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Free online state tax filing Publication 17(SP) - Introductory Material Table of Contents Qué Hay de Nuevo Recordatorios IntroductionIconos. Free online state tax filing Para pedir formularios y publicaciones. Free online state tax filing Preguntas sobre los impuestos. Free online state tax filing Todo material en esta publicación puede ser reimpreso gratuitamente. Free online state tax filing Una referencia a El Impuesto Federal sobre los Ingresos (2013) sería apropiada. Free online state tax filing Las explicaciones y ejemplos en esta publicación representan la interpretación del Servicio de Impuestos Internos (IRS, por sus siglas en inglés) con respecto a: Leyes tributarias promulgadas por el Congreso de los Estados Unidos, Reglamentos del Departamento del Tesoro de los Estados Unidos y Decisiones de los tribunales. Free online state tax filing Sin embargo, la información provista no abarca cada situación y no se presenta con la intención de reemplazar la ley o cambiar su significado. Free online state tax filing Esta publicación abarca ciertos temas sobre los cuales un tribunal puede haber dictado un fallo más favorable para los contribuyentes que la interpretación hecha por el IRS. Free online state tax filing Hasta que estas interpretaciones divergentes sean resueltas por fallos o decretos de un tribunal superior o de alguna otra manera, esta publicación continuará presentando las interpretaciones hechas por el IRS. Free online state tax filing Todos los contribuyentes tienen derechos importantes cuando tratan con el IRS. Free online state tax filing Estos derechos están descritos en la sección titulada Derechos del Contribuyente , al final de esta publicación. Free online state tax filing Qué Hay de Nuevo Esta sección resume ciertos cambios tributarios importantes que entraron en vigor en el año 2013. Free online state tax filing La mayor parte de estos cambios se abordan en más detalle en esta publicación. Free online state tax filing Acontecimientos futuros. Free online state tax filing  Si desea obtener la información más reciente sobre temas de ley tributaria que se explican en esta publicación, incluyendo toda información sobre legislación tributaria, acceda a www. Free online state tax filing irs. Free online state tax filing gov/pub17sp. Free online state tax filing Impuesto Adicional del Medicare. Free online state tax filing  Comenzando en el año 2013, le corresponderá un Impuesto Adicional del Medicare de 0. Free online state tax filing 9% sobre los salarios, la compensación por jubilación ferroviaria (RRTA, por sus siglas en inglés) y el ingreso sobre el trabajo por cuenta propia que están sujetos al impuesto al Medicare. Free online state tax filing El impuesto corresponde si estos ingresos son mayores que: $125,000, si es casado que presenta una declaración por separado, $250,000, si es casado que presenta una declaración conjunta o $200,000, si presenta la declaración utilizando cualquier otro estado civil para efectos de la declaración. Free online state tax filing Si desea más información, vea el Formulario 8959 y sus Instrucciones, disponibles en inglés. Free online state tax filing Impuesto sobre los ingresos netos de inversión. Free online state tax filing  Comenzando en el año 2013, usted podría estar sujeto al impuesto sobre los ingresos netos de inversión (NIIT, por sus siglas en inglés). Free online state tax filing Este impuesto es el 3. Free online state tax filing 8% de la cantidad menor entre (a) su ingreso neto de inversión o (b) la cantidad en exceso de su ingreso bruto ajustado modificado sobre: $125,000, si es casado que presenta una declaración por separado, $250,000, si es casado que presenta una declaración conjunta o si es viudo calificado o $200,000, si presenta la declaración utilizando cualquier otro estado civil para efectos de la declaración. Free online state tax filing Si desea más información, vea el Formulario 8960 y sus Instrucciones, disponibles en inglés. Free online state tax filing Cambio en las tasas tributarias. Free online state tax filing  La tasa tributaria mayor es de 39. Free online state tax filing 6%. Free online state tax filing Si desea más información, vea la Hoja de Trabajo para el Cálculo del Impuesto del Año 2013 o las Tasas Impositivas de 2013 , las cuales se encuentran al final de esta publicación. Free online state tax filing Tasa tributaria sobre las ganancias netas de capital y dividendos calificados. Free online state tax filing  La tasa tributaria máxima de 15% sobre las ganancias netas de capital y los dividendos calificados ha aumentado a 20% para algunos contribuyentes. Free online state tax filing Vea el capítulo 16 . Free online state tax filing Gastos médicos y dentales. Free online state tax filing  Usted puede deducir solamente la parte de sus gastos médicos y dentales que sea mayor que el 10% de su ingreso bruto ajustado (7. Free online state tax filing 5% si usted o su cónyuge tiene 65 años de edad o más). Free online state tax filing Vea el capítulo 21 . Free online state tax filing Aumento de la cantidad de la exención personal para determinados contribuyentes. Free online state tax filing  La exención personal que le corresponde a usted ha aumentado a $3,900. Free online state tax filing Pero, esta cantidad se reduce si su ingreso bruto ajustado es mayor que: $150,000, si es casado que presenta una declaración por separado, $250,000, si es soltero, $275,000, si es cabeza de familia o $300,000, si presenta la declaración utilizando cualquier otro estado civil para efectos de la declaración. Free online state tax filing Vea el capítulo 3 . Free online state tax filing Límite sobre las deducciones detalladas. Free online state tax filing  Usted puede que no tenga derecho de deducir todas sus deducciones detalladas si su ingreso bruto ajustado es mayor que: $150,000, si es casado que presenta una declaración por separado, $250,000, si es soltero, $275,000, si es cabeza de familia o $300,000, si presenta la declaración utilizando cualquier otro estado civil para efectos de la declaración. Free online state tax filing Vea el capítulo 29 . Free online state tax filing Matrimonio entre el mismo sexo. Free online state tax filing  Si tiene un cónyuge de su mismo sexo con quien usted se casó en un estado (o jurisdicción o país extranjero) que reconoce el matrimonio entre personas del mismo sexo, usted y su cónyuge tienen que utilizar el estado civil para efectos de la declaración de casados que presentan una declaración conjunta o casado que presenta la declaración por separado en su declaración del año 2013. Free online state tax filing Utilice uno de estos estados civiles para efectos de la declaración aunque usted y su cónyuge en la actualidad vivan en un estado (o jurisdicción o país extranjero) en donde no se reconozca el matrimonio entre personas del mismo sexo. Free online state tax filing Vea el capítulo 2 . Free online state tax filing Si reúne ciertos requisitos, quizás podría presentar declaraciones enmendadas para cambiar su estado civil para efectos de la declaración para algunos años anteriores. Free online state tax filing Si desea saber más detalles sobre declaraciones enmendadas, vea el capítulo 1 . Free online state tax filing Cuenta flexible de ahorros para gastos médicos (FSA, por sus siglas en inglés). Free online state tax filing  Comenzando con los años del plan después de 2012, usted no puede hacer aportaciones mediante la reducción de salarios mayores de $2,500 a cuentas flexibles de ahorros para gastos médicos (FSA, por sus siglas en inglés). Free online state tax filing Vea el capítulo 5 . Free online state tax filing Créditos tributarios que vencen. Free online state tax filing  El crédito por vehículo eléctrico enchufable y la parte reembolsable del crédito del impuesto mínimo de años anteriores ha vencido. Free online state tax filing Usted no puede reclamar ninguno de éstos en su declaración del año 2013. Free online state tax filing Vea el capítulo 37 . Free online state tax filing Esquemas de inversión de tipo Ponzi. Free online state tax filing  Hay nuevas reglas sobre cómo reclamar una deducción en el Formulario 4684, en inglés, debido a una pérdida por robo por un esquema de inversión de tipo Ponzi. Free online state tax filing Vea el capítulo 25 . Free online state tax filing Método simplificado para la deducción por oficina en el hogar. Free online state tax filing  Si usted puede tomar una deducción por tener una oficina en su hogar, quizás pueda utilizar un método simplificado para calcular dicha deducción. Free online state tax filing Vea la Publicación 587, disponible en inglés. Free online state tax filing Tarifas estándar por milla. Free online state tax filing  Para 2013, la tarifa estándar por milla permitida por el costo de operar su automóvil para uso comercial ha aumentado a 56½ centavos por milla. Free online state tax filing Vea el capítulo 26 . Free online state tax filing Para 2013, la tarifa estándar por milla permitida por el costo de operar su automóvil por razones médicas ha aumentado a 24 centavos por milla. Free online state tax filing Vea el capítulo 21 . Free online state tax filing Para 2013, la tarifa estándar por milla permitida por el costo de operar su automóvil para determinar los gastos de mudanza ha aumentado a 24 centavos por milla. Free online state tax filing Vea la Publicación 521, Moving Expenses (Gastos de mudanza), en inglés. Free online state tax filing Recordatorios A continuación aparecen recordatorios importantes y otros asuntos que le podrían ayudar a presentar su declaración de impuestos del año 2013. Free online state tax filing Muchos de estos asuntos se explican más adelante en esta publicación. Free online state tax filing Anote su número de Seguro Social (SSN, por sus siglas en inglés) en la declaración. Free online state tax filing  Anote su número de Seguro Social (SSN, por sus siglas en inglés) en el espacio correspondiente de la declaración de impuestos. Free online state tax filing Si presentó una declaración conjunta de impuestos en el año 2012 y presenta una declaración conjunta en el año 2013 con el mismo cónyuge, escriba los nombres y números de Seguro Social en el mismo orden en que lo hizo en el año 2012. Free online state tax filing Vea el capítulo 1 . Free online state tax filing Proteja su documentación tributaria contra el robo de identidad. Free online state tax filing  El robo de identidad ocurre cuando otra persona usa la información personal de usted sin su autorización para cometer fraude u otros delitos. Free online state tax filing Dicha información personal podría ser su nombre, número de Seguro Social (SSN, por sus siglas en inglés) u otra información de identificación. Free online state tax filing Un ladrón de identidad puede usar su SSN para obtener un empleo o puede presentar una declaración de impuestos usando su SSN robado para recibir un reembolso. Free online state tax filing Si desea más información sobre el robo de identidad e información sobre cómo reducir su riesgo al robo de identidad, vea el capítulo 1 . Free online state tax filing Números de identificación del contribuyente. Free online state tax filing  Tiene que proveer el número de identificación del contribuyente de cada persona por la cual reclama ciertos beneficios tributarios. Free online state tax filing Este requisito se aplica aun en el caso en que la persona haya nacido en el año 2013. Free online state tax filing Por lo general, este número es el número de Seguro Social de la persona. Free online state tax filing Vea el capítulo 1 . Free online state tax filing Ingreso de fuentes en el extranjero. Free online state tax filing  Si es ciudadano de los Estados Unidos con ingresos provenientes de fuentes en el extranjero (ingresos del extranjero), tiene que declarar todos estos ingresos en su declaración de impuestos, a menos que estén exentos conforme a las leyes estadounidenses. Free online state tax filing Esto es cierto tanto si vive dentro como fuera de los Estados Unidos e independientemente de si recibe o no un Formulario W-2 ó 1099 del pagador extranjero. Free online state tax filing Esto corresponde al ingreso del trabajo (como salarios y propinas) y también al ingreso no derivado del trabajo (como intereses, dividendos, ganancias de capital, pensiones, alquileres y regalías). Free online state tax filing Si reside fuera de los Estados Unidos, es posible que pueda excluir la totalidad o parte de su ingreso del trabajo procedente de fuentes en el extranjero. Free online state tax filing Para más detalles, vea la Publicación 54, Tax Guide for U. Free online state tax filing S. Free online state tax filing Citizens and Resident Aliens Abroad (Guía tributaria para ciudadanos y residentes estadounidenses en el extranjero), en inglés. Free online state tax filing Activos financieros extranjeros. Free online state tax filing  Si tuvo activos financieros extranjeros en el 2013, es posible que tenga que presentar el nuevo Formulario 8938 con su declaración. Free online state tax filing Vea www. Free online state tax filing IRS. Free online state tax filing gov/form8938, en inglés, para más detalles. Free online state tax filing Prórroga automática de 6 meses para presentar la declaración de impuestos. Free online state tax filing  Puede usar el Formulario 4868(SP), Solicitud de Prórroga Automática para Presentar la Declaración del Impuesto sobre el Ingreso Personal de los Estados Unidos (o el Formulario 4868, en inglés), para obtener una prórroga automática de 6 meses para presentar su declaración de impuestos. Free online state tax filing Vea el capítulo 1 . Free online state tax filing Incluya su número de teléfono en la declaración. Free online state tax filing  Para resolver rápidamente cualquier pregunta que necesitemos hacerle para tramitar su declaración, nos gustaría poder llamarlo. Free online state tax filing Anote el número de teléfono donde podamos llamarlo durante el día, al lado del espacio donde firma la declaración de impuestos y donde aparece su ocupación. Free online state tax filing Si usted presenta una declaración conjunta, puede anotar el número de teléfono suyo o el de su cónyuge. Free online state tax filing Pago de los impuestos. Free online state tax filing   Puede pagar sus impuestos a través de la Internet, a través del teléfono o por medio de cheque o giro. Free online state tax filing Puede efectuar una transferencia directa de su cuenta bancaria o utilizar una tarjeta de crédito o débito. Free online state tax filing Si presenta su declaración electrónicamente (por medio de e-file), puede programar un pago electrónico. Free online state tax filing Vea el capítulo 1 . Free online state tax filing Maneras más rápidas de presentar su declaración. Free online state tax filing  El IRS ofrece maneras rápidas y fiables de presentar la información tributaria sin tener que presentar una declaración en papel. Free online state tax filing Puede usar el sistema electrónico e-file del IRS para presentar su declaración de impuestos. Free online state tax filing Vea el capítulo 1 . Free online state tax filing Presentación electrónica gratuita de la declaración. Free online state tax filing  Usted quizás pueda presentar su declaración de impuestos del año 2013 por Internet sin pagar cargo alguno. Free online state tax filing Vea el capítulo 1 . Free online state tax filing Cambio de dirección. Free online state tax filing  Si cambia de dirección, debe notificarle al IRS. Free online state tax filing Vea el tema titulado Cambio de Dirección , en el capítulo 1. Free online state tax filing Reembolsos de una declaración presentada fuera de plazo. Free online state tax filing  Si a usted se le debe un reembolso pero no presentó una declaración, por lo general tendrá que presentar su declaración dentro de 3 años a partir de la fecha en que la declaración venció (incluidas prórrogas) para obtener ese reembolso. Free online state tax filing Vea el capítulo 1 . Free online state tax filing Declaraciones de impuestos frívolas. Free online state tax filing  El IRS ha publicado una lista de posturas identificadas como frívolas. Free online state tax filing La multa por presentar una declaración de impuestos frívola es de $5,000. Free online state tax filing Vea el capítulo 1 . Free online state tax filing Reclamación errónea de reembolso o crédito. Free online state tax filing  Quizás tenga que pagar una multa si reclama erróneamente un reembolso o crédito. Free online state tax filing Vea el capítulo 1 . Free online state tax filing Información sobre la Ley de Confidencialidad de Información y la Ley de Reducción de Trámites. Free online state tax filing   La IRS Restructuring and Reform Act of 1998 (Ley de Reestructuración y Reforma del Servicio de Impuestos Internos de 1998), la Privacy Act of 1974 (Ley de Confidencialidad de Información de 1974) y la Paperwork Reduction Act of 1980 (Ley de Reducción de Trámites de 1980) requieren que, cuando le solicitemos información, le informemos primero sobre cuál es nuestro derecho legal para solicitar esa información, por qué la estamos solicitando, cómo se usará la información, qué podría suceder si no la recibimos y si su respuesta es voluntaria, necesaria para obtener un beneficio u obligatoria conforme a la ley. Free online state tax filing Una explicación completa sobre este tema puede encontrarse en las instrucciones de los formularios. Free online state tax filing Servicio a los contribuyentes. Free online state tax filing  Puede hacer una cita para recibir ayuda en persona en el Centro de Ayuda al Contribuyente más conveniente en el día laborable que más le convenga. Free online state tax filing Vea el tema titulado Cómo Obtener Ayuda con los Impuestos , al final de esta publicación. Free online state tax filing Mandato para preparadores de impuestos sobre el sistema e-file. Free online state tax filing  La mayoría de los preparadores de impuestos remunerados que preparan y presentan declaraciones tienen que presentar electrónicamente por medio del sistema e-file. Free online state tax filing Puede ser que su preparador le comunique sobre este requisito y las opciones que están a disposición suya. Free online state tax filing Inspector General del Tesoro para la Administración Tributaria. Free online state tax filing   Si desea denunciar confidencialmente la mala conducta, ineficacia, el fraude o abuso cometido por un empleado del IRS, puede llamar al 1-800-366-4484 (1-800-877-8339 para personas sordas, con limitación auditiva o que tienen impedimentos del habla, y que usen equipo TTY/TDD). Free online state tax filing Puede mantenerse anónimo. Free online state tax filing Fotografías de niños desaparecidos. Free online state tax filing  El IRS se enorgullece en colaborar con el National Center for Missing and Exploited Children (Centro Nacional de Búsqueda de Niños Desaparecidos y Explotados). Free online state tax filing Las fotografías de niños desaparecidos que han sido seleccionadas por el Centro pueden aparacer en esta publicación en páginas que de otra manera estarían en blanco. Free online state tax filing Usted puede ayudar a que estos niños regresen a sus hogares mirando sus fotografías y llamando al número gratuito 1-800-THE-LOST (1-800-843-5678) si reconoce a un niño. Free online state tax filing Introduction Esta publicación abarca las reglas generales para la presentación de una declaración federal de impuestos sobre el ingreso. Free online state tax filing La publicación complementa la información contenida en las instrucciones para el formulario de impuestos. Free online state tax filing Igualmente explica las leyes tributarias para asegurar que usted pague sólo los impuestos que adeuda y nada más. Free online state tax filing Cómo está organizada esta publicación. Free online state tax filing   Esta publicación sigue de cerca el Formulario 1040, U. Free online state tax filing S. Free online state tax filing Individual Income Tax Return (Declaración de impuestos de los Estados Unidos sobre los ingresos personales), disponible en inglés. Free online state tax filing Está dividida en seis partes que abarcan distintas secciones del Formulario 1040. Free online state tax filing Cada parte está subdividida en capítulos que normalmente explican una línea del formulario. Free online state tax filing No se preocupe si presenta el Formulario 1040A o el Formulario 1040EZ. Free online state tax filing Todo lo que está incluido en una línea de cualquiera de ambos formularios se incluye también en el Formulario 1040. Free online state tax filing   La tabla de contenido que aparece al comienzo de esta publicación y el índice que aparece al final le servirán de utilidad para encontrar la información que necesite. Free online state tax filing Qué se incluye en esta publicación. Free online state tax filing   Esta publicación comienza con las reglas para la presentación de una declaración de impuestos. Free online state tax filing La publicación explica: Quién tiene que presentar una declaración, Qué formulario se debe utilizar para declarar los impuestos, Cuándo es la fecha de vencimiento de la declaración, Cómo presentar su declaración usando el sistema electrónico e-file y Otra información general. Free online state tax filing Esta publicación le ayudará a identificar el estado civil para propósitos de la declaración al cual tiene derecho. Free online state tax filing Del mismo modo, le ayudará a determinar si puede reclamar algún dependiente y si los ingresos que recibe están sujetos a impuestos. Free online state tax filing La publicación también explica la deducción estándar, las clases de gastos que quizás pueda deducir y varios créditos que quizás pueda tomar para reducir sus impuestos. Free online state tax filing   A lo largo de la publicación, hay ejemplos que muestran cómo se aplican las leyes tributarias en situaciones típicas. Free online state tax filing También hay organigramas y tablas en la publicación que presentan información tributaria en una manera fácil de entender. Free online state tax filing   Muchos de los temas que se tratan en esta publicación son explicados en mayor detalle en otras publicaciones del IRS. Free online state tax filing Se hace referencia a dichas publicaciones y se indica si están disponibles en español o en inglés. Free online state tax filing Iconos. Free online state tax filing   En la publicación se utilizan pequeños símbolos gráficos, o sea iconos, para llamar su atención a información especial. Free online state tax filing Vea la Tabla 1 , más adelante, para una explicación de cada icono usado en esta publicación. Free online state tax filing Qué no se incluye en esta publicación. Free online state tax filing   Algunos materiales que le podrían ser útiles no se incluyen en esta publicación pero pueden encontrarse en el folleto de instrucciones del formulario de impuestos. Free online state tax filing Esto incluye listas que identifican lo siguiente: Dónde declarar ciertas partidas que aparecen en documentos informativos y Temas tributarios grabados (temas TeleTax). Free online state tax filing   Si opera su propio negocio o si tiene otros ingresos del trabajo por cuenta propia, tales como del cuidado de niños o la venta de artesanía, vea las siguientes publicaciones para más información: Publicación 334, Tax Guide for Small Business (For Individuals Who Use Schedule C or C-EZ) (Guía tributaria para pequeños negocios (para personas que usen el Anexo C o C-EZ)), en inglés. Free online state tax filing Publicación 535, Business Expenses (Gastos de negocios), en inglés. Free online state tax filing Publicación 587, Business Use of Your Home (Including Use by Daycare Providers) (Uso comercial de su vivienda (incluyendo el uso por proveedores del cuidado de niños)), en inglés. Free online state tax filing Ayuda del IRS. Free online state tax filing   Existen muchas maneras en que puede obtener ayuda del IRS. Free online state tax filing Éstas se explican bajo el tema titulado Cómo Obtener Ayuda con los Impuestos , al final de esta publicación. Free online state tax filing Comentarios y sugerencias. Free online state tax filing   Agradeceremos sus comentarios acerca de esta publicación, así como sus sugerencias para ediciones futuras. Free online state tax filing   Puede enviar sus comentarios a la dirección siguiente:  Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Free online state tax filing NW, IR-6526 Washington, DC 20224   Contestamos muchas cartas por teléfono. Free online state tax filing Por lo tanto, sería útil que incluyera en la correspondencia su número de teléfono, con el código de área, en donde nos podamos comunicar con usted durante el día. Free online state tax filing   Usted nos puede enviar comentarios desde la página web www. Free online state tax filing irs. Free online state tax filing gov/formspubs, en inglés, seleccionando Comment on Tax Forms and Publications (Enviar comentarios sobre los formularios y publicaciones de impuestos), bajo la sección More Information (Información adicional). Free online state tax filing   Aunque no le podemos contestar individualmente, agradecemos sus comentarios y sugerencias y los tendremos en cuenta para ediciones futuras de nuestros productos tributarios. Free online state tax filing Para pedir formularios y publicaciones. Free online state tax filing   Visite www. Free online state tax filing irs. Free online state tax filing gov/formspubs para descargar formularios y publicaciones, llame al 1-800-829-3676 para pedir formularios y publicaciones o escriba a la dirección indicada a continuación y recibirá una respuesta dentro de 10 días después de que nosotros recibamos su solicitud. Free online state tax filing  Internal Revenue Service 1201 N. Free online state tax filing Mitsubishi Motorway Bloomington, IL 61705-6613 Preguntas sobre los impuestos. Free online state tax filing   Si tiene una pregunta sobre los impuestos, verifique la información disponible en IRS. Free online state tax filing gov/espanol o llame al 1-800-829-1040. Free online state tax filing No podemos contestar preguntas sobre impuestos enviadas a ninguna de las dos direcciones indicadas anteriormente. Free online state tax filing Misión del IRS. Free online state tax filing   Proveerles a los contribuyentes de los Estados Unidos de América un servicio de la más alta calidad al ayudarles a entender y cumplir con sus responsabilidades tributarias y, a la vez, hacer cumplir las leyes tributarias de manera íntegra y justa para todos. Free online state tax filing Tabla 1. Free online state tax filing Leyenda de los Iconos Icono Explicación Partidas que podrían causarle problemas en particular o una alerta sobre legislaciones pendientes que podrían entrar en vigor después de que se imprima esta publicación. Free online state tax filing Un sitio en Internet o una dirección de correo electrónico. Free online state tax filing Una dirección que podría necesitar. Free online state tax filing Documentos que debería mantener en su documentación personal. Free online state tax filing Cálculos que necesite realizar o una hoja de trabajo que pueda tener que completar y conservar para sus archivos. Free online state tax filing Un número de teléfono importante. Free online state tax filing Información que podría necesitar. Free online state tax filing Prev  Up  Next   Home   More Online Publications
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Responsible Parties and Nominees

Responsible Parties

All EIN applications (mail, fax, electronic) must disclose the name and Taxpayer Identification Number (SSN, ITIN, or EIN) of the true principal officer, general partner, grantor, owner or trustor. This individual or entity, which the IRS will call the “responsible party,” controls, manages, or directs the applicant entity and the disposition of its funds and assets. If there is more than one responsible party, the entity may list whichever party the entity wants the IRS to recognize as the responsible party. 

According to the Instructions for the current revision of the application, the “responsible party” is defined as follows:

For entities with shares or interests traded on a public exchange, or which are registered with the Securities and Exchange Commission, “responsible party” is (a) the principal officer, if the business is a corporation, (b) a general partner, if a partnership, (c) the owner of an entity that is disregarded as separate from its owner (disregarded entities owned by a corporation enter the corporation’s name and EIN), or (d) a grantor, owner, or trustor if a trust.

For all other entities, “responsible party” is  the person who has a level of control over, or entitlement to, the funds or assets in the entity that, as a practical matter, enables the individual, directly or indirectly, to control, manage or direct the entity and the disposition of its funds and assets. The ability to fund the entity or the entitlement to the property of the entity alone, however, without any corresponding authority to control, manage, or direct the entity (such as in the case of a minor child beneficiary), does not cause the individual to be a responsible party.

Nominees

A “nominee” is someone who is given limited authority to act on behalf of an entity, usually for a limited period of time, and usually during the formation of the entity.  The “principal officer, general partner,” etc., as defined by the IRS, is the true “responsible party” for the entity, instead of a nominee. The “responsible party” is the individual or entity that controls, manages, or directs the entity and the disposition of the entity’s funds and assets, unlike a nominee, who is given little or no authority over the entity’s assets. 

The Internal Revenue Service has become aware that nominee individuals are being listed as principal officers, general partners, grantors, owners, and trustors in the Employer Identification Number (EIN) application process. A nominee is not one of these people. Rather, nominees are temporarily authorized to act on behalf of entities during the formation process. The use of nominees in the EIN application process prevents the IRS from gathering appropriate information on entity ownership, and has been found to facilitate tax non-compliance by entities and their owners.

The IRS does not authorize the use of nominees to obtain EINs. All EIN applications (mail, fax, electronic) must disclose the name and Taxpayer Identification Number (SSN, ITIN, or EIN) of the true principal officer, general partner, grantor, owner or trustor. This individual or entity, which the IRS will call the “responsible party,” controls, manages, or directs the applicant entity and the disposition of its funds and assets.

To properly submit a Form SS-4, the form and authorization should include the name, Taxpayer Identification Number and signature of the responsible party. Third party designees filing online applications are reminded of their obligation to retain a complete signed copy of the paper Form SS-4 and signed authorization statement for each entity application filed with the IRS. Nominees do not have the authority to authorize third party designees to file Forms SS-4, and should not be listed on the Form SS-4.

If a nominee is used in the state formation process and the true responsible party has not yet been identified, the entity must identify that individual before applying for an EIN.

The IRS will continue to pursue enforcement actions to prevent the misuse of EIN applications.

If you used a nominee for the EIN Application process, visit Correcting Business Information Where a Nominee Was Used to learn how to correct your information.

Page Last Reviewed or Updated: 03-Jan-2014

The Free Online State Tax Filing

Free online state tax filing 7. Free online state tax filing   Depreciation, Depletion, and Amortization Table of Contents What's New for 2013 Introduction Topics - This chapter discusses: Useful Items - You may want to see: Overview of DepreciationWhat Property Can Be Depreciated? What Property Cannot Be Depreciated? When Does Depreciation Begin and End? Can You Use MACRS To Depreciate Your Property? What Is the Basis of Your Depreciable Property? How Do You Treat Repairs and Improvements? Do You Have To File Form 4562? How Do You Correct Depreciation Deductions? Section 179 Expense DeductionWhat Property Qualifies? What Property Does Not Qualify? How Much Can You Deduct? How Do You Elect the Deduction? When Must You Recapture the Deduction? Claiming the Special Depreciation AllowanceWhat is Qualified Property? How Can You Elect Not To Claim the Allowance? When Must You Recapture an Allowance Figuring Depreciation Under MACRSWhich Depreciation System (GDS or ADS) Applies? Which Property Class Applies Under GDS? What Is the Placed-in-Service Date? What Is the Basis for Depreciation? Which Recovery Period Applies? Which Convention Applies? Which Depreciation Method Applies? How Is the Depreciation Deduction Figured? How Do You Use General Asset Accounts? When Do You Recapture MACRS Depreciation? Additional Rules for Listed PropertyWhat Is Listed Property? What Is the Business-Use Requirement? Do the Passenger Automobile Limits Apply? Depletion Who Can Claim Depletion? Figuring Depletion AmortizationBusiness Start-Up Costs Reforestation Costs Section 197 Intangibles What's New for 2013 Increased section 179 expense deduction dollar limits. Free online state tax filing  The maximum amount you can elect to deduct for most section 179 property you placed in service in 2013 is $500,000. Free online state tax filing This limit is reduced by the amount by which the cost of the property placed in service during the tax year exceeds $2 million. Free online state tax filing See Dollar Limits under Section 179 Expense Deduction , later. Free online state tax filing Extension of special depreciation allowance for certain qualified property acquired after December 31, 2007. Free online state tax filing . Free online state tax filing  You may be able to take a 50% special depreciation allowance for certain qualified property acquired after December 31, 2007, and placed in service before January 1, 2014. Free online state tax filing See Claiming the Special Depreciation Allowance , later. Free online state tax filing Expiration of the 3- year recovery period for certain race horses. Free online state tax filing  The 3-year recovery period for race horses two years old or younger will expire for such horses placed in service after December 31, 2013. Free online state tax filing Introduction If you buy or make improvements to farm property such as machinery, equipment, livestock, or a structure with a useful life of more than a year, you generally cannot deduct its entire cost in one year. Free online state tax filing Instead, you must spread the cost over the time you use the property and deduct part of it each year. Free online state tax filing For most types of property, this is called depreciation. Free online state tax filing This chapter gives information on depreciation methods that generally apply to property placed in service after 1986. Free online state tax filing For information on depreciating pre-1987 property, see Publication 534, Depreciating Property Placed in Service Before 1987. Free online state tax filing Topics - This chapter discusses: Overview of depreciation Section 179 expense deduction Special depreciation allowance Modified Accelerated Cost Recovery System (MACRS) Listed property Basic information on cost depletion (including timber depletion) and percentage depletion Amortization of the costs of going into business, reforestation costs, the costs of pollution control facilities, and the costs of section 197 intangibles Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 534 Depreciating Property Placed in Service Before 1987 535 Business Expenses 544 Sales and Other Dispositions of Assets 551 Basis of Assets 946 How To Depreciate Property Form (and Instructions) T (Timber), Forest Activities Schedule 3115 Application for Change in Accounting Method 4562 Depreciation and Amortization 4797 Sales of Business Property See chapter 16 for information about getting publications and forms. Free online state tax filing It is important to keep good records for property you depreciate. Free online state tax filing Do not file these records with your return. Free online state tax filing Instead, you should keep them as part of the permanent records of the depreciated property. Free online state tax filing They will help you verify the accuracy of the depreciation of assets placed in service in the current and previous tax years. Free online state tax filing For general information on recordkeeping, see Publication 583, Starting a Business and Keeping Records. Free online state tax filing For specific information on keeping records for section 179 property and listed property, see Publication 946, How To Depreciate Property. Free online state tax filing Overview of Depreciation This overview discusses basic information on the following. Free online state tax filing What property can be depreciated. Free online state tax filing What property cannot be depreciated. Free online state tax filing When depreciation begins and ends. Free online state tax filing Whether MACRS can be used to figure depreciation. Free online state tax filing What is the basis of your depreciable property. Free online state tax filing How to treat repairs and improvements. Free online state tax filing When you must file Form 4562. Free online state tax filing How you can correct depreciation claimed incorrectly. Free online state tax filing What Property Can Be Depreciated? You can depreciate most types of tangible property (except land), such as buildings, machinery, equipment, vehicles, certain livestock, and furniture. Free online state tax filing You can also depreciate certain intangible property, such as copyrights, patents, and computer software. Free online state tax filing To be depreciable, the property must meet all the following requirements. Free online state tax filing It must be property you own. Free online state tax filing It must be used in your business or income-producing activity. Free online state tax filing It must have a determinable useful life. Free online state tax filing It must have a useful life that extends substantially beyond the year you place it in service. Free online state tax filing Property You Own To claim depreciation, you usually must be the owner of the property. Free online state tax filing You are considered as owning property even if it is subject to a debt. Free online state tax filing Leased property. Free online state tax filing   You can depreciate leased property only if you retain the incidents of ownership in the property. Free online state tax filing This means you bear the burden of exhaustion of the capital investment in the property. Free online state tax filing Therefore, if you lease property from someone to use in your trade or business or for the production of income, you generally cannot depreciate its cost because you do not retain the incidents of ownership. Free online state tax filing You can, however, depreciate any capital improvements you make to the leased property. Free online state tax filing See Additions and Improvements under Which Recovery Period Applies in chapter 4 of Publication 946. Free online state tax filing   If you lease property to someone, you generally can depreciate its cost even if the lessee (the person leasing from you) has agreed to preserve, replace, renew, and maintain the property. Free online state tax filing However, you cannot depreciate the cost of the property if the lease provides that the lessee is to maintain the property and return to you the same property or its equivalent in value at the expiration of the lease in as good condition and value as when leased. Free online state tax filing Life tenant. Free online state tax filing   Generally, if you hold business or investment property as a life tenant, you can depreciate it as if you were the absolute owner of the property. Free online state tax filing See Certain term interests in property , later, for an exception. Free online state tax filing Property Used in Your Business or Income-Producing Activity To claim depreciation on property, you must use it in your business or income-producing activity. Free online state tax filing If you use property to produce income (investment use), the income must be taxable. Free online state tax filing You cannot depreciate property that you use solely for personal activities. Free online state tax filing However, if you use property for business or investment purposes and for personal purposes, you can deduct depreciation based only on the percentage of business or investment use. Free online state tax filing Example 1. Free online state tax filing   If you use your car for farm business, you can deduct depreciation based on its percentage of use in farming. Free online state tax filing If you also use it for investment purposes, you can depreciate it based on its percentage of investment use. Free online state tax filing Example 2. Free online state tax filing   If you use part of your home for business, you may be able to deduct depreciation on that part based on its business use. Free online state tax filing For more information, see Business Use of Your Home in chapter 4. Free online state tax filing Inventory. Free online state tax filing   You can never depreciate inventory because it is not held for use in your business. Free online state tax filing Inventory is any property you hold primarily for sale to customers in the ordinary course of your business. Free online state tax filing Livestock. Free online state tax filing   Livestock purchased for draft, breeding, or dairy purposes can be depreciated only if they are not kept in an inventory account. Free online state tax filing Livestock you raise usually has no depreciable basis because the costs of raising them are deducted and not added to their basis. Free online state tax filing However, see Immature livestock under When Does Depreciation Begin and End , later, for a special rule. Free online state tax filing Property Having a Determinable Useful Life To be depreciable, your property must have a determinable useful life. Free online state tax filing This means it must be something that wears out, decays, gets used up, becomes obsolete, or loses its value from natural causes. Free online state tax filing Irrigation systems and water wells. Free online state tax filing   Irrigation systems and wells used in a trade or business can be depreciated if their useful life can be determined. Free online state tax filing You can depreciate irrigation systems and wells composed of masonry, concrete, tile, metal, or wood. Free online state tax filing In addition, you can depreciate costs for moving dirt to construct irrigation systems and water wells composed of these materials. Free online state tax filing However, land preparation costs for center pivot irrigation systems are not depreciable. Free online state tax filing Dams, ponds, and terraces. Free online state tax filing   In general, you cannot depreciate earthen dams, ponds, and terraces unless the structures have a determinable useful life. Free online state tax filing What Property Cannot Be Depreciated? Certain property cannot be depreciated, even if the requirements explained earlier are met. Free online state tax filing This includes the following. Free online state tax filing Land. Free online state tax filing You can never depreciate the cost of land because land does not wear out, become obsolete, or get used up. Free online state tax filing The cost of land generally includes the cost of clearing, grading, planting, and landscaping. Free online state tax filing Although you cannot depreciate land, you can depreciate certain costs incurred in preparing land for business use. Free online state tax filing See chapter 1 of Publication 946. Free online state tax filing Property placed in service and disposed of in the same year. Free online state tax filing Determining when property is placed in service is explained later. Free online state tax filing Equipment used to build capital improvements. Free online state tax filing You must add otherwise allowable depreciation on the equipment during the period of construction to the basis of your improvements. Free online state tax filing Intangible property such as section 197 intangibles. Free online state tax filing This property does not have a determinable useful life and generally cannot be depreciated. Free online state tax filing However, see Amortization , later. Free online state tax filing Special rules apply to computer software (discussed below). Free online state tax filing Certain term interests (discussed below). Free online state tax filing Computer software. Free online state tax filing   Computer software is generally not a section 197 intangible even if acquired in connection with the acquisition of a business, if it meets all of the following tests. Free online state tax filing It is readily available for purchase by the general public. Free online state tax filing It is subject to a nonexclusive license. Free online state tax filing It has not been substantially modified. Free online state tax filing   If the software meets the tests above, it can be depreciated and may qualify for the section 179 expense deduction and the special depreciation allowance (if applicable), discussed later. Free online state tax filing Certain term interests in property. Free online state tax filing   You cannot depreciate a term interest in property created or acquired after July 27, 1989, for any period during which the remainder interest is held, directly or indirectly, by a person related to you. Free online state tax filing This rule does not apply to the holder of a term interest in property acquired by gift, bequest, or inheritance. Free online state tax filing For more information, see chapter 1 of Publication 946. Free online state tax filing When Does Depreciation Begin and End? You begin to depreciate your property when you place it in service for use in your trade or business or for the production of income. Free online state tax filing You stop depreciating property either when you have fully recovered your cost or other basis or when you retire it from service, whichever happens first. Free online state tax filing Placed in Service Property is placed in service when it is ready and available for a specific use, whether in a business activity, an income-producing activity, a tax-exempt activity, or a personal activity. Free online state tax filing Even if you are not using the property, it is in service when it is ready and available for its specific use. Free online state tax filing Example. Free online state tax filing You bought a planter for use in your farm business. Free online state tax filing The planter was delivered in December 2012 after harvest was over. Free online state tax filing You begin to depreciate the planter for 2012 because it was ready and available for its specific use in 2012, even though it will not be used until the spring of 2013. Free online state tax filing If your planter comes unassembled in December 2012 and is put together in February 2013, it is not placed in service until 2013. Free online state tax filing You begin to depreciate it in 2013. Free online state tax filing If your planter was delivered and assembled in February 2013 but not used until April 2013, it is placed in service in February 2013, because this is when the planter was ready for its specified use. Free online state tax filing You begin to depreciate it in 2013. Free online state tax filing Fruit or nut trees and vines. Free online state tax filing   If you acquire an orchard, grove, or vineyard before the trees or vines have reached the income-producing stage, and they have a preproductive period of more than 2 years, you must capitalize the preproductive-period costs under the uniform capitalization rules (unless you elect not to use these rules). Free online state tax filing See chapter 6 for information about the uniform capitalization rules. Free online state tax filing Your depreciation begins when the trees and vines reach the income-producing stage (that is, when they bear fruit, nuts, or grapes in quantities sufficient to commercially warrant harvesting). Free online state tax filing Immature livestock. Free online state tax filing   Depreciation for livestock begins when the livestock reaches the age of maturity. Free online state tax filing If you bought immature livestock for drafting purposes, depreciation begins when they can be worked. Free online state tax filing If you bought immature livestock for dairy purposes, depreciation begins when they can be milked. Free online state tax filing If you bought immature livestock for breeding purposes, depreciation begins when they can be bred. Free online state tax filing Your basis for depreciation is your initial cost for the immature livestock. Free online state tax filing Idle Property Continue to claim a deduction for depreciation on property used in your business or for the production of income even if it is temporarily idle. Free online state tax filing For example, if you stop using a machine because there is a temporary lack of a market for a product made with that machine, continue to deduct depreciation on the machine. Free online state tax filing Cost or Other Basis Fully Recovered You stop depreciating property when you have fully recovered your cost or other basis. Free online state tax filing This happens when your section 179 and allowed or allowable depreciation deductions equal your cost or investment in the property. Free online state tax filing Retired From Service You stop depreciating property when you retire it from service, even if you have not fully recovered its cost or other basis. Free online state tax filing You retire property from service when you permanently withdraw it from use in a trade or business or from use in the production of income because of any of the following events. Free online state tax filing You sell or exchange the property. Free online state tax filing You convert the property to personal use. Free online state tax filing You abandon the property. Free online state tax filing You transfer the property to a supplies or scrap account. Free online state tax filing The property is destroyed. Free online state tax filing For information on abandonment of property, see chapter 8. Free online state tax filing For information on destroyed property, see chapter 11 and Publication 547, Casualties, Disasters, and Thefts. Free online state tax filing Can You Use MACRS To Depreciate Your Property? You must use the Modified Accelerated Cost Recovery System (MACRS) to depreciate most business and investment property placed in service after 1986. Free online state tax filing MACRS is explained later under Figuring Depreciation Under MACRS . Free online state tax filing You cannot use MACRS to depreciate the following property. Free online state tax filing Property you placed in service before 1987. Free online state tax filing Use the methods discussed in Publication 534. Free online state tax filing Certain property owned or used in 1986. Free online state tax filing See chapter 1 of Publication 946. Free online state tax filing Intangible property. Free online state tax filing Films, video tapes, and recordings. Free online state tax filing Certain corporate or partnership property acquired in a nontaxable transfer. Free online state tax filing Property you elected to exclude from MACRS. Free online state tax filing For more information, see chapter 1 of Publication 946. Free online state tax filing What Is the Basis of Your Depreciable Property? To figure your depreciation deduction, you must determine the basis of your property. Free online state tax filing To determine basis, you need to know the cost or other basis of your property. Free online state tax filing Cost or other basis. Free online state tax filing   The basis of property you buy is usually its cost plus amounts you paid for items such as sales tax, freight charges, and installation and testing fees. Free online state tax filing The cost includes the amount you pay in cash, debt obligations, other property, or services. Free online state tax filing   There are times when you cannot use cost as basis. Free online state tax filing In these situations, the fair market value (FMV) or the adjusted basis of the property may be used. Free online state tax filing Adjusted basis. Free online state tax filing   To find your property's basis for depreciation, you may have to make certain adjustments (increases and decreases) to the basis of the property for events occurring between the time you acquired the property and the time you placed it in service. Free online state tax filing Basis adjustment for depreciation allowed or allowable. Free online state tax filing   After you place your property in service, you must reduce the basis of the property by the depreciation allowed or allowable, whichever is greater. Free online state tax filing Depreciation allowed is depreciation you actually deducted (from which you received a tax benefit). Free online state tax filing Depreciation allowable is depreciation you are entitled to deduct. Free online state tax filing   If you do not claim depreciation you are entitled to deduct, you must still reduce the basis of the property by the full amount of depreciation allowable. Free online state tax filing   If you deduct more depreciation than you should, you must reduce your basis by any amount deducted from which you received a tax benefit (the depreciation allowed). Free online state tax filing   For more information, see chapter 6. Free online state tax filing How Do You Treat Repairs and Improvements? You generally deduct the cost of repairing business property in the same way as any other business expense. Free online state tax filing However, if a repair or replacement increases the value of your property, makes it more useful, or lengthens its life, you must treat it as an improvement and depreciate it. Free online state tax filing Treat improvements as separate depreciable property. Free online state tax filing See chapter 1 of Publication 946 for more information. Free online state tax filing Example. Free online state tax filing You repair a small section on a corner of the roof of a barn that you rent to others. Free online state tax filing You deduct the cost of the repair as a business expense. Free online state tax filing However, if you replace the entire roof, the new roof is considered to be an improvement because it increases the value and lengthens the life for the property. Free online state tax filing You depreciate the cost of the new roof. Free online state tax filing Improvements to rented property. Free online state tax filing   You can depreciate permanent improvements you make to business property you rent from someone else. Free online state tax filing Do You Have To File Form 4562? Use Form 4562 to claim your deduction for depreciation and amortization. Free online state tax filing You must complete and attach Form 4562 to your tax return if you are claiming any of the following. Free online state tax filing A section 179 expense deduction for the current year or a section 179 carryover from a prior year. Free online state tax filing Depreciation for property placed in service during the current year. Free online state tax filing Depreciation on any vehicle or other listed property, regardless of when it was placed in service. Free online state tax filing Amortization of costs that began in the current year. Free online state tax filing For more information, see the Instructions for Form 4562. Free online state tax filing How Do You Correct Depreciation Deductions? If you deducted an incorrect amount of depreciation in any year, you may be able to make a correction by filing an amended return for that year. Free online state tax filing You can file an amended return to correct the amount of depreciation claimed for any property in any of the following situations. Free online state tax filing You claimed the incorrect amount because of a mathematical error made in any year. Free online state tax filing You claimed the incorrect amount because of a posting error made in any year, for example, omitting an asset from the depreciation schedule. Free online state tax filing You have not adopted a method of accounting for the property placed in service by you in tax years ending after December 29, 2003. Free online state tax filing You claimed the incorrect amount on property placed in service by you in tax years ending before December 30, 2003. Free online state tax filing Note. Free online state tax filing You have adopted a method of accounting if you used the same incorrect method of depreciation for two or more consecutively filed returns. Free online state tax filing If you are not allowed to make the correction on an amended return, you may be able to change your accounting method to claim the correct amount of depreciation. Free online state tax filing See the Instructions for Form 3115. Free online state tax filing Section 179 Expense Deduction You can elect to recover all or part of the cost of certain qualifying property, up to a limit, by deducting it in the year you place the property in service. Free online state tax filing This is the section 179 expense deduction. Free online state tax filing You can elect the section 179 expense deduction instead of recovering the cost by taking depreciation deductions. Free online state tax filing This part of the chapter explains the rules for the section 179 expense deduction. Free online state tax filing It explains what property qualifies for the deduction, what property does not qualify for the deduction, the limits that may apply, how to elect the deduction, and when you may have to recapture the deduction. Free online state tax filing For more information, see chapter 2 of Publication 946. Free online state tax filing What Property Qualifies? To qualify for the section 179 expense deduction, your property must meet all the following requirements. Free online state tax filing It must be eligible property. Free online state tax filing It must be acquired for business use. Free online state tax filing It must have been acquired by purchase. Free online state tax filing Eligible Property To qualify for the section 179 expense deduction, your property must be one of the following types of depreciable property. Free online state tax filing Tangible personal property. Free online state tax filing Qualified real property. Free online state tax filing (Special rules apply to qualified real property that you elect to treat as qualified section 179 real property. Free online state tax filing For more information, see chapter 2 of Publication 946 and section 179(f) of the Internal Revenue Code. Free online state tax filing ) Other tangible property (except buildings and their structural components) used as: An integral part of manufacturing, production, or extraction or of furnishing transportation, communications, electricity, gas, water, or sewage disposal services; A research facility used in connection with any of the activities in (a) above; or A facility used in connection with any of the activities in (a) for the bulk storage of fungible commodities. Free online state tax filing Single purpose agricultural (livestock) or horticultural structures. Free online state tax filing Storage facilities (except buildings and their structural components) used in connection with distributing petroleum or any primary product of petroleum. Free online state tax filing Off-the-shelf computer software that is readily available for purchase by the general public, is subject to a nonexclusive lease, and has not been substantially modified. Free online state tax filing Tangible personal property. Free online state tax filing   Tangible personal property is any tangible property that is not real property. Free online state tax filing It includes the following property. Free online state tax filing Machinery and equipment. Free online state tax filing Property contained in or attached to a building (other than structural components), such as milk tanks, automatic feeders, barn cleaners, and office equipment. Free online state tax filing Gasoline storage tanks and pumps at retail service stations. Free online state tax filing Livestock, including horses, cattle, hogs, sheep, goats, and mink and other fur-bearing animals. Free online state tax filing Facility used for the bulk storage of fungible commodities. Free online state tax filing   A facility used for the bulk storage of fungible commodities is qualifying property for purposes of the section 179 expense deduction if it is used in connection with any of the activities listed earlier in item (3)(a). Free online state tax filing Bulk storage means the storage of a commodity in a large mass before it is used. Free online state tax filing Grain bins. Free online state tax filing   A grain bin is an example of a storage facility that is qualifying section 179 property. Free online state tax filing It is a facility used in connection with the production of grain or livestock for the bulk storage of fungible commodities. Free online state tax filing Single purpose agricultural or horticultural structures. Free online state tax filing   A single purpose agricultural (livestock) or horticultural structure is qualifying property for purposes of the section 179 expense deduction. Free online state tax filing Agricultural structure. Free online state tax filing   A single purpose agricultural (livestock) structure is any building or enclosure specifically designed, constructed, and used for both the following reasons. Free online state tax filing To house, raise, and feed a particular type of livestock and its produce. Free online state tax filing To house the equipment, including any replacements, needed to house, raise, or feed the livestock. Free online state tax filing For this purpose, livestock includes poultry. Free online state tax filing   Single purpose structures are qualifying property if used, for example, to breed chickens or hogs, produce milk from dairy cattle, or produce feeder cattle or pigs, broiler chickens, or eggs. Free online state tax filing The facility must include, as an integral part of the structure or enclosure, equipment necessary to house, raise, and feed the livestock. Free online state tax filing Horticultural structure. Free online state tax filing   A single purpose horticultural structure is either of the following. Free online state tax filing A greenhouse specifically designed, constructed, and used for the commercial production of plants. Free online state tax filing A structure specifically designed, constructed, and used for the commercial production of mushrooms. Free online state tax filing Use of structure. Free online state tax filing   A structure must be used only for the purpose that qualified it. Free online state tax filing For example, a hog barn will not be qualifying property if you use it to house poultry. Free online state tax filing Similarly, using part of your greenhouse to sell plants will make the greenhouse nonqualifying property. Free online state tax filing   If a structure includes work space, the work space can be used only for the following activities. Free online state tax filing Stocking, caring for, or collecting livestock or plants or their produce. Free online state tax filing Maintaining the enclosure or structure. Free online state tax filing Maintaining or replacing the equipment or stock enclosed or housed in the structure. Free online state tax filing Property Acquired by Purchase To qualify for the section 179 expense deduction, your property must have been acquired by purchase. Free online state tax filing For example, property acquired by gift or inheritance does not qualify. Free online state tax filing Property acquired from a related person (that is, your spouse, ancestors, or lineal descendants) is not considered acquired by purchase. Free online state tax filing Example. Free online state tax filing Ken is a farmer. Free online state tax filing He purchased two tractors, one from his brother and one from his father. Free online state tax filing He placed both tractors in service in the same year he bought them. Free online state tax filing The tractor purchased from his father does not qualify for the section 179 expense deduction because he is a related person (as defined above). Free online state tax filing The tractor purchased from his brother does qualify for the deduction because Ken is not a related person (as defined above). Free online state tax filing What Property Does Not Qualify? Land and improvements. Free online state tax filing   Land and land improvements, do not qualify as section 179 property. Free online state tax filing Land improvements include nonagricultural fences, swimming pools, paved parking areas, wharves, docks, bridges, and fences. Free online state tax filing However, agricultural fences do qualify as section 179 property. Free online state tax filing Similarly, field drainage tile also qualifies as section 179 property. Free online state tax filing Excepted property. Free online state tax filing   Even if the requirements explained in the preceding discussions are met, farmers cannot elect the section 179 expense deduction for the following property. Free online state tax filing Certain property you lease to others (if you are a noncorporate lessor). Free online state tax filing Certain property used predominantly to furnish lodging or in connection with the furnishing of lodging. Free online state tax filing Property used by a tax-exempt organization (other than a tax-exempt farmers' cooperative) unless the property is used mainly in a taxable unrelated trade or business. Free online state tax filing Property used by governmental units or foreign persons or entities (except property used under a lease with a term of less than 6 months). Free online state tax filing How Much Can You Deduct? Your section 179 expense deduction is generally the cost of the qualifying property. Free online state tax filing However, the total amount you can elect to deduct under section 179 is subject to a dollar limit and a business income limit. Free online state tax filing These limits apply to each taxpayer, not to each business. Free online state tax filing However, see Married individuals under Dollar Limits , later. Free online state tax filing See also the special rules for applying the limits for partnerships and S corporations under Partnerships and S Corporations , later. Free online state tax filing If you deduct only part of the cost of qualifying property as a section 179 expense deduction, you can generally depreciate the cost you do not deduct. Free online state tax filing Use Part I of Form 4562 to figure your section 179 expense deduction. Free online state tax filing Partial business use. Free online state tax filing   When you use property for business and nonbusiness purposes, you can elect the section 179 expense deduction only if you use it more than 50% for business in the year you place it in service. Free online state tax filing If you used the property more than 50% for business, multiply the cost of the property by the percentage of business use. Free online state tax filing Use the resulting business cost to figure your section 179 expense deduction. Free online state tax filing Trade-in of other property. Free online state tax filing   If you buy qualifying property with cash and a trade-in, its cost for purposes of the section 179 expense deduction includes only the cash you paid. Free online state tax filing For example, if you buy (for cash and a trade-in) a new tractor for use in your business, your cost for the section 179 expense deduction is the cash you paid. Free online state tax filing It does not include the adjusted basis of the old tractor you trade for the new tractor. Free online state tax filing Example. Free online state tax filing J-Bar Farms traded two cultivators having a total adjusted basis of $6,800 for a new cultivator costing $13,200. Free online state tax filing They received an $8,000 trade-in allowance for the old cultivators and paid $5,200 cash for the new cultivator. Free online state tax filing J-Bar also traded a used pickup truck with an adjusted basis of $8,000 for a new pickup truck costing $35,000. Free online state tax filing They received a $5,000 trade-in allowance and paid $30,000 cash for the new pickup truck. Free online state tax filing Only the cash paid by J-Bar qualifies for the section 179 expense deduction. Free online state tax filing J-Bar's business costs that qualify for a section 179 expense deduction are $35,200 ($5,200 + $30,000). Free online state tax filing Dollar Limits The total amount you can elect to deduct under section 179 for most property placed in service in 2013 is $500,000. Free online state tax filing If you acquire and place in service more than one item of qualifying property during the year, you can allocate the section 179 expense deduction among the items in any way, as long as the total deduction is not more than $500,000. Free online state tax filing Qualified real property that you elect to treat as section 179 property is limited to $250,000 of the maximum section 179 deduction of $500,000 for 2013. Free online state tax filing You do not have to claim the full $500,000. Free online state tax filing For specific information on the section 179 dollar limits, see chapter 2 of Publication 946. Free online state tax filing Reduced dollar limit for cost exceeding $2 million. Free online state tax filing   If the cost of your qualifying section 179 property placed in service in 2013 is over $2 million, you must reduce the dollar limit (but not below zero) by the amount of cost over $2 million. Free online state tax filing If the cost of your section 179 property placed in service during 2013 is $2,500,000 or more, you cannot take a section 179 expense deduction and you cannot carry over the cost that is more than $2,500,000. Free online state tax filing Example. Free online state tax filing This year, James Smith placed in service machinery costing $2,050,000. Free online state tax filing Because this cost is $50,000 more than $2 million, he must reduce his dollar limit to $450,000 ($500,000 − $50,000). Free online state tax filing Limits for sport utility vehicles. Free online state tax filing   The total amount you can elect to deduct for certain sport utility vehicles and certain other vehicles placed in service in 2013 is $25,000. Free online state tax filing This rule applies to any 4-wheeled vehicle primarily designed or used to carry passengers over public streets, roads, and highways that is rated at more than 6,000 pounds gross vehicle weight and not more than 14,000 pounds gross vehicle weight. Free online state tax filing   For more information, see chapter 2 of Publication 946. Free online state tax filing Limits for passenger automobiles. Free online state tax filing   For a passenger automobile that is placed in service in 2013, the total section 179 and depreciation deduction is limited. Free online state tax filing See Do the Passenger Automobile Limits Apply , later. Free online state tax filing Married individuals. Free online state tax filing   If you are married, how you figure your section 179 expense deduction depends on whether you file jointly or separately. Free online state tax filing If you file a joint return, you and your spouse are treated as one taxpayer in determining any reduction to the dollar limit, regardless of which of you purchased the property or placed it in service. Free online state tax filing If you and your spouse file separate returns, you are treated as one taxpayer for the dollar limit, including the reduction for costs over $2 million. Free online state tax filing You must allocate the dollar limit (after any reduction) equally between you, unless you both elect a different allocation. Free online state tax filing If the percentages elected by each of you do not total 100%, 50% will be allocated to each of you. Free online state tax filing Joint return after separate returns. Free online state tax filing   If you and your spouse elect to amend your separate returns by filing a joint return after the due date for filing your return, the dollar limit on the joint return is the lesser of the following amounts. Free online state tax filing The dollar limit (after reduction for any cost of section 179 property over $2 million). Free online state tax filing The total cost of section 179 property you and your spouse elected to expense on your separate returns. Free online state tax filing Business Income Limit The total cost you can deduct each year after you apply the dollar limit is limited to the taxable income from the active conduct of any trade or business during the year. Free online state tax filing Generally, you are considered to actively conduct a trade or business if you meaningfully participate in the management or operations of the trade or business. Free online state tax filing Any cost not deductible in one year under section 179 because of this limit can be carried to the next year. Free online state tax filing See Carryover of disallowed deduction , later. Free online state tax filing Taxable income. Free online state tax filing   In general, figure taxable income for this purpose by totaling the net income and losses from all trades and businesses you actively conducted during the year. Free online state tax filing In addition to net income or loss from a sole proprietorship, partnership, or S corporation, net income or loss derived from a trade or business also includes the following items. Free online state tax filing Section 1231 gains (or losses) as discussed in chapter 9. Free online state tax filing Interest from working capital of your trade or business. Free online state tax filing Wages, salaries, tips, or other pay earned by you (or your spouse if you file a joint return) as an employee of any employer. Free online state tax filing   In addition, figure taxable income without regard to any of the following. Free online state tax filing The section 179 expense deduction. Free online state tax filing The self-employment tax deduction. Free online state tax filing Any net operating loss carryback or carryforward. Free online state tax filing Any unreimbursed employee business expenses. Free online state tax filing Two different taxable income limits. Free online state tax filing   In addition to the business income limit for your section 179 expense deduction, you may have a taxable income limit for some other deduction (for example, charitable contributions). Free online state tax filing You may have to figure the limit for this other deduction taking into account the section 179 expense deduction. Free online state tax filing If so, complete the following steps. Free online state tax filing Step Action 1 Figure taxable income without the section 179 expense deduction or the other deduction. Free online state tax filing 2 Figure a hypothetical section 179 expense deduction using the taxable income figured in Step 1. Free online state tax filing 3 Subtract the hypothetical section 179 expense deduction figured in Step 2 from the taxable income figured in Step 1. Free online state tax filing 4 Figure a hypothetical amount for the other deduction using the amount figured in Step 3 as taxable income. Free online state tax filing 5 Subtract the hypothetical other deduction figured in Step 4 from the taxable income figured in  Step 1. Free online state tax filing 6 Figure your actual section 179 expense deduction using the taxable income figured in Step 5. Free online state tax filing 7 Subtract your actual section 179 expense deduction figured in Step 6 from the taxable income figured in Step 1. Free online state tax filing 8 Figure your actual other deduction using the taxable income figured in Step 7. Free online state tax filing Example. Free online state tax filing On February 1, 2013, the XYZ farm corporation purchased and placed in service qualifying section 179 property that cost $500,000. Free online state tax filing It elects to expense the entire $500,000 cost under section 179. Free online state tax filing In June, the corporation gave a charitable contribution of $10,000. Free online state tax filing A corporation's limit on charitable contributions is figured after subtracting any section 179 expense deduction. Free online state tax filing The business income limit for the section 179 expense deduction is figured after subtracting any allowable charitable contributions. Free online state tax filing XYZ's taxable income figured without the section 179 expense deduction or the deduction for charitable contributions is $520,000. Free online state tax filing XYZ figures its section 179 expense deduction and its deduction for charitable contributions as follows. Free online state tax filing Step 1. Free online state tax filing Taxable income figured without either deduction is $520,000. Free online state tax filing Step 2. Free online state tax filing Using $520,000 as taxable income, XYZ's hypothetical section 179 expense deduction is $500,000. Free online state tax filing Step 3. Free online state tax filing $20,000 ($520,000 − $500,000). Free online state tax filing Step 4. Free online state tax filing Using $20,000 (from Step 3) as taxable income, XYZ's hypothetical charitable contribution (limited to 10% of taxable income) is $2,000. Free online state tax filing Step 5. Free online state tax filing $518,000 ($520,000 − $2,000). Free online state tax filing Step 6. Free online state tax filing Using $518,000 (from Step 5) as taxable income, XYZ figures the actual section 179 expense deduction. Free online state tax filing Because the taxable income is at least $500,000, XYZ can take a $500,000 section 179 expense deduction. Free online state tax filing Step 7. Free online state tax filing $20,000 ($520,000 − $500,000). Free online state tax filing Step 8. Free online state tax filing Using $20,000 (from Step 7) as taxable income, XYZ's actual charitable contribution (limited to 10% of taxable income) is $2,000. Free online state tax filing Carryover of disallowed deduction. Free online state tax filing   You can carry over for an unlimited number of years the cost of any section 179 property you elected to expense but were unable to because of the business income limit. Free online state tax filing   The amount you carry over is used in determining your section 179 expense deduction in the next year. Free online state tax filing However, it is subject to the limits in that year. Free online state tax filing If you place more than one property in service in a year, you can select the properties for which all or a part of the cost will be carried forward. Free online state tax filing Your selections must be shown in your books and records. Free online state tax filing Example. Free online state tax filing Last year, Joyce Jones placed in service a machine that cost $8,000 and elected to deduct all $8,000 under section 179. Free online state tax filing The taxable income from her business (determined without regard to both a section 179 expense deduction for the cost of the machine and the self-employment tax deduction) was $6,000. Free online state tax filing Her section 179 expense deduction was limited to $6,000. Free online state tax filing The $2,000 cost that was not allowed as a section 179 expense deduction (because of the business income limit) is carried to this year. Free online state tax filing This year, Joyce placed another machine in service that cost $9,000. Free online state tax filing Her taxable income from business (determined without regard to both a section 179 expense deduction for the cost of the machine and the self-employment tax deduction) is $10,000. Free online state tax filing Joyce can deduct the full cost of the machine ($9,000) but only $1,000 of the carryover from last year because of the business income limit. Free online state tax filing She can carry over the balance of $1,000 to next year. Free online state tax filing Partnerships and S Corporations The section 179 expense deduction limits apply both to the partnership or S corporation and to each partner or shareholder. Free online state tax filing The partnership or S corporation determines its section 179 expense deduction subject to the limits. Free online state tax filing It then allocates the deduction among its partners or shareholders. Free online state tax filing If you are a partner in a partnership or shareholder of an S corporation, you add the amount allocated from the partnership or S corporation to any section 179 costs not related to the partnership or S corporation and then apply the dollar limit to this total. Free online state tax filing To determine any reduction in the dollar limit for costs over $560,000, you do not include any of the cost of section 179 property placed in service by the partnership or S corporation. Free online state tax filing After you apply the dollar limit, you apply the business income limit to any remaining section 179 costs. Free online state tax filing For more information, see chapter 2 of Publication 946. Free online state tax filing Example. Free online state tax filing In 2013, Partnership P placed in service section 179 property with a total cost of $2,160,000. Free online state tax filing P must reduce its dollar limit by $160,000 ($2,160,000 − $2,000,000). Free online state tax filing Its maximum section 179 expense deduction is $340,000 ($500,000 − $160,000), and it elects to expense that amount. Free online state tax filing Because P's taxable income from the active conduct of all its trades or businesses for the year was $400,000, it can deduct the full $340,000. Free online state tax filing P allocates $100,000 of its section 179 expense deduction and $110,000 of its taxable income to John, one of its partners. Free online state tax filing John also conducts a business as a sole proprietor and in 2013, placed in service in that business, section 179 property costing $28,000. Free online state tax filing John's taxable income from that business was $10,000. Free online state tax filing In addition to the $100,000 allocated from P, he elects to expense the $28,000 of his sole proprietorship's section 179 costs. Free online state tax filing However, John's deduction is limited to his business taxable income of $120,000 ($110,000 from P plus $10,000 from his sole proprietorship). Free online state tax filing He carries over $8,000 ($128,000 − $120,000) of the elected section 179 costs to 2014. Free online state tax filing How Do You Elect the Deduction? You elect to take the section 179 expense deduction by completing Part I of Form 4562. Free online state tax filing If you elect the deduction for listed property, complete Part V of  Form 4562 before completing Part I. Free online state tax filing   File Form 4562 with either of the following: Your original tax return (whether or not you filed it timely), or An amended return filed within the time prescribed by law. Free online state tax filing An election made on an amended return must specify the item of section 179 property to which the election applies and the part of the cost of each such item to be taken into account. Free online state tax filing The amended return must also include any resulting adjustments to taxable income. Free online state tax filing Revoking an election. Free online state tax filing   An election (or any specification made in the election) to take a section 179 expense deduction for 2013 can be revoked without IRS approval by filing an amended return. Free online state tax filing The amended return must be filed within the time prescribed by law. Free online state tax filing The amended return must also include any resulting adjustments to taxable income (for example, allowable depreciation in that tax year for the item of section 179 property for which the election pertains. Free online state tax filing ) Once made, the revocation is irrevocable. Free online state tax filing When Must You Recapture the Deduction? You may have to recapture the section 179 expense deduction if, in any year during the property's recovery period, the percentage of business use drops to 50% or less. Free online state tax filing In the year the business use drops to 50% or less, you include the recapture amount as ordinary income. Free online state tax filing You also increase the basis of the property by the recapture amount. Free online state tax filing Recovery periods for property are discussed later. Free online state tax filing If you sell, exchange, or otherwise dispose of the property, do not figure the recapture amount under the rules explained in this discussion. Free online state tax filing Instead, use the rules for recapturing depreciation explained in  chapter 9 under Section 1245 Property. Free online state tax filing   If the property is listed property, do not figure the recapture amount under the rules explained in this discussion when the percentage of business use drops to 50% or less. Free online state tax filing Instead, use the rules for recapturing depreciation explained in chapter 5 of Publication 946 under Recapture of Excess Depreciation. Free online state tax filing Figuring the recapture amount. Free online state tax filing   To figure the amount to recapture, take the following steps. Free online state tax filing Figure the allowable depreciation for the section 179 expense deduction you claimed. Free online state tax filing Begin with the year you placed the property in service and include the year of recapture. Free online state tax filing Subtract the depreciation figured in (1) from the section 179 expense deduction you actually claimed. Free online state tax filing The result is the amount you must recapture. Free online state tax filing Example. Free online state tax filing In January 2011, Paul Lamb, a calendar year taxpayer, bought and placed in service section 179 property costing $10,000. Free online state tax filing The property is not listed property. Free online state tax filing He elected a $5,000 section 179 expense deduction for the property and also elected not to claim a special depreciation allowance. Free online state tax filing He used the property only for business in 2011 and 2012. Free online state tax filing During 2013, he used the property 40% for business and 60% for personal use. Free online state tax filing He figures his recapture amount as follows. Free online state tax filing Section 179 expense deduction claimed (2011) $5,000 Minus: Allowable depreciation (instead of section 179 expense deduction):   2011 $1,250   2012 1,875   2013 ($1,250 × 40% (business)) 500 3,625 2013 — Recapture amount $1,375     Paul must include $1,375 in income for 2013. Free online state tax filing Where to report recapture. Free online state tax filing   Report any recapture of the section 179 expense deduction as ordinary income in Part IV of Form 4797 and include it in income on Schedule F (Form 1040). Free online state tax filing Recapture for qualified section 179 GO Zone property. Free online state tax filing   If any qualified section 179 GO Zone property ceases to be used in the GO Zone in a later year, you must recapture the benefit of the increased section 179 expense deduction as “other income. Free online state tax filing ” Claiming the Special Depreciation Allowance For qualified property (defined below) placed in service in 2013, you can take an additional 50% special depreciation allowance. Free online state tax filing The allowance is an additional deduction you can take after any section 179 expense deduction and before you figure regular depreciation under MACRS. Free online state tax filing Figure the special depreciation allowance by multiplying the depreciable basis of the qualified property by 50%. Free online state tax filing What is Qualified Property? For farmers, qualified property generally is certain qualified property acquired after December 31, 2007, and placed in service before January 1, 2014. Free online state tax filing Certain qualified property acquired after December 31, 2007, and placed in service before January 1, 2014. Free online state tax filing   Certain qualified property (defined below) acquired after December 31, 2007, and before January 1, 2014, is eligible for a 50% special depreciation allowance. Free online state tax filing   Qualified property includes the following: Tangible property depreciated under the Modified Accelerated Cost Recovery System (MACRS) with a recovery period of 20 years or less. Free online state tax filing Water utility property. Free online state tax filing Off-the-shelf computer software. Free online state tax filing Qualified leasehold improvement property. Free online state tax filing   Qualified property must also meet all of the following tests: You must have acquired qualified property by purchase after December 31, 2007. Free online state tax filing If a binding contract to acquire the property existed before January 1, 2008, the property does not qualify. Free online state tax filing Qualified property must be placed in service after December 31, 2007 and placed in service before January 1, 2014 (before January 1, 2015 for certain property with a long production period and for certain aircraft). Free online state tax filing The original use of the property must begin with you after December 31, 2007. Free online state tax filing For more information, see chapter 3 of Publication 946. Free online state tax filing How Can You Elect Not To Claim the Allowance? You can elect, for any class of property, not to deduct the special depreciation allowance for all property in such class placed in service during the tax year. Free online state tax filing To make the election, attach a statement to your return indicating the class of property for which you are making the election. Free online state tax filing Generally, you must make the election on a timely filed tax return (including extensions) for the year in which you place the property in service. Free online state tax filing However, if you timely filed your return for the year without making the election, you still can make the election by filing an amended return within 6 months of the due date of the original return (not including extensions). Free online state tax filing Attach the election statement to the amended return. Free online state tax filing On the amended return, write “Filed pursuant to section 301. Free online state tax filing 9100-2. Free online state tax filing ” Once made, the election may not be revoked without IRS consent. Free online state tax filing If you elect not to have the special depreciation allowance apply, the property may be subject to an alternative minimum tax adjustment for depreciation. Free online state tax filing When Must You Recapture an Allowance When you dispose of property for which you claimed a special depreciation allowance, any gain on the disposition is generally recaptured (included in income) as ordinary income up to the amount of the special depreciation allowance previously allowed or allowable. Free online state tax filing For more information, see chapter 3 of Publication 946. Free online state tax filing Figuring Depreciation Under MACRS The Modified Accelerated Cost Recovery System (MACRS) is used to recover the basis of most business and investment property placed in service after 1986. Free online state tax filing MACRS consists of two depreciation systems, the General Depreciation System (GDS) and the Alternative Depreciation System (ADS). Free online state tax filing Generally, these systems provide different methods and recovery periods to use in figuring depreciation deductions. Free online state tax filing To be sure you can use MACRS to figure depreciation for your property, see Can You Use MACRS To Depreciate Your Property, earlier. Free online state tax filing This part explains how to determine which MACRS depreciation system applies to your property. Free online state tax filing It also discusses the following information that you need to know before you can figure depreciation under MACRS. Free online state tax filing Property's recovery class. Free online state tax filing Placed-in-service date. Free online state tax filing Basis for depreciation. Free online state tax filing Recovery period. Free online state tax filing Convention. Free online state tax filing Depreciation method. Free online state tax filing Finally, this part explains how to use this information to figure your depreciation deduction. Free online state tax filing Which Depreciation System (GDS or ADS) Applies? Your use of either the General Depreciation System (GDS) or the Alternative Depreciation System (ADS) to depreciate property under MACRS determines what depreciation method and recovery period you use. Free online state tax filing You generally must use GDS unless you are specifically required by law to use ADS or you elect to use ADS. Free online state tax filing Required use of ADS. Free online state tax filing   You must use ADS for the following property. Free online state tax filing All property used predominantly in a farming business and placed in service in any tax year during which an election not to apply the uniform capitalization rules to certain farming costs is in effect. Free online state tax filing Listed property used 50% or less in a qualified business use. Free online state tax filing See Additional Rules for Listed Property , later. Free online state tax filing Any tax-exempt use property. Free online state tax filing Any tax-exempt bond-financed property. Free online state tax filing Any property imported from a foreign country for which an Executive Order is in effect because the country maintains trade restrictions or engages in other discriminatory acts. Free online state tax filing Any tangible property used predominantly outside the United States during the year. Free online state tax filing If you are required to use ADS to depreciate your property, you cannot claim the special depreciation allowance. Free online state tax filing Electing ADS. Free online state tax filing   Although your property may qualify for GDS, you can elect to use ADS. Free online state tax filing The election generally must cover all property in the same property class you placed in service during the year. Free online state tax filing However, the election for residential rental property and nonresidential real property can be made on a property-by-property basis. Free online state tax filing Once you make this election, you can never revoke it. Free online state tax filing   You make the election by completing line 20 in Part III of Form 4562. Free online state tax filing Which Property Class Applies Under GDS? The following is a list of the nine property classes under GDS. Free online state tax filing 3-year property. Free online state tax filing 5-year property. Free online state tax filing 7-year property. Free online state tax filing 10-year property. Free online state tax filing 15-year property. Free online state tax filing 20-year property. Free online state tax filing 25-year property. Free online state tax filing Residential rental property. Free online state tax filing Nonresidential real property. Free online state tax filing See Which Property Class Applies Under GDS in chapter 4 of Publication 946 for examples of the types of property included in each class. Free online state tax filing What Is the Placed-in-Service Date? You begin to claim depreciation when your property is placed in service for use either in a trade or business or for the production of income. Free online state tax filing The placed-in-service date for your property is the date the property is ready and available for a specific use. Free online state tax filing It is therefore not necessarily the date it is first used. Free online state tax filing If you converted property held for personal use to use in a trade or business or for the production of income, treat the property as being placed in service on the conversion date. Free online state tax filing See Placed in Service under When Does Depreciation Begin and End , earlier, for examples illustrating when property is placed in service. Free online state tax filing What Is the Basis for Depreciation? The basis for depreciation of MACRS property is the property's cost or other basis multiplied by the percentage of business/investment use. Free online state tax filing Reduce that amount by any credits and deductions allocable to the property. Free online state tax filing The following are examples of some of the credits and deductions that reduce basis. Free online state tax filing Any deduction for section 179 property. Free online state tax filing Any deduction for removal of barriers to the disabled and the elderly. Free online state tax filing Any disabled access credit, enhanced oil recovery credit, and credit for employer-provided childcare facilities and services. Free online state tax filing Any special depreciation allowance. Free online state tax filing Basis adjustment for investment credit property under section 50(c) of the Internal Revenue Code. Free online state tax filing For information about how to determine the cost or other basis of property, see What Is the Basis of Your Depreciable Property , earlier. Free online state tax filing Also, see chapter 6. Free online state tax filing For additional credits and deductions that affect basis, see section 1016 of the Internal Revenue Code. Free online state tax filing Which Recovery Period Applies? The recovery period of property is the number of years over which you recover its cost or other basis. Free online state tax filing It is determined based on the depreciation system (GDS or ADS) used. Free online state tax filing See Table 7-1 for recovery periods under both GDS and ADS for some commonly used assets. Free online state tax filing For a complete list of recovery periods, see the Table of Class Lives and Recovery Periods in Appendix B of Publication 946. Free online state tax filing House trailers for farm laborers. Free online state tax filing   To depreciate a house trailer you supply as housing for those who work on your farm, use one of the following recovery periods if the house trailer is mobile (it has wheels and a history of movement). Free online state tax filing A 7-year recovery period under GDS. Free online state tax filing A 10-year recovery period under ADS. Free online state tax filing   However, if the house trailer is not mobile (its wheels have been removed and permanent utilities and pipes attached to it), use one of the following recovery periods. Free online state tax filing A 20-year recovery period under GDS. Free online state tax filing A 25-year recovery period under ADS. Free online state tax filing Water wells. Free online state tax filing   Water wells used to provide water for raising poultry and livestock are land improvements. Free online state tax filing If they are depreciable, use one of the following recovery periods. Free online state tax filing A 15-year recovery period under GDS. Free online state tax filing A 20-year recovery period under ADS. Free online state tax filing   The types of water wells that can be depreciated were discussed earlier in Irrigation systems and water wells under Property Having a Determinable Useful Life . Free online state tax filing Table 7-1. Free online state tax filing Farm Property Recovery Periods   Recovery Period in Years Assets GDS ADS Agricultural structures (single purpose) 10 15 Automobiles 5 5 Calculators and copiers 5 6 Cattle (dairy or breeding) 5 7 Communication equipment1 7 10 Computer and peripheral equipment 5 5 Drainage facilities 15 20 Farm buildings2 20 25 Farm machinery and equipment 7 10 Fences (agricultural) 7 10 Goats and sheep (breeding) 5 5 Grain bin 7 10 Hogs (breeding) 3 3 Horses (age when placed in service)     Breeding and working (12 years or less) 7 10 Breeding and working (more than 12 years) 3 10 Racing horses 3 12 Horticultural structures (single purpose) 10 15 Logging machinery and equipment3 5 6 Nonresidential real property 394 40 Office furniture, fixtures, and equipment (not calculators, copiers, or typewriters) 7 10 Paved lots 15 20 Residential rental property 27. Free online state tax filing 5 40 Tractor units (over-the-road) 3 4 Trees or vines bearing fruit or nuts 10 20 Truck (heavy duty, unloaded weight 13,000 lbs. Free online state tax filing or more) 5 6 Truck (actual weight less than 13,000 lbs) 5 5 Water wells 15 20 1 Not including communication equipment listed in other classes. Free online state tax filing 2 Not including single purpose agricultural or horticultural structures. Free online state tax filing 3 Used by logging and sawmill operators for cutting of timber. Free online state tax filing 4 For property placed in service after May 12, 1993; for property placed in service before May 13, 1993,  the recovery period is 31. Free online state tax filing 5 years. Free online state tax filing Which Convention Applies? Under MACRS, averaging conventions establish when the recovery period begins and ends. Free online state tax filing The convention you use determines the number of months for which you can claim depreciation in the year you place property in service and in the year you dispose of the property. Free online state tax filing Use one of the following conventions. Free online state tax filing The half-year convention. Free online state tax filing The mid-month convention. Free online state tax filing The mid-quarter convention. Free online state tax filing For a detailed explanation of each convention, see Which Convention Applies in chapter 4 of Publication 946. Free online state tax filing Also, see the Instructions for Form 4562. Free online state tax filing Which Depreciation Method Applies? MACRS provides three depreciation methods under GDS and one depreciation method under ADS. Free online state tax filing The 200% declining balance method over a GDS recovery period. Free online state tax filing The 150% declining balance method over a GDS recovery period. Free online state tax filing The straight line method over a GDS recovery period. Free online state tax filing The straight line method over an ADS recovery period. Free online state tax filing Depreciation Table. Free online state tax filing   The following table lists the types of property you can depreciate under each method. Free online state tax filing The declining balance method is abbreviated as DB and the straight line method is abbreviated as SL. Free online state tax filing Depreciation Table System/Method   Type of Property GDS using  150% DB • All property used in a farming business (except real property)   • All 15- and 20-year property   • Nonfarm 3-, 5-, 7-, and 10-year property1 GDS using SL • Nonresidential real property   • Residential rental property   • Trees or vines bearing fruit or nuts   • All 3-, 5-, 7-, 10-, 15-, and 20-year property1 ADS using SL • Property used predomi- nantly outside the United States   • Farm property used when an election not to apply the uniform capitalization rules is in effect   • Tax-exempt property   • Tax-exempt bond-financed property   • Imported property2   • Any property for which you elect to use this method1 GDS using  200% DB • Nonfarm 3-, 5-, 7-, and 10-year property 1Elective method 2See section 168(g)(6) of the Internal Revenue  Code Property used in farming business. Free online state tax filing   For personal property placed in service after 1988 in a farming business, you must use the 150% declining balance method over a GDS recovery period or you can elect one of the following methods. Free online state tax filing The straight line method over a GDS recovery period. Free online state tax filing The straight line method over an ADS recovery period. Free online state tax filing For property placed in service before 1999, you could have elected to use the 150% declining balance method using the ADS recovery periods for certain property classes. Free online state tax filing If you made this election, continue to use the same method and recovery period for that property. Free online state tax filing Real property. Free online state tax filing   You can depreciate real property using the straight line method under either GDS or ADS. Free online state tax filing Switching to straight line. Free online state tax filing   If you use a declining balance method, you switch to the straight line method in the year it provides an equal or greater deduction. Free online state tax filing If you use the MACRS percentage tables, discussed later under How Is the Depreciation Deduction Figured , you do not need to determine in which year your deduction is greater using the straight line method. Free online state tax filing The tables have the switch to the straight line method built into their rates. Free online state tax filing Fruit or nut trees and vines. Free online state tax filing   Depreciate trees and vines bearing fruit or nuts under GDS using the straight line method over a 10-year recovery period. Free online state tax filing ADS required for some farmers. Free online state tax filing   If you elect not to apply the uniform capitalization rules to any plant shown in Table 6-1 of chapter 6 and produced in your farming business, you must use ADS for all property you place in service in any year the election is in effect. Free online state tax filing See chapter 6 for a discussion of the application of the uniform capitalization rules to farm property. Free online state tax filing Electing a different method. Free online state tax filing   As shown in the Depreciation Table , you can elect a different method for depreciation for certain types of property. Free online state tax filing You must make the election by the due date of the return (including extensions) for the year you placed the property in service. Free online state tax filing However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of your return (excluding extensions). Free online state tax filing Attach the election to the amended return and write “Filed pursuant to section 301. Free online state tax filing 9100-2” on the election statement. Free online state tax filing File the amended return at the same address you filed the original return. Free online state tax filing Once you make the election, you cannot change it. Free online state tax filing    If you elect to use a different method for one item in a property class, you must apply the same method to all property in that class placed in service during the year of the election. Free online state tax filing However, you can make the election on a property-by-property basis for residential rental and nonresidential real property. Free online state tax filing Straight line election. Free online state tax filing   Instead of using the declining balance method, you can elect to use the straight line method over the GDS recovery period. Free online state tax filing Make the election by entering “S/L” under column (f) in Part III of Form 4562. Free online state tax filing ADS election. Free online state tax filing   As explained earlier under Which Depreciation System (GDS or ADS) Applies , you can elect to use ADS even though your property may come under GDS. Free online state tax filing ADS uses the straight line method of depreciation over the ADS recovery periods, which are generally longer than the GDS recovery periods. Free online state tax filing The ADS recovery periods for many assets used in the business of farming are listed in Table 7–1. Free online state tax filing Additional ADS recovery periods for other classes of property may be found in the Table of Class Lives and Recovery Periods in Appendix B of Publication 946. Free online state tax filing How Is the Depreciation Deduction Figured? To figure your depreciation deduction under MACRS, you first determine the depreciation system, property class, placed-in-service date, basis amount, recovery period, convention, and depreciation method that applies to your property. Free online state tax filing Then you are ready to figure your depreciation deduction. Free online state tax filing You can figure it in one of two ways. Free online state tax filing You can use the percentage tables provided by the IRS. Free online state tax filing You can figure your own deduction without using the tables. Free online state tax filing Figuring your own MACRS deduction will generally result in a slightly different amount than using the tables. Free online state tax filing Using the MACRS Percentage Tables To help you figure your deduction under MACRS, the IRS has established percentage tables that incorporate the applicable convention and depreciation method. Free online state tax filing These percentage tables are in Appendix A of Publication 946. Free online state tax filing Rules for using the tables. Free online state tax filing   The following rules cover the use of the percentage tables. Free online state tax filing You must apply the rates in the percentage tables to your property's unadjusted basis. Free online state tax filing Unadjusted basis is the same basis amount you would use to figure gain on a sale but figured without reducing your original basis by any MACRS depreciation taken in earlier years. Free online state tax filing You cannot use the percentage tables for a short tax year. Free online state tax filing See chapter 4 of Publication 946 for information on how to figure the deduction for a short tax year. Free online state tax filing You generally must continue to use them for the entire recovery period of the property. Free online state tax filing You must stop using the tables if you adjust the basis of the property for any reason other than— Depreciation allowed or allowable, or An addition or improvement to the property, which is depreciated as a separate property. Free online state tax filing Basis adjustment due to casualty loss. Free online state tax filing   If you reduce the basis of your property because of a casualty, you cannot continue to use the percentage tables. Free online state tax filing For the year of the adjustment and the remaining recovery period, you must figure the depreciation yourself using the property's adjusted basis at the end of the year. Free online state tax filing See Figuring the Deduction Without Using the Tables in chapter 4 of Publication 946. Free online state tax filing Figuring depreciation using the 150% DB method and half-year convention. Free online state tax filing    Table 7-2 has the percentages for 3-, 5-, 7-, and 20-year property. Free online state tax filing The percentages are based on the 150% declining balance method with a change to the straight line method. Free online state tax filing This table covers only the half-year convention and the first 8 years for 20-year property. Free online state tax filing See Appendix A in Publication 946 for complete MACRS tables, including tables for the mid-quarter and mid-month convention. Free online state tax filing   The following examples show how to figure depreciation under MACRS using the percentages in Table 7-2 . Free online state tax filing Example 1. Free online state tax filing During the year, you bought an item of 7-year property for $10,000 and placed it in service. Free online state tax filing You do not elect a section 179 expense deduction for this property. Free online state tax filing In addition, the property is not qualified property for purposes of the special depreciation allowance. Free online state tax filing The unadjusted basis of the property is $10,000. Free online state tax filing You use the percentages in Table 7-2 to figure your deduction. Free online state tax filing Since this is 7-year property, you multiply $10,000 by 10. Free online state tax filing 71% to get this year's depreciation of $1,071. Free online state tax filing For next year, your depreciation will be $1,913 ($10,000 × 19. Free online state tax filing 13%). Free online state tax filing Example 2. Free online state tax filing You had a barn constructed on your farm at a cost of $20,000. Free online state tax filing You placed the barn in service this year. Free online state tax filing You elect not to claim the special depreciation allowance. Free online state tax filing The barn is 20-year property and you use the table percentages to figure your deduction. Free online state tax filing You figure this year's depreciation by multiplying $20,000 (unadjusted basis) by 3. Free online state tax filing 75% to get $750. Free online state tax filing For next year, your depreciation will be $1,443. Free online state tax filing 80 ($20,000 × 7. Free online state tax filing 219%). Free online state tax filing Table 7-2. Free online state tax filing 150% Declining Balance Method (Half-Year Convention) Year 3-Year 5-Year 7-Year 20-Year 1 25. Free online state tax filing 0 % 15. Free online state tax filing 00 % 10. Free online state tax filing 71 % 3. Free online state tax filing 750 % 2 37. Free online state tax filing 5   25. Free online state tax filing 50   19. Free online state tax filing 13   7. Free online state tax filing 219   3 25. Free online state tax filing 0   17. Free online state tax filing 85   15. Free online state tax filing 03   6. Free online state tax filing 677   4 12. Free online state tax filing 5   16. Free online state tax filing 66   12. Free online state tax filing 25   6. Free online state tax filing 177   5     16. Free online state tax filing 66   12. Free online state tax filing 25   5. Free online state tax filing 713   6     8. Free online state tax filing 33   12. Free online state tax filing 25   5. Free online state tax filing 285   7         12. Free online state tax filing 25   4. Free online state tax filing 888   8         6. Free online state tax filing 13   4. Free online state tax filing 522   Figuring depreciation using the straight line method and half-year convention. Free online state tax filing   The following table has the straight line percentages for 3-, 5-, 7-, and 20-year property using the half-year convention. Free online state tax filing The table covers only the first 8 years for 20-year property. Free online state tax filing See Appendix A in Publication 946 for complete MACRS tables, including tables for the mid-quarter and mid-month convention. Free online state tax filing Table 7-3. Free online state tax filing Straight Line Method (Half-Year Convention) Year 3-Year 5-Year 7-Year 20-Year 1 16. Free online state tax filing 67 % 10 % 7. Free online state tax filing 14 % 2. Free online state tax filing 5 % 2 33. Free online state tax filing 33   20   14. Free online state tax filing 29   5. Free online state tax filing 0   3 33. Free online state tax filing 33   20   14. Free online state tax filing 29   5. Free online state tax filing 0   4 16. Free online state tax filing 67   20   14. Free online state tax filing 28   5. Free online state tax filing 0   5     20   14. Free online state tax filing 29   5. Free online state tax filing 0   6     10   14. Free online state tax filing 28   5. Free online state tax filing 0   7         14. Free online state tax filing 29   5. Free online state tax filing 0   8         7. Free online state tax filing 14   5. Free online state tax filing 0