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Instructions For 1040x

Form 1040s1040ez Tax Booklet1040x Free Software Downloads2006 Utah State Tax ReturnFree Tax Filing 2012 OnlineIrs State Tax FormsPrintable 2011 Tax FormsHow Do I Amend A Tax Return For 2010File 1040 XEfile 2012 Tax Return FreeFree Tax Filing StateHow To Prepare An Amended Tax Return2011 Tax ReturnE File 2012 Federal Tax Return2007 TaxesTax Filing Deadline 2010Free State Efile Tax ReturnFree Tax Preparation OnlineH&r Block Free Tax ReturnHow To Amend A Tax Return1040ez Fill InTurbo Tax Amended ReturnFile State Taxes For FreeIrs GovHow To File A Amended Tax ReturnFile 1040xFile 2008 Taxes1040a 2012 Tax ReturnState Taxs1040 Ez InstructionsFile Federal And State Taxes Free OnlineEz Tax Form 2013Hnrblock ComTax Form EzStates With No Retirement Income TaxIrs Amended TaxesHrblockfreeFile 2011 Taxes For Free1040 Ez Tax FormsTurbotax For Military Members Free

Instructions For 1040x

Instructions for 1040x Publication 907 - Introductory Material Table of Contents Future Developments IntroductionOrdering forms and publications. Instructions for 1040x Tax questions. Instructions for 1040x Future Developments For the latest information about developments related to Publication 907, such as legislation enacted after this publication was published, go to www. Instructions for 1040x IRS. Instructions for 1040x gov/pub907. Instructions for 1040x    Introduction This publication gives you a brief introduction to certain parts of the tax law of particular interest to people with disabilities and those who care for people with disabilities. Instructions for 1040x It includes highlights about: Income, Itemized deductions, Tax credits, Household employers, and Business tax incentives. Instructions for 1040x You will find most of the information you need to complete your tax return in your form instruction booklet. Instructions for 1040x If you need additional information, you may want to order a free tax publication. Instructions for 1040x You may also want to take advantage of the other free tax help services that the IRS provides. Instructions for 1040x See How To Get Tax Help , at the end of this publication, for information about getting publications, forms, and free tax services. Instructions for 1040x Comments and suggestions. Instructions for 1040x   We welcome your comments about this publication and your suggestions for future editions. Instructions for 1040x   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Instructions for 1040x NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Instructions for 1040x Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Instructions for 1040x   You can send your comments from www. Instructions for 1040x irs. Instructions for 1040x gov/formspubs/. Instructions for 1040x Click on “More Information” and then on “Comment on Tax Forms and Publications”. Instructions for 1040x   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Instructions for 1040x Ordering forms and publications. Instructions for 1040x   Visit www. Instructions for 1040x irs. Instructions for 1040x gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. Instructions for 1040x Internal Revenue Service 1201 N. Instructions for 1040x Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Instructions for 1040x   If you have a tax question, check the information available on IRS. Instructions for 1040x gov or call 1-800-829-1040. Instructions for 1040x We cannot answer tax questions sent to either of the above addresses. Instructions for 1040x Prev  Up  Next   Home   More Online Publications
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Beware: Offers to Skip a Payment

If your credit company invites you to skip a monthly payment without a penalty, it is not doing you a favor. You will still owe finance charges on your unpaid balance. And interest could be adding up on any purchases you make after the due date you skipped.

Beware: Teaser Rates

Some cards are advertised with very low introductory interest rates called teasers. The rate is good for a short period of time. If you know you can pay what you owe while the low rate is in effect, it could be a good deal. But if the teaser time runs out and you still owe money, you could end up paying a higher rate than you might have without the special introductory rate. Just one late payment could also cancel the teaser rate.

Beware: Credit Insurance

When you take out a loan for a big purchase, a salesperson may try to sell you credit insurance. Your credit card company may also encourage you to purchase credit insurance. The coverage may be promoted as a way for you to protect yourself if your property is damaged or lost. Other credit insurance offers promises to make loan payments if you are laid off, become disabled or die. It is almost always better to buy regular property, life or disability insurance instead of credit insurance.

Be Alert: 'Credit Repair' Scams

Beware! Before you sign up for fee based credit repair services, beware. Many of the promised services are either illegal or ones you can do for free by yourself. Before you sign up to work with these companies, here are some tidbits to keep in mind:

  • A credit repair company must give you a copy of the "Consumer Credit File Rights under State and Federal Law" before you sign a contract.
  • The company cannot perform any services until you have signed a written contract and completed a three day waiting period, during which time you can cancel the contract without paying any fees.
  • The company cannot charge you until it has completed the promised services, according to the Credit Repair Organizations Act.
  • It is illegal to erase timely and accurate negative information contained in your credit history.
  • Suggestions that you create a new credit history (also called file segregation) by requesting an Employer Identification Number from the IRS are also illegal.
  • You can work to solve your own credit challenges, by requesting a free copy of your credit report, and by working with creditors to dispute incorrect information.

CARD Act Protections for Consumers

The Credit Card Accountability Responsibility & Disclosure (CARD) Act brought about sweeping protections for consumers. Among other things, your credit card company:

Fees

  • Cannot change rates or fees without sending you a notice 45 days in advance in most cases.
  • Must give you the option of rejecting a fee increase, but be aware that the credit card company may close your account if you reject the fee increase and may require a higher monthly payment.
  • Cannot charge you a late payment fee of more than $25, regardless of how much you owe- unless one of your last six payments was late or the credit card company can justify a higher fee based on the cost of late payments.
  • Cannot charge a late payment fee that is greater than your minimum payment.
  • Cannot charge you an inactivity fee for not using your card.
  • Cannot charge you more than one fee for a single late payment or any other violation of your cardholder agreement.
  • Cannot charge you over-the-limit transaction fees unless you opt in, stating that you want to allow transactions that take you over your credit card limit. If the credit card company allows the transaction without your opt-in, it cannot charge you a fee.
  • Can impose only one fee per billing cycle for transactions that take you over your credit limit if you opt in to over-the-limit transactions. You can revoke your opt-in at any time.

Payments

  • Has to tell you how long it will take to pay off your balance if you make only minimum payments.
  • Must mail or deliver your credit card bill at least 21 days before your payment is due.
  • Must apply any payments above the minimum required amount to the balance with the highest interest rate, if you have more than one rate.

Interest Rates

  • Cannot increase your rate for the first 12 months after you open an account unless you have a variable interest rate or an introductory rate; you are more than 60 days late paying your bill; or you are in a workout agreement and don't make payments as arranged.
  • Cannot charge higher rates for purchases made before you receive notice of a new rate.
  • Cannot use the double-cycle billing method when calculating interest; interest can only be charged on balances within the current billing cycle.
  • Cannot increase your Annual Percentage Rate (APR) without explaining why it is doing so. If your credit card company increases your APR, it generally must re-evaluate that rate increase every six months. Under some circumstances, it may have to reduce your rate after the evaluation.

What's more, a credit card company can grant credit cards to consumers under age 21 only if they can show they are able to make payments or have a cosigner for the card. The Federal Reserve has more information about CARD Act protections.

The Instructions For 1040x

Instructions for 1040x 5. Instructions for 1040x   Additional Rules for Listed Property Table of Contents Introduction Useful Items - You may want to see: What Is Listed Property?Passenger Automobiles Other Property Used for Transportation Computers and Related Peripheral Equipment Can Employees Claim a Deduction? What Is the Business-Use Requirement?How To Allocate Use Qualified Business Use Recapture of Excess Depreciation Lessee's Inclusion Amount Do the Passenger Automobile Limits Apply?Maximum Depreciation Deduction Deductions After the Recovery Period Deductions For Passenger Automobiles Acquired in a Trade-in What Records Must Be Kept?Adequate Records How Is Listed Property Information Reported? Introduction This chapter discusses the deduction limits and other special rules that apply to certain listed property. Instructions for 1040x Listed property includes cars and other property used for transportation, property used for entertainment, and certain computers. Instructions for 1040x Deductions for listed property (other than certain leased property) are subject to the following special rules and limits. Instructions for 1040x Deduction for employees. Instructions for 1040x If your use of the property is not for your employer's convenience or is not required as a condition of your employment, you cannot deduct depreciation or rent expenses for your use of the property as an employee. Instructions for 1040x Business-use requirement. Instructions for 1040x If the property is not used predominantly (more than 50%) for qualified business use, you cannot claim the section 179 deduction or a special depreciation allowance. Instructions for 1040x In addition, you must figure any depreciation deduction under the Modified Accelerated Cost Recovery System (MACRS) using the straight line method over the ADS recovery period. Instructions for 1040x You may also have to recapture (include in income) any excess depreciation claimed in previous years. Instructions for 1040x A similar inclusion amount applies to certain leased property. Instructions for 1040x Passenger automobile limits and rules. Instructions for 1040x Annual limits apply to depreciation deductions (including section 179 deductions and any special depreciation allowance) for certain passenger automobiles. Instructions for 1040x You can continue to deduct depreciation for the unrecovered basis resulting from these limits after the end of the recovery period. Instructions for 1040x This chapter defines listed property and explains the special rules and depreciation deduction limits that apply, including the special inclusion amount rule for leased property. Instructions for 1040x It also discusses the recordkeeping rules for listed property and explains how to report information about the property on your tax return. Instructions for 1040x Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 535 Business Expenses 587 Business Use of Your Home (Including Use by Daycare Providers) Form (and Instructions) 2106 Employee Business Expenses 2106-EZ Unreimbursed Employee Business Expenses 4562 Depreciation and Amortization 4797 Sales of Business Property See chapter 6 for information about getting publications and forms. Instructions for 1040x What Is Listed Property? Listed property is any of the following. Instructions for 1040x Passenger automobiles (as defined later). Instructions for 1040x Any other property used for transportation, unless it is an excepted vehicle. Instructions for 1040x Property generally used for entertainment, recreation, or amusement (including photographic, phonographic, communication, and video-recording equipment). Instructions for 1040x Computers and related peripheral equipment, unless used only at a regular business establishment and owned or leased by the person operating the establishment. Instructions for 1040x A regular business establishment includes a portion of a dwelling unit that is used both regularly and exclusively for business as discussed in Publication 587. Instructions for 1040x Improvements to listed property. Instructions for 1040x   An improvement made to listed property that must be capitalized is treated as a new item of depreciable property. Instructions for 1040x The recovery period and method of depreciation that apply to the listed property as a whole also apply to the improvement. Instructions for 1040x For example, if you must depreciate the listed property using the straight line method, you also must depreciate the improvement using the straight line method. Instructions for 1040x Passenger Automobiles A passenger automobile is any four-wheeled vehicle made primarily for use on public streets, roads, and highways and rated at 6,000 pounds or less of unloaded gross vehicle weight (6,000 pounds or less of gross vehicle weight for trucks and vans). Instructions for 1040x It includes any part, component, or other item physically attached to the automobile at the time of purchase or usually included in the purchase price of an automobile. Instructions for 1040x The following vehicles are not considered passenger automobiles for these purposes. Instructions for 1040x An ambulance, hearse, or combination ambulance-hearse used directly in a trade or business. Instructions for 1040x A vehicle used directly in the trade or business of transporting persons or property for pay or hire. Instructions for 1040x A truck or van that is a qualified nonpersonal use vehicle. Instructions for 1040x Qualified nonpersonal use vehicles. Instructions for 1040x   Qualified nonpersonal use vehicles are vehicles that by their nature are not likely to be used more than a minimal amount for personal purposes. Instructions for 1040x They include the trucks and vans listed as excepted vehicles under Other Property Used for Transportation , next. Instructions for 1040x They also include trucks and vans that have been specially modified so that they are not likely to be used more than a minimal amount for personal purposes, such as by installation of permanent shelving and painting the vehicle to display advertising or the company's name. Instructions for 1040x For a detailed discussion of passenger automobiles, including leased passenger automobiles, see  Publication 463. Instructions for 1040x Other Property Used for Transportation Although vehicles used to transport persons or property for pay or hire and vehicles rated at more than the 6,000-pound threshold are not passenger automobiles, they are still “other property used for transportation” and are subject to the special rules for listed property. Instructions for 1040x Other property used for transportation includes trucks, buses, boats, airplanes, motorcycles, and any other vehicles used to transport persons or goods. Instructions for 1040x Excepted vehicles. Instructions for 1040x   Other property used for transportation does not include the following qualified nonpersonal use vehicles (defined earlier under Passenger Automobiles ). Instructions for 1040x Clearly marked police and fire vehicles. Instructions for 1040x Unmarked vehicles used by law enforcement officers if the use is officially authorized. Instructions for 1040x Ambulances used as such and hearses used as such. Instructions for 1040x Any vehicle with a loaded gross vehicle weight of over 14,000 pounds that is designed to carry cargo. Instructions for 1040x Bucket trucks (cherry pickers), cement mixers, dump trucks (including garbage trucks), flatbed trucks, and refrigerated trucks. Instructions for 1040x Combines, cranes and derricks, and forklifts. Instructions for 1040x Delivery trucks with seating only for the driver, or only for the driver plus a folding jump seat. Instructions for 1040x Qualified moving vans. Instructions for 1040x Qualified specialized utility repair trucks. Instructions for 1040x School buses used in transporting students and employees of schools. Instructions for 1040x Other buses with a capacity of at least 20 passengers that are used as passenger buses. Instructions for 1040x Tractors and other special purpose farm vehicles. Instructions for 1040x Clearly marked police and fire vehicle. Instructions for 1040x   A clearly marked police or fire vehicle is a vehicle that meets all the following requirements. Instructions for 1040x It is owned or leased by a governmental unit or an agency or instrumentality of a governmental unit. Instructions for 1040x It is required to be used for commuting by a police officer or fire fighter who, when not on a regular shift, is on call at all times. Instructions for 1040x It is prohibited from being used for personal use (other than commuting) outside the limit of the police officer's arrest powers or the fire fighter's obligation to respond to an emergency. Instructions for 1040x It is clearly marked with painted insignia or words that make it readily apparent that it is a police or fire vehicle. Instructions for 1040x A marking on a license plate is not a clear marking for these purposes. Instructions for 1040x Qualified moving van. Instructions for 1040x   A qualified moving van is any truck or van used by a professional moving company for moving household or business goods if the following requirements are met. Instructions for 1040x No personal use of the van is allowed other than for travel to and from a move site or for minor personal use, such as a stop for lunch on the way from one move site to another. Instructions for 1040x Personal use for travel to and from a move site happens no more than five times a month on average. Instructions for 1040x Personal use is limited to situations in which it is more convenient to the employer, because of the location of the employee's residence in relation to the location of the move site, for the van not to be returned to the employer's business location. Instructions for 1040x Qualified specialized utility repair truck. Instructions for 1040x   A truck is a qualified specialized utility repair truck if it is not a van or pickup truck and all the following apply. Instructions for 1040x The truck was specifically designed for and is used to carry heavy tools, testing equipment, or parts. Instructions for 1040x Shelves, racks, or other permanent interior construction has been installed to carry and store the tools, equipment, or parts and would make it unlikely that the truck would be used, other than minimally, for personal purposes. Instructions for 1040x The employer requires the employee to drive the truck home in order to be able to respond in emergency situations for purposes of restoring or maintaining electricity, gas, telephone, water, sewer, or steam utility services. Instructions for 1040x Computers and Related Peripheral Equipment A computer is a programmable, electronically activated device capable of accepting information, applying prescribed processes to the information, and supplying the results of those processes with or without human intervention. Instructions for 1040x It consists of a central processing unit with extensive storage, logic, arithmetic, and control capabilities. Instructions for 1040x Related peripheral equipment is any auxiliary machine which is designed to be controlled by the central processing unit of a computer. Instructions for 1040x The following are neither computers nor related peripheral equipment. Instructions for 1040x Any equipment that is an integral part of other property that is not a computer. Instructions for 1040x Typewriters, calculators, adding and accounting machines, copiers, duplicating equipment, and similar equipment. Instructions for 1040x Equipment of a kind used primarily for the user's amusement or entertainment, such as video games. Instructions for 1040x Can Employees Claim a Deduction? If you are an employee, you can claim a depreciation deduction for the use of your listed property (whether owned or rented) in performing services as an employee only if your use is a business use. Instructions for 1040x The use of your property in performing services as an employee is a business use only if both the following requirements are met. Instructions for 1040x The use is for your employer's convenience. Instructions for 1040x The use is required as a condition of your employment. Instructions for 1040x If these requirements are not met, you cannot deduct depreciation (including the section 179 deduction) or rent expenses for your use of the property as an employee. Instructions for 1040x Employer's convenience. Instructions for 1040x   Whether the use of listed property is for your employer's convenience must be determined from all the facts. Instructions for 1040x The use is for your employer's convenience if it is for a substantial business reason of the employer. Instructions for 1040x The use of listed property during your regular working hours to carry on your employer's business generally is for the employer's convenience. Instructions for 1040x Condition of employment. Instructions for 1040x   Whether the use of listed property is a condition of your employment depends on all the facts and circumstances. Instructions for 1040x The use of property must be required for you to perform your duties properly. Instructions for 1040x Your employer does not have to require explicitly that you use the property. Instructions for 1040x However, a mere statement by the employer that the use of the property is a condition of your employment is not sufficient. Instructions for 1040x Example 1. Instructions for 1040x Virginia Sycamore is employed as a courier with We Deliver, which provides local courier services. Instructions for 1040x She owns and uses a motorcycle to deliver packages to downtown offices. Instructions for 1040x We Deliver explicitly requires all delivery persons to own a car or motorcycle for use in their employment. Instructions for 1040x Virginia's use of the motorcycle is for the convenience of We Deliver and is required as a condition of employment. Instructions for 1040x Example 2. Instructions for 1040x Bill Nelson is an inspector for Uplift, a construction company with many sites in the local area. Instructions for 1040x He must travel to these sites on a regular basis. Instructions for 1040x Uplift does not furnish an automobile or explicitly require him to use his own automobile. Instructions for 1040x However, it pays him for any costs he incurs in traveling to the various sites. Instructions for 1040x The use of his own automobile or a rental automobile is for the convenience of Uplift and is required as a condition of employment. Instructions for 1040x Example 3. Instructions for 1040x Assume the same facts as in Example 2 except that Uplift furnishes a car to Bill, who chooses to use his own car and receive payment for using it. Instructions for 1040x The use of his own car is neither for the convenience of Uplift nor required as a condition of employment. Instructions for 1040x Example 4. Instructions for 1040x Marilyn Lee is a pilot for Y Company, a small charter airline. Instructions for 1040x Y requires pilots to obtain 80 hours of flight time annually in addition to flight time spent with the airline. Instructions for 1040x Pilots usually can obtain these hours by flying with the Air Force Reserve or by flying part-time with another airline. Instructions for 1040x Marilyn owns her own airplane. Instructions for 1040x The use of her airplane to obtain the required flight hours is neither for the convenience of the employer nor required as a condition of employment. Instructions for 1040x Example 5. Instructions for 1040x David Rule is employed as an engineer with Zip, an engineering contracting firm. Instructions for 1040x He occasionally takes work home at night rather than work late in the office. Instructions for 1040x He owns and uses a home computer which is virtually identical to the office model. Instructions for 1040x His use of the computer is neither for the convenience of his employer nor required as a condition of employment. Instructions for 1040x What Is the Business-Use Requirement? You can claim the section 179 deduction and a special depreciation allowance for listed property and depreciate listed property using GDS and a declining balance method if the property meets the business-use requirement. Instructions for 1040x To meet this requirement, listed property must be used predominantly (more than 50% of its total use) for qualified business use. Instructions for 1040x If this requirement is not met, the following rules apply. Instructions for 1040x Property not used predominantly for qualified business use during the year it is placed in service does not qualify for the section 179 deduction. Instructions for 1040x Property not used predominantly for qualified business use during the year it is placed in service does not qualify for a special depreciation allowance. Instructions for 1040x Any depreciation deduction under MACRS for property not used predominantly for qualified business use during any year must be figured using the straight line method over the ADS recovery period. Instructions for 1040x This rule applies each year of the recovery period. Instructions for 1040x Excess depreciation on property previously used predominantly for qualified business use must be recaptured (included in income) in the first year in which it is no longer used predominantly for qualified business use. Instructions for 1040x A lessee must add an inclusion amount to income in the first year in which the leased property is not used predominantly for qualified business use. Instructions for 1040x Being required to use the straight line method for an item of listed property not used predominantly for qualified business use is not the same as electing the straight line method. Instructions for 1040x It does not mean that you have to use the straight line method for other property in the same class as the item of listed property. Instructions for 1040x Exception for leased property. Instructions for 1040x   The business-use requirement generally does not apply to any listed property leased or held for leasing by anyone regularly engaged in the business of leasing listed property. Instructions for 1040x   You are considered regularly engaged in the business of leasing listed property only if you enter into contracts for the leasing of listed property with some frequency over a continuous period of time. Instructions for 1040x This determination is made on the basis of the facts and circumstances in each case and takes into account the nature of your business in its entirety. Instructions for 1040x Occasional or incidental leasing activity is insufficient. Instructions for 1040x For example, if you lease only one passenger automobile during a tax year, you are not regularly engaged in the business of leasing automobiles. Instructions for 1040x An employer who allows an employee to use the employer's property for personal purposes and charges the employee for the use is not regularly engaged in the business of leasing the property used by the employee. Instructions for 1040x How To Allocate Use To determine whether the business-use requirement is met, you must allocate the use of any item of listed property used for more than one purpose during the year among its various uses. Instructions for 1040x For passenger automobiles and other means of transportation, allocate the property's use on the basis of mileage. Instructions for 1040x You determine the percentage of qualified business use by dividing the number of miles you drove the vehicle for business purposes during the year by the total number of miles you drove the vehicle for all purposes (including business miles) during the year. Instructions for 1040x For other listed property, allocate the property's use on the basis of the most appropriate unit of time the property is actually used (rather than merely being available for use). Instructions for 1040x For example, you can determine the percentage of business use of a computer by dividing the number of hours you used the computer for business purposes during the year by the total number of hours you used the computer for all purposes (including business use) during the year. Instructions for 1040x Entertainment use. Instructions for 1040x   Treat the use of listed property for entertainment, recreation, or amusement purposes as a business use only to the extent you can deduct expenses (other than interest and property tax expenses) due to its use as an ordinary and necessary business expense. Instructions for 1040x Commuting use. Instructions for 1040x   The use of an automobile for commuting is not business use, regardless of whether work is performed during the trip. Instructions for 1040x For example, a business telephone call made on a car telephone while commuting to work does not change the character of the trip from commuting to business. Instructions for 1040x This is also true for a business meeting held in a car while commuting to work. Instructions for 1040x Similarly, a business call made on an otherwise personal trip does not change the character of a trip from personal to business. Instructions for 1040x The fact that an automobile is used to display material that advertises the owner's or user's trade or business does not convert an otherwise personal use into business use. Instructions for 1040x Use of your automobile by another person. Instructions for 1040x   If someone else uses your automobile, do not treat that use as business use unless one of the following conditions applies. Instructions for 1040x That use is directly connected with your business. Instructions for 1040x You properly report the value of the use as income to the other person and withhold tax on the income where required. Instructions for 1040x You are paid a fair market rent. Instructions for 1040x Treat any payment to you for the use of the automobile as a rent payment for purposes of item (3). Instructions for 1040x Employee deductions. Instructions for 1040x   If you are an employee, do not treat your use of listed property as business use unless it is for your employer's convenience and is required as a condition of your employment. Instructions for 1040x See Can Employees Claim a Deduction , earlier. Instructions for 1040x Qualified Business Use Qualified business use of listed property is any use of the property in your trade or business. Instructions for 1040x However, it does not include the following uses. Instructions for 1040x The leasing of property to any 5% owner or related person (to the extent the property is used by a 5% owner or person related to the owner or lessee of the property). Instructions for 1040x The use of property as pay for the services of a 5% owner or related person. Instructions for 1040x The use of property as pay for services of any person (other than a 5% owner or related person), unless the value of the use is included in that person's gross income and income tax is withheld on that amount where required. Instructions for 1040x Property does not stop being used predominantly for qualified business use because of a transfer at death. Instructions for 1040x Exception for leasing or compensatory use of aircraft. Instructions for 1040x   Treat the leasing of any aircraft by a 5% owner or related person, or the compensatory use of any aircraft, as a qualified business use if at least 25% of the total use of the aircraft during the year is for a qualified business use. Instructions for 1040x 5% owner. Instructions for 1040x   For a business entity that is not a corporation, a 5% owner is any person who owns more than 5% of the capital or profits interest in the business. Instructions for 1040x   For a corporation, a 5% owner is any person who owns, or is considered to own, either of the following. Instructions for 1040x More than 5% of the outstanding stock of the corporation. Instructions for 1040x Stock possessing more than 5% of the total combined voting power of all stock in the corporation. Instructions for 1040x Related persons. Instructions for 1040x   For a description of related persons, see Related persons in the discussion on property owned or used in 1986 under What Method Can You Use To Depreciate Your Property in chapter 1 . Instructions for 1040x For this purpose, however, treat as related persons only the relationships listed in items (1) through (10) of that discussion and substitute “50%” for “10%” each place it appears. Instructions for 1040x Examples. Instructions for 1040x   The following examples illustrate whether the use of business property is qualified business use. Instructions for 1040x Example 1. Instructions for 1040x John Maple is the sole proprietor of a plumbing contracting business. Instructions for 1040x John employs his brother, Richard, in the business. Instructions for 1040x As part of Richard's pay, he is allowed to use one of the company automobiles for personal use. Instructions for 1040x The company includes the value of the personal use of the automobile in Richard's gross income and properly withholds tax on it. Instructions for 1040x The use of the automobile is pay for the performance of services by a related person, so it is not a qualified business use. Instructions for 1040x Example 2. Instructions for 1040x John, in Example 1, allows unrelated employees to use company automobiles for personal purposes. Instructions for 1040x He does not include the value of the personal use of the company automobiles as part of their compensation and he does not withhold tax on the value of the use of the automobiles. Instructions for 1040x This use of company automobiles by employees is not a qualified business use. Instructions for 1040x Example 3. Instructions for 1040x James Company Inc. Instructions for 1040x owns several automobiles that its employees use for business purposes. Instructions for 1040x The employees also are allowed to take the automobiles home at night. Instructions for 1040x The fair market value of each employee's use of an automobile for any personal purpose, such as commuting to and from work, is reported as income to the employee and James Company withholds tax on it. Instructions for 1040x This use of company automobiles by employees, even for personal purposes, is a qualified business use for the company. Instructions for 1040x Investment Use The use of property to produce income in a nonbusiness activity (investment use) is not a qualified business use. Instructions for 1040x However, you can treat the investment use as business use to figure the depreciation deduction for the property in a given year. Instructions for 1040x Example 1. Instructions for 1040x Sarah Bradley uses a home computer 50% of the time to manage her investments. Instructions for 1040x She also uses the computer 40% of the time in her part-time consumer research business. Instructions for 1040x Sarah's home computer is listed property because it is not used at a regular business establishment. Instructions for 1040x She does not use the computer predominantly for qualified business use. Instructions for 1040x Therefore, she cannot elect a section 179 deduction or claim a special depreciation allowance for the computer. Instructions for 1040x She must depreciate it using the straight line method over the ADS recovery period. Instructions for 1040x Her combined business/investment use for determining her depreciation deduction is 90%. Instructions for 1040x Example 2. Instructions for 1040x If Sarah uses her computer 30% of the time to manage her investments and 60% of the time in her consumer research business, it is used predominantly for qualified business use. Instructions for 1040x She can elect a section 179 deduction and, if she does not deduct all the computer's cost, she can claim a special depreciation allowance and depreciate the computer using the 200% declining balance method over the GDS recovery period. Instructions for 1040x Her combined business/investment use for determining her depreciation deduction is 90%. Instructions for 1040x Recapture of Excess Depreciation If you used listed property more than 50% in a qualified business use in the year you placed it in service, you must recapture (include in income) excess depreciation in the first year you use it 50% or less. Instructions for 1040x You also increase the adjusted basis of your property by the same amount. Instructions for 1040x Excess depreciation is: The depreciation allowable for the property (including any section 179 deduction and special depreciation allowance claimed) for years before the first year you do not use the property predominantly for qualified business use, minus The depreciation that would have been allowable for those years if you had not used the property predominantly for qualified business use in the year you placed it in service. Instructions for 1040x To determine the amount in (2) above, you must refigure the depreciation using the straight line method and the ADS recovery period. Instructions for 1040x Example. Instructions for 1040x In June 2009, Ellen Rye purchased and placed in service a pickup truck that cost $18,000. Instructions for 1040x She used it only for qualified business use for 2009 through 2012. Instructions for 1040x Ellen claimed a section 179 deduction of $10,000 based on the purchase of the truck. Instructions for 1040x She began depreciating it using the 200% DB method over a 5-year GDS recovery period. Instructions for 1040x The pickup truck's gross vehicle weight was over 6,000 pounds, so it was not subject to the passenger automobile limits discussed later under Do the Passenger Automobile Limits Apply. Instructions for 1040x During 2013, she used the truck 50% for business and 50% for personal purposes. Instructions for 1040x She includes $4,018 excess depreciation in her gross income for 2013. Instructions for 1040x The excess depreciation is determined as follows. Instructions for 1040x Total section 179 deduction ($10,000) and depreciation claimed ($6,618) for 2009 through 2012. Instructions for 1040x (Depreciation is from Table A-1. Instructions for 1040x ) $16,618 Minus: Depreciation allowable (Table A-8):     2009 – 10% of $18,000 $1,800   2010 – 20% of $18,000 3,600   2011 – 20% of $18,000 3,600   2012 – 20% of $18,000 3,600 12,600 Excess depreciation $4,018 If Ellen's use of the truck does not change to 50% for business and 50% for personal purposes until 2015, there will be no excess depreciation. Instructions for 1040x The total depreciation allowable using Table A-8 through 2015 will be $18,000, which equals the total of the section 179 deduction and depreciation she will have claimed. Instructions for 1040x Where to figure and report recapture. Instructions for 1040x   Use Form 4797, Part IV, to figure the recapture amount. Instructions for 1040x Report the recapture amount as other income on the same form or schedule on which you took the depreciation deduction. Instructions for 1040x For example, report the recapture amount as other income on Schedule C (Form 1040) if you took the depreciation deduction on Schedule C. Instructions for 1040x If you took the depreciation deduction on Form 2106, report the recapture amount as other income on Form 1040, line 21. Instructions for 1040x Lessee's Inclusion Amount If you use leased listed property other than a passenger automobile for business/investment use, you must include an amount in your income in the first year your qualified business-use percentage is 50% or less. Instructions for 1040x Your qualified business-use percentage is the part of the property's total use that is qualified business use (defined earlier). Instructions for 1040x For the inclusion amount rules for a leased passenger automobile, see Leasing a Car in chapter 4 of Publication 463. Instructions for 1040x The inclusion amount is the sum of Amount A and Amount B, described next. Instructions for 1040x However, see the special rules for the inclusion amount, later, if your lease begins in the last 9 months of your tax year or is for less than one year. Instructions for 1040x Amount A. Instructions for 1040x   Amount A is: The fair market value of the property, multiplied by The business/investment use for the first tax year the qualified business-use percentage is 50% or less, multiplied by The applicable percentage from Table A-19 in Appendix A . Instructions for 1040x   The fair market value of the property is the value on the first day of the lease term. Instructions for 1040x If the capitalized cost of an item of listed property is specified in the lease agreement, you must treat that amount as the fair market value. Instructions for 1040x Amount B. Instructions for 1040x   Amount B is: The fair market value of the property, multiplied by The average of the business/investment use for all tax years the property was leased that precede the first tax year the qualified business-use percentage is 50% or less, multiplied by The applicable percentage from Table A–20 in Appendix A . Instructions for 1040x Maximum inclusion amount. Instructions for 1040x   The inclusion amount cannot be more than the sum of the deductible amounts of rent for the tax year in which the lessee must include the amount in gross income. Instructions for 1040x Inclusion amount worksheet. Instructions for 1040x   The following worksheet is provided to help you figure the inclusion amount for leased listed property. Instructions for 1040x Inclusion Amount Worksheet for Leased Listed Property 1. Instructions for 1040x Fair market value   2. Instructions for 1040x Business/investment use for first year business use is 50% or less   3. Instructions for 1040x Multiply line 1 by line 2. Instructions for 1040x   4. Instructions for 1040x Rate (%) from Table A-19   5. Instructions for 1040x Multiply line 3 by line 4. Instructions for 1040x This is Amount A. Instructions for 1040x   6. Instructions for 1040x Fair market value   7. Instructions for 1040x Average business/investment use for years property leased before the first year business use is 50% or less . Instructions for 1040x . Instructions for 1040x . Instructions for 1040x . Instructions for 1040x . Instructions for 1040x . Instructions for 1040x . Instructions for 1040x . Instructions for 1040x . Instructions for 1040x . Instructions for 1040x . Instructions for 1040x . Instructions for 1040x . Instructions for 1040x   8. Instructions for 1040x Multiply line 6 by line 7   9. Instructions for 1040x Rate (%) from Table A-20   10. Instructions for 1040x Multiply line 8 by line 9. Instructions for 1040x This is Amount B. Instructions for 1040x   11. Instructions for 1040x Add line 5 and line 10. Instructions for 1040x This is your inclusion amount. Instructions for 1040x Enter here and as other income on the form or schedule on which you originally took the deduction (for example, Schedule C or F (Form 1040), Form 1040, Form 1120, etc. Instructions for 1040x )         Example. Instructions for 1040x On February 1, 2011, Larry House, a calendar year taxpayer, leased and placed in service a computer with a fair market value of $3,000. Instructions for 1040x The lease is for a period of 5 years. Instructions for 1040x Larry does not use the computer at a regular business establishment, so it is listed property. Instructions for 1040x His business use of the property (all of which is qualified business use) is 80% in 2011, 60% in 2012, and 40% in 2013. Instructions for 1040x He must add an inclusion amount to gross income for 2013, the first tax year his qualified business-use percentage is 50% or less. Instructions for 1040x The computer has a 5-year recovery period under both GDS and ADS. Instructions for 1040x 2013 is the third tax year of the lease, so the applicable percentage from Table A-19 is −19. Instructions for 1040x 8%. Instructions for 1040x The applicable percentage from Table A-20 is 22. Instructions for 1040x 0%. Instructions for 1040x Larry's deductible rent for the computer for 2013 is $800. Instructions for 1040x Larry uses the Inclusion amount worksheet. Instructions for 1040x to figure the amount he must include in income for 2013. Instructions for 1040x His inclusion amount is $224, which is the sum of −$238 (Amount A) and $462 (Amount B). Instructions for 1040x Inclusion Amount Worksheet for Leased Listed Property 1. Instructions for 1040x Fair market value $3,000   2. Instructions for 1040x Business/investment use for first year business use is 50% or less 40 % 3. Instructions for 1040x Multiply line 1 by line 2. Instructions for 1040x 1,200   4. Instructions for 1040x Rate (%) from Table A-19 −19. Instructions for 1040x 8 % 5. Instructions for 1040x Multiply line 3 by line 4. Instructions for 1040x This is Amount A. Instructions for 1040x −238   6. Instructions for 1040x Fair market value 3,000   7. Instructions for 1040x Average business/investment use for years property leased before the first year business use is 50% or less 70 % 8. Instructions for 1040x Multiply line 6 by line 7 2,100   9. Instructions for 1040x Rate (%) from Table A-20 22. Instructions for 1040x 0 % 10. Instructions for 1040x Multiply line 8 by line 9. Instructions for 1040x This is Amount B. Instructions for 1040x 462   11. Instructions for 1040x Add line 5 and line 10. Instructions for 1040x This is your inclusion amount. Instructions for 1040x Enter here and as other income on the form or schedule on which you originally took the deduction (for example, Schedule C or F (Form 1040), Form 1040, Form 1120, etc. Instructions for 1040x ) $224           Lease beginning in the last 9 months of your tax year. Instructions for 1040x    The inclusion amount is subject to a special rule if all the following apply. Instructions for 1040x The lease term begins within 9 months before the close of your tax year. Instructions for 1040x You do not use the property predominantly (more than 50%) for qualified business use during that part of the tax year. Instructions for 1040x The lease term continues into your next tax year. Instructions for 1040x Under this special rule, add the inclusion amount to income in the next tax year. Instructions for 1040x Figure the inclusion amount by taking into account the average of the business/investment use for both tax years (line 2 of the Inclusion Amount Worksheet for Leased Listed Property) and the applicable percentage for the tax year the lease term begins. Instructions for 1040x Skip lines 6 through 9 of the worksheet and enter zero on line 10. Instructions for 1040x Example 1. Instructions for 1040x On August 1, 2012, Julie Rule, a calendar year taxpayer, leased and placed in service an item of listed property. Instructions for 1040x The property is 5-year property with a fair market value of $10,000. Instructions for 1040x Her property has a recovery period of 5 years under ADS. Instructions for 1040x The lease is for 5 years. Instructions for 1040x Her business use of the property was 50% in 2012 and 90% in 2013. Instructions for 1040x She paid rent of $3,600 for 2012, of which $3,240 is deductible. Instructions for 1040x She must include $147 in income in 2013. Instructions for 1040x The $147 is the sum of Amount A and Amount B. Instructions for 1040x Amount A is $147 ($10,000 × 70% × 2. Instructions for 1040x 1%), the product of the fair market value, the average business use for 2012 and 2013, and the applicable percentage for year one from Table A-19 . Instructions for 1040x Amount B is zero. Instructions for 1040x Lease for less than one year. Instructions for 1040x   A special rule for the inclusion amount applies if the lease term is less than one year and you do not use the property predominantly (more than 50%) for qualified business use. Instructions for 1040x The amount included in income is the inclusion amount (figured as described in the preceding discussions) multiplied by a fraction. Instructions for 1040x The numerator of the fraction is the number of days in the lease term and the denominator is 365 (or 366 for leap years). Instructions for 1040x   The lease term for listed property other than residential rental or nonresidential real property includes options to renew. Instructions for 1040x If you have two or more successive leases that are part of the same transaction (or a series of related transactions) for the same or substantially similar property, treat them as one lease. Instructions for 1040x Example 2. Instructions for 1040x On October 1, 2012, John Joyce, a calendar year taxpayer, leased and placed in service an item of listed property that is 3-year property. Instructions for 1040x This property had a fair market value of $15,000 and a recovery period of 5 years under ADS. Instructions for 1040x The lease term was 6 months (ending on March 31, 2013), during which he used the property 45% in business. Instructions for 1040x He must include $71 in income in 2013. Instructions for 1040x The $71 is the sum of Amount A and Amount B. Instructions for 1040x Amount A is $71 ($15,000 × 45% × 2. Instructions for 1040x 1% × 183/365), the product of the fair market value, the average business use for both years, and the applicable percentage for year one from Table A-19 , prorated for the length of the lease. Instructions for 1040x Amount B is zero. Instructions for 1040x Where to report inclusion amount. Instructions for 1040x   Report the inclusion amount figured as described in the preceding discussions as other income on the same form or schedule on which you took the deduction for your rental costs. Instructions for 1040x For example, report the inclusion amount as other income on Schedule C (Form 1040) if you took the deduction on Schedule C. Instructions for 1040x If you took the deduction for rental costs on Form 2106, report the inclusion amount as other income on Form 1040, line 21. Instructions for 1040x Do the Passenger Automobile Limits Apply? The depreciation deduction, including the section 179 deduction and special depreciation allowance, you can claim for a passenger automobile (defined earlier) each year is limited. Instructions for 1040x This section describes the maximum depreciation deduction amounts for 2013 and explains how to deduct, after the recovery period, the unrecovered basis of your property that results from applying the passenger automobile limit. Instructions for 1040x Exception for leased cars. Instructions for 1040x   The passenger automobile limits generally do not apply to passenger automobiles leased or held for leasing by anyone regularly engaged in the business of leasing passenger automobiles. Instructions for 1040x For information on when you are considered regularly engaged in the business of leasing listed property, including passenger automobiles, see Exception for leased property , earlier, under What Is the Business-Use Requirement . Instructions for 1040x Maximum Depreciation Deduction The passenger automobile limits are the maximum depreciation amounts you can deduct for a passenger automobile. Instructions for 1040x They are based on the date you placed the automobile in service. Instructions for 1040x Passenger Automobiles The maximum deduction amounts for most passenger automobiles are shown in the following table. Instructions for 1040x Maximum Depreciation Deduction for Passenger Automobiles Date       4th & Placed 1st 2nd 3rd Later In Service Year Year Year Years 2013 $11,1601 $5,100 $3,050 $1,875 2012 11,1601 5,100 3,050 1,875 2011 11,0602 4,900 2,950 1,775 2010 11,0602  4,900 2,950 1,775 2009 10,9603 4,800 2,850 1,775 2008 10,9603  4,800 2,850 1,775 2007 3,060 4,900 2,850 1,775 2006 2,960 4,800 2,850 1,775 2005 2,960 4,700 2,850 1,675 2004 10,6104 4,800 2,850 1,675 5/06/2003– 12/31/2003 10,7105 4,900 2,950 1,775 1/01/2003– 5/05/2003 7,6606 4,900 2,950 1,775 1If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,160. Instructions for 1040x 2If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,060. Instructions for 1040x 3If you elected not to claim any special depreciation allowance for the vehicle or the vehicle is not qualified property, the maximum deduction is $2,960. Instructions for 1040x 4If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $2,960. Instructions for 1040x 5If you acquired the vehicle before 5/06/03, the maximum deduction is $7,660. Instructions for 1040x If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $3,060. Instructions for 1040x 6If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $3,060. Instructions for 1040x If your business/investment use of the automobile is less than 100%, you must reduce the maximum deduction amount by multiplying the maximum amount by the percentage of business/investment use determined on an annual basis during the tax year. Instructions for 1040x If you have a short tax year, you must reduce the maximum deduction amount by multiplying the maximum amount by a fraction. Instructions for 1040x The numerator of the fraction is the number of months and partial months in the short tax year and the denominator is 12. Instructions for 1040x Example. Instructions for 1040x On April 15, 2013, Virginia Hart bought and placed in service a new car for $14,500. Instructions for 1040x She used the car only in her business. Instructions for 1040x She files her tax return based on the calendar year. Instructions for 1040x She does not elect a section 179 deduction and elected not to claim any special depreciation allowance for the car. Instructions for 1040x Under MACRS, a car is 5-year property. Instructions for 1040x Since she placed her car in service on April 15 and used it only for business, she uses the percentages in Table A-1 to figure her MACRS depreciation on the car. Instructions for 1040x Virginia multiplies the $14,500 unadjusted basis of her car by 0. Instructions for 1040x 20 to get her MACRS depreciation of $2,900 for 2013. Instructions for 1040x This $2,900 is below the maximum depreciation deduction of $3,160 for passenger automobiles placed in service in 2013. Instructions for 1040x She can deduct the full $2,900. Instructions for 1040x Electric Vehicles The maximum depreciation deductions for passenger automobiles that are produced to run primarily on electricity are higher than those for other automobiles. Instructions for 1040x The maximum deduction amounts for electric vehicles placed in service after August 5, 1997, and before January 1, 2007, are shown in the following table. Instructions for 1040x Owners of electric vehicles placed in service after December 31, 2006, should use the table of maximum deduction amounts later for electric vehicles classified as passenger automobiles or use the table of maximum deduction amounts for trucks and vans later, for electric vehicles classified as trucks and vans. Instructions for 1040x Maximum Depreciation Deduction For Electric Vehicles Date       4th & Placed 1st 2nd 3rd Later In Service Year Year Year Years 2006 $8,980 $14,400 $8,650 $5,225 2005 8,880 14,200 8,450 5,125 2004 31,8301 14,300 8,550 5,125 5/06/2003– 12/31/2003 32,0302 14,600 8,750 5,225 1/01/2003– 5/05/2003 22,8803 14,600 8,750 5,225 1If you elected not to claim any special depreciation allowance for the vehicle or the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $8,880. Instructions for 1040x 2If you acquired the vehicle before 5/06/03, the maximum deduction is $22,880. Instructions for 1040x If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $9,080. Instructions for 1040x 3 If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $9,080. Instructions for 1040x Trucks and Vans The maximum depreciation deductions for trucks and vans placed in service after 2002 are higher than those for other passenger automobiles. Instructions for 1040x The maximum deduction amounts for trucks and vans are shown in the following table. Instructions for 1040x Maximum Depreciation Deduction For Trucks and Vans Date       4th & Placed 1st 2nd 3rd Later In Service Year Year Year Years 2013 $11,3601 $5,400 $3,250 $1,975 2012 11,3601 5,300 3,150 1,875 2011 11,2602 5,200 3,150 1,875 2010 11,1603 5,100 3,050 1,875 2009 11,0604 4,900 2,950 1,775 2008 11,1605 5,100 3,050 1,875 2007 3,260 5,200 3,050 1,875 2006 3,260 5,200 3,150 1,875 2005 3,260 5,200 3,150 1,875 2004 10,9106 5,300 3,150 1,875 5/06/2003– 12/31/2003 11,0107 5,400 3,250 1,975 1/01/2003– 5/05/2003 7,9608 5,400 3,250 1,975 1 If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,360. Instructions for 1040x 2 If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,260. Instructions for 1040x 3 If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,160. Instructions for 1040x 4 If you elect not to claim any special depreciation allowance for the vehicle or the vehicle is not qualified property, the maximum deduction is $3,060. Instructions for 1040x 5If you elected not to claim any special depreciation allowance for the vehicle or the vehicle is not qualified property, the maximum deduction is $3,160. Instructions for 1040x 6If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, or the maximum deduction is $3,260. Instructions for 1040x 7 If you acquired the vehicle before 5/06/03, the maximum deduction is $7,960. Instructions for 1040x If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $3,360. Instructions for 1040x 8 If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $3,360. Instructions for 1040x Depreciation Worksheet for Passenger Automobiles You can use the following worksheet to figure your depreciation deduction using the percentage tables. Instructions for 1040x Then use the information from this worksheet to prepare Form 4562. Instructions for 1040x Depreciation Worksheet for Passenger Automobiles   Part I   1. Instructions for 1040x MACRS system (GDS or ADS)     2. Instructions for 1040x Property class     3. Instructions for 1040x Date placed in service     4. Instructions for 1040x Recovery period     5. Instructions for 1040x Method and convention     6. Instructions for 1040x Depreciation rate (from tables)     7. Instructions for 1040x Maximum depreciation deduction for this year from the appropriate table       8. Instructions for 1040x Business/investment-use percentage       9. Instructions for 1040x Multiply line 7 by line 8. Instructions for 1040x This is your adjusted maximum depreciation deduction       10. Instructions for 1040x Section 179 deduction claimed this year (not more than line 9). Instructions for 1040x Enter -0- if this is not the year you placed the car in service. Instructions for 1040x         Note. Instructions for 1040x  1) If line 10 is equal to line 9, stop here. Instructions for 1040x Your combined section 179 and depreciation deduction (including your special depreciation allowance) is limited to the amount on line 9. Instructions for 1040x  2) If line 10 is less than line 9, complete Part II. Instructions for 1040x   Part II   11. Instructions for 1040x Subtract line 10 from line 9. Instructions for 1040x This is the limit on the amount you can deduct for depreciation (including any special depreciation allowance )       12. Instructions for 1040x Cost or other basis (reduced by any alternative motor vehicle credit 1or credit for electric vehicles 2)       13. Instructions for 1040x Multiply line 12 by line 8. Instructions for 1040x This is your business/investment cost       14. Instructions for 1040x Section 179 deduction claimed in the year you placed the car in service       15. Instructions for 1040x Subtract line 14 from line 13. Instructions for 1040x This is your tentative basis for depreciation       16. Instructions for 1040x Multiply line 15 by . Instructions for 1040x 50 if the 50% special depreciation allowance applies. Instructions for 1040x This is your special depreciation allowance. Instructions for 1040x Enter -0- if this is not the year you placed the car in service, the car is not qualified property, or you elected not to claim a special depreciation allowance       Note 1) If line 16 is equal to line 11, stop here. Instructions for 1040x Your depreciation deduction (including your special depreciation allowance) is limited to the amount on line 11. Instructions for 1040x  2) If line 16 is less than line 11, complete Part III. Instructions for 1040x   Part III   17. Instructions for 1040x Subtract line 16 from 11. Instructions for 1040x This is the limit on the amount you can deduct for MACRS depreciation       18. Instructions for 1040x Subtract line 16 from line 15. Instructions for 1040x This is your basis for depreciation. Instructions for 1040x       19. Instructions for 1040x Multiply line 18 by line 6. Instructions for 1040x This is your tentative MACRS depreciation deduction. Instructions for 1040x       20. Instructions for 1040x Enter the lesser of line 17 or line 19. Instructions for 1040x This is your MACRS depreciation deduction. Instructions for 1040x     1 When figuring the amount to enter on line 12, do not reduce your cost or other basis by any section 179 deduction you claimed for your car. Instructions for 1040x 2 Reduce the basis by the lesser of $4,000 or 10% of the cost of the vehicle even if the credit is less than that amount. Instructions for 1040x             Deductions After the Recovery Period If the depreciation deductions for your automobile are reduced under the passenger automobile limits, you will have unrecovered basis in your automobile at the end of the recovery period. Instructions for 1040x If you continue to use the automobile for business, you can deduct that unrecovered basis after the recovery period ends. Instructions for 1040x You can claim a depreciation deduction in each succeeding tax year until you recover your full basis in the car. Instructions for 1040x The maximum amount you can deduct each year is determined by the date you placed the car in service and your business/investment-use percentage. Instructions for 1040x See Maximum Depreciation Deduction , earlier. Instructions for 1040x Unrecovered basis is the cost or other basis of the passenger automobile reduced by any clean-fuel vehicle deduction, electric vehicle credit, depreciation, and section 179 deductions that would have been allowable if you had used the car 100% for business and investment use and the passenger automobile limits had not applied. Instructions for 1040x You cannot claim a depreciation deduction for listed property other than passenger automobiles after the recovery period ends. Instructions for 1040x There is no unrecovered basis at the end of the recovery period because you are considered to have used this property 100% for business and investment purposes during all of the recovery period. Instructions for 1040x Example. Instructions for 1040x In May 2007, you bought and placed in service a car costing $31,500. Instructions for 1040x The car was 5-year property under GDS (MACRS). Instructions for 1040x You did not elect a section 179 deduction and elected not to claim any special depreciation allowance for the car. Instructions for 1040x You used the car exclusively for business during the recovery period (2007 through 2012). Instructions for 1040x You figured your depreciation as shown below. Instructions for 1040x Year Percentage Amount Limit   Allowed 2007 20. Instructions for 1040x 0% $6,300 $2,960   $2,960 2008 32. Instructions for 1040x 0 10,080 4,800   4,800 2009 19. Instructions for 1040x 2 6,048 2,850   2,850 2010 11. Instructions for 1040x 52 3,629 1,675   1,675 2011 11. Instructions for 1040x 52 3,629 1,675   1,675 2012 5. Instructions for 1040x 76 1,814 1,675   1,675 Total   $15,635 At the end of 2012, you had an unrecovered basis of $15,865 ($31,500 − $15,635). Instructions for 1040x If in 2013 and later years you continue to use the car 100% for business, you can deduct each year the lesser of $1,675 or your remaining unrecovered basis. Instructions for 1040x If your business use of the car had been less than 100% during any year, your depreciation deduction would have been less than the maximum amount allowable for that year. Instructions for 1040x However, in figuring your unrecovered basis in the car, you would still reduce your basis by the maximum amount allowable as if the business use had been 100%. Instructions for 1040x For example, if you had used your car 60% for business instead of 100%, your allowable depreciation deductions would have been $9,519 ($15,865 × 60%), but you still would have to reduce your basis by $15,865 to determine your unrecovered basis. Instructions for 1040x Deductions For Passenger Automobiles Acquired in a Trade-in If you acquire a passenger automobile in a trade-in, depreciate the carryover basis separately as if the trade-in did not occur. Instructions for 1040x Depreciate the part of the new automobile's basis that exceeds its carryover basis (excess basis) as if it were newly placed in service property. Instructions for 1040x This excess basis is the additional cash paid for the new automobile in the trade-in. Instructions for 1040x The depreciation figured for the two components of the basis (carryover basis and excess basis) is subject to a single passenger automobile limit. Instructions for 1040x Special rules apply in determining the passenger automobile limits. Instructions for 1040x These rules and examples are discussed in section 1. Instructions for 1040x 168(i)-6(d)(3) of the regulations. Instructions for 1040x Instead of figuring depreciation for the carryover basis and the excess basis separately, you can elect to treat the old automobile as disposed of and both of the basis components for the new automobile as if placed in service at the time of the trade-in. Instructions for 1040x For more information, including how to make this election, see Election out under Property Acquired in a Like-kind Exchange or Involuntary Conversion in chapter 4 and sections 1. Instructions for 1040x 168(i)-6(i) and 1. Instructions for 1040x 168(i)-6(j) of the regulations. Instructions for 1040x What Records Must Be Kept? You cannot take any depreciation or section 179 deduction for the use of listed property unless you can prove your business/investment use with adequate records or with sufficient evidence to support your own statements. Instructions for 1040x For listed property, you must keep records for as long as any recapture can still occur. Instructions for 1040x Recapture can occur in any tax year of the recovery period. Instructions for 1040x Adequate Records To meet the adequate records requirement, you must maintain an account book, diary, log, statement of expense, trip sheet, or similar record or other documentary evidence that, together with the receipt, is sufficient to establish each element of an expenditure or use. Instructions for 1040x You do not have to record information in an account book, diary, or similar record if the information is already shown on the receipt. Instructions for 1040x However, your records should back up your receipts in an orderly manner. Instructions for 1040x Elements of expenditure or use. Instructions for 1040x   Your records or other documentary evidence must support all the following. Instructions for 1040x The amount of each separate expenditure, such as the cost of acquiring the item, maintenance and repair costs, capital improvement costs, lease payments, and any other expenses. Instructions for 1040x The amount of each business and investment use (based on an appropriate measure, such as mileage for vehicles and time for other listed property), and the total use of the property for the tax year. Instructions for 1040x The date of the expenditure or use. Instructions for 1040x The business or investment purpose for the expenditure or use. Instructions for 1040x   Written documents of your expenditure or use are generally better evidence than oral statements alone. Instructions for 1040x You do not have to keep a daily log. Instructions for 1040x However, some type of record containing the elements of an expenditure or the business or investment use of listed property made at or near the time of the expenditure or use and backed up by other documents is preferable to a statement you prepare later. Instructions for 1040x Timeliness. Instructions for 1040x   You must record the elements of an expenditure or use at the time you have full knowledge of the elements. Instructions for 1040x An expense account statement made from an account book, diary, or similar record prepared or maintained at or near the time of the expenditure or use generally is considered a timely record if, in the regular course of business: The statement is given by an employee to the employer, or The statement is given by an independent contractor to the client or customer. Instructions for 1040x   For example, a log maintained on a weekly basis, that accounts for use during the week, will be considered a record made at or near the time of use. Instructions for 1040x Business purpose supported. Instructions for 1040x   Generally, an adequate record of business purpose must be in the form of a written statement. Instructions for 1040x However, the amount of detail necessary to establish a business purpose depends on the facts and circumstances of each case. Instructions for 1040x A written explanation of the business purpose will not be required if the purpose can be determined from the surrounding facts and circumstances. Instructions for 1040x For example, a salesperson visiting customers on an established sales route will not normally need a written explanation of the business purpose of his or her travel. Instructions for 1040x Business use supported. Instructions for 1040x   An adequate record contains enough information on each element of every business or investment use. Instructions for 1040x The amount of detail required to support the use depends on the facts and circumstances. Instructions for 1040x For example, a taxpayer who uses a truck for both business and personal purposes and whose only business use of the truck is to make customer deliveries on an established route can satisfy the requirement by recording the length of the route, including the total number of miles driven during the tax year and the date of each trip at or near the time of the trips. Instructions for 1040x   Although you generally must prepare an adequate written record, you can prepare a record of the business use of listed property in a computer memory device that uses a logging program. Instructions for 1040x Separate or combined expenditures or uses. Instructions for 1040x   Each use by you normally is considered a separate use. Instructions for 1040x However, you can combine repeated uses as a single item. Instructions for 1040x   Record each expenditure as a separate item. Instructions for 1040x Do not combine it with other expenditures. Instructions for 1040x If you choose, however, you can combine amounts you spent for the use of listed property during a tax year, such as for gasoline or automobile repairs. Instructions for 1040x If you combine these expenses, you do not need to support the business purpose of each expense. Instructions for 1040x Instead, you can divide the expenses based on the total business use of the listed property. Instructions for 1040x   You can account for uses that can be considered part of a single use, such as a round trip or uninterrupted business use, by a single record. Instructions for 1040x For example, you can account for the use of a truck to make deliveries at several locations that begin and end at the business premises and can include a stop at the business in between deliveries by a single record of miles driven. Instructions for 1040x You can account for the use of a passenger automobile by a salesperson for a business trip away from home over a period of time by a single record of miles traveled. Instructions for 1040x Minimal personal use (such as a stop for lunch between two business stops) is not an interruption of business use. Instructions for 1040x Confidential information. Instructions for 1040x   If any of the information on the elements of an expenditure or use is confidential, you do not need to include it in the account book or similar record if you record it at or near the time of the expenditure or use. Instructions for 1040x You must keep it elsewhere and make it available as support to the IRS director for your area on request. Instructions for 1040x Substantial compliance. Instructions for 1040x   If you have not fully supported a particular element of an expenditure or use, but have complied with the adequate records requirement for the expenditure or use to the satisfaction of the IRS director for your area, you can establish this element by any evidence the IRS director for your area deems adequate. Instructions for 1040x   If you fail to establish to the satisfaction of the IRS director for your area that you have substantially complied with the adequate records requirement for an element of an expenditure or use, you must establish the element as follows. Instructions for 1040x By your own oral or written statement containing detailed information as to the element. Instructions for 1040x By other evidence sufficient to establish the element. Instructions for 1040x   If the element is the cost or amount, time, place, or date of an expenditure or use, its supporting evidence must be direct evidence, such as oral testimony by witnesses or a written statement setting forth detailed information about the element or the documentary evidence. Instructions for 1040x If the element is the business purpose of an expenditure, its supporting evidence can be circumstantial evidence. Instructions for 1040x Sampling. Instructions for 1040x   You can maintain an adequate record for part of a tax year and use that record to support your business and investment use of listed property for the entire tax year if it can be shown by other evidence that the periods for which you maintain an adequate record are representative of the use throughout the year. Instructions for 1040x Example 1. Instructions for 1040x Denise Williams, a sole proprietor and calendar year taxpayer, operates an interior decorating business out of her home. Instructions for 1040x She uses her automobile for local business visits to the homes or offices of clients, for meetings with suppliers and subcontractors, and to pick up and deliver items to clients. Instructions for 1040x There is no other business use of the automobile, but she and family members also use it for personal purposes. Instructions for 1040x She maintains adequate records for the first 3 months of the year showing that 75% of the automobile use was for business. Instructions for 1040x Subcontractor invoices and paid bills show that her business continued at approximately the same rate for the rest of the year. Instructions for 1040x If there is no change in circumstances, such as the purchase of a second car for exclusive use in her business, the determination that her combined business/investment use of the automobile for the tax year is 75% rests on sufficient supporting evidence. Instructions for 1040x Example 2. Instructions for 1040x Assume the same facts as in Example 1, except that Denise maintains adequate records during the first week of every month showing that 75% of her use of the automobile is for business. Instructions for 1040x Her business invoices show that her business continued at the same rate during the later weeks of each month so that her weekly records are representative of the automobile's business use throughout the month. Instructions for 1040x The determination that her business/investment use of the automobile for the tax year is 75% rests on sufficient supporting evidence. Instructions for 1040x Example 3. Instructions for 1040x Bill Baker, a sole proprietor and calendar year taxpayer, is a salesman in a large metropolitan area for a company that manufactures household products. Instructions for 1040x For the first 3 weeks of each month, he occasionally uses his own automobile for business travel within the metropolitan area. Instructions for 1040x During these weeks, his business use of the automobile does not follow a consistent pattern. Instructions for 1040x During the fourth week of each month, he delivers all business orders taken during the previous month. Instructions for 1040x The business use of his automobile, as supported by adequate records, is 70% of its total use during that fourth week. Instructions for 1040x The determination based on the record maintained during the fourth week of the month that his business/investment use of the automobile for the tax year is 70% does not rest on sufficient supporting evidence because his use during that week is not representative of use during other periods. Instructions for 1040x Loss of records. Instructions for 1040x   When you establish that failure to produce adequate records is due to loss of the records through circumstances beyond your control, such as through fire, flood, earthquake, or other casualty, you have the right to support a deduction by reasonable reconstruction of your expenditures and use. Instructions for 1040x How Is Listed Property Information Reported? You must provide the information about your listed property requested in Part V of Form 4562, Section A, if you claim either of the following deductions. Instructions for 1040x Any deduction for a vehicle. Instructions for 1040x A depreciation deduction for any other listed property. Instructions for 1040x If you claim any deduction for a vehicle, you also must provide the information requested in Section B. Instructions for 1040x If you provide the vehicle for your employee's use, the employee must give you this information. Instructions for 1040x If you provide any vehicle for use by an employee, you must first answer the questions in Section C to see if you meet an exception to completing Section B for that vehicle. Instructions for 1040x Vehicles used by your employees. Instructions for 1040x   You do not have to complete Section B, Part V, for vehicles used by your employees who are not more-than-5% owners or related persons if you meet at least one of the following requirements. Instructions for 1040x You maintain a written policy statement that prohibits one of the following uses of the vehicles. Instructions for 1040x All personal use including commuting. Instructions for 1040x Personal use, other than commuting, by employees who are not officers, directors, or 1%-or-more owners. Instructions for 1040x You treat all use of the vehicles by your employees as personal use. Instructions for 1040x You provide more than five vehicles for use by your employees, and you keep in your records the information on their use given to you by the employees. Instructions for 1040x For demonstrator automobiles provided to full-time salespersons, you maintain a written policy statement that limits the total mileage outside the salesperson's normal working hours and prohibits use of the automobile by anyone else, for vacation trips, or to store personal possessions. Instructions for 1040x Exceptions. Instructions for 1040x   If you file Form 2106, 2106-EZ, or Schedule C-EZ (Form 1040), and you are not required to file Form 4562, report information about listed property on that form and not on Form 4562. Instructions for 1040x Also, if you file Schedule C (Form 1040) and are claiming the standard mileage rate or actual vehicle expenses (except depreciation) and you are not required to file Form 4562 for any other reason, report vehicle information in Part IV of Schedule C and not on Form 4562. Instructions for 1040x Prev  Up  Next   Home   More Online Publications