds Issued and Refund Amounts

Number of Internal Revenue Refunds Issued
The number of refunds issued are shown for selected returns, including corporation, individual, employment, estate, gift, and excise taxes, by state.

• Prior to 2000, the number of refunds for selected tax return types are classified by Internal Revenue region and district.

Fiscal Years available:
1999     1998     1997     1996     1995

 

Amount of Internal Revenue Refunds Issued, Including Interest
These tables show the total dollar amount refunded, by state and type of tax.

• Prior to 2000, the total dollar amounts refunded are shown by Internal Revenue region and district and by type of tax return. 

Fiscal Years available:
1999     1998     1997     1996     1995


Historical IRS Tax Refunds
Total dollar amounts refunded by quarter and fiscal year, by type of return.

SOI Bulletin Historical Table 19
Fiscal Years covered:  1987-2007




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File taxes free 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. File taxes free Property not disposed of or abandoned. File taxes free Special rule for normal retirements from item accounts. File taxes free Abandoned property. File taxes free Single item accounts. File taxes free Multiple property account. File taxes free 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. File taxes free If your property qualified for MACRS, you must depreciate it under MACRS. File taxes free See Publication 946. File taxes free However, you cannot use MACRS for certain property because of special rules that exclude it from MACRS. File taxes free Also, you can elect to exclude certain property from being depreciated under MACRS. File taxes free 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. File taxes free Intangible property. File taxes free   You cannot depreciate intangible property under ACRS or MACRS. File taxes free You depreciate intangible property using any other reasonable method, usually, the straight line method. File taxes free Note. File taxes free The cost of certain intangible property that you acquire after August 10, 1993, must be amortized over a 15-year period. File taxes free For more information, see chapter 12 of Publication 535. File taxes free Public utility property. File taxes free   The law excludes from MACRS any public utility property for which the taxpayer does not use a normalization method of accounting. File taxes free This type of property is subject to depreciation under a special rule. File taxes free Videocassettes. File taxes free   If you are in the videocassette rental business, you can depreciate those videocassettes purchased for rental. File taxes free 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. File taxes free The straight line method, salvage value, and useful life are discussed later under Methods To Use. File taxes free 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. File taxes free How To Figure the Deduction Two other reasonable methods can be used to figure your deduction for property not covered under ACRS or MACRS. File taxes free These methods are straight line and declining balance. File taxes free To figure depreciation using these methods, you must generally determine three things about the property you intend to depreciate. File taxes free They are: The basis, The useful life, and The estimated salvage value at the end of its useful life. File taxes free The amount of the deduction in any year also depends on which method of depreciation you choose. File taxes free Basis To deduct the proper amount of depreciation each year, first determine your basis in the property you intend to depreciate. File taxes free The basis used for figuring depreciation is the same as the basis that would be used for figuring the gain on a sale. File taxes free Your original basis is usually the purchase price. File taxes free 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. File taxes free Adjusted basis. File taxes free   Events will often change the basis of property. File taxes free When this occurs, the changed basis is called the adjusted basis. File taxes free Some events, such as improvements you make, increase basis. File taxes free Events such as deducting casualty losses and depreciation decrease basis. File taxes free 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. File taxes free   Publication 551 explains how to figure basis for property acquired in different ways. File taxes free 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. File taxes free 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. File taxes free It is the length of time over which you will make yearly depreciation deductions of your basis in the property. File taxes free It is how long it will continue to be useful to you, not how long the property will last. File taxes free Many things affect the useful life of property, such as: Frequency of use, Age when acquired, Your repair policy, and Environmental conditions. File taxes free 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. File taxes free Consider all these factors before you arrive at a useful life for your property. File taxes free The useful life of the same type of property varies from user to user. File taxes free When you determine the useful life of your property, keep in mind your own experience with similar property. File taxes free 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. File taxes free Change in useful life. File taxes free   You base your estimate of useful life on certain facts. File taxes free If these facts change significantly, you can adjust your estimate of the remaining useful life. File taxes free However, you redetermine the estimated useful life only when the change is substantial and there is a clear reason for making the change. File taxes free Salvage Value It is important for you to accurately determine the correct salvage value of the property you want to depreciate. File taxes free You generally cannot depreciate property below a reasonable salvage value. File taxes free Determining salvage value. File taxes free   Salvage value is the estimated value of property at the end of its useful life. File taxes free It is what you expect to get for the property if you sell it after you can no longer use it productively. File taxes free You must estimate the salvage value of a piece of property when you first acquire it. File taxes free   Salvage value is affected both by how you use the property and how long you use it. File taxes free If it is your policy to dispose of property that is still in good operating condition, the salvage value can be relatively large. File taxes free However, if your policy is to use property until it is no longer usable, its salvage value can be its junk value. File taxes free Changing salvage value. File taxes free   Once you determine the salvage value for property, you should not change it merely because prices have changed. File taxes free However, if you redetermine the useful life of property, as discussed earlier under Change in useful life, you can also redetermine the salvage value. File taxes free When you redetermine the salvage value, take into account the facts that exist at the time. File taxes free Net salvage. File taxes free   Net salvage is the salvage value of property minus what it costs to remove it when you dispose of it. File taxes free You can choose either salvage value or net salvage when you figure depreciation. File taxes free You must consistently use the one you choose and the treatment of the costs of removal must be consistent with the practice adopted. File taxes free However, if the cost to remove the property is more than the estimated salvage value, then net salvage is zero. File taxes free Your salvage value can never be less than zero. File taxes free Ten percent rule. File taxes free   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. File taxes free You can subtract from your estimate of salvage value an amount equal to 10% of your basis in the property. File taxes free If salvage value is less than 10% of basis, you can ignore salvage value when you figure depreciation. File taxes free Methods To Use Two methods of depreciation are the straight line and declining balance methods. File taxes free If ACRS or MACRS does not apply, you can use one of these methods. File taxes free 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. File taxes free Straight Line Method Before 1981, you could use any reasonable method for every kind of depreciable property. File taxes free One of these methods was the straight line method. File taxes free This method was also used for intangible property. File taxes free It lets you deduct the same amount of depreciation each year. File taxes free To figure your deduction, determine the adjusted basis of your property, its salvage value, and its estimated useful life. File taxes free Subtract the salvage value, if any, from the adjusted basis. File taxes free The balance is the total amount of depreciation you can take over the useful life of the property. File taxes free Divide the balance by the number of years remaining in the useful life. File taxes free This gives you the amount of your yearly depreciation deduction. File taxes free 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. File taxes free 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. File taxes free Example. File taxes free In April 1994, Frank bought a franchise for $5,600. File taxes free It expires in 10 years. File taxes free This property is intangible property that cannot be depreciated under MACRS. File taxes free Frank depreciates the franchise under the straight line method, using a 10-year useful life and no salvage value. File taxes free He takes the $5,600 basis and divides that amount by 10 years ($5,600 ÷ 10 = $560, a full year's use). File taxes free He must prorate the $560 for his 9 months of use in 1994. File taxes free This gives him a deduction of $420 ($560 ÷ 9/12). File taxes free In 1995, Frank can deduct $560 for the full year. File taxes free 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. File taxes free The rate cannot be more than twice the straight line rate. File taxes free Rate of depreciation. File taxes free   Under this method, you must determine your declining balance rate of depreciation. File taxes free The initial step is to: Divide the number 1 by the useful life of your property to get a straight line rate. File taxes free (For example, if property has a useful life of 5 years, its normal straight line rate of depreciation is ⅕, or 20%. File taxes free ) Multiply this straight line rate by a number that is more than 1 but not more than 2 to determine the declining balance rate. File taxes free Unless there is a change in the useful life during the time you depreciate the property, the rate of depreciation generally will not change. File taxes free Depreciation deductions. File taxes free   After you determine the rate of depreciation, multiply the adjusted basis of the property by it. File taxes free This gives you the amount of your deduction. File taxes free 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%). File taxes free 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. File taxes free Subtract the previous year's depreciation from your basis ($10,000 - $2,000 = $8,000). File taxes free Multiply this amount by the rate of depreciation ($8,000 ÷ 20% = $1,600). File taxes free Your depreciation deduction for the second year is $1,600. File taxes free   As you can see from this example, your adjusted basis in the property gets smaller each year. File taxes free Also, under this method, deductions are larger in the earlier years and smaller in the later years. File taxes free You can make a change to the straight line method without consent. File taxes free Salvage value. File taxes free   Do not subtract salvage value when you figure your yearly depreciation deductions under the declining balance method. File taxes free However, you cannot depreciate the property below its reasonable salvage value. File taxes free Determine salvage value using the rules discussed earlier, including the special 10% rule. File taxes free Example. File taxes free If your adjusted basis has been decreased to $1,000 and the rate of depreciation is 20%, your depreciation deduction should be $200. File taxes free But if your estimate of salvage value was $900, you can only deduct $100. File taxes free This is because $100 is the amount that would lower your adjusted basis to equal salvage value. File taxes free Income Forecast Method The income forecast method requires income projections for each videocassette or group of videocassettes. File taxes free You can group the videocassettes by title for making this projection. File taxes free You determine the depreciation by applying a fraction to the cost less salvage value of the cassette. File taxes free The numerator is the income from the videocassette for the tax year and the denominator is the total projected income for the cassette. File taxes free For more information on the income forecast method, see Revenue Ruling 60-358 in Cumulative Bulletin 1960, Volume 2, on page 68. File taxes free How To Change Methods In some cases, you may change your method of depreciation for property depreciated under a reasonable method. File taxes free If you change your method of depreciation, it is generally a change in your method of accounting. File taxes free You must get IRS consent before making the change. File taxes free However, you do not need permission for certain changes in your method of depreciation. File taxes free The rules discussed in this section do not apply to property depreciated under ACRS or MACRS. File taxes free For information on ACRS elections,see Revocation of election, in chapter 1 under Alternate ACRS Method. File taxes free Change to the straight line method. File taxes free   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. File taxes free However, if you have a written agreement with the IRS that prohibits a change, you must first get IRS permission. File taxes free When the change is made, figure depreciation based on your adjusted basis in the property at that time. File taxes free Your adjusted basis takes into account all previous depreciation deductions. File taxes free Use the estimated remaining useful life of your property at the time of change and its estimated salvage value. File taxes free   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. File taxes free You cannot make the change on an amended return filed after the due date of the original return (including extensions). File taxes free   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. File taxes free   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. File taxes free Changes that require permission. File taxes free   For most other changes in method of depreciation, you must get permission from the IRS. File taxes free To request a change in method of depreciation, file Form 3115. File taxes free File the application within the first 180 days of the tax year the change is to become effective. File taxes free In most cases, there is a user fee that must accompany Form 3115. File taxes free See the instructions for Form 3115 to determine if a fee is required. File taxes free Changes granted automatically. File taxes free   The IRS automatically approves certain changes of a method of depreciation. File taxes free But, you must file Form 3115 for these automatic changes. File taxes free   However, IRS can deny permission if Form 3115 is not filed on time. File taxes free For more information on automatic changes, see Revenue Procedure 74-11, 1974-1 C. File taxes free B. File taxes free 420. File taxes free Changes for which approval is not automatic. File taxes free   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. File taxes free   You must request and receive permission for these changes. File taxes free 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. File taxes free Change from an improper method. File taxes free   If the IRS disallows the method you are using, you do not need permission to change to a proper method. File taxes free You can adopt the straight line method, or any other method that would have been permitted if you had used it from the beginning. File taxes free 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. File taxes free However, you must file the amended return before the filing date for the next tax year. File taxes free Dispositions Retirement is the permanent withdrawal of depreciable property from use in your trade or business or for the production of income. File taxes free You can do this by selling, exchanging, or abandoning the item of property. File taxes free You can also withdraw it from use without disposing of it. File taxes free For example, you could place it in a supplies or scrap account. File taxes free Retirements can be either normal or abnormal depending on all facts and circumstances. File taxes free The rules discussed next do not apply to MACRS and ACRS property. File taxes free Normal retirement. File taxes free   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. File taxes free 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. File taxes free Abnormal retirement. File taxes free   A retirement can be abnormal if you withdraw the property early or under other circumstances. File taxes free For example, if the property is damaged by a fire or suddenly becomes obsolete and is now useless. File taxes free Gain or loss on retirement. File taxes free   There are special rules for figuring the gain or loss on retirement of property. File taxes free The gain or loss will depend on several factors. File taxes free 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. File taxes free A single property account contains only one item of property. File taxes free A multiple property account is one in which several items have been combined with a single rate of depreciation assigned to the entire account. File taxes free Sale or exchange. File taxes free   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. File taxes free See Publication 544. File taxes free Property not disposed of or abandoned. File taxes free   If property is retired permanently, but not disposed of or physically abandoned, you do not recognize gain. File taxes free 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. File taxes free 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. File taxes free   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. File taxes free Special rule for normal retirements from item accounts. File taxes free   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. File taxes free However, you cannot deduct losses if you use the average useful life to figure depreciation and they have a wide range of useful lives. File taxes free   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. File taxes free Abandoned property. File taxes free   If you physically abandon property, you can deduct as a loss the adjusted basis of the property at the time of its abandonment. File taxes free 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. File taxes free Basis of property retired. File taxes free   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. File taxes free Single item accounts. File taxes free   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. File taxes free This is generally the cost or other basis of the item of property less depreciation. File taxes free See Publication 551. File taxes free Multiple property account. File taxes free   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. File taxes free 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. File taxes free   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. File taxes free The method of depreciation used for the multiple property account is used. File taxes free 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. File taxes free Prev  Up  Next   Home   More Online Publications