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How To Fill Out A 1040x Form For The Irs

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How To Fill Out A 1040x Form For The Irs

How to fill out a 1040x form for the irs 4. How to fill out a 1040x form for the irs   Student Loan Interest Deduction Table of Contents Introduction Student Loan Interest DefinedQualified Student Loan Qualified Education Expenses Include As Interest Do Not Include As Interest When Must Interest Be Paid Can You Claim the DeductionNo Double Benefit Allowed Figuring the DeductionEffect of the Amount of Your Income on the Amount of Your Deduction Which Worksheet To Use Claiming the Deduction Introduction Generally, personal interest you pay, other than certain mortgage interest, is not deductible on your tax return. How to fill out a 1040x form for the irs However, if your modified adjusted gross income (MAGI) is less than $75,000 ($155,000 if filing a joint return) there is a special deduction allowed for paying interest on a student loan (also known as an education loan) used for higher education. How to fill out a 1040x form for the irs For most taxpayers, MAGI is the adjusted gross income as figured on their federal income tax return before subtracting any deduction for student loan interest. How to fill out a 1040x form for the irs This deduction can reduce the amount of your income subject to tax by up to $2,500 in 2013. How to fill out a 1040x form for the irs The student loan interest deduction is taken as an adjustment to income. How to fill out a 1040x form for the irs This means you can claim this deduction even if you do not itemize deductions on Schedule A (Form 1040). How to fill out a 1040x form for the irs This chapter explains: What type of loan interest you can deduct, Whether you can claim the deduction, What expenses you must have paid with the student loan, Who is an eligible student, How to figure the deduction, and How to claim the deduction. How to fill out a 1040x form for the irs Table 4-1. How to fill out a 1040x form for the irs Student Loan Interest Deduction at a Glance This table summarizes the features of the student loan interest deduction. How to fill out a 1040x form for the irs Do not rely on this table alone. How to fill out a 1040x form for the irs Refer to the text for complete details. How to fill out a 1040x form for the irs Feature   Description Maximum benefit   You can reduce your income subject to tax by up to $2,500. How to fill out a 1040x form for the irs Loan qualifications   Your student loan: •must have been taken out solely to pay qualified education expenses, and •cannot be from a related person or made under a qualified employer plan. How to fill out a 1040x form for the irs Student qualifications   The student must be: •you, your spouse, or your dependent, and  •enrolled at least half-time in a degree program. How to fill out a 1040x form for the irs Time limit on deduction   You can deduct interest paid during the remaining period of your student loan. How to fill out a 1040x form for the irs Limit on modified adjusted gross income (MAGI)   $155,000 if married filing a joint return; $75,000 if single, head of household, or qualifying widow(er). How to fill out a 1040x form for the irs Student Loan Interest Defined Student loan interest is interest you paid during the year on a qualified student loan. How to fill out a 1040x form for the irs It includes both required and voluntary interest payments. How to fill out a 1040x form for the irs Qualified Student Loan This is a loan you took out solely to pay qualified education expenses (defined later) that were: For you, your spouse, or a person who was your dependent when you took out the loan, Paid or incurred within a reasonable period of time before or after you took out the loan, and For education provided during an academic period for an eligible student. How to fill out a 1040x form for the irs Loans from the following sources are not qualified student loans. How to fill out a 1040x form for the irs A related person. How to fill out a 1040x form for the irs A qualified employer plan. How to fill out a 1040x form for the irs Your dependent. How to fill out a 1040x form for the irs   Generally, your dependent is someone who is either a: Qualifying child, or Qualifying relative. How to fill out a 1040x form for the irs You can find more information about dependents in Publication 501. How to fill out a 1040x form for the irs Exceptions. How to fill out a 1040x form for the irs   For purposes of the student loan interest deduction, there are the following exceptions to the general rules for dependents. How to fill out a 1040x form for the irs An individual can be your dependent even if you are the dependent of another taxpayer. How to fill out a 1040x form for the irs An individual can be your dependent even if the individual files a joint return with a spouse. How to fill out a 1040x form for the irs An individual can be your dependent even if the individual had gross income for the year that was equal to or more than the exemption amount for the year ($3,900 for 2013). How to fill out a 1040x form for the irs Reasonable period of time. How to fill out a 1040x form for the irs   Qualified education expenses are treated as paid or incurred within a reasonable period of time before or after you take out the loan if they are paid with the proceeds of student loans that are part of a federal postsecondary education loan program. How to fill out a 1040x form for the irs   Even if not paid with the proceeds of that type of loan, the expenses are treated as paid or incurred within a reasonable period of time if both of the following requirements are met. How to fill out a 1040x form for the irs The expenses relate to a specific academic period, and The loan proceeds are disbursed within a period that begins 90 days before the start of that academic period and ends 90 days after the end of that academic period. How to fill out a 1040x form for the irs   If neither of the above situations applies, the reasonable period of time usually is determined based on all the relevant facts and circumstances. How to fill out a 1040x form for the irs Academic period. How to fill out a 1040x form for the irs   An academic period includes a semester, trimester, quarter, or other period of study (such as a summer school session) as reasonably determined by an educational institution. How to fill out a 1040x form for the irs In the case of an educational institution that uses credit hours or clock hours and does not have academic terms, each payment period can be treated as an academic period. How to fill out a 1040x form for the irs Eligible student. How to fill out a 1040x form for the irs   This is a student who was enrolled at least half-time in a program leading to a degree, certificate, or other recognized educational credential. How to fill out a 1040x form for the irs Enrolled at least half-time. How to fill out a 1040x form for the irs   A student was enrolled at least half-time if the student was taking at least half the normal full-time work load for his or her course of study. How to fill out a 1040x form for the irs   The standard for what is half of the normal full-time work load is determined by each eligible educational institution. How to fill out a 1040x form for the irs However, the standard may not be lower than any of those established by the U. How to fill out a 1040x form for the irs S. How to fill out a 1040x form for the irs Department of Education under the Higher Education Act of 1965. How to fill out a 1040x form for the irs Related person. How to fill out a 1040x form for the irs   You cannot deduct interest on a loan you get from a related person. How to fill out a 1040x form for the irs Related persons include: Your spouse, Your brothers and sisters, Your half brothers and half sisters, Your ancestors (parents, grandparents, etc. How to fill out a 1040x form for the irs ), Your lineal descendants (children, grandchildren, etc. How to fill out a 1040x form for the irs ), and Certain corporations, partnerships, trusts, and exempt organizations. How to fill out a 1040x form for the irs Qualified employer plan. How to fill out a 1040x form for the irs   You cannot deduct interest on a loan made under a qualified employer plan or under a contract purchased under such a plan. How to fill out a 1040x form for the irs Qualified Education Expenses For purposes of the student loan interest deduction, these expenses are the total costs of attending an eligible educational institution, including graduate school. How to fill out a 1040x form for the irs They include amounts paid for the following items. How to fill out a 1040x form for the irs Tuition and fees. How to fill out a 1040x form for the irs Room and board. How to fill out a 1040x form for the irs Books, supplies, and equipment. How to fill out a 1040x form for the irs Other necessary expenses (such as transportation). How to fill out a 1040x form for the irs The cost of room and board qualifies only to the extent that it is not more than the greater of: The allowance for room and board, as determined by the eligible educational institution, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student, or The actual amount charged if the student is residing in housing owned or operated by the eligible educational institution. How to fill out a 1040x form for the irs Eligible educational institution. How to fill out a 1040x form for the irs   An eligible educational institution is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U. How to fill out a 1040x form for the irs S. How to fill out a 1040x form for the irs Department of Education. How to fill out a 1040x form for the irs It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. How to fill out a 1040x form for the irs   Certain educational institutions located outside the United States also participate in the U. How to fill out a 1040x form for the irs S. How to fill out a 1040x form for the irs Department of Education's Federal Student Aid (FSA) programs. How to fill out a 1040x form for the irs   For purposes of the student loan interest deduction, an eligible educational institution also includes an institution conducting an internship or residency program leading to a degree or certificate from an institution of higher education, a hospital, or a health care facility that offers postgraduate training. How to fill out a 1040x form for the irs   An educational institution must meet the above criteria only during the academic period(s) for which the student loan was incurred. How to fill out a 1040x form for the irs The deductibility of interest on the loan is not affected by the institution's subsequent loss of eligibility. How to fill out a 1040x form for the irs    The educational institution should be able to tell you if it is an eligible educational institution. How to fill out a 1040x form for the irs Adjustments to Qualified Education Expenses You must reduce your qualified education expenses by the total amount paid for them with the following tax-free items. How to fill out a 1040x form for the irs Employer-provided educational assistance. How to fill out a 1040x form for the irs See chapter 11, Employer-Provided Educational Assistance . How to fill out a 1040x form for the irs Tax-free distribution of earnings from a Coverdell education savings account (ESA). How to fill out a 1040x form for the irs See Tax-Free Distributions in chapter 7, Coverdell Education Savings Account. How to fill out a 1040x form for the irs Tax-free distribution of earnings from a qualified tuition program (QTP). How to fill out a 1040x form for the irs See Figuring the Taxable Portion of a Distribution in chapter 8, Qualified Tuition Program. How to fill out a 1040x form for the irs U. How to fill out a 1040x form for the irs S. How to fill out a 1040x form for the irs savings bond interest that you exclude from income because it is used to pay qualified education expenses. How to fill out a 1040x form for the irs See chapter 10, Education Savings Bond Program . How to fill out a 1040x form for the irs The tax-free part of scholarships and fellowships. How to fill out a 1040x form for the irs See Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. How to fill out a 1040x form for the irs Veterans' educational assistance. How to fill out a 1040x form for the irs See Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. How to fill out a 1040x form for the irs Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. How to fill out a 1040x form for the irs Include As Interest In addition to simple interest on the loan, if all other requirements are met, the items discussed below can be student loan interest. How to fill out a 1040x form for the irs Loan origination fee. How to fill out a 1040x form for the irs   In general, this is a one-time fee charged by the lender when a loan is made. How to fill out a 1040x form for the irs To be deductible as interest, a loan origination fee must be for the use of money rather than for property or services (such as commitment fees or processing costs) provided by the lender. How to fill out a 1040x form for the irs A loan origination fee treated as interest accrues over the term of the loan. How to fill out a 1040x form for the irs   Loan origination fees were not required to be reported on Form 1098-E, Student Loan Interest Statement, for loans made before September 1, 2004. How to fill out a 1040x form for the irs If loan origination fees are not included in the amount reported on your Form 1098-E, you can use any reasonable method to allocate the loan origination fees over the term of the loan. How to fill out a 1040x form for the irs The method shown in the example below allocates equal portions of the loan origination fee to each payment required under the terms of the loan. How to fill out a 1040x form for the irs A method that results in the double deduction of the same portion of a loan origination fee would not be reasonable. How to fill out a 1040x form for the irs Example. How to fill out a 1040x form for the irs In August 2004, Bill took out a student loan for $16,000 to pay the tuition for his senior year of college. How to fill out a 1040x form for the irs The lender charged a 3% loan origination fee ($480) that was withheld from the funds Bill received. How to fill out a 1040x form for the irs Bill began making payments on his student loan in 2013. How to fill out a 1040x form for the irs Because the loan origination fee was not included in his 2013 Form 1098-E, Bill can use any reasonable method to allocate that fee over the term of the loan. How to fill out a 1040x form for the irs Bill's loan is payable in 120 equal monthly payments. How to fill out a 1040x form for the irs He allocates the $480 fee equally over the total number of payments ($480 ÷ 120 months = $4 per month). How to fill out a 1040x form for the irs Bill made 7 payments in 2013, so he paid $28 ($4 × 7) of interest attributable to the loan origination fee. How to fill out a 1040x form for the irs To determine his student loan interest deduction, he will add the $28 to the amount of other interest reported to him on Form 1098-E. How to fill out a 1040x form for the irs Capitalized interest. How to fill out a 1040x form for the irs   This is unpaid interest on a student loan that is added by the lender to the outstanding principal balance of the loan. How to fill out a 1040x form for the irs Capitalized interest is treated as interest for tax purposes and is deductible as payments of principal are made on the loan. How to fill out a 1040x form for the irs No deduction for capitalized interest is allowed in a year in which no loan payments were made. How to fill out a 1040x form for the irs Interest on revolving lines of credit. How to fill out a 1040x form for the irs   This interest, which includes interest on credit card debt, is student loan interest if the borrower uses the line of credit (credit card) only to pay qualified education expenses. How to fill out a 1040x form for the irs See Qualified Education Expenses , earlier. How to fill out a 1040x form for the irs Interest on refinanced student loans. How to fill out a 1040x form for the irs   This includes interest on both: Consolidated loans—loans used to refinance more than one student loan of the same borrower, and Collapsed loans—two or more loans of the same borrower that are treated by both the lender and the borrower as one loan. How to fill out a 1040x form for the irs    If you refinance a qualified student loan for more than your original loan and you use the additional amount for any purpose other than qualified education expenses, you cannot deduct any interest paid on the refinanced loan. How to fill out a 1040x form for the irs Voluntary interest payments. How to fill out a 1040x form for the irs   These are payments made on a qualified student loan during a period when interest payments are not required, such as when the borrower has been granted a deferment or the loan has not yet entered repayment status. How to fill out a 1040x form for the irs Example. How to fill out a 1040x form for the irs The payments on Roger's student loan were scheduled to begin in June 2012, 6 months after he graduated from college. How to fill out a 1040x form for the irs He began making payments as required. How to fill out a 1040x form for the irs In September 2013, Roger enrolled in graduate school on a full-time basis. How to fill out a 1040x form for the irs He applied for and was granted deferment of his loan payments while in graduate school. How to fill out a 1040x form for the irs Wanting to pay down his student loan as much as possible, he made loan payments in October and November 2013. How to fill out a 1040x form for the irs Even though these were voluntary (not required) payments, Roger can deduct the interest paid in October and November. How to fill out a 1040x form for the irs Allocating Payments Between Interest and Principal The allocation of payments between interest and principal for tax purposes might not be the same as the allocation shown on the Form 1098-E or other statement you receive from the lender or loan servicer. How to fill out a 1040x form for the irs To make the allocation for tax purposes, a payment generally applies first to stated interest that remains unpaid as of the date the payment is due, second to any loan origination fees allocable to the payment, third to any capitalized interest that remains unpaid as of the date the payment is due, and fourth to the outstanding principal. How to fill out a 1040x form for the irs Example. How to fill out a 1040x form for the irs In August 2012, Peg took out a $10,000 student loan to pay the tuition for her senior year of college. How to fill out a 1040x form for the irs The lender charged a 3% loan origination fee ($300) that was withheld from the funds Peg received. How to fill out a 1040x form for the irs The interest (5% simple) on this loan accrued while she completed her senior year and for 6 months after she graduated. How to fill out a 1040x form for the irs At the end of that period, the lender determined the amount to be repaid by capitalizing all accrued but unpaid interest ($625 interest accrued from August 2012 through October 2013) and adding it to the outstanding principal balance of the loan. How to fill out a 1040x form for the irs The loan is payable over 60 months, with a payment of $200. How to fill out a 1040x form for the irs 51 due on the first of each month, beginning November 2013. How to fill out a 1040x form for the irs Peg did not receive a Form 1098-E for 2013 from her lender because the amount of interest she paid did not require the lender to issue an information return. How to fill out a 1040x form for the irs However, she did receive an account statement from the lender that showed the following 2013 payments on her outstanding loan of $10,625 ($10,000 principal + $625 accrued but unpaid interest). How to fill out a 1040x form for the irs Payment Date   Payment   Stated Interest   Principal November 2013   $200. How to fill out a 1040x form for the irs 51   $44. How to fill out a 1040x form for the irs 27   $156. How to fill out a 1040x form for the irs 24 December 2013   $200. How to fill out a 1040x form for the irs 51   $43. How to fill out a 1040x form for the irs 62   $156. How to fill out a 1040x form for the irs 89 Totals   $401. How to fill out a 1040x form for the irs 02   $87. How to fill out a 1040x form for the irs 89   $313. How to fill out a 1040x form for the irs 13 To determine the amount of interest that could be deducted on the loan for 2013, Peg starts with the total amount of stated interest she paid, $87. How to fill out a 1040x form for the irs 89. How to fill out a 1040x form for the irs Next, she allocates the loan origination fee over the term of the loan ($300 ÷ 60 months = $5 per month). How to fill out a 1040x form for the irs A total of $10 ($5 of each of the two principal payments) should be treated as interest for tax purposes. How to fill out a 1040x form for the irs Peg then applies the unpaid capitalized interest ($625) to the two principal payments in the order in which they were made, and determines that the remaining amount of principal of both payments is treated as interest for tax purposes. How to fill out a 1040x form for the irs Assuming that Peg qualifies to take the student loan interest deduction, she can deduct $401. How to fill out a 1040x form for the irs 02 ($87. How to fill out a 1040x form for the irs 89 + $10 + $303. How to fill out a 1040x form for the irs 13). How to fill out a 1040x form for the irs For 2014, Peg will continue to allocate $5 of the loan origination fee to the principal portion of each monthly payment she makes and treat that amount as interest for tax purposes. How to fill out a 1040x form for the irs She also will apply the remaining amount of capitalized interest ($625 − $303. How to fill out a 1040x form for the irs 13 = $321. How to fill out a 1040x form for the irs 87) to the principal payments in the order in which they are made until the balance is zero, and treat those amounts as interest for tax purposes. How to fill out a 1040x form for the irs Do Not Include As Interest You cannot claim a student loan interest deduction for any of the following items. How to fill out a 1040x form for the irs Interest you paid on a loan if, under the terms of the loan, you are not legally obligated to make interest payments. How to fill out a 1040x form for the irs Loan origination fees that are payments for property or services provided by the lender, such as commitment fees or processing costs. How to fill out a 1040x form for the irs Interest you paid on a loan to the extent payments were made through your participation in the National Health Service Corps Loan Repayment Program (the “NHSC Loan Repayment Program”) or certain other loan repayment assistance programs. How to fill out a 1040x form for the irs For more information, see Student Loan Repayment Assistance in chapter 5, Student Loan Cancellations and Repayment Assistance. How to fill out a 1040x form for the irs When Must Interest Be Paid You can deduct all interest you paid during the year on your student loan, including voluntary payments, until the loan is paid off. How to fill out a 1040x form for the irs Can You Claim the Deduction Generally, you can claim the deduction if all of the following requirements are met. How to fill out a 1040x form for the irs Your filing status is any filing status except married filing separately. How to fill out a 1040x form for the irs No one else is claiming an exemption for you on his or her tax return. How to fill out a 1040x form for the irs You are legally obligated to pay interest on a qualified student loan. How to fill out a 1040x form for the irs You paid interest on a qualified student loan. How to fill out a 1040x form for the irs Claiming an exemption for you. How to fill out a 1040x form for the irs   Another taxpayer is claiming an exemption for you if he or she lists your name and other required information on his or her Form 1040 (or Form 1040A), line 6c, or Form 1040NR, line 7c. How to fill out a 1040x form for the irs Example 1. How to fill out a 1040x form for the irs During 2013, Josh paid $600 interest on his qualified student loan. How to fill out a 1040x form for the irs Only he is legally obligated to make the payments. How to fill out a 1040x form for the irs No one claimed an exemption for Josh for 2013. How to fill out a 1040x form for the irs Assuming all other requirements are met, Josh can deduct the $600 of interest he paid on his 2013 Form 1040 or 1040A. How to fill out a 1040x form for the irs Example 2. How to fill out a 1040x form for the irs During 2013, Jo paid $1,100 interest on her qualified student loan. How to fill out a 1040x form for the irs Only she is legally obligated to make the payments. How to fill out a 1040x form for the irs Jo's parents claimed an exemption for her on their 2013 tax return. How to fill out a 1040x form for the irs In this case, neither Jo nor her parents may deduct the student loan interest Jo paid in 2013. How to fill out a 1040x form for the irs Interest paid by others. How to fill out a 1040x form for the irs   If you are the person legally obligated to make interest payments and someone else makes a payment of interest on your behalf, you are treated as receiving the payments from the other person and, in turn, paying the interest. How to fill out a 1040x form for the irs Example 1. How to fill out a 1040x form for the irs Darla obtained a qualified student loan to attend college. How to fill out a 1040x form for the irs After Darla's graduation from college, she worked as an intern for a nonprofit organization. How to fill out a 1040x form for the irs As part of the internship program, the nonprofit organization made an interest payment on behalf of Darla. How to fill out a 1040x form for the irs This payment was treated as additional compensation and reported in box 1 of her Form W-2. How to fill out a 1040x form for the irs Assuming all other qualifications are met, Darla can deduct this payment of interest on her tax return. How to fill out a 1040x form for the irs Example 2. How to fill out a 1040x form for the irs Ethan obtained a qualified student loan to attend college. How to fill out a 1040x form for the irs After graduating from college, the first monthly payment on his loan was due in December. How to fill out a 1040x form for the irs As a gift, Ethan's mother made this payment for him. How to fill out a 1040x form for the irs No one is claiming a dependency exemption for Ethan on his or her tax return. How to fill out a 1040x form for the irs Assuming all other qualifications are met, Ethan can deduct this payment of interest on his tax return. How to fill out a 1040x form for the irs No Double Benefit Allowed You cannot deduct as interest on a student loan any amount that is an allowable deduction under any other provision of the tax law (for example, as home mortgage interest). How to fill out a 1040x form for the irs Figuring the Deduction Your student loan interest deduction for 2013 is generally the smaller of: $2,500, or The interest you paid in 2013. How to fill out a 1040x form for the irs However, the amount determined above may be gradually reduced (phased out) or eliminated based on your filing status and MAGI as explained below. How to fill out a 1040x form for the irs You can use Worksheet 4-1. How to fill out a 1040x form for the irs Student Loan Interest Deduction Worksheet (at the end of this chapter) to figure both your MAGI and your deduction. How to fill out a 1040x form for the irs Form 1098-E. How to fill out a 1040x form for the irs   To help you figure your student loan interest deduction, you should receive Form 1098-E. How to fill out a 1040x form for the irs Generally, an institution (such as a bank or governmental agency) that received interest payments of $600 or more during 2013 on one or more qualified student loans must send Form 1098-E (or acceptable substitute) to each borrower by January 31, 2014. How to fill out a 1040x form for the irs   For qualified student loans taken out before September 1, 2004, the institution is required to include on Form 1098-E only payments of stated interest. How to fill out a 1040x form for the irs Other interest payments, such as certain loan origination fees and capitalized interest, may not appear on the form you receive. How to fill out a 1040x form for the irs However, if you pay qualifying interest that is not included on Form 1098-E, you can also deduct those amounts. How to fill out a 1040x form for the irs See Allocating Payments Between Interest and Principal , earlier. How to fill out a 1040x form for the irs    The lender may ask for a completed Form W-9S, or similar statement to obtain the borrower's name, address, and taxpayer identification number. How to fill out a 1040x form for the irs The form may also be used by the borrower to certify that the student loan was incurred solely to pay for qualified education expenses. How to fill out a 1040x form for the irs Effect of the Amount of Your Income on the Amount of Your Deduction The amount of your student loan interest deduction is phased out (gradually reduced) if your MAGI is between $60,000 and $75,000 ($125,000 and $155,000 if you file a joint return). How to fill out a 1040x form for the irs You cannot take a student loan interest deduction if your MAGI is $75,000 or more ($155,000 or more if you file a joint return). How to fill out a 1040x form for the irs Modified adjusted gross income (MAGI). How to fill out a 1040x form for the irs   For most taxpayers, MAGI is adjusted gross income (AGI) as figured on their federal income tax return before subtracting any deduction for student loan interest. How to fill out a 1040x form for the irs However, as discussed below, there may be other modifications. How to fill out a 1040x form for the irs Table 4-2 shows how the amount of your MAGI can affect your student loan interest deduction. How to fill out a 1040x form for the irs Table 4-2. How to fill out a 1040x form for the irs Effect of MAGI on Student Loan Interest Deduction IF your filing status is. How to fill out a 1040x form for the irs . How to fill out a 1040x form for the irs . How to fill out a 1040x form for the irs AND your MAGI is. How to fill out a 1040x form for the irs . How to fill out a 1040x form for the irs . How to fill out a 1040x form for the irs THEN your student loan interest deduction is. How to fill out a 1040x form for the irs . How to fill out a 1040x form for the irs . How to fill out a 1040x form for the irs single,  head of household, or qualifying widow(er) not more than $60,000 not affected by the phaseout. How to fill out a 1040x form for the irs more than $60,000  but less than $75,000 reduced because of the phaseout. How to fill out a 1040x form for the irs $75,000 or more eliminated by the phaseout. How to fill out a 1040x form for the irs married filing joint return not more than $125,000 not affected by the phaseout. How to fill out a 1040x form for the irs more than $125,000 but less than $155,000 reduced because of the phaseout. How to fill out a 1040x form for the irs $155,000 or more eliminated by the phaseout. How to fill out a 1040x form for the irs MAGI when using Form 1040A. How to fill out a 1040x form for the irs   If you file Form 1040A, your MAGI is the AGI on line 22 of that form figured without taking into account any amount on line 18 (student loan interest deduction) and line 19 (tuition and fees deduction). How to fill out a 1040x form for the irs MAGI when using Form 1040. How to fill out a 1040x form for the irs   If you file Form 1040, your MAGI is the AGI on line 38 of that form figured without taking into account any amount on line 33 (student loan interest deduction), line 34 (tuition and fees deduction), or line 35 (domestic production activities deduction), and modified by adding back any: Foreign earned income exclusion, Foreign housing exclusion, Foreign housing deduction, Exclusion of income by bona fide residents of American Samoa, and Exclusion of income by bona fide residents of Puerto Rico. How to fill out a 1040x form for the irs MAGI when using Form 1040NR. How to fill out a 1040x form for the irs   If you file Form 1040NR, your MAGI is the AGI on line 36 of that form figured without taking into account any amount on line 33 (student loan interest deduction) and line 34 (domestic production activities deduction). How to fill out a 1040x form for the irs MAGI when using Form 1040NR-EZ. How to fill out a 1040x form for the irs   If you file Form 1040NR-EZ, your MAGI is the AGI on line 10 of that form figured without taking into account any amount on line 9 (student loan interest deduction). How to fill out a 1040x form for the irs Phaseout. How to fill out a 1040x form for the irs   If your MAGI is within the range of incomes where the credit must be reduced, you must figure your reduced deduction. How to fill out a 1040x form for the irs To figure the phaseout, multiply your interest deduction (before the phaseout) by a fraction. How to fill out a 1040x form for the irs The numerator is your MAGI minus $60,000 ($125,000 in the case of a joint return). How to fill out a 1040x form for the irs The denominator is $15,000 ($30,000 in the case of a joint return). How to fill out a 1040x form for the irs Subtract the result from your deduction (before the phaseout) to give you the amount you can deduct. How to fill out a 1040x form for the irs Example 1. How to fill out a 1040x form for the irs During 2013 you paid $800 interest on a qualified student loan. How to fill out a 1040x form for the irs Your 2013 MAGI is $145,000 and you are filing a joint return. How to fill out a 1040x form for the irs You must reduce your deduction by $533, figured as follows. How to fill out a 1040x form for the irs   $800 × $145,000 − $125,000  $30,000 = $533   Your reduced student loan interest deduction is $267 ($800 − $533). How to fill out a 1040x form for the irs Example 2. How to fill out a 1040x form for the irs The facts are the same as in Example 1 except that you paid $2,750 interest. How to fill out a 1040x form for the irs Your maximum deduction for 2013 is $2,500. How to fill out a 1040x form for the irs You must reduce your maximum deduction by $1,667, figured as follows. How to fill out a 1040x form for the irs   $2,500 × $145,000 − $125,000  $30,000 = $1,667   In this example, your reduced student loan interest deduction is $833 ($2,500 − $1,667). How to fill out a 1040x form for the irs Which Worksheet To Use Generally, you figure the deduction using the Student Loan Interest Deduction Worksheet in the instructions for Form 1040, Form 1040A, or Form 1040NR. How to fill out a 1040x form for the irs However, if you are filing Form 2555, Foreign Earned Income, Form 2555-EZ, Foreign Earned Income Exclusion, or Form 4563, Exclusion of Income for Bona Fide Residents of American Samoa, or you are excluding income from sources within Puerto Rico, you must complete Worksheet 4-1. How to fill out a 1040x form for the irs Student Loan Interest Deduction Worksheet at the end of this chapter. How to fill out a 1040x form for the irs Claiming the Deduction The student loan interest deduction is an adjustment to income. How to fill out a 1040x form for the irs To claim the deduction, enter the allowable amount on line 33 (Form 1040), line 18 (Form 1040A), line 33 (Form 1040NR), or line 9 (Form 1040NR-EZ). How to fill out a 1040x form for the irs Worksheet 4-1. How to fill out a 1040x form for the irs Student Loan Interest Deduction Worksheet Use this worksheet instead of the worksheet in the Form 1040 instructions if you are filing Form 2555, 2555-EZ, or 4563, or you are excluding income from sources within Puerto Rico. How to fill out a 1040x form for the irs Before using this worksheet, you must complete Form 1040, lines 7 through 32, plus any amount to be entered on the dotted line next to line 36. How to fill out a 1040x form for the irs 1. How to fill out a 1040x form for the irs Enter the total interest you paid in 2013 on qualified student loans. How to fill out a 1040x form for the irs Do not enter  more than $2,500 1. How to fill out a 1040x form for the irs   2. How to fill out a 1040x form for the irs Enter the amount from Form 1040, line 22 2. How to fill out a 1040x form for the irs       3. How to fill out a 1040x form for the irs Enter the total of the amounts from Form 1040,  lines 23 through 32 3. How to fill out a 1040x form for the irs           4. How to fill out a 1040x form for the irs Enter the total of any amounts entered on the dotted line next to Form 1040, line 36 4. How to fill out a 1040x form for the irs           5. How to fill out a 1040x form for the irs Add lines 3 and 4 5. How to fill out a 1040x form for the irs       6. How to fill out a 1040x form for the irs Subtract line 5 from line 2 6. How to fill out a 1040x form for the irs       7. How to fill out a 1040x form for the irs Enter any foreign earned income exclusion and/or housing  exclusion (Form 2555, line 45, or Form 2555-EZ, line 18) 7. How to fill out a 1040x form for the irs       8. How to fill out a 1040x form for the irs Enter any foreign housing deduction (Form 2555, line 50) 8. How to fill out a 1040x form for the irs       9. How to fill out a 1040x form for the irs Enter the amount of income from Puerto Rico you are excluding 9. How to fill out a 1040x form for the irs       10. How to fill out a 1040x form for the irs Enter the amount of income from American Samoa  you are excluding (Form 4563, line 15) 10. How to fill out a 1040x form for the irs       11. How to fill out a 1040x form for the irs Add lines 6 through 10. How to fill out a 1040x form for the irs This is your modified adjusted gross income 11. How to fill out a 1040x form for the irs   12. How to fill out a 1040x form for the irs Enter the amount shown below for your filing status 12. How to fill out a 1040x form for the irs     •Single, head of household, or qualifying widow(er)—$60,000       •Married filing jointly—$125,000     13. How to fill out a 1040x form for the irs Is the amount on line 11 more than the amount on line 12?       □ No. How to fill out a 1040x form for the irs Skip lines 13 and 14, enter -0- on line 15, and go to line 16. How to fill out a 1040x form for the irs       □ Yes. How to fill out a 1040x form for the irs Subtract line 12 from line 11 13. How to fill out a 1040x form for the irs   14. How to fill out a 1040x form for the irs Divide line 13 by $15,000 ($30,000 if married filing jointly). How to fill out a 1040x form for the irs Enter the result as a decimal  (rounded to at least three places). How to fill out a 1040x form for the irs If the result is 1. How to fill out a 1040x form for the irs 000 or more, enter 1. How to fill out a 1040x form for the irs 000 14. How to fill out a 1040x form for the irs . How to fill out a 1040x form for the irs 15. How to fill out a 1040x form for the irs Multiply line 1 by line 14 15. How to fill out a 1040x form for the irs   16. How to fill out a 1040x form for the irs Student loan interest deduction. How to fill out a 1040x form for the irs Subtract line 15 from line 1. How to fill out a 1040x form for the irs Enter the result here  and on Form 1040, line 33. How to fill out a 1040x form for the irs Do not include this amount in figuring any other  deduction on your return (such as on Schedule A, C, E, etc. How to fill out a 1040x form for the irs ) 16. How to fill out a 1040x form for the irs   Prev  Up  Next   Home   More Online Publications
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How to fill out a 1040x form for the irs 7. How to fill out a 1040x form for the irs   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. How to fill out a 1040x form for the irs  The maximum amount you can elect to deduct for most section 179 property you placed in service in 2013 is $500,000. How to fill out a 1040x form for the irs This limit is reduced by the amount by which the cost of the property placed in service during the tax year exceeds $2 million. How to fill out a 1040x form for the irs See Dollar Limits under Section 179 Expense Deduction , later. How to fill out a 1040x form for the irs Extension of special depreciation allowance for certain qualified property acquired after December 31, 2007. How to fill out a 1040x form for the irs . How to fill out a 1040x form for the irs  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. How to fill out a 1040x form for the irs See Claiming the Special Depreciation Allowance , later. How to fill out a 1040x form for the irs Expiration of the 3- year recovery period for certain race horses. How to fill out a 1040x form for the irs  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. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs Instead, you must spread the cost over the time you use the property and deduct part of it each year. How to fill out a 1040x form for the irs For most types of property, this is called depreciation. How to fill out a 1040x form for the irs This chapter gives information on depreciation methods that generally apply to property placed in service after 1986. How to fill out a 1040x form for the irs For information on depreciating pre-1987 property, see Publication 534, Depreciating Property Placed in Service Before 1987. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs It is important to keep good records for property you depreciate. How to fill out a 1040x form for the irs Do not file these records with your return. How to fill out a 1040x form for the irs Instead, you should keep them as part of the permanent records of the depreciated property. How to fill out a 1040x form for the irs They will help you verify the accuracy of the depreciation of assets placed in service in the current and previous tax years. How to fill out a 1040x form for the irs For general information on recordkeeping, see Publication 583, Starting a Business and Keeping Records. How to fill out a 1040x form for the irs For specific information on keeping records for section 179 property and listed property, see Publication 946, How To Depreciate Property. How to fill out a 1040x form for the irs Overview of Depreciation This overview discusses basic information on the following. How to fill out a 1040x form for the irs What property can be depreciated. How to fill out a 1040x form for the irs What property cannot be depreciated. How to fill out a 1040x form for the irs When depreciation begins and ends. How to fill out a 1040x form for the irs Whether MACRS can be used to figure depreciation. How to fill out a 1040x form for the irs What is the basis of your depreciable property. How to fill out a 1040x form for the irs How to treat repairs and improvements. How to fill out a 1040x form for the irs When you must file Form 4562. How to fill out a 1040x form for the irs How you can correct depreciation claimed incorrectly. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs You can also depreciate certain intangible property, such as copyrights, patents, and computer software. How to fill out a 1040x form for the irs To be depreciable, the property must meet all the following requirements. How to fill out a 1040x form for the irs It must be property you own. How to fill out a 1040x form for the irs It must be used in your business or income-producing activity. How to fill out a 1040x form for the irs It must have a determinable useful life. How to fill out a 1040x form for the irs It must have a useful life that extends substantially beyond the year you place it in service. How to fill out a 1040x form for the irs Property You Own To claim depreciation, you usually must be the owner of the property. How to fill out a 1040x form for the irs You are considered as owning property even if it is subject to a debt. How to fill out a 1040x form for the irs Leased property. How to fill out a 1040x form for the irs   You can depreciate leased property only if you retain the incidents of ownership in the property. How to fill out a 1040x form for the irs This means you bear the burden of exhaustion of the capital investment in the property. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs You can, however, depreciate any capital improvements you make to the leased property. How to fill out a 1040x form for the irs See Additions and Improvements under Which Recovery Period Applies in chapter 4 of Publication 946. How to fill out a 1040x form for the irs   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. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs Life tenant. How to fill out a 1040x form for the irs   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. How to fill out a 1040x form for the irs See Certain term interests in property , later, for an exception. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs If you use property to produce income (investment use), the income must be taxable. How to fill out a 1040x form for the irs You cannot depreciate property that you use solely for personal activities. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs Example 1. How to fill out a 1040x form for the irs   If you use your car for farm business, you can deduct depreciation based on its percentage of use in farming. How to fill out a 1040x form for the irs If you also use it for investment purposes, you can depreciate it based on its percentage of investment use. How to fill out a 1040x form for the irs Example 2. How to fill out a 1040x form for the irs   If you use part of your home for business, you may be able to deduct depreciation on that part based on its business use. How to fill out a 1040x form for the irs For more information, see Business Use of Your Home in chapter 4. How to fill out a 1040x form for the irs Inventory. How to fill out a 1040x form for the irs   You can never depreciate inventory because it is not held for use in your business. How to fill out a 1040x form for the irs Inventory is any property you hold primarily for sale to customers in the ordinary course of your business. How to fill out a 1040x form for the irs Livestock. How to fill out a 1040x form for the irs   Livestock purchased for draft, breeding, or dairy purposes can be depreciated only if they are not kept in an inventory account. How to fill out a 1040x form for the irs Livestock you raise usually has no depreciable basis because the costs of raising them are deducted and not added to their basis. How to fill out a 1040x form for the irs However, see Immature livestock under When Does Depreciation Begin and End , later, for a special rule. How to fill out a 1040x form for the irs Property Having a Determinable Useful Life To be depreciable, your property must have a determinable useful life. How to fill out a 1040x form for the irs This means it must be something that wears out, decays, gets used up, becomes obsolete, or loses its value from natural causes. How to fill out a 1040x form for the irs Irrigation systems and water wells. How to fill out a 1040x form for the irs   Irrigation systems and wells used in a trade or business can be depreciated if their useful life can be determined. How to fill out a 1040x form for the irs You can depreciate irrigation systems and wells composed of masonry, concrete, tile, metal, or wood. How to fill out a 1040x form for the irs In addition, you can depreciate costs for moving dirt to construct irrigation systems and water wells composed of these materials. How to fill out a 1040x form for the irs However, land preparation costs for center pivot irrigation systems are not depreciable. How to fill out a 1040x form for the irs Dams, ponds, and terraces. How to fill out a 1040x form for the irs   In general, you cannot depreciate earthen dams, ponds, and terraces unless the structures have a determinable useful life. How to fill out a 1040x form for the irs What Property Cannot Be Depreciated? Certain property cannot be depreciated, even if the requirements explained earlier are met. How to fill out a 1040x form for the irs This includes the following. How to fill out a 1040x form for the irs Land. How to fill out a 1040x form for the irs You can never depreciate the cost of land because land does not wear out, become obsolete, or get used up. How to fill out a 1040x form for the irs The cost of land generally includes the cost of clearing, grading, planting, and landscaping. How to fill out a 1040x form for the irs Although you cannot depreciate land, you can depreciate certain costs incurred in preparing land for business use. How to fill out a 1040x form for the irs See chapter 1 of Publication 946. How to fill out a 1040x form for the irs Property placed in service and disposed of in the same year. How to fill out a 1040x form for the irs Determining when property is placed in service is explained later. How to fill out a 1040x form for the irs Equipment used to build capital improvements. How to fill out a 1040x form for the irs You must add otherwise allowable depreciation on the equipment during the period of construction to the basis of your improvements. How to fill out a 1040x form for the irs Intangible property such as section 197 intangibles. How to fill out a 1040x form for the irs This property does not have a determinable useful life and generally cannot be depreciated. How to fill out a 1040x form for the irs However, see Amortization , later. How to fill out a 1040x form for the irs Special rules apply to computer software (discussed below). How to fill out a 1040x form for the irs Certain term interests (discussed below). How to fill out a 1040x form for the irs Computer software. How to fill out a 1040x form for the irs   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. How to fill out a 1040x form for the irs It is readily available for purchase by the general public. How to fill out a 1040x form for the irs It is subject to a nonexclusive license. How to fill out a 1040x form for the irs It has not been substantially modified. How to fill out a 1040x form for the irs   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. How to fill out a 1040x form for the irs Certain term interests in property. How to fill out a 1040x form for the irs   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. How to fill out a 1040x form for the irs This rule does not apply to the holder of a term interest in property acquired by gift, bequest, or inheritance. How to fill out a 1040x form for the irs For more information, see chapter 1 of Publication 946. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs Even if you are not using the property, it is in service when it is ready and available for its specific use. How to fill out a 1040x form for the irs Example. How to fill out a 1040x form for the irs You bought a planter for use in your farm business. How to fill out a 1040x form for the irs The planter was delivered in December 2012 after harvest was over. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs If your planter comes unassembled in December 2012 and is put together in February 2013, it is not placed in service until 2013. How to fill out a 1040x form for the irs You begin to depreciate it in 2013. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs You begin to depreciate it in 2013. How to fill out a 1040x form for the irs Fruit or nut trees and vines. How to fill out a 1040x form for the irs   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). How to fill out a 1040x form for the irs See chapter 6 for information about the uniform capitalization rules. How to fill out a 1040x form for the irs 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). How to fill out a 1040x form for the irs Immature livestock. How to fill out a 1040x form for the irs   Depreciation for livestock begins when the livestock reaches the age of maturity. How to fill out a 1040x form for the irs If you bought immature livestock for drafting purposes, depreciation begins when they can be worked. How to fill out a 1040x form for the irs If you bought immature livestock for dairy purposes, depreciation begins when they can be milked. How to fill out a 1040x form for the irs If you bought immature livestock for breeding purposes, depreciation begins when they can be bred. How to fill out a 1040x form for the irs Your basis for depreciation is your initial cost for the immature livestock. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs Cost or Other Basis Fully Recovered You stop depreciating property when you have fully recovered your cost or other basis. How to fill out a 1040x form for the irs This happens when your section 179 and allowed or allowable depreciation deductions equal your cost or investment in the property. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs You sell or exchange the property. How to fill out a 1040x form for the irs You convert the property to personal use. How to fill out a 1040x form for the irs You abandon the property. How to fill out a 1040x form for the irs You transfer the property to a supplies or scrap account. How to fill out a 1040x form for the irs The property is destroyed. How to fill out a 1040x form for the irs For information on abandonment of property, see chapter 8. How to fill out a 1040x form for the irs For information on destroyed property, see chapter 11 and Publication 547, Casualties, Disasters, and Thefts. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs MACRS is explained later under Figuring Depreciation Under MACRS . How to fill out a 1040x form for the irs You cannot use MACRS to depreciate the following property. How to fill out a 1040x form for the irs Property you placed in service before 1987. How to fill out a 1040x form for the irs Use the methods discussed in Publication 534. How to fill out a 1040x form for the irs Certain property owned or used in 1986. How to fill out a 1040x form for the irs See chapter 1 of Publication 946. How to fill out a 1040x form for the irs Intangible property. How to fill out a 1040x form for the irs Films, video tapes, and recordings. How to fill out a 1040x form for the irs Certain corporate or partnership property acquired in a nontaxable transfer. How to fill out a 1040x form for the irs Property you elected to exclude from MACRS. How to fill out a 1040x form for the irs For more information, see chapter 1 of Publication 946. How to fill out a 1040x form for the irs What Is the Basis of Your Depreciable Property? To figure your depreciation deduction, you must determine the basis of your property. How to fill out a 1040x form for the irs To determine basis, you need to know the cost or other basis of your property. How to fill out a 1040x form for the irs Cost or other basis. How to fill out a 1040x form for the irs   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. How to fill out a 1040x form for the irs The cost includes the amount you pay in cash, debt obligations, other property, or services. How to fill out a 1040x form for the irs   There are times when you cannot use cost as basis. How to fill out a 1040x form for the irs In these situations, the fair market value (FMV) or the adjusted basis of the property may be used. How to fill out a 1040x form for the irs Adjusted basis. How to fill out a 1040x form for the irs   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. How to fill out a 1040x form for the irs Basis adjustment for depreciation allowed or allowable. How to fill out a 1040x form for the irs   After you place your property in service, you must reduce the basis of the property by the depreciation allowed or allowable, whichever is greater. How to fill out a 1040x form for the irs Depreciation allowed is depreciation you actually deducted (from which you received a tax benefit). How to fill out a 1040x form for the irs Depreciation allowable is depreciation you are entitled to deduct. How to fill out a 1040x form for the irs   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. How to fill out a 1040x form for the irs   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). How to fill out a 1040x form for the irs   For more information, see chapter 6. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs Treat improvements as separate depreciable property. How to fill out a 1040x form for the irs See chapter 1 of Publication 946 for more information. How to fill out a 1040x form for the irs Example. How to fill out a 1040x form for the irs You repair a small section on a corner of the roof of a barn that you rent to others. How to fill out a 1040x form for the irs You deduct the cost of the repair as a business expense. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs You depreciate the cost of the new roof. How to fill out a 1040x form for the irs Improvements to rented property. How to fill out a 1040x form for the irs   You can depreciate permanent improvements you make to business property you rent from someone else. How to fill out a 1040x form for the irs Do You Have To File Form 4562? Use Form 4562 to claim your deduction for depreciation and amortization. How to fill out a 1040x form for the irs You must complete and attach Form 4562 to your tax return if you are claiming any of the following. How to fill out a 1040x form for the irs A section 179 expense deduction for the current year or a section 179 carryover from a prior year. How to fill out a 1040x form for the irs Depreciation for property placed in service during the current year. How to fill out a 1040x form for the irs Depreciation on any vehicle or other listed property, regardless of when it was placed in service. How to fill out a 1040x form for the irs Amortization of costs that began in the current year. How to fill out a 1040x form for the irs For more information, see the Instructions for Form 4562. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs You can file an amended return to correct the amount of depreciation claimed for any property in any of the following situations. How to fill out a 1040x form for the irs You claimed the incorrect amount because of a mathematical error made in any year. How to fill out a 1040x form for the irs You claimed the incorrect amount because of a posting error made in any year, for example, omitting an asset from the depreciation schedule. How to fill out a 1040x form for the irs You have not adopted a method of accounting for the property placed in service by you in tax years ending after December 29, 2003. How to fill out a 1040x form for the irs You claimed the incorrect amount on property placed in service by you in tax years ending before December 30, 2003. How to fill out a 1040x form for the irs Note. How to fill out a 1040x form for the irs You have adopted a method of accounting if you used the same incorrect method of depreciation for two or more consecutively filed returns. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs See the Instructions for Form 3115. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs This is the section 179 expense deduction. How to fill out a 1040x form for the irs You can elect the section 179 expense deduction instead of recovering the cost by taking depreciation deductions. How to fill out a 1040x form for the irs This part of the chapter explains the rules for the section 179 expense deduction. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs For more information, see chapter 2 of Publication 946. How to fill out a 1040x form for the irs What Property Qualifies? To qualify for the section 179 expense deduction, your property must meet all the following requirements. How to fill out a 1040x form for the irs It must be eligible property. How to fill out a 1040x form for the irs It must be acquired for business use. How to fill out a 1040x form for the irs It must have been acquired by purchase. How to fill out a 1040x form for the irs Eligible Property To qualify for the section 179 expense deduction, your property must be one of the following types of depreciable property. How to fill out a 1040x form for the irs Tangible personal property. How to fill out a 1040x form for the irs Qualified real property. How to fill out a 1040x form for the irs (Special rules apply to qualified real property that you elect to treat as qualified section 179 real property. How to fill out a 1040x form for the irs For more information, see chapter 2 of Publication 946 and section 179(f) of the Internal Revenue Code. How to fill out a 1040x form for the irs ) 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. How to fill out a 1040x form for the irs Single purpose agricultural (livestock) or horticultural structures. How to fill out a 1040x form for the irs Storage facilities (except buildings and their structural components) used in connection with distributing petroleum or any primary product of petroleum. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs Tangible personal property. How to fill out a 1040x form for the irs   Tangible personal property is any tangible property that is not real property. How to fill out a 1040x form for the irs It includes the following property. How to fill out a 1040x form for the irs Machinery and equipment. How to fill out a 1040x form for the irs Property contained in or attached to a building (other than structural components), such as milk tanks, automatic feeders, barn cleaners, and office equipment. How to fill out a 1040x form for the irs Gasoline storage tanks and pumps at retail service stations. How to fill out a 1040x form for the irs Livestock, including horses, cattle, hogs, sheep, goats, and mink and other fur-bearing animals. How to fill out a 1040x form for the irs Facility used for the bulk storage of fungible commodities. How to fill out a 1040x form for the irs   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). How to fill out a 1040x form for the irs Bulk storage means the storage of a commodity in a large mass before it is used. How to fill out a 1040x form for the irs Grain bins. How to fill out a 1040x form for the irs   A grain bin is an example of a storage facility that is qualifying section 179 property. How to fill out a 1040x form for the irs It is a facility used in connection with the production of grain or livestock for the bulk storage of fungible commodities. How to fill out a 1040x form for the irs Single purpose agricultural or horticultural structures. How to fill out a 1040x form for the irs   A single purpose agricultural (livestock) or horticultural structure is qualifying property for purposes of the section 179 expense deduction. How to fill out a 1040x form for the irs Agricultural structure. How to fill out a 1040x form for the irs   A single purpose agricultural (livestock) structure is any building or enclosure specifically designed, constructed, and used for both the following reasons. How to fill out a 1040x form for the irs To house, raise, and feed a particular type of livestock and its produce. How to fill out a 1040x form for the irs To house the equipment, including any replacements, needed to house, raise, or feed the livestock. How to fill out a 1040x form for the irs For this purpose, livestock includes poultry. How to fill out a 1040x form for the irs   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. How to fill out a 1040x form for the irs The facility must include, as an integral part of the structure or enclosure, equipment necessary to house, raise, and feed the livestock. How to fill out a 1040x form for the irs Horticultural structure. How to fill out a 1040x form for the irs   A single purpose horticultural structure is either of the following. How to fill out a 1040x form for the irs A greenhouse specifically designed, constructed, and used for the commercial production of plants. How to fill out a 1040x form for the irs A structure specifically designed, constructed, and used for the commercial production of mushrooms. How to fill out a 1040x form for the irs Use of structure. How to fill out a 1040x form for the irs   A structure must be used only for the purpose that qualified it. How to fill out a 1040x form for the irs For example, a hog barn will not be qualifying property if you use it to house poultry. How to fill out a 1040x form for the irs Similarly, using part of your greenhouse to sell plants will make the greenhouse nonqualifying property. How to fill out a 1040x form for the irs   If a structure includes work space, the work space can be used only for the following activities. How to fill out a 1040x form for the irs Stocking, caring for, or collecting livestock or plants or their produce. How to fill out a 1040x form for the irs Maintaining the enclosure or structure. How to fill out a 1040x form for the irs Maintaining or replacing the equipment or stock enclosed or housed in the structure. How to fill out a 1040x form for the irs Property Acquired by Purchase To qualify for the section 179 expense deduction, your property must have been acquired by purchase. How to fill out a 1040x form for the irs For example, property acquired by gift or inheritance does not qualify. How to fill out a 1040x form for the irs Property acquired from a related person (that is, your spouse, ancestors, or lineal descendants) is not considered acquired by purchase. How to fill out a 1040x form for the irs Example. How to fill out a 1040x form for the irs Ken is a farmer. How to fill out a 1040x form for the irs He purchased two tractors, one from his brother and one from his father. How to fill out a 1040x form for the irs He placed both tractors in service in the same year he bought them. How to fill out a 1040x form for the irs The tractor purchased from his father does not qualify for the section 179 expense deduction because he is a related person (as defined above). How to fill out a 1040x form for the irs The tractor purchased from his brother does qualify for the deduction because Ken is not a related person (as defined above). How to fill out a 1040x form for the irs What Property Does Not Qualify? Land and improvements. How to fill out a 1040x form for the irs   Land and land improvements, do not qualify as section 179 property. How to fill out a 1040x form for the irs Land improvements include nonagricultural fences, swimming pools, paved parking areas, wharves, docks, bridges, and fences. How to fill out a 1040x form for the irs However, agricultural fences do qualify as section 179 property. How to fill out a 1040x form for the irs Similarly, field drainage tile also qualifies as section 179 property. How to fill out a 1040x form for the irs Excepted property. How to fill out a 1040x form for the irs   Even if the requirements explained in the preceding discussions are met, farmers cannot elect the section 179 expense deduction for the following property. How to fill out a 1040x form for the irs Certain property you lease to others (if you are a noncorporate lessor). How to fill out a 1040x form for the irs Certain property used predominantly to furnish lodging or in connection with the furnishing of lodging. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs Property used by governmental units or foreign persons or entities (except property used under a lease with a term of less than 6 months). How to fill out a 1040x form for the irs How Much Can You Deduct? Your section 179 expense deduction is generally the cost of the qualifying property. How to fill out a 1040x form for the irs However, the total amount you can elect to deduct under section 179 is subject to a dollar limit and a business income limit. How to fill out a 1040x form for the irs These limits apply to each taxpayer, not to each business. How to fill out a 1040x form for the irs However, see Married individuals under Dollar Limits , later. How to fill out a 1040x form for the irs See also the special rules for applying the limits for partnerships and S corporations under Partnerships and S Corporations , later. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs Use Part I of Form 4562 to figure your section 179 expense deduction. How to fill out a 1040x form for the irs Partial business use. How to fill out a 1040x form for the irs   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. How to fill out a 1040x form for the irs If you used the property more than 50% for business, multiply the cost of the property by the percentage of business use. How to fill out a 1040x form for the irs Use the resulting business cost to figure your section 179 expense deduction. How to fill out a 1040x form for the irs Trade-in of other property. How to fill out a 1040x form for the irs   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. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs It does not include the adjusted basis of the old tractor you trade for the new tractor. How to fill out a 1040x form for the irs Example. How to fill out a 1040x form for the irs J-Bar Farms traded two cultivators having a total adjusted basis of $6,800 for a new cultivator costing $13,200. How to fill out a 1040x form for the irs They received an $8,000 trade-in allowance for the old cultivators and paid $5,200 cash for the new cultivator. How to fill out a 1040x form for the irs J-Bar also traded a used pickup truck with an adjusted basis of $8,000 for a new pickup truck costing $35,000. How to fill out a 1040x form for the irs They received a $5,000 trade-in allowance and paid $30,000 cash for the new pickup truck. How to fill out a 1040x form for the irs Only the cash paid by J-Bar qualifies for the section 179 expense deduction. How to fill out a 1040x form for the irs J-Bar's business costs that qualify for a section 179 expense deduction are $35,200 ($5,200 + $30,000). How to fill out a 1040x form for the irs Dollar Limits The total amount you can elect to deduct under section 179 for most property placed in service in 2013 is $500,000. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs You do not have to claim the full $500,000. How to fill out a 1040x form for the irs For specific information on the section 179 dollar limits, see chapter 2 of Publication 946. How to fill out a 1040x form for the irs Reduced dollar limit for cost exceeding $2 million. How to fill out a 1040x form for the irs   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. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs Example. How to fill out a 1040x form for the irs This year, James Smith placed in service machinery costing $2,050,000. How to fill out a 1040x form for the irs Because this cost is $50,000 more than $2 million, he must reduce his dollar limit to $450,000 ($500,000 − $50,000). How to fill out a 1040x form for the irs Limits for sport utility vehicles. How to fill out a 1040x form for the irs   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. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs   For more information, see chapter 2 of Publication 946. How to fill out a 1040x form for the irs Limits for passenger automobiles. How to fill out a 1040x form for the irs   For a passenger automobile that is placed in service in 2013, the total section 179 and depreciation deduction is limited. How to fill out a 1040x form for the irs See Do the Passenger Automobile Limits Apply , later. How to fill out a 1040x form for the irs Married individuals. How to fill out a 1040x form for the irs   If you are married, how you figure your section 179 expense deduction depends on whether you file jointly or separately. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs You must allocate the dollar limit (after any reduction) equally between you, unless you both elect a different allocation. How to fill out a 1040x form for the irs If the percentages elected by each of you do not total 100%, 50% will be allocated to each of you. How to fill out a 1040x form for the irs Joint return after separate returns. How to fill out a 1040x form for the irs   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. How to fill out a 1040x form for the irs The dollar limit (after reduction for any cost of section 179 property over $2 million). How to fill out a 1040x form for the irs The total cost of section 179 property you and your spouse elected to expense on your separate returns. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs Any cost not deductible in one year under section 179 because of this limit can be carried to the next year. How to fill out a 1040x form for the irs See Carryover of disallowed deduction , later. How to fill out a 1040x form for the irs Taxable income. How to fill out a 1040x form for the irs   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. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs Section 1231 gains (or losses) as discussed in chapter 9. How to fill out a 1040x form for the irs Interest from working capital of your trade or business. How to fill out a 1040x form for the irs Wages, salaries, tips, or other pay earned by you (or your spouse if you file a joint return) as an employee of any employer. How to fill out a 1040x form for the irs   In addition, figure taxable income without regard to any of the following. How to fill out a 1040x form for the irs The section 179 expense deduction. How to fill out a 1040x form for the irs The self-employment tax deduction. How to fill out a 1040x form for the irs Any net operating loss carryback or carryforward. How to fill out a 1040x form for the irs Any unreimbursed employee business expenses. How to fill out a 1040x form for the irs Two different taxable income limits. How to fill out a 1040x form for the irs   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). How to fill out a 1040x form for the irs You may have to figure the limit for this other deduction taking into account the section 179 expense deduction. How to fill out a 1040x form for the irs If so, complete the following steps. How to fill out a 1040x form for the irs Step Action 1 Figure taxable income without the section 179 expense deduction or the other deduction. How to fill out a 1040x form for the irs 2 Figure a hypothetical section 179 expense deduction using the taxable income figured in Step 1. How to fill out a 1040x form for the irs 3 Subtract the hypothetical section 179 expense deduction figured in Step 2 from the taxable income figured in Step 1. How to fill out a 1040x form for the irs 4 Figure a hypothetical amount for the other deduction using the amount figured in Step 3 as taxable income. How to fill out a 1040x form for the irs 5 Subtract the hypothetical other deduction figured in Step 4 from the taxable income figured in  Step 1. How to fill out a 1040x form for the irs 6 Figure your actual section 179 expense deduction using the taxable income figured in Step 5. How to fill out a 1040x form for the irs 7 Subtract your actual section 179 expense deduction figured in Step 6 from the taxable income figured in Step 1. How to fill out a 1040x form for the irs 8 Figure your actual other deduction using the taxable income figured in Step 7. How to fill out a 1040x form for the irs Example. How to fill out a 1040x form for the irs On February 1, 2013, the XYZ farm corporation purchased and placed in service qualifying section 179 property that cost $500,000. How to fill out a 1040x form for the irs It elects to expense the entire $500,000 cost under section 179. How to fill out a 1040x form for the irs In June, the corporation gave a charitable contribution of $10,000. How to fill out a 1040x form for the irs A corporation's limit on charitable contributions is figured after subtracting any section 179 expense deduction. How to fill out a 1040x form for the irs The business income limit for the section 179 expense deduction is figured after subtracting any allowable charitable contributions. How to fill out a 1040x form for the irs XYZ's taxable income figured without the section 179 expense deduction or the deduction for charitable contributions is $520,000. How to fill out a 1040x form for the irs XYZ figures its section 179 expense deduction and its deduction for charitable contributions as follows. How to fill out a 1040x form for the irs Step 1. How to fill out a 1040x form for the irs Taxable income figured without either deduction is $520,000. How to fill out a 1040x form for the irs Step 2. How to fill out a 1040x form for the irs Using $520,000 as taxable income, XYZ's hypothetical section 179 expense deduction is $500,000. How to fill out a 1040x form for the irs Step 3. How to fill out a 1040x form for the irs $20,000 ($520,000 − $500,000). How to fill out a 1040x form for the irs Step 4. How to fill out a 1040x form for the irs Using $20,000 (from Step 3) as taxable income, XYZ's hypothetical charitable contribution (limited to 10% of taxable income) is $2,000. How to fill out a 1040x form for the irs Step 5. How to fill out a 1040x form for the irs $518,000 ($520,000 − $2,000). How to fill out a 1040x form for the irs Step 6. How to fill out a 1040x form for the irs Using $518,000 (from Step 5) as taxable income, XYZ figures the actual section 179 expense deduction. How to fill out a 1040x form for the irs Because the taxable income is at least $500,000, XYZ can take a $500,000 section 179 expense deduction. How to fill out a 1040x form for the irs Step 7. How to fill out a 1040x form for the irs $20,000 ($520,000 − $500,000). How to fill out a 1040x form for the irs Step 8. How to fill out a 1040x form for the irs Using $20,000 (from Step 7) as taxable income, XYZ's actual charitable contribution (limited to 10% of taxable income) is $2,000. How to fill out a 1040x form for the irs Carryover of disallowed deduction. How to fill out a 1040x form for the irs   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. How to fill out a 1040x form for the irs   The amount you carry over is used in determining your section 179 expense deduction in the next year. How to fill out a 1040x form for the irs However, it is subject to the limits in that year. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs Your selections must be shown in your books and records. How to fill out a 1040x form for the irs Example. How to fill out a 1040x form for the irs Last year, Joyce Jones placed in service a machine that cost $8,000 and elected to deduct all $8,000 under section 179. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs Her section 179 expense deduction was limited to $6,000. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs This year, Joyce placed another machine in service that cost $9,000. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs She can carry over the balance of $1,000 to next year. How to fill out a 1040x form for the irs Partnerships and S Corporations The section 179 expense deduction limits apply both to the partnership or S corporation and to each partner or shareholder. How to fill out a 1040x form for the irs The partnership or S corporation determines its section 179 expense deduction subject to the limits. How to fill out a 1040x form for the irs It then allocates the deduction among its partners or shareholders. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs After you apply the dollar limit, you apply the business income limit to any remaining section 179 costs. How to fill out a 1040x form for the irs For more information, see chapter 2 of Publication 946. How to fill out a 1040x form for the irs Example. How to fill out a 1040x form for the irs In 2013, Partnership P placed in service section 179 property with a total cost of $2,160,000. How to fill out a 1040x form for the irs P must reduce its dollar limit by $160,000 ($2,160,000 − $2,000,000). How to fill out a 1040x form for the irs Its maximum section 179 expense deduction is $340,000 ($500,000 − $160,000), and it elects to expense that amount. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs P allocates $100,000 of its section 179 expense deduction and $110,000 of its taxable income to John, one of its partners. How to fill out a 1040x form for the irs John also conducts a business as a sole proprietor and in 2013, placed in service in that business, section 179 property costing $28,000. How to fill out a 1040x form for the irs John's taxable income from that business was $10,000. How to fill out a 1040x form for the irs In addition to the $100,000 allocated from P, he elects to expense the $28,000 of his sole proprietorship's section 179 costs. How to fill out a 1040x form for the irs 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). How to fill out a 1040x form for the irs He carries over $8,000 ($128,000 − $120,000) of the elected section 179 costs to 2014. How to fill out a 1040x form for the irs How Do You Elect the Deduction? You elect to take the section 179 expense deduction by completing Part I of Form 4562. How to fill out a 1040x form for the irs If you elect the deduction for listed property, complete Part V of  Form 4562 before completing Part I. How to fill out a 1040x form for the irs   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. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs The amended return must also include any resulting adjustments to taxable income. How to fill out a 1040x form for the irs Revoking an election. How to fill out a 1040x form for the irs   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. How to fill out a 1040x form for the irs The amended return must be filed within the time prescribed by law. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs ) Once made, the revocation is irrevocable. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs In the year the business use drops to 50% or less, you include the recapture amount as ordinary income. How to fill out a 1040x form for the irs You also increase the basis of the property by the recapture amount. How to fill out a 1040x form for the irs Recovery periods for property are discussed later. How to fill out a 1040x form for the irs If you sell, exchange, or otherwise dispose of the property, do not figure the recapture amount under the rules explained in this discussion. How to fill out a 1040x form for the irs Instead, use the rules for recapturing depreciation explained in  chapter 9 under Section 1245 Property. How to fill out a 1040x form for the irs   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. How to fill out a 1040x form for the irs Instead, use the rules for recapturing depreciation explained in chapter 5 of Publication 946 under Recapture of Excess Depreciation. How to fill out a 1040x form for the irs Figuring the recapture amount. How to fill out a 1040x form for the irs   To figure the amount to recapture, take the following steps. How to fill out a 1040x form for the irs Figure the allowable depreciation for the section 179 expense deduction you claimed. How to fill out a 1040x form for the irs Begin with the year you placed the property in service and include the year of recapture. How to fill out a 1040x form for the irs Subtract the depreciation figured in (1) from the section 179 expense deduction you actually claimed. How to fill out a 1040x form for the irs The result is the amount you must recapture. How to fill out a 1040x form for the irs Example. How to fill out a 1040x form for the irs In January 2011, Paul Lamb, a calendar year taxpayer, bought and placed in service section 179 property costing $10,000. How to fill out a 1040x form for the irs The property is not listed property. How to fill out a 1040x form for the irs He elected a $5,000 section 179 expense deduction for the property and also elected not to claim a special depreciation allowance. How to fill out a 1040x form for the irs He used the property only for business in 2011 and 2012. How to fill out a 1040x form for the irs During 2013, he used the property 40% for business and 60% for personal use. How to fill out a 1040x form for the irs He figures his recapture amount as follows. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs Where to report recapture. How to fill out a 1040x form for the irs   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). How to fill out a 1040x form for the irs Recapture for qualified section 179 GO Zone property. How to fill out a 1040x form for the irs   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. How to fill out a 1040x form for the irs ” Claiming the Special Depreciation Allowance For qualified property (defined below) placed in service in 2013, you can take an additional 50% special depreciation allowance. How to fill out a 1040x form for the irs The allowance is an additional deduction you can take after any section 179 expense deduction and before you figure regular depreciation under MACRS. How to fill out a 1040x form for the irs Figure the special depreciation allowance by multiplying the depreciable basis of the qualified property by 50%. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs Certain qualified property acquired after December 31, 2007, and placed in service before January 1, 2014. How to fill out a 1040x form for the irs   Certain qualified property (defined below) acquired after December 31, 2007, and before January 1, 2014, is eligible for a 50% special depreciation allowance. How to fill out a 1040x form for the irs   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. How to fill out a 1040x form for the irs Water utility property. How to fill out a 1040x form for the irs Off-the-shelf computer software. How to fill out a 1040x form for the irs Qualified leasehold improvement property. How to fill out a 1040x form for the irs   Qualified property must also meet all of the following tests: You must have acquired qualified property by purchase after December 31, 2007. How to fill out a 1040x form for the irs If a binding contract to acquire the property existed before January 1, 2008, the property does not qualify. How to fill out a 1040x form for the irs 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). How to fill out a 1040x form for the irs The original use of the property must begin with you after December 31, 2007. How to fill out a 1040x form for the irs For more information, see chapter 3 of Publication 946. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs To make the election, attach a statement to your return indicating the class of property for which you are making the election. How to fill out a 1040x form for the irs 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 fill out a 1040x form for the irs 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). How to fill out a 1040x form for the irs Attach the election statement to the amended return. How to fill out a 1040x form for the irs On the amended return, write “Filed pursuant to section 301. How to fill out a 1040x form for the irs 9100-2. How to fill out a 1040x form for the irs ” Once made, the election may not be revoked without IRS consent. How to fill out a 1040x form for the irs If you elect not to have the special depreciation allowance apply, the property may be subject to an alternative minimum tax adjustment for depreciation. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs For more information, see chapter 3 of Publication 946. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs MACRS consists of two depreciation systems, the General Depreciation System (GDS) and the Alternative Depreciation System (ADS). How to fill out a 1040x form for the irs Generally, these systems provide different methods and recovery periods to use in figuring depreciation deductions. How to fill out a 1040x form for the irs To be sure you can use MACRS to figure depreciation for your property, see Can You Use MACRS To Depreciate Your Property, earlier. How to fill out a 1040x form for the irs This part explains how to determine which MACRS depreciation system applies to your property. How to fill out a 1040x form for the irs It also discusses the following information that you need to know before you can figure depreciation under MACRS. How to fill out a 1040x form for the irs Property's recovery class. How to fill out a 1040x form for the irs Placed-in-service date. How to fill out a 1040x form for the irs Basis for depreciation. How to fill out a 1040x form for the irs Recovery period. How to fill out a 1040x form for the irs Convention. How to fill out a 1040x form for the irs Depreciation method. How to fill out a 1040x form for the irs Finally, this part explains how to use this information to figure your depreciation deduction. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs You generally must use GDS unless you are specifically required by law to use ADS or you elect to use ADS. How to fill out a 1040x form for the irs Required use of ADS. How to fill out a 1040x form for the irs   You must use ADS for the following property. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs Listed property used 50% or less in a qualified business use. How to fill out a 1040x form for the irs See Additional Rules for Listed Property , later. How to fill out a 1040x form for the irs Any tax-exempt use property. How to fill out a 1040x form for the irs Any tax-exempt bond-financed property. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs Any tangible property used predominantly outside the United States during the year. How to fill out a 1040x form for the irs If you are required to use ADS to depreciate your property, you cannot claim the special depreciation allowance. How to fill out a 1040x form for the irs Electing ADS. How to fill out a 1040x form for the irs   Although your property may qualify for GDS, you can elect to use ADS. How to fill out a 1040x form for the irs The election generally must cover all property in the same property class you placed in service during the year. How to fill out a 1040x form for the irs However, the election for residential rental property and nonresidential real property can be made on a property-by-property basis. How to fill out a 1040x form for the irs Once you make this election, you can never revoke it. How to fill out a 1040x form for the irs   You make the election by completing line 20 in Part III of Form 4562. How to fill out a 1040x form for the irs Which Property Class Applies Under GDS? The following is a list of the nine property classes under GDS. How to fill out a 1040x form for the irs 3-year property. How to fill out a 1040x form for the irs 5-year property. How to fill out a 1040x form for the irs 7-year property. How to fill out a 1040x form for the irs 10-year property. How to fill out a 1040x form for the irs 15-year property. How to fill out a 1040x form for the irs 20-year property. How to fill out a 1040x form for the irs 25-year property. How to fill out a 1040x form for the irs Residential rental property. How to fill out a 1040x form for the irs Nonresidential real property. How to fill out a 1040x form for the irs See Which Property Class Applies Under GDS in chapter 4 of Publication 946 for examples of the types of property included in each class. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs The placed-in-service date for your property is the date the property is ready and available for a specific use. How to fill out a 1040x form for the irs It is therefore not necessarily the date it is first used. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs See Placed in Service under When Does Depreciation Begin and End , earlier, for examples illustrating when property is placed in service. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs Reduce that amount by any credits and deductions allocable to the property. How to fill out a 1040x form for the irs The following are examples of some of the credits and deductions that reduce basis. How to fill out a 1040x form for the irs Any deduction for section 179 property. How to fill out a 1040x form for the irs Any deduction for removal of barriers to the disabled and the elderly. How to fill out a 1040x form for the irs Any disabled access credit, enhanced oil recovery credit, and credit for employer-provided childcare facilities and services. How to fill out a 1040x form for the irs Any special depreciation allowance. How to fill out a 1040x form for the irs Basis adjustment for investment credit property under section 50(c) of the Internal Revenue Code. How to fill out a 1040x form for the irs For information about how to determine the cost or other basis of property, see What Is the Basis of Your Depreciable Property , earlier. How to fill out a 1040x form for the irs Also, see chapter 6. How to fill out a 1040x form for the irs For additional credits and deductions that affect basis, see section 1016 of the Internal Revenue Code. How to fill out a 1040x form for the irs Which Recovery Period Applies? The recovery period of property is the number of years over which you recover its cost or other basis. How to fill out a 1040x form for the irs It is determined based on the depreciation system (GDS or ADS) used. How to fill out a 1040x form for the irs See Table 7-1 for recovery periods under both GDS and ADS for some commonly used assets. How to fill out a 1040x form for the irs For a complete list of recovery periods, see the Table of Class Lives and Recovery Periods in Appendix B of Publication 946. How to fill out a 1040x form for the irs House trailers for farm laborers. How to fill out a 1040x form for the irs   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). How to fill out a 1040x form for the irs A 7-year recovery period under GDS. How to fill out a 1040x form for the irs A 10-year recovery period under ADS. How to fill out a 1040x form for the irs   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. How to fill out a 1040x form for the irs A 20-year recovery period under GDS. How to fill out a 1040x form for the irs A 25-year recovery period under ADS. How to fill out a 1040x form for the irs Water wells. How to fill out a 1040x form for the irs   Water wells used to provide water for raising poultry and livestock are land improvements. How to fill out a 1040x form for the irs If they are depreciable, use one of the following recovery periods. How to fill out a 1040x form for the irs A 15-year recovery period under GDS. How to fill out a 1040x form for the irs A 20-year recovery period under ADS. How to fill out a 1040x form for the irs   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 . How to fill out a 1040x form for the irs Table 7-1. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs 2 Not including single purpose agricultural or horticultural structures. How to fill out a 1040x form for the irs 3 Used by logging and sawmill operators for cutting of timber. How to fill out a 1040x form for the irs 4 For property placed in service after May 12, 1993; for property placed in service before May 13, 1993,  the recovery period is 31. How to fill out a 1040x form for the irs 5 years. How to fill out a 1040x form for the irs Which Convention Applies? Under MACRS, averaging conventions establish when the recovery period begins and ends. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs Use one of the following conventions. How to fill out a 1040x form for the irs The half-year convention. How to fill out a 1040x form for the irs The mid-month convention. How to fill out a 1040x form for the irs The mid-quarter convention. How to fill out a 1040x form for the irs For a detailed explanation of each convention, see Which Convention Applies in chapter 4 of Publication 946. How to fill out a 1040x form for the irs Also, see the Instructions for Form 4562. How to fill out a 1040x form for the irs Which Depreciation Method Applies? MACRS provides three depreciation methods under GDS and one depreciation method under ADS. How to fill out a 1040x form for the irs The 200% declining balance method over a GDS recovery period. How to fill out a 1040x form for the irs The 150% declining balance method over a GDS recovery period. How to fill out a 1040x form for the irs The straight line method over a GDS recovery period. How to fill out a 1040x form for the irs The straight line method over an ADS recovery period. How to fill out a 1040x form for the irs Depreciation Table. How to fill out a 1040x form for the irs   The following table lists the types of property you can depreciate under each method. How to fill out a 1040x form for the irs The declining balance method is abbreviated as DB and the straight line method is abbreviated as SL. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs   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. How to fill out a 1040x form for the irs The straight line method over a GDS recovery period. How to fill out a 1040x form for the irs The straight line method over an ADS recovery period. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs If you made this election, continue to use the same method and recovery period for that property. How to fill out a 1040x form for the irs Real property. How to fill out a 1040x form for the irs   You can depreciate real property using the straight line method under either GDS or ADS. How to fill out a 1040x form for the irs Switching to straight line. How to fill out a 1040x form for the irs   If you use a declining balance method, you switch to the straight line method in the year it provides an equal or greater deduction. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs The tables have the switch to the straight line method built into their rates. How to fill out a 1040x form for the irs Fruit or nut trees and vines. How to fill out a 1040x form for the irs   Depreciate trees and vines bearing fruit or nuts under GDS using the straight line method over a 10-year recovery period. How to fill out a 1040x form for the irs ADS required for some farmers. How to fill out a 1040x form for the irs   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. How to fill out a 1040x form for the irs See chapter 6 for a discussion of the application of the uniform capitalization rules to farm property. How to fill out a 1040x form for the irs Electing a different method. How to fill out a 1040x form for the irs   As shown in the Depreciation Table , you can elect a different method for depreciation for certain types of property. How to fill out a 1040x form for the irs You must make the election by the due date of the return (including extensions) for the year you placed the property in service. How to fill out a 1040x form for the irs 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). How to fill out a 1040x form for the irs Attach the election to the amended return and write “Filed pursuant to section 301. How to fill out a 1040x form for the irs 9100-2” on the election statement. How to fill out a 1040x form for the irs File the amended return at the same address you filed the original return. How to fill out a 1040x form for the irs Once you make the election, you cannot change it. How to fill out a 1040x form for the irs    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. How to fill out a 1040x form for the irs However, you can make the election on a property-by-property basis for residential rental and nonresidential real property. How to fill out a 1040x form for the irs Straight line election. How to fill out a 1040x form for the irs   Instead of using the declining balance method, you can elect to use the straight line method over the GDS recovery period. How to fill out a 1040x form for the irs Make the election by entering “S/L” under column (f) in Part III of Form 4562. How to fill out a 1040x form for the irs ADS election. How to fill out a 1040x form for the irs   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. How to fill out a 1040x form for the irs ADS uses the straight line method of depreciation over the ADS recovery periods, which are generally longer than the GDS recovery periods. How to fill out a 1040x form for the irs The ADS recovery periods for many assets used in the business of farming are listed in Table 7–1. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs Then you are ready to figure your depreciation deduction. How to fill out a 1040x form for the irs You can figure it in one of two ways. How to fill out a 1040x form for the irs You can use the percentage tables provided by the IRS. How to fill out a 1040x form for the irs You can figure your own deduction without using the tables. How to fill out a 1040x form for the irs Figuring your own MACRS deduction will generally result in a slightly different amount than using the tables. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs These percentage tables are in Appendix A of Publication 946. How to fill out a 1040x form for the irs Rules for using the tables. How to fill out a 1040x form for the irs   The following rules cover the use of the percentage tables. How to fill out a 1040x form for the irs You must apply the rates in the percentage tables to your property's unadjusted basis. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs You cannot use the percentage tables for a short tax year. How to fill out a 1040x form for the irs See chapter 4 of Publication 946 for information on how to figure the deduction for a short tax year. How to fill out a 1040x form for the irs You generally must continue to use them for the entire recovery period of the property. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs Basis adjustment due to casualty loss. How to fill out a 1040x form for the irs   If you reduce the basis of your property because of a casualty, you cannot continue to use the percentage tables. How to fill out a 1040x form for the irs 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. How to fill out a 1040x form for the irs See Figuring the Deduction Without Using the Tables in chapter 4 of Publication 946. How to fill out a 1040x form for the irs Figuring depreciation using the 150% DB method and half-year convention. How to fill out a 1040x form for the irs    Table 7-2 has the percentages for 3-, 5-, 7-, and 20-year property. How to fill out a 1040x form for the irs The percentages are based on the 150% declining balance method with a change to the straight line method. How to fill out a 1040x form for the irs This table covers only the half-year convention and the first 8 years for 20-year property. How to fill out a 1040x form for the irs See Appendix A in Publication 946 for complete MACRS tables, including tables for the mid-quarter and mid-month convention. How to fill out a 1040x form for the irs   The following examples show how to figure depreciation under MACRS using the percentages in Table 7-2 . How to fill out a 1040x form for the irs Example 1. How to fill out a 1040x form for the irs During the year, you bought an item of 7-year property for $10,000 and placed it in service. How to fill out a 1040x form for the irs You do not elect a section 179 expense deduction for this property. How to fill out a 1040x form for the irs In addition, the property is not qualified property for purposes of the special depreciation allowance. How to fill out a 1040x form for the irs The unadjusted basis of the property is $10,000. How to fill out a 1040x form for the irs You use the percentages in Table 7-2 to figure your deduction. How to fill out a 1040x form for the irs Since this is 7-year property, you multiply $10,000 by 10. How to fill out a 1040x form for the irs 71% to get this year's depreciation of $1,071. How to fill out a 1040x form for the irs For next year, your depreciation will be $1,913 ($10,000 × 19. How to fill out a 1040x form for the irs 13%). How to fill out a 1040x form for the irs Example 2. How to fill out a 1040x form for the irs You had a barn constructed on your farm at a cost of $20,000. How to fill out a 1040x form for the irs You placed the barn in service this year. How to fill out a 1040x form for the irs You elect not to claim the special depreciation allowance. How to fill out a 1040x form for the irs The barn is 20-year property and you use the table percentages to figure your deduction. How to fill out a 1040x form for the irs You figure this year's depreciation by multiplying $20,000 (unadjusted basis) by 3. How to fill out a 1040x form for the irs 75% to get $750. How to fill out a 1040x form for the irs For next year, your depreciation will be $1,443. How to fill out a 1040x form for the irs 80 ($20,000 × 7. How to fill out a 1040x form for the irs 219%). How to fill out a 1040x form for the irs Table 7-2. How to fill out a 1040x form for the irs 150% Declining Balance Method (Half-Year Convention) Year 3-Year 5-Year 7-Year 20-Year 1 25. How to fill out a 1040x form for the irs 0 % 15. How to fill out a 1040x form for the irs 00 % 10. How to fill out a 1040x form for the irs 71 % 3. How to fill out a 1040x form for the irs 750 % 2 37. How to fill out a 1040x form for the irs 5   25. How to fill out a 1040x form for the irs 50   19. How to fill out a 1040x form for the irs 13   7. How to fill out a 1040x form for the irs 219   3 25. How to fill out a 1040x form for the irs 0   17. How to fill out a 1040x form for the irs 85   15. How to fill out a 1040x form for the irs 03   6. How to fill out a 1040x form for the irs 677   4 12. How to fill out a 1040x form for the irs 5   16. How to fill out a 1040x form for the irs 66   12. How to fill out a 1040x form for the irs 25   6. How to fill out a 1040x form for the irs 177   5     16. How to fill out a 1040x form for the irs 66   12. How to fill out a 1040x form for the irs 25   5. How to fill out a 1040x form for the irs 713   6     8. How to fill out a 1040x form for the irs 33   12. How to fill out a 1040x form for the irs 25   5. How to fill out a 1040x form for the irs 285   7         12. How to fill out a 1040x form for the irs 25   4. How to fill out a 1040x form for the irs 888   8         6. How to fill out a 1040x form for the irs 13   4. How to fill out a 1040x form for the irs 522   Figuring depreciation using the straight line method and half-year convention. How to fill out a 1040x form for the irs   The following table has the straight line percentages for 3-, 5-, 7-, and 20-year property using the half-year convention. How to fill out a 1040x form for the irs The table covers only the first 8 years for 20-year property. How to fill out a 1040x form for the irs See Appendix A in Publication 946 for complete MACRS tables, including tables for the mid-quarter and mid-month convention. How to fill out a 1040x form for the irs Table 7-3. How to fill out a 1040x form for the irs Straight Line Method (Half-Year Convention) Year 3-Year 5-Year 7-Year 20-Year 1 16. How to fill out a 1040x form for the irs 67 % 10 % 7. How to fill out a 1040x form for the irs 14 % 2. How to fill out a 1040x form for the irs 5 % 2 33. How to fill out a 1040x form for the irs 33   20   14. How to fill out a 1040x form for the irs 29   5. How to fill out a 1040x form for the irs 0   3 33. How to fill out a 1040x form for the irs 33   20   14. How to fill out a 1040x form for the irs 29   5. How to fill out a 1040x form for the irs 0   4 16. How to fill out a 1040x form for the irs 67   20   14. How to fill out a 1040x form for the irs 28   5. How to fill out a 1040x form for the irs 0   5     20   14. How to fill out a 1040x form for the irs 29   5. How to fill out a 1040x form for the irs 0   6     10   14. How to fill out a 1040x form for the irs 28   5. How to fill out a 1040x form for the irs 0   7         14. How to fill out a 1040x form for the irs 29   5. How to fill out a 1040x form for the irs 0   8         7. How to fill out a 1040x form for the irs 14   5. How to fill out a 1040x form for the irs 0