Filing Your Taxes Online is Fast, Easy and Secure.
Start now and receive your tax refund in as little as 7 days.

1. Get Answers

Your online questions are customized to your unique tax situation.

2. Maximize your Refund

Find tax credits for everything from school tuition to buying a hybri

3. E-File for FREE

E-file free with direct deposit to get your refund in as few as 7 days.

Filing your taxes with paper mail can be difficult and it could take weeks for your refund to arrive. IRS e-file is easy, fast and secure. There is no paperwork going to the IRS so tax refunds can be processed in as little as 7 days with direct deposit. As you prepare your taxes online, you can see your tax refund in real time.

FREE audit support and representation from an enrolled agent – NEW and only from H&R Block

How To Amend My 2012 Tax Return

1040ez Worksheet Line FIrs FormsFree State Tax Online Filing1040x SoftwareFree Turbo Tax FilingTaxact 2011 Free EditionLate Tax Return1040x FillableFederal Tax Return 2011Efile 2012How Do You File State Income TaxesFile Taxes Online Free 2012Irs 1040ez 2012Military Turbo TaxTax 1040 EzTax CutState Income Tax Forms 2011Free Tax Extension Form1040x Form 2013Where Can I File My 2012 Taxes Online1040x Fillable Form1040 Form FreeEfile Tax ReturnFile 2010 Taxes With TurbotaxH Rblock ComH&r Block Free Tax Returns1040ez 2012Free State And Federal Tax FilingHow To File Irs Form 1040xIrs State Tax FormsAmend A Federal Tax ReturnIrs Form 1040 Ez InstructionsPreparing Form 1040xHow To File An Amended Tax Return For 2012Irs Tax ExtensionOnline Tax PreparationFederal Tax Forms 1040 EzFile Tax ExtensionTax Planning Us 1040File 2012 Taxes Free Online

How To Amend My 2012 Tax Return

How to amend my 2012 tax return Depreciation Table of Contents Introduction Special Depreciation AllowanceQualified Property Election Not To Claim the Allowance Rules for Returns Filed Before June 1, 2002 Passenger Automobiles New York Liberty Zone BenefitsSpecial Liberty Zone Depreciation Allowance Increased Section 179 Deduction Liberty Zone Leasehold Improvement Property If you depreciate business property that you acquired and placed in service after September 10, 2001, new law contains provisions that may affect your depreciation deduction for that property. How to amend my 2012 tax return Publication 946, How To Depreciate Property, contains information on depreciation. How to amend my 2012 tax return However, Publication 946 does not contain the new provisions because it was printed before the law was enacted. How to amend my 2012 tax return The new provisions are in the Supplement to Publication 946, which is reprinted below. How to amend my 2012 tax return Supplement to Publication 946 How To Depreciate Property   Introduction After Publication 946 was printed, the Job Creation and Worker Assistance Act of 2002 was signed into law by the President. How to amend my 2012 tax return The new law made several changes in the tax rules explained in the publication. How to amend my 2012 tax return Some of the changes apply to property placed in service during 2001. How to amend my 2012 tax return This supplemental publication describes those changes and explains what you should do if you are affected by them. How to amend my 2012 tax return The situations and examples in Publication 946 do not reflect any of the changes made by the Job Creation and Worker Assistance Act of 2002. How to amend my 2012 tax return The new law contains the following provisions. How to amend my 2012 tax return 30% depreciation deductions (special depreciation allowance and special New York Liberty Zone (Liberty Zone) depreciation allowance) for the year qualified property is placed in service after September 10, 2001. How to amend my 2012 tax return An increased dollar limit on the section 179 deduction for qualified Liberty Zone property purchased after September 10, 2001. How to amend my 2012 tax return A shorter recovery period for qualified Liberty Zone leasehold improvement property placed in service after September 10, 2001. How to amend my 2012 tax return An increase in the maximum depreciation deduction for 2001 for a qualified passenger automobile placed in service after September 10, 2001. How to amend my 2012 tax return If you believe you qualify for an increased deduction under any of these new rules, you must file the revised 2001 Form 4562 (dated March 2002) for 2001 calendar or fiscal years and 2000 fiscal years ending after September 10, 2001. How to amend my 2012 tax return If you have already filed a tax return, this supplemental publication explains how to claim these benefits and how to elect not to claim the special depreciation allowance or special Liberty Zone depreciation allowance. How to amend my 2012 tax return See Table 2 at the end of the supplement for an overview of the rules that apply if you filed your return before June 1, 2002. How to amend my 2012 tax return Special Depreciation Allowance You can take a special depreciation allowance for qualified property you place in service after September 10, 2001. How to amend my 2012 tax return The allowance is an additional deduction of 30% of the property's depreciable basis. How to amend my 2012 tax return To figure the depreciable basis, you must first multiply the property's cost or other basis by the percentage of business/investment use and then reduce that amount by any section 179 deduction and certain other deductions and credits for the property. How to amend my 2012 tax return See What Is the Basis for Depreciation? on page 23 in Publication 946 for more information on figuring depreciable basis. How to amend my 2012 tax return The allowance is deductible for both regular tax and alternative minimum tax (AMT) purposes. How to amend my 2012 tax return There is no AMT adjustment required for any depreciation figured on the remaining basis of the property. How to amend my 2012 tax return In the year you claim the allowance (generally the year you place the property in service), you must reduce the depreciable basis of the property by the allowance before figuring your regular depreciation deduction. How to amend my 2012 tax return Example 1. How to amend my 2012 tax return On November 1, 2001, you bought and placed in service in your business qualified property that cost $100,000. How to amend my 2012 tax return You did not elect to claim a section 179 deduction. How to amend my 2012 tax return You can deduct 30% of the cost ($30,000) as a special depreciation allowance for 2001. How to amend my 2012 tax return You use the remaining $70,000 of cost to figure your regular depreciation deduction for 2001 and later years. How to amend my 2012 tax return Example 2. How to amend my 2012 tax return The facts are the same as in Example 1, except that you choose to deduct $24,000 of the property's cost as a section 179 deduction. How to amend my 2012 tax return You use the remaining $76,000 of cost to figure your special depreciation allowance of $22,800 ($76,000 × 30%). How to amend my 2012 tax return You use the remaining $53,200 of cost to figure your regular depreciation deduction for 2001 and later years. How to amend my 2012 tax return Qualified Property To qualify for the special depreciation allowance, your property must meet the following requirements. How to amend my 2012 tax return It is new property of one of the following types. How to amend my 2012 tax return Property depreciated under the modified accelerated cost recovery system (MACRS) with a recovery period of 20 years or less. How to amend my 2012 tax return See Can You Use MACRS To Depreciate Your Property and Which Recovery Period Applies? on pages 7 and 23, respectively, in Publication 946. How to amend my 2012 tax return Water utility property. How to amend my 2012 tax return See 25-year property on page 22 in Publication 946. How to amend my 2012 tax return Computer software that is not a section 197 intangible as described in Computer software on page 5 in Publication 946. How to amend my 2012 tax return (The cost of some computer software is treated as part of the cost of hardware and is depreciated under MACRS. How to amend my 2012 tax return ) Qualified leasehold improvement property (defined later). How to amend my 2012 tax return It meets the following tests (explained later under Tests To Be Met). How to amend my 2012 tax return Acquisition date test. How to amend my 2012 tax return Placed in service date test. How to amend my 2012 tax return Original use test. How to amend my 2012 tax return It is not excepted property (explained later under Excepted Property). How to amend my 2012 tax return Qualified leasehold improvement property. How to amend my 2012 tax return    Generally, this is any improvement to an interior part of a building that is nonresidential real property, provided all of the following requirements are met. How to amend my 2012 tax return The improvement is made under or pursuant to a lease by the lessee (or any sublessee) or the lessor of that part of the building. How to amend my 2012 tax return That part of the building is to be occupied exclusively by the lessee (or any sublessee) of that part. How to amend my 2012 tax return The improvement is placed in service more than 3 years after the date the building was first placed in service. How to amend my 2012 tax return   However, a qualified leasehold improvement does not include any improvement for which the expenditure is attributable to any of the following. How to amend my 2012 tax return The enlargement of the building. How to amend my 2012 tax return Any elevator or escalator. How to amend my 2012 tax return Any structural component benefiting a common area. How to amend my 2012 tax return The internal structural framework of the building. How to amend my 2012 tax return   Generally, a binding commitment to enter into a lease is treated as a lease and the parties to the commitment are treated as the lessor and lessee. How to amend my 2012 tax return However, a binding commitment between related persons is not treated as a lease. How to amend my 2012 tax return Related persons. How to amend my 2012 tax return   For this purpose, the following are related persons. How to amend my 2012 tax return Members of an affiliated group. How to amend my 2012 tax return The persons listed in items (1) through (9) under Related persons on page 8 of Publication 946 (except that “80% or more” should be substituted for “more than 10%” each place it appears). How to amend my 2012 tax return An executor and a beneficiary of the same estate. How to amend my 2012 tax return Tests To Be Met To qualify for the special depreciation allowance, the property must meet all of the following tests. How to amend my 2012 tax return Acquisition date test. How to amend my 2012 tax return    Generally, you must have acquired the property either: After September 10, 2001, and before September 11, 2004, but only if no written binding contract for the acquisition was in effect before September 11, 2001, or Pursuant to a written binding contract entered into after September 10, 2001, and before September 11, 2004. How to amend my 2012 tax return   Property you manufacture, construct, or produce for your own use meets this test if you began the manufacture, construction, or production of the property after September 10, 2001, and before September 11, 2004. How to amend my 2012 tax return Placed in service date test. How to amend my 2012 tax return   Generally, the property must be placed in service for use in your trade or business or for the production of income after September 10, 2001, and before January 1, 2005. How to amend my 2012 tax return   If you sold property you placed in service after September 10, 2001, and you leased it back within 3 months after the property was originally placed in service, the property is treated as placed in service no earlier than the date it is used under the leaseback. How to amend my 2012 tax return Original use test. How to amend my 2012 tax return   The original use of the property must have begun with you after September 10, 2001. How to amend my 2012 tax return “Original use” means the first use to which the property is put, whether or not by you. How to amend my 2012 tax return Additional capital expenditures you incurred after September 10, 2001, to recondition or rebuild your property meet the original use test. How to amend my 2012 tax return Excepted Property The following property does not qualify for the special depreciation allowance. How to amend my 2012 tax return Property used by any person before September 11, 2001. How to amend my 2012 tax return Property required to be depreciated using ADS. How to amend my 2012 tax return This includes listed property used 50% or less in a qualified business use. How to amend my 2012 tax return Qualified New York Liberty Zone leasehold improvement property (defined next). How to amend my 2012 tax return Qualified New York Liberty Zone leasehold improvement property. How to amend my 2012 tax return   This is any qualified leasehold improvement property (as defined earlier) if all of the following requirements are met. How to amend my 2012 tax return The improvement is to a building located in the New York Liberty Zone (defined later under New York Liberty Zone Benefits). How to amend my 2012 tax return The improvement is placed in service after September 10, 2001, and before January 1, 2007. How to amend my 2012 tax return No written binding contract for the improvement was in effect before September 11, 2001. How to amend my 2012 tax return Election Not To Claim the Allowance You can elect not to claim the special depreciation allowance for qualified property. How to amend my 2012 tax return If you make this election for any property, it applies to all property in the same property class placed in service during the year. How to amend my 2012 tax return To make this election, attach a statement to your return indicating you elect not to claim the allowance and the class of property for which you are making the election. How to amend my 2012 tax return When to make election. How to amend my 2012 tax return   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. How to amend my 2012 tax return   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 the original return (not including extensions). How to amend my 2012 tax return Attach the election statement to the amended return. How to amend my 2012 tax return At the top of the election statement, write “Filed pursuant to section 301. How to amend my 2012 tax return 9100–2. How to amend my 2012 tax return ” Revoking an election. How to amend my 2012 tax return   Once you elect not to deduct the special depreciation allowance for a class of property, you cannot revoke the election without IRS consent. How to amend my 2012 tax return A request to revoke the election is subject to a user fee. How to amend my 2012 tax return Rules for Returns Filed Before June 1, 2002 The following rules apply if you placed qualified property in service after September 10, 2001, and filed your return before June 1, 2002. How to amend my 2012 tax return The rules apply to returns for the following years. How to amend my 2012 tax return 2000 fiscal years that end after September 10, 2001. How to amend my 2012 tax return 2001 calendar and fiscal years. How to amend my 2012 tax return Claiming the allowance. How to amend my 2012 tax return   If you did not claim the allowance on your return and did not make the election not to claim the allowance, you can do either of the following to claim the allowance. How to amend my 2012 tax return File an amended return by the due date (not including extensions) of your return for the year following the year the property was placed in service. How to amend my 2012 tax return Write “Filed Pursuant to Rev. How to amend my 2012 tax return Proc. How to amend my 2012 tax return 2002–33” at the top of the amended return. How to amend my 2012 tax return File Form 3115, Application for Change in Accounting Method, with your return for the year following the year the property was placed in service. How to amend my 2012 tax return Your return must be filed by the due date (including extensions). How to amend my 2012 tax return Write “Automatic Change Filed Under Rev. How to amend my 2012 tax return Proc. How to amend my 2012 tax return 2002–33” on the appropriate line of Form 3115. How to amend my 2012 tax return You must also file a copy (with signature) of the completed Form 3115 with the IRS National Office no later than when you file the original with your return. How to amend my 2012 tax return For more information about filing Form 3115, including the address to send it to, see Revenue Procedure 2002–9, Revenue Procedure 2002–19, and Revenue Procedure 2002–33. How to amend my 2012 tax return Example 1. How to amend my 2012 tax return You are an individual and you use the calendar year. How to amend my 2012 tax return You placed qualified property in service for your business in December 2001. How to amend my 2012 tax return You filed your 2001 income tax return before April 15, 2002. How to amend my 2012 tax return You did not claim the special depreciation allowance for the property and did not make the election not to claim the allowance. How to amend my 2012 tax return You can claim the special allowance by filing an amended 2001 return by April 15, 2003, with “Filed Pursuant to Rev. How to amend my 2012 tax return Proc. How to amend my 2012 tax return 2002–33” at the top of the amended return. How to amend my 2012 tax return You must file an amended return by April 15, 2003, even if you get an extension of time to file your 2002 tax return. How to amend my 2012 tax return Example 2. How to amend my 2012 tax return The facts concerning your 2001 return are the same as in Example 1. How to amend my 2012 tax return In addition, you got an automatic 4-month extension of time (to August 15, 2003) to file your 2002 return. How to amend my 2012 tax return You can claim the special allowance by filing a Form 3115 (with “Filed Pursuant to Rev. How to amend my 2012 tax return Proc. How to amend my 2012 tax return 2002–33” on the appropriate line) with your 2002 return by August 15, 2003. How to amend my 2012 tax return You must also file a copy of this Form 3115 with the IRS National Office no later than when you file your 2002 return. How to amend my 2012 tax return Electing not to claim the allowance. How to amend my 2012 tax return   Generally, you have elected not to claim the special depreciation allowance for a class of property if you: Filed your return timely (including extensions) for the year you placed qualified property in service and indicated on a statement with the return that you are not claiming the allowance, or Filed your return timely and filed an amended return within 6 months of the due date of the original return (not including extensions) and indicated on a statement with the amended return that you are not claiming the allowance. How to amend my 2012 tax return The statement must indicate that you are not deducting the special depreciation allowance and the class of property to which the election applies. How to amend my 2012 tax return The statement can be either attached to or written on the return. How to amend my 2012 tax return You can, for example, write “not deducting 30%” on Form 4562. How to amend my 2012 tax return Deemed election. How to amend my 2012 tax return   If you have not followed either of the procedures described above to elect not to claim the allowance, you may still be treated as making the election. How to amend my 2012 tax return You will be treated as making the election if you meet both of the following conditions. How to amend my 2012 tax return You filed your return for the year you placed the property in service and claimed depreciation, but not the special allowance, for any class of property. How to amend my 2012 tax return You do not file an amended return or a Form 3115 within the time prescribed for claiming the special allowance. How to amend my 2012 tax return See Claiming the allowance, earlier. How to amend my 2012 tax return Passenger Automobiles The limit on your depreciation deduction (including any section 179 deduction) for any passenger automobile that is qualified property (defined earlier) placed in service after September 10, 2001, and for which you claim the special depreciation allowance is increased. How to amend my 2012 tax return Generally, the limit is increased from $3,060 to $7,660. How to amend my 2012 tax return However, if the automobile is a qualified electric car, the limit is increased from $9,280 to $23,080 ($22,980 if placed in service in 2002). How to amend my 2012 tax return Table 1 shows the maximum deduction amounts for 2001. How to amend my 2012 tax return Table 1. How to amend my 2012 tax return Maximum Deduction for 2001 Qualified Vehicle Placed in Service Before Sept. How to amend my 2012 tax return 11 Placed in Service After Sept. How to amend my 2012 tax return 10 Passenger automobile $3,060 $7,660 Electric car 9,280 23,080 1 1$22,980 if you place an electric car in service in 2002. How to amend my 2012 tax return Election not to claim the allowance. How to amend my 2012 tax return   The increased maximum depreciation deduction does not apply if you elected not to claim the special depreciation allowance as explained earlier under Election Not To Claim the Allowance and Rules for Returns Filed Before June 1, 2002. How to amend my 2012 tax return New York Liberty Zone Benefits Several benefits are available for property you place in service in the New York Liberty Zone (Liberty Zone). How to amend my 2012 tax return They include a special depreciation allowance for the year you place the property in service, an increased section 179 deduction, and the classification of certain leasehold improvement property as 5-year property. How to amend my 2012 tax return Area defined. How to amend my 2012 tax return   The New York Liberty Zone is the area located on or south of Canal Street, East Broadway (east of its intersection with Canal Street), or Grand Street (east of its intersection with East Broadway) in the Borough of Manhattan in the City of New York, New York. How to amend my 2012 tax return Special Liberty Zone Depreciation Allowance You can take a special depreciation allowance for qualified Liberty Zone property you place in service after September 10, 2001. How to amend my 2012 tax return The allowance is an additional deduction of 30% of the property's depreciable basis. How to amend my 2012 tax return To figure the depreciable basis, you must first multiply the property's cost or other basis by the percentage of business/investment use and then reduce that amount by any section 179 deduction and certain other deductions and credits for the property. How to amend my 2012 tax return See What Is the Basis for Depreciation? on page 23 in Publication 946 for more information on figuring depreciable basis. How to amend my 2012 tax return The allowance is deductible for both regular tax and alternative minimum tax (AMT) purposes. How to amend my 2012 tax return There is no AMT adjustment required for any depreciation figured on the remaining basis of the property. How to amend my 2012 tax return In the year you claim the allowance (generally the year you place the property in service), you must reduce the depreciable basis of the property by the allowance before figuring your regular depreciation deduction. How to amend my 2012 tax return You cannot claim the special Liberty Zone depreciation allowance for property eligible for the special depreciation allowance explained earlier in Qualified Property under Special Depreciation Allowance. How to amend my 2012 tax return Qualified property is eligible for only one special depreciation allowance. How to amend my 2012 tax return Example 1. How to amend my 2012 tax return On November 1, 2001, you bought and placed in service in your business, which is in the Liberty Zone, qualified Liberty Zone property that cost $200,000. How to amend my 2012 tax return You did not elect to claim a section 179 deduction. How to amend my 2012 tax return You can deduct 30% of the cost ($60,000) as a special Liberty Zone depreciation allowance for 2001. How to amend my 2012 tax return You use the remaining $140,000 of cost to figure your regular depreciation deduction for 2001 and later years. How to amend my 2012 tax return Example 2. How to amend my 2012 tax return The facts are the same as in Example 1, except that you choose to deduct $59,000 of the property's cost as a section 179 deduction. How to amend my 2012 tax return (See Increased Section 179 Deduction, later, for information concerning how this section 179 deduction amount is figured). How to amend my 2012 tax return You use the remaining $141,000 of cost to figure your special Liberty Zone depreciation allowance of $42,300 ($141,000 × 30%). How to amend my 2012 tax return You use the remaining $98,700 of cost to figure your regular depreciation deduction for 2001 and later years. How to amend my 2012 tax return Qualified Liberty Zone Property For a 2001 calendar or fiscal year and a 2000 fiscal year that ends after September 10, 2001, property qualifies for the special Liberty Zone depreciation allowance if it meets the following requirements. How to amend my 2012 tax return It is one of the following types of property. How to amend my 2012 tax return Used property depreciated under MACRS with a recovery period of 20 years or less. How to amend my 2012 tax return See Can You Use MACRS To Depreciate Your Property and Which Recovery Period Applies? on pages 7 and 23, respectively, in Publication 946. How to amend my 2012 tax return Used water utility property. How to amend my 2012 tax return See 25-year property on page 22 in Publication 946. How to amend my 2012 tax return Used computer software that is not a section 197 intangible as described in Computer software on page 5 in Publication 946. How to amend my 2012 tax return (The cost of some computer software is treated as part of the cost of hardware and is depreciated under MACRS. How to amend my 2012 tax return ) Certain nonresidential real property and residential rental property (defined later). How to amend my 2012 tax return It meets the following tests (explained later under Tests to be met). How to amend my 2012 tax return Acquisition date test. How to amend my 2012 tax return Placed in service date test. How to amend my 2012 tax return Substantial use test. How to amend my 2012 tax return Original use test. How to amend my 2012 tax return It is not excepted property (explained later under Excepted property). How to amend my 2012 tax return Nonresidential real property and residential rental property. How to amend my 2012 tax return   This property is qualifying property only to the extent it rehabilitates real property damaged, or replaces real property destroyed or condemned, as a result of the terrorist attack of September 11, 2001. How to amend my 2012 tax return Property is treated as replacing destroyed or condemned property if, as part of an integrated plan, such property replaces real property included in a continuous area that includes real property destroyed or condemned. How to amend my 2012 tax return   For these purposes, real property is considered destroyed (or condemned) only if an entire building or structure was destroyed (or condemned) as a result of the terrorist attack. How to amend my 2012 tax return Otherwise, the property is considered damaged real property. How to amend my 2012 tax return For example, if certain structural components of a building (such as walls, floors, or plumbing fixtures) are damaged or destroyed as a result of the terrorist attack, but the building is not destroyed (or condemned), then only costs related to replacing the damaged or destroyed structural components qualify for the special Liberty Zone depreciation allowance. How to amend my 2012 tax return Tests to be met. How to amend my 2012 tax return   To qualify for the special Liberty Zone depreciation allowance, your property must meet all of the following tests. How to amend my 2012 tax return Acquisition date test. How to amend my 2012 tax return   You must have acquired the property by purchase after September 10, 2001, and there must not have been a binding written contract for the acquisition in effect before September 11, 2001. How to amend my 2012 tax return   For information on the acquisition of property by purchase, see Property Acquired by Purchase on page 15 of Publication 946. How to amend my 2012 tax return   Property you manufacture, construct, or produce for your own use meets this test if you began the manufacture, construction, or production of the property after September 10, 2001. How to amend my 2012 tax return Placed in service date test. How to amend my 2012 tax return   Generally, the property must be placed in service for use in your trade or business or for the production of income before January 1, 2007 (January 1, 2010, in the case of qualifying nonresidential real property and residential rental property). How to amend my 2012 tax return   If you sold property you placed in service after September 10, 2001, and you leased it back within 3 months after the property was originally placed in service, the property is treated as placed in service no earlier than the date it is used under the leaseback. How to amend my 2012 tax return Substantial use test. How to amend my 2012 tax return   Substantially all use of the property must be in the Liberty Zone and in the active conduct of your trade or business in the Liberty Zone. How to amend my 2012 tax return Original use test. How to amend my 2012 tax return   The original use of the property in the Liberty Zone must have begun with you after September 10, 2001. How to amend my 2012 tax return   Used property can be qualified Liberty Zone property if it has not previously been used within the Liberty Zone. How to amend my 2012 tax return Also, additional capital expenditures you incurred after September 10, 2001, to recondition or rebuild your property meet the original use test if the original use of the property in the Liberty Zone began with you. How to amend my 2012 tax return Excepted property. How to amend my 2012 tax return   The following property does not qualify for the special Liberty Zone depreciation allowance. How to amend my 2012 tax return Property eligible for the special depreciation allowance explained earlier in Qualified Property under Special Depreciation Allowance. How to amend my 2012 tax return Property required to be depreciated using ADS. How to amend my 2012 tax return This includes listed property used 50% or less in a qualified business use. How to amend my 2012 tax return Qualified New York Liberty Zone leasehold improvement property (defined earlier in Excepted Property under Special Depreciation Allowance). How to amend my 2012 tax return Example. How to amend my 2012 tax return In December 2001, you bought and placed in service in your business in the Liberty Zone the following property. How to amend my 2012 tax return New office furniture with a MACRS recovery period of 7 years. How to amend my 2012 tax return A used computer with a MACRS recovery period of 5 years. How to amend my 2012 tax return The computer had not previously been used within the Liberty Zone. How to amend my 2012 tax return Because the office furniture is new property, it qualifies for the special depreciation allowance, but not the special Liberty Zone depreciation allowance. How to amend my 2012 tax return Because the computer is used property that had not previously been used in the Liberty Zone, it qualifies for the special Liberty Zone depreciation allowance, but not the special depreciation allowance. How to amend my 2012 tax return Election Not To Claim the Liberty Zone Allowance You can elect not to claim the special Liberty Zone depreciation allowance for qualified property. How to amend my 2012 tax return If you make this election for any property, it applies to all property in the same property class placed in service during the year. How to amend my 2012 tax return To make this election, attach a statement to your return indicating you elect not to claim the allowance and the class of property for which you are making the election. How to amend my 2012 tax return When to make the election. How to amend my 2012 tax return   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. How to amend my 2012 tax return   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 the original return (not including extensions). How to amend my 2012 tax return Attach the election statement to the amended return. How to amend my 2012 tax return At the top of the election statement, write “Filed pursuant to section 301. How to amend my 2012 tax return 9100–2. How to amend my 2012 tax return ” Revoking an election. How to amend my 2012 tax return   Once you elect not to deduct the special Liberty Zone depreciation allowance for a class of property, you cannot revoke the election without IRS consent. How to amend my 2012 tax return A request to revoke the election is subject to a user fee. How to amend my 2012 tax return Returns filed before June 1, 2002. How to amend my 2012 tax return   The rules that apply to the special depreciation allowance discussed earlier in Rules for Returns Filed Before June 1, 2002 under Special Depreciation Allowance also apply to the special Liberty Zone depreciation allowance. How to amend my 2012 tax return Increased Section 179 Deduction Under section 179 of the Internal Revenue Code, you can choose 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. How to amend my 2012 tax return For tax years beginning in 2000, that limit was $20,000. How to amend my 2012 tax return For tax years beginning in 2001 and 2002, that limit is generally $24,000. How to amend my 2012 tax return If the cost of qualifying section 179 property placed in service in a year is over $200,000, you must reduce the dollar limit (but not below zero) by the amount of the cost over $200,000. How to amend my 2012 tax return Increased Dollar Limit The dollar limit on the section 179 deduction is increased for certain property placed in service in the Liberty Zone. How to amend my 2012 tax return The increase is the smaller of the following amounts. How to amend my 2012 tax return $35,000. How to amend my 2012 tax return The cost of section 179 property that is qualified Liberty Zone property placed in service during the year. How to amend my 2012 tax return If you use the revised 2001 Form 4562 (dated March 2002) for a tax year beginning in 2000, you must reduce the section 179 dollar limit to $20,000 before adding the additional amount for qualified property. How to amend my 2012 tax return Qualified property. How to amend my 2012 tax return   To qualify for the increased section 179 deduction, your property must be section 179 property that is either: Qualified Liberty Zone property, or Property that would be qualified Liberty Zone property except that it is eligible for the special depreciation allowance. How to amend my 2012 tax return Qualified Liberty Zone property is explained earlier in Qualified Liberty Zone Property under Special Liberty Zone Depreciation Allowance. How to amend my 2012 tax return Property eligible for the special depreciation allowance is explained earlier in Qualified Property under Special Depreciation Allowance. How to amend my 2012 tax return For information on the requirements that must be met for property to qualify for the section 179 deduction, see What Property Qualifies? on page 14 of Publication 946. How to amend my 2012 tax return Example 1. How to amend my 2012 tax return In 2002, you place in service in your business, which is in the Liberty Zone, qualified property (defined earlier) costing $25,000. How to amend my 2012 tax return Because this cost is less than $35,000, the dollar limit on the section 179 deduction is increased by $25,000 to $49,000 ($24,000 + $25,000). How to amend my 2012 tax return Example 2. How to amend my 2012 tax return In 2002, you place in service in your business, which is in the Liberty Zone, qualified property (defined earlier) costing $75,000. How to amend my 2012 tax return Because $35,000 is less than the cost of the property you place in service, the dollar limit on the section 179 deduction you can claim is increased by $35,000 to $59,000 ($24,000 + $35,000). How to amend my 2012 tax return Reduced Dollar Limit Generally, you must reduce the dollar limit for a year by the cost of qualifying section 179 property placed in service in the year that is more than $200,000. How to amend my 2012 tax return However, if the cost of your Liberty Zone property exceeds $200,000, you take into account only 50% (instead of 100%) of the cost of qualified property placed in service in a year. How to amend my 2012 tax return Example. How to amend my 2012 tax return In 2002, you place in service in your business, which is in the Liberty Zone, qualified property costing $460,000. How to amend my 2012 tax return Your increased dollar limit is $59,000 ($35,000 + $24,000). How to amend my 2012 tax return Because 50% of the cost of the property you place in service ($230,000) is $30,000 more than $200,000, you must reduce your $59,000 dollar limit to $29,000 ($59,000 - $30,000). How to amend my 2012 tax return Recapture Rules Rules similar to those explained on page 20 of Publication 946 under When Must You Recapture the Deduction? apply with respect to any qualified property you stop using in the Liberty Zone. How to amend my 2012 tax return Returns Filed Before June 1, 2002 If you filed a return before June 1, 2002, and did not deduct the increased section 179 amount for qualified property placed in service after September 10, 2001, you can deduct the increased amount by filing an amended return by the due date (not including extensions) of the return for the year after the year the property was placed in service. How to amend my 2012 tax return This rule applies to returns for the following years. How to amend my 2012 tax return 2000 fiscal years that end after September 10, 2001. How to amend my 2012 tax return 2001 calendar and fiscal years. How to amend my 2012 tax return On the amended return, write “Filed Pursuant to Rev. How to amend my 2012 tax return Proc. How to amend my 2012 tax return 2002–33. How to amend my 2012 tax return ” Liberty Zone Leasehold Improvement Property Qualified Liberty Zone leasehold improvement property (described earlier in Qualified Property under Special Depreciation Allowance) is 5-year property. How to amend my 2012 tax return This means that it is depreciated over a recovery period of 5 years. How to amend my 2012 tax return For information about recovery periods, see Which Recovery Period Applies? on page 23 of Publication 946. How to amend my 2012 tax return The straight-line method must be used with respect to qualified Liberty Zone leasehold improvement property. How to amend my 2012 tax return Under ADS, the recovery period for qualified Liberty Zone leasehold improvement property is 9 years. How to amend my 2012 tax return Returns Filed Before June 1, 2002 If you filed either of the following returns before June 1, 2002, and did not depreciate qualified Liberty Zone leasehold improvement property placed in service during the tax year as 5-year property using the straight line method, you should file an amended return before you file your return for the year after the year the property was placed in service. How to amend my 2012 tax return Your 2000 fiscal year return (for a 2000 fiscal year that ends after September 10, 2001). How to amend my 2012 tax return Your 2001 calendar or fiscal year return. How to amend my 2012 tax return On the amended return, write “Filed Pursuant to Rev. How to amend my 2012 tax return Proc. How to amend my 2012 tax return 2002–33. How to amend my 2012 tax return ” Table 2. How to amend my 2012 tax return Rules for Returns Filed Before June 1, 2002 Note:This chart highlights the rules for returns affected by the Job Creation and Worker Assistance Act of 2002 that were filed before June 1, 2002, without accounting for any of the new benefits under the law. How to amend my 2012 tax return See the text for definitions and examples. How to amend my 2012 tax return Do not rely on this chart alone. How to amend my 2012 tax return IF you want to. How to amend my 2012 tax return . How to amend my 2012 tax return . How to amend my 2012 tax return THEN you. How to amend my 2012 tax return . How to amend my 2012 tax return . How to amend my 2012 tax return BY. How to amend my 2012 tax return . How to amend my 2012 tax return . How to amend my 2012 tax return claim the special depreciation allowance or special Liberty Zone depreciation allowance • must file an amended return • the due date (not including extensions) of your return for the year after the year the property was placed in service, or • must file Form 3115, Application for Change in Accounting Method, with your return for the year after the year the property was placed in service • the due date (including extensions) of your return for the year after the year the property was placed in service, and • must file a copy of your completed Form 3115 with the IRS National Office • the date you file the original Form 3115 with your return for the year after the year the property was placed in service. How to amend my 2012 tax return elect not to claim the special depreciation allowance or the special Liberty Zone depreciation allowance 1 • must have filed your return timely for the year the property was placed in service, and   • must file an amended return stating you are not claiming the allowance • the date that is 6 months after the due date of the original return (not including extensions). How to amend my 2012 tax return deduct the increased section 179 amount • must file an amended return • the due date (not including extensions) of your return for the year after the year the property was placed in service. How to amend my 2012 tax return use a 5-year recovery period for depreciating qualified Liberty Zone leasehold improvement property • should file an amended return • the date you file your return for the year after the year the property was placed in service. How to amend my 2012 tax return 1See also Deemed election under Rules for Returns Filed Before June 1, 2002, earlier. How to amend my 2012 tax return Prev  Up  Next   Home   More Online Publications
Print - Click this link to Print this page

Understanding Your CP284 Notice

We approved your Form 1128, Application to Adopt, Change, or Retain a Tax Year.


What you need to do

  • Timely file a short period annual return for the tax year ending that is shown on Form 1128.
  • Keep this notice for your records.

You may want to

Call 1-800-829-3676 (1-800-TAX-FORM) to order forms and publications or visit our website, www.irs.gov, to download them.


Answers to Common Questions

What is Form 1128?
When approved, this form allows a taxpayer to change the date on which they close their tax year. Partnerships, S corporations, personal service corporations (PSCs), or trusts may be required to file the form to adopt or retain a certain tax year.


Understanding your notice

Your notice may look different from the sample because the information contained in your notice is tailored to your situation.

Notice CP284, Page 1

Page Last Reviewed or Updated: 09-Dec-2013

Printable samples of this notice (PDF)

 

 

How to get help

  • Call the 1-800 number listed on the top right corner of your notice.
  • Authorize someone (e.g., accountant) to contact the IRS on your behalf using Form 2848.
  • See if you qualify for help from a Low Income Taxpayer Clinic.
     

The How To Amend My 2012 Tax Return

How to amend my 2012 tax return 1. How to amend my 2012 tax return   Rental Income and Expenses (If No Personal Use of Dwelling) Table of Contents Rental IncomeWhen To Report Types of Income Rental ExpensesWhen To Deduct Types of Expenses This chapter discusses the various types of rental income and expenses for a residential rental activity with no personal use of the dwelling. How to amend my 2012 tax return Generally, each year you will report all income and deduct all out-of-pocket expenses in full. How to amend my 2012 tax return The deduction to recover the cost of your rental property—depreciation—is taken over a prescribed number of years, and is discussed in chapter 2, Depreciation of Rental Property. How to amend my 2012 tax return If your rental income is from property you also use personally or rent to someone at less than a fair rental price, first read the information in chapter 5 , Personal Use of Dwelling Unit (Including Vacation Home). How to amend my 2012 tax return Rental Income In most cases, you must include in your gross income all amounts you receive as rent. How to amend my 2012 tax return Rental income is any payment you receive for the use or occupation of property. How to amend my 2012 tax return In addition to amounts you receive as normal rental payments, there are other amounts that may be rental income. How to amend my 2012 tax return When To Report When you report rental income on your tax return generally depends on whether you are a cash basis taxpayer or use an accrual method. How to amend my 2012 tax return Most individual taxpayers use the cash method. How to amend my 2012 tax return Cash method. How to amend my 2012 tax return   You are a cash basis taxpayer if you report income on your return in the year you actually or constructively receive it, regardless of when it was earned. How to amend my 2012 tax return You constructively receive income when it is made available to you, for example, by being credited to your bank account. How to amend my 2012 tax return Accrual method. How to amend my 2012 tax return    If you are an accrual basis taxpayer, you generally report income when you earn it, rather than when you receive it. How to amend my 2012 tax return You generally deduct your expenses when you incur them, rather than when you pay them. How to amend my 2012 tax return More information. How to amend my 2012 tax return   See Publication 538, Accounting Periods and Methods, for more information about when you constructively receive income and accrual methods of accounting. How to amend my 2012 tax return Types of Income The following are common types of rental income. How to amend my 2012 tax return Advance rent. How to amend my 2012 tax return   Advance rent is any amount you receive before the period that it covers. How to amend my 2012 tax return Include advance rent in your rental income in the year you receive it regardless of the period covered or the method of accounting you use. How to amend my 2012 tax return Example. How to amend my 2012 tax return On March 18, 2013, you signed a 10-year lease to rent your property. How to amend my 2012 tax return During 2013, you received $9,600 for the first year's rent and $9,600 as rent for the last year of the lease. How to amend my 2012 tax return You must include $19,200 in your rental income in the first year. How to amend my 2012 tax return Canceling a lease. How to amend my 2012 tax return   If your tenant pays you to cancel a lease, the amount you receive is rent. How to amend my 2012 tax return Include the payment in your income in the year you receive it regardless of your method of accounting. How to amend my 2012 tax return Expenses paid by tenant. How to amend my 2012 tax return   If your tenant pays any of your expenses, those payments are rental income. How to amend my 2012 tax return Because you must include this amount in income, you can also deduct the expenses if they are deductible rental expenses. How to amend my 2012 tax return For more information, see Rental Expenses , later. How to amend my 2012 tax return Example 1. How to amend my 2012 tax return Your tenant pays the water and sewage bill for your rental property and deducts the amount from the normal rent payment. How to amend my 2012 tax return Under the terms of the lease, your tenant does not have to pay this bill. How to amend my 2012 tax return Include the utility bill paid by the tenant and any amount received as a rent payment in your rental income. How to amend my 2012 tax return You can deduct the utility payment made by your tenant as a rental expense. How to amend my 2012 tax return Example 2. How to amend my 2012 tax return While you are out of town, the furnace in your rental property stops working. How to amend my 2012 tax return Your tenant pays for the necessary repairs and deducts the repair bill from the rent payment. How to amend my 2012 tax return Include the repair bill paid by the tenant and any amount received as a rent payment in your rental income. How to amend my 2012 tax return You can deduct the repair payment made by your tenant as a rental expense. How to amend my 2012 tax return Property or services. How to amend my 2012 tax return   If you receive property or services as rent, instead of money, include the fair market value of the property or services in your rental income. How to amend my 2012 tax return   If the services are provided at an agreed upon or specified price, that price is the fair market value unless there is evidence to the contrary. How to amend my 2012 tax return Example. How to amend my 2012 tax return Your tenant is a house painter. How to amend my 2012 tax return He offers to paint your rental property instead of paying 2 months rent. How to amend my 2012 tax return You accept his offer. How to amend my 2012 tax return Include in your rental income the amount the tenant would have paid for 2 months rent. How to amend my 2012 tax return You can deduct that same amount as a rental expense for painting your property. How to amend my 2012 tax return Security deposits. How to amend my 2012 tax return   Do not include a security deposit in your income when you receive it if you plan to return it to your tenant at the end of the lease. How to amend my 2012 tax return But if you keep part or all of the security deposit during any year because your tenant does not live up to the terms of the lease, include the amount you keep in your income in that year. How to amend my 2012 tax return    If an amount called a security deposit is to be used as a final payment of rent, it is advance rent. How to amend my 2012 tax return Include it in your income when you receive it. How to amend my 2012 tax return Other Sources of Rental Income Lease with option to buy. How to amend my 2012 tax return   If the rental agreement gives your tenant the right to buy your rental property, the payments you receive under the agreement are generally rental income. How to amend my 2012 tax return If your tenant exercises the right to buy the property, the payments you receive for the period after the date of sale are considered part of the selling price. How to amend my 2012 tax return Part interest. How to amend my 2012 tax return   If you own a part interest in rental property, you must report your part of the rental income from the property. How to amend my 2012 tax return Rental of property also used as your home. How to amend my 2012 tax return   If you rent property that you also use as your home and you rent it less than 15 days during the tax year, do not include the rent you receive in your income and do not deduct rental expenses. How to amend my 2012 tax return However, you can deduct on Schedule A (Form 1040), Itemized Deductions, the interest, taxes, and casualty and theft losses that are allowed for nonrental property. How to amend my 2012 tax return See chapter 5, Personal Use of Dwelling Unit (Including Vacation Home). How to amend my 2012 tax return Rental Expenses In most cases, the expenses of renting your property, such as maintenance, insurance, taxes, and interest, can be deducted from your rental income. How to amend my 2012 tax return Personal use of rental property. How to amend my 2012 tax return   If you sometimes use your rental property for personal purposes, you must divide your expenses between rental and personal use. How to amend my 2012 tax return Also, your rental expense deductions may be limited. How to amend my 2012 tax return See chapter 5, Personal Use of Dwelling Unit (Including Vacation Home). How to amend my 2012 tax return Part interest. How to amend my 2012 tax return   If you own a part interest in rental property, you can deduct expenses you paid according to your percentage of ownership. How to amend my 2012 tax return Example. How to amend my 2012 tax return Roger owns a one-half undivided interest in a rental house. How to amend my 2012 tax return Last year he paid $968 for necessary repairs on the property. How to amend my 2012 tax return Roger can deduct $484 (50% × $968) as a rental expense. How to amend my 2012 tax return He is entitled to reimbursement for the remaining half from the co-owner. How to amend my 2012 tax return When To Deduct You generally deduct your rental expenses in the year you pay them. How to amend my 2012 tax return If you use the accrual method, see Publication 538 for more information. How to amend my 2012 tax return Types of Expenses Listed below are the most common rental expenses. How to amend my 2012 tax return Advertising. How to amend my 2012 tax return Auto and travel expenses. How to amend my 2012 tax return Cleaning and maintenance. How to amend my 2012 tax return Commissions. How to amend my 2012 tax return Depreciation. How to amend my 2012 tax return Insurance. How to amend my 2012 tax return Interest (other). How to amend my 2012 tax return Legal and other professional fees. How to amend my 2012 tax return Local transportation expenses. How to amend my 2012 tax return Management fees. How to amend my 2012 tax return Mortgage interest paid to banks, etc. How to amend my 2012 tax return Points. How to amend my 2012 tax return Rental payments. How to amend my 2012 tax return Repairs. How to amend my 2012 tax return Taxes. How to amend my 2012 tax return Utilities. How to amend my 2012 tax return Some of these expenses, as well as other less common ones, are discussed below. How to amend my 2012 tax return Depreciation. How to amend my 2012 tax return   Depreciation is a capital expense. How to amend my 2012 tax return It is the mechanism for recovering your cost in an income producing property and must be taken over the expected life of the property. How to amend my 2012 tax return   You can begin to depreciate rental property when it is ready and available for rent. How to amend my 2012 tax return See Placed in Service under When Does Depreciation Begin and End in chapter 2. How to amend my 2012 tax return Insurance premiums paid in advance. How to amend my 2012 tax return   If you pay an insurance premium for more than one year in advance, for each year of coverage you can deduct the part of the premium payment that will apply to that year. How to amend my 2012 tax return You cannot deduct the total premium in the year you pay it. How to amend my 2012 tax return See chapter 6 of Publication 535 for information on deductible premiums. How to amend my 2012 tax return Interest expense. How to amend my 2012 tax return   You can deduct mortgage interest you pay on your rental property. How to amend my 2012 tax return When you refinance a rental property for more than the previous outstanding balance, the portion of the interest allocable to loan proceeds not related to rental use generally cannot be deducted as a rental expense. How to amend my 2012 tax return Chapter 4 of Publication 535 explains mortgage interest in detail. How to amend my 2012 tax return Expenses paid to obtain a mortgage. How to amend my 2012 tax return   Certain expenses you pay to obtain a mortgage on your rental property cannot be deducted as interest. How to amend my 2012 tax return These expenses, which include mortgage commissions, abstract fees, and recording fees, are capital expenses that are part of your basis in the property. How to amend my 2012 tax return Form 1098, Mortgage Interest Statement. How to amend my 2012 tax return   If you paid $600 or more of mortgage interest on your rental property to any one person, you should receive a Form 1098 or similar statement showing the interest you paid for the year. How to amend my 2012 tax return If you and at least one other person (other than your spouse if you file a joint return) were liable for, and paid interest on, the mortgage, and the other person received the Form 1098, report your share of the interest on Schedule E (Form 1040), line 13. How to amend my 2012 tax return Attach a statement to your return showing the name and address of the other person. How to amend my 2012 tax return On the dotted line next to line 13, enter “See attached. How to amend my 2012 tax return ” Legal and other professional fees. How to amend my 2012 tax return   You can deduct, as a rental expense, legal and other professional expenses such as tax return preparation fees you paid to prepare Schedule E, Part I. How to amend my 2012 tax return For example, on your 2013 Schedule E you can deduct fees paid in 2013 to prepare Part I of your 2012 Schedule E. How to amend my 2012 tax return You can also deduct, as a rental expense, any expense (other than federal taxes and penalties) you paid to resolve a tax underpayment related to your rental activities. How to amend my 2012 tax return Local benefit taxes. How to amend my 2012 tax return   In most cases, you cannot deduct charges for local benefits that increase the value of your property, such as charges for putting in streets, sidewalks, or water and sewer systems. How to amend my 2012 tax return These charges are nondepreciable capital expenditures and must be added to the basis of your property. How to amend my 2012 tax return However, you can deduct local benefit taxes that are for maintaining, repairing, or paying interest charges for the benefits. How to amend my 2012 tax return Local transportation expenses. How to amend my 2012 tax return   You may be able to deduct your ordinary and necessary local transportation expenses if you incur them to collect rental income or to manage, conserve, or maintain your rental property. How to amend my 2012 tax return However, transportation expenses incurred to travel between your home and a rental property generally constitute nondeductible commuting costs unless you use your home as your principal place of business. How to amend my 2012 tax return See Publication 587, Business Use of Your Home, for information on determining if your home office qualifies as a principal place of business. How to amend my 2012 tax return   Generally, if you use your personal car, pickup truck, or light van for rental activities, you can deduct the expenses using one of two methods: actual expenses or the standard mileage rate. How to amend my 2012 tax return For 2013, the standard mileage rate for business use is 56. How to amend my 2012 tax return 5 cents per mile. How to amend my 2012 tax return For more information, see chapter 4 of Publication 463. How to amend my 2012 tax return    To deduct car expenses under either method, you must keep records that follow the rules in chapter 5 of Publication 463. How to amend my 2012 tax return In addition, you must complete Form 4562, Part V, and attach it to your tax return. How to amend my 2012 tax return Pre-rental expenses. How to amend my 2012 tax return   You can deduct your ordinary and necessary expenses for managing, conserving, or maintaining rental property from the time you make it available for rent. How to amend my 2012 tax return Rental of equipment. How to amend my 2012 tax return   You can deduct the rent you pay for equipment that you use for rental purposes. How to amend my 2012 tax return However, in some cases, lease contracts are actually purchase contracts. How to amend my 2012 tax return If so, you cannot deduct these payments. How to amend my 2012 tax return You can recover the cost of purchased equipment through depreciation. How to amend my 2012 tax return Rental of property. How to amend my 2012 tax return   You can deduct the rent you pay for property that you use for rental purposes. How to amend my 2012 tax return If you buy a leasehold for rental purposes, you can deduct an equal part of the cost each year over the term of the lease. How to amend my 2012 tax return Travel expenses. How to amend my 2012 tax return   You can deduct the ordinary and necessary expenses of traveling away from home if the primary purpose of the trip is to collect rental income or to manage, conserve, or maintain your rental property. How to amend my 2012 tax return You must properly allocate your expenses between rental and nonrental activities. How to amend my 2012 tax return You cannot deduct the cost of traveling away from home if the primary purpose of the trip is to improve the property. How to amend my 2012 tax return The cost of improvements is recovered by taking depreciation. How to amend my 2012 tax return For information on travel expenses, see chapter 1 of Publication 463. How to amend my 2012 tax return    To deduct travel expenses, you must keep records that follow the rules in chapter 5 of Publication 463. How to amend my 2012 tax return Uncollected rent. How to amend my 2012 tax return   If you are a cash basis taxpayer, do not deduct uncollected rent. How to amend my 2012 tax return Because you have not included it in your income, it is not deductible. How to amend my 2012 tax return   If you use an accrual method, report income when you earn it. How to amend my 2012 tax return If you are unable to collect the rent, you may be able to deduct it as a business bad debt. How to amend my 2012 tax return See chapter 10 of Publication 535 for more information about business bad debts. How to amend my 2012 tax return Vacant rental property. How to amend my 2012 tax return   If you hold property for rental purposes, you may be able to deduct your ordinary and necessary expenses (including depreciation) for managing, conserving, or maintaining the property while the property is vacant. How to amend my 2012 tax return However, you cannot deduct any loss of rental income for the period the property is vacant. How to amend my 2012 tax return Vacant while listed for sale. How to amend my 2012 tax return   If you sell property you held for rental purposes, you can deduct the ordinary and necessary expenses for managing, conserving, or maintaining the property until it is sold. How to amend my 2012 tax return If the property is not held out and available for rent while listed for sale, the expenses are not deductible rental expenses. How to amend my 2012 tax return Points The term “points” is often used to describe some of the charges paid, or treated as paid, by a borrower to take out a loan or a mortgage. How to amend my 2012 tax return These charges are also called loan origination fees, maximum loan charges, or premium charges. How to amend my 2012 tax return Any of these charges (points) that are solely for the use of money are interest. How to amend my 2012 tax return Because points are prepaid interest, you generally cannot deduct the full amount in the year paid, but must deduct the interest over the term of the loan. How to amend my 2012 tax return The method used to figure the amount of points you can deduct each year follows the original issue discount (OID) rules. How to amend my 2012 tax return In this case, points are equivalent to OID, which is the difference between: The amount borrowed (redemption price at maturity, or principal) and The proceeds (issue price). How to amend my 2012 tax return The first step is to determine whether your total OID (which you may have on bonds or other investments in addition to the mortgage loan), including the OID resulting from the points, is insignificant or de minimis. How to amend my 2012 tax return If the OID is not de minimis, you must use the constant-yield method to figure how much you can deduct. How to amend my 2012 tax return De minimis OID. How to amend my 2012 tax return   The OID is de minimis if it is less than one-fourth of 1% (. How to amend my 2012 tax return 0025) of the stated redemption price at maturity (principal amount of the loan) multiplied by the number of full years from the date of original issue to maturity (term of the loan). How to amend my 2012 tax return   If the OID is de minimis, you can choose one of the following ways to figure the amount of points you can deduct each year. How to amend my 2012 tax return On a constant-yield basis over the term of the loan. How to amend my 2012 tax return On a straight line basis over the term of the loan. How to amend my 2012 tax return In proportion to stated interest payments. How to amend my 2012 tax return In its entirety at maturity of the loan. How to amend my 2012 tax return You make this choice by deducting the OID (points) in a manner consistent with the method chosen on your timely filed tax return for the tax year in which the loan is issued. How to amend my 2012 tax return Example. How to amend my 2012 tax return Carol Madison took out a $100,000 mortgage loan on January 1, 2013, to buy a house she will use as a rental during 2013. How to amend my 2012 tax return The loan is to be repaid over 30 years. How to amend my 2012 tax return During 2013, Carol paid $10,000 of mortgage interest (stated interest) to the lender. How to amend my 2012 tax return When the loan was made, she paid $1,500 in points to the lender. How to amend my 2012 tax return The points reduced the principal amount of the loan from $100,000 to $98,500, resulting in $1,500 of OID. How to amend my 2012 tax return Carol determines that the points (OID) she paid are de minimis based on the following computation. How to amend my 2012 tax return Redemption price at maturity (principal amount of the loan) $100,000 Multiplied by: The term of the  loan in complete years ×30 Multiplied by ×. How to amend my 2012 tax return 0025 De minimis amount $7,500 The points (OID) she paid ($1,500) are less than the de minimis amount ($7,500). How to amend my 2012 tax return Therefore, Carol has de minimis OID and she can choose one of the four ways discussed earlier to figure the amount she can deduct each year. How to amend my 2012 tax return Under the straight line method, she can deduct $50 each year for 30 years. How to amend my 2012 tax return Constant-yield method. How to amend my 2012 tax return   If the OID is not de minimis, you must use the constant-yield method to figure how much you can deduct each year. How to amend my 2012 tax return   You figure your deduction for the first year in the following manner. How to amend my 2012 tax return Determine the issue price of the loan. How to amend my 2012 tax return If you paid points on the loan, the issue price generally is the difference between the principal and the points. How to amend my 2012 tax return Multiply the result in (1) by the yield to maturity (defined later). How to amend my 2012 tax return Subtract any qualified stated interest payments (defined later) from the result in (2). How to amend my 2012 tax return This is the OID you can deduct in the first year. How to amend my 2012 tax return Yield to maturity (YTM). How to amend my 2012 tax return   This rate is generally shown in the literature you receive from your lender. How to amend my 2012 tax return If you do not have this information, consult your lender or tax advisor. How to amend my 2012 tax return In general, the YTM is the discount rate that, when used in computing the present value of all principal and interest payments, produces an amount equal to the principal amount of the loan. How to amend my 2012 tax return Qualified stated interest (QSI). How to amend my 2012 tax return   In general, this is the stated interest that is unconditionally payable in cash or property (other than another loan of the issuer) at least annually over the term of the loan at a fixed rate. How to amend my 2012 tax return Example—Year 1. How to amend my 2012 tax return The facts are the same as in the previous example. How to amend my 2012 tax return The yield to maturity on Carol's loan is 10. How to amend my 2012 tax return 2467%, compounded annually. How to amend my 2012 tax return She figured the amount of points (OID) she could deduct in 2013 as follows. How to amend my 2012 tax return Principal amount of the loan $100,000 Minus: Points (OID) –1,500 Issue price of the loan $98,500 Multiplied by: YTM × . How to amend my 2012 tax return 102467 Total 10,093 Minus: QSI –10,000 Points (OID) deductible in 2013 $93 To figure your deduction in any subsequent year, you start with the adjusted issue price. How to amend my 2012 tax return To get the adjusted issue price, add to the issue price figured in Year 1 any OID previously deducted. How to amend my 2012 tax return Then follow steps (2) and (3), earlier. How to amend my 2012 tax return Example—Year 2. How to amend my 2012 tax return Carol figured the deduction for 2014 as follows. How to amend my 2012 tax return Issue price $98,500 Plus: Points (OID) deducted  in 2013 +93 Adjusted issue price $98,593 Multiplied by: YTM × . How to amend my 2012 tax return 102467 Total 10,103 Minus: QSI –10,000 Points (OID) deductible in 2014 $103 Loan or mortgage ends. How to amend my 2012 tax return    If your loan or mortgage ends, you may be able to deduct any remaining points (OID) in the tax year in which the loan or mortgage ends. How to amend my 2012 tax return A loan or mortgage may end due to a refinancing, prepayment, foreclosure, or similar event. How to amend my 2012 tax return However, if the refinancing is with the same lender, the remaining points (OID) generally are not deductible in the year in which the refinancing occurs, but may be deductible over the term of the new mortgage or loan. How to amend my 2012 tax return Points when loan refinance is more than the previous outstanding balance. How to amend my 2012 tax return   When you refinance a rental property for more than the previous outstanding balance, the portion of the points allocable to loan proceeds not related to rental use generally cannot be deducted as a rental expense. How to amend my 2012 tax return For example, if an individual refinanced a loan with a balance of $100,000, the amount of the new loan was $120,000, and the taxpayer used $20,000 to purchase a car, points allocable to the $20,000 would be treated as nondeductible personal interest. How to amend my 2012 tax return Repairs and Improvements Generally, an expense for repairing or maintaining your rental property may be deducted if you are not required to capitalize the expense. How to amend my 2012 tax return Improvements. How to amend my 2012 tax return   You must capitalize any expense you pay to improve your rental property. How to amend my 2012 tax return An expense is for an improvement if it results in a betterment to your property, restores your property, or adapts your property to a new or different use. How to amend my 2012 tax return Betterments. How to amend my 2012 tax return   Expenses that may result in a betterment to your property include expenses for fixing a pre-existing defect or condition, enlarging or expanding your property, or increasing the capacity, strength, or quality of your property. How to amend my 2012 tax return Restoration. How to amend my 2012 tax return   Expenses that may be for restoration include expenses for replacing a substantial structural part of your property, repairing damage to your property after you properly adjusted the basis of your property as a result of a casualty loss, or rebuilding your property to a like-new condition. How to amend my 2012 tax return Adaptation. How to amend my 2012 tax return   Expenses that may be for adaptation include expenses for altering your property to a use that is not consistent with the intended ordinary use of your property when you began renting the property. How to amend my 2012 tax return Separate the costs of repairs and improvements, and keep accurate records. How to amend my 2012 tax return You will need to know the cost of improvements when you sell or depreciate your property. How to amend my 2012 tax return The expenses you capitalize for improving your property can generally be depreciated as if the improvement were separate property. How to amend my 2012 tax return Table 1-1. How to amend my 2012 tax return Examples of Improvements Additions Bedroom Bathroom Deck Garage Porch Patio  Lawn & Grounds Landscaping Driveway Walkway Fence Retaining wall Sprinkler system Swimming pool Miscellaneous Storm windows, doors New roof Central vacuum Wiring upgrades Satellite dish Security system   Heating & Air Conditioning Heating system Central air conditioning Furnace Duct work Central humidifier Filtration system Plumbing Septic system Water heater Soft water system Filtration system  Interior Improvements Built-in appliances Kitchen modernization Flooring Wall-to-wall carpeting  Insulation Attic Walls, floor Pipes, duct work Prev  Up  Next   Home   More Online Publications