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

1. Get Answers

Your online questions are customized to your unique tax situation.

2. Maximize your Refund

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

3. E-File for FREE

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

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

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

Internal Revenue Tax Forms 2012

2009 Form 1040 Ez2010 Form 1040Irs 2012 1040 Tax FormsTurbotax Free FileFree File State Federal TaxesIrs Form 990 Ez 2010Amend Federal Tax Return 2011Irs ComTax Forms 1040ez 2011Filing A 1040 EzHow To Amend A 2010 Tax ReturnFile Back Tax ReturnsHow Do I File My 2011 Taxes OnlineForms To File 2011 TaxesHrblock Free FileHow To File State TaxIrs FormsFederal Tax Form 1040xHow To Refile Taxes2012 Income Tax FilingWww 1040ez Com1040ez FormHow To File An Amended Tax Return For 2011H&r Block Free Tax SoftwareHr Block Tax PrepIncome Tax Filing ExtensionVita TaxTurbotax Amended Return 20131040x Tax FormFiling 2011 Taxes In 2013Free Electronic Tax FilingFile 2006 Federal Taxes Free2011 Irs Form 1040ezEz Form 2014State Income Tax ChartFile Taxes OnlineState Tax Forms 20122011 Tax FormTurbo Tax Free OnlineTurbo Tax Form 1040x

Internal Revenue Tax Forms 2012

Internal revenue tax forms 2012 4. Internal revenue tax forms 2012   Detailed Examples Table of Contents These examples use actual forms to help you prepare your income tax return. Internal revenue tax forms 2012 However, the information shown on the filled-in forms is not from any actual person or scenario. Internal revenue tax forms 2012 Example 1—Mortgage loan modification. Internal revenue tax forms 2012    In 2007, Nancy Oak bought a main home for $435,000. Internal revenue tax forms 2012 Nancy took out a $420,000 mortgage loan to buy the home and made a down payment of $15,000. Internal revenue tax forms 2012 The loan was secured by the home. Internal revenue tax forms 2012 The mortgage loan was a recourse debt, meaning that Nancy was personally liable for the debt. Internal revenue tax forms 2012 In 2008, Nancy took out a second mortgage loan (also a recourse debt) in the amount of $30,000 that was used to substantially improve her kitchen. Internal revenue tax forms 2012    In 2011, when the outstanding principal of the first and second mortgage loans was $440,000, Nancy refinanced the two recourse loans into one recourse loan in the amount of $475,000. Internal revenue tax forms 2012 The FMV of Nancy's home at the time of the refinancing was $500,000. Internal revenue tax forms 2012 Nancy used the additional $35,000 debt ($475,000 new mortgage loan minus $440,000 outstanding principal of Nancy's first and second mortgage loans immediately before the refinancing) to pay off personal credit cards and to pay college tuition for her son. Internal revenue tax forms 2012 After the refinancing, Nancy has qualified principal residence indebtedness in the amount of $440,000 because the refinanced debt is qualified principal residence indebtedness only to the extent the amount of debt is not more than the old mortgage principal just before the refinancing. Internal revenue tax forms 2012   In 2013, Nancy was unable to make her mortgage loan payments. Internal revenue tax forms 2012 On August 31, 2013, when the outstanding balance of her refinanced mortgage loan was still $475,000 and the FMV of the property was $425,000, Nancy's bank agreed to a loan modification (a “workout”) that resulted in a $40,000 reduction in the principal balance of her loan. Internal revenue tax forms 2012 Nancy was neither insolvent nor in bankruptcy at the time of the loan modification. Internal revenue tax forms 2012   Nancy received a 2013 Form 1099-C from her bank in January 2014 showing canceled debt of $40,000 in box 2. Internal revenue tax forms 2012 Identifiable event code "F" appears in box 6. Internal revenue tax forms 2012 This box shows the reason the creditor has filed Form 1099-C. Internal revenue tax forms 2012 To determine if she must include the canceled debt in her income, Nancy must determine whether she meets any of the exceptions or exclusions that apply to canceled debts. Internal revenue tax forms 2012 Nancy determines that the only exception or exclusion that applies to her is the qualified principal residence indebtedness exclusion. Internal revenue tax forms 2012   Next, Nancy determines the amount, if any, of the $40,000 of canceled debt that was qualified principal residence indebtedness. Internal revenue tax forms 2012 Although Nancy has $440,000 of qualified principal residence indebtedness, part of her loan ($35,000) was not qualified principal residence indebtedness because it was used to pay off personal credit cards and college tuition for her son. Internal revenue tax forms 2012 Applying the ordering rule, the qualified principal residence indebtedness exclusion applies only to the extent the amount canceled is more than the amount of the debt (immediately before the cancellation) that is not qualified principal residence indebtedness. Internal revenue tax forms 2012 Thus, Nancy can exclude only $5,000 of the canceled debt as qualified principal residence indebtedness ($40,000 amount canceled minus $35,000 nonqualified debt). Internal revenue tax forms 2012   Because Nancy does not meet any other exception or exclusion, she checks only the box on line 1e of Form 982 and enters $5,000 on line 2. Internal revenue tax forms 2012 Nancy must also enter $5,000 on line 10b and reduce the basis of her main home by the $5,000 she excluded from income, bringing the adjusted basis in her home to $460,000 ($435,000 purchase price plus $30,000 substantial improvement minus $5,000). Internal revenue tax forms 2012 Nancy must also include the $35,000 nonqualified debt portion in income on Form 1040, line 21. Internal revenue tax forms 2012 You can see Nancy's Form 1099-C and a portion of her Form 1040 below. Internal revenue tax forms 2012 Nancy's 2013 Form 1099-C, Cancellation of Debt This image is too large to be displayed in the current screen. Internal revenue tax forms 2012 Please click the link to view the image. Internal revenue tax forms 2012 Form 1099-C, Cancellation of Debt Nancy's 2013 Form 1040 This image is too large to be displayed in the current screen. Internal revenue tax forms 2012 Please click the link to view the image. Internal revenue tax forms 2012 Form 1040, U. Internal revenue tax forms 2012 S. Internal revenue tax forms 2012 Individual Income Tax Nancy's Form 982 This image is too large to be displayed in the current screen. Internal revenue tax forms 2012 Please click the link to view the image. Internal revenue tax forms 2012 Form 982 Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment)              Example 2—Mortgage loan foreclosure. Internal revenue tax forms 2012    In 2005, John and Mary Elm bought a main home for $335,000. Internal revenue tax forms 2012 John and Mary took out a $320,000 mortgage loan to buy the home and made a down payment of $15,000. Internal revenue tax forms 2012 The loan was secured by the home and is a recourse debt, meaning John and Mary are personally liable for the debt. Internal revenue tax forms 2012   John and Mary became unable to make their mortgage loan payments and on March 1, 2013, when the outstanding balance of the mortgage loan was $315,000 and the FMV of the property was $290,000, the bank foreclosed on the property and simultaneously canceled the remaining mortgage debt. Internal revenue tax forms 2012 Immediately before the foreclosure, John and Mary's only other assets and liabilities were a checking account with a balance of $6,000, retirement savings of $13,000, and credit card debt of $5,500. Internal revenue tax forms 2012   John and Mary received a 2013 Form 1099-C showing canceled debt of $25,000 in box 2 ($315,000 outstanding balance minus $290,000 FMV) and an FMV of $290,000 in box 7. Internal revenue tax forms 2012 Identifiable event code "D" appears in box 6. Internal revenue tax forms 2012 This box shows the reason the creditor has filed Form 1099-C. Internal revenue tax forms 2012 In order to determine if John and Mary must include the canceled debt in income, they must first determine whether they meet any of the exceptions or exclusions that apply to canceled debts. Internal revenue tax forms 2012 In this example, John and Mary meet both the insolvency and qualified principal residence indebtedness exclusions. Internal revenue tax forms 2012 Their sample Form 1099-C is shown on this page. Internal revenue tax forms 2012   John and Mary complete the insolvency worksheet and determine that they were insolvent immediately before the cancellation because at that time their liabilities exceeded the FMV of their assets by $11,500 ($320,500 total liabilities minus $309,000 FMV of total assets). Internal revenue tax forms 2012 However, because the entire debt canceled is qualified principal residence indebtedness, the insolvency exclusion only applies if John and Mary elect to apply the insolvency exclusion instead of the qualified principal residence exclusion. Internal revenue tax forms 2012   John and Mary do not elect to apply the insolvency exclusion instead of the qualified principal residence exclusion because under the insolvency exclusion their exclusion would be limited to the amount by which they were insolvent ($11,500). Internal revenue tax forms 2012 Instead, John and Mary check box 1e of Form 982 to exclude the canceled debt under the qualified principal residence exclusion. Internal revenue tax forms 2012 Under the qualified principal residence exclusion, the amount that John and Mary can exclude is not limited because their qualified principal residence indebtedness is not more than $2 million and no portion of the loan was nonqualified debt. Internal revenue tax forms 2012 As a result, John and Mary enter the full $25,000 of canceled debt on line 2 of Form 982. Internal revenue tax forms 2012 Because John and Mary no longer own the home due to the foreclosure, John and Mary have no remaining basis in the home at the time of the debt cancellation. Internal revenue tax forms 2012 Thus, John and Mary leave line 10b of Form 982 blank. Internal revenue tax forms 2012   John and Mary must also determine whether they have a gain or loss from the foreclosure. Internal revenue tax forms 2012 John and Mary complete Table 1-1 (shown below) and find that they have a $45,000 loss from the foreclosure. Internal revenue tax forms 2012 Because this loss relates to their home, it is a nondeductible loss. Internal revenue tax forms 2012   John and Mary's Form 1099-C, Insolvency Worksheet, and Form 982 follow. Internal revenue tax forms 2012 John and Mary's 2013 Form 1099-C, Cancellation of Debt This image is too large to be displayed in the current screen. Internal revenue tax forms 2012 Please click the link to view the image. Internal revenue tax forms 2012 Form 1099-C, Cancellation of Debt Table 1-1. Internal revenue tax forms 2012 Worksheet for Foreclosures and Repossessions (for John and Mary Elm) Part 1. Internal revenue tax forms 2012 Complete Part 1 only if you were personally liable for the debt (even if none of the debt was canceled). Internal revenue tax forms 2012 Otherwise, go to Part 2. Internal revenue tax forms 2012 1. Internal revenue tax forms 2012 Enter the amount of outstanding debt immediately before the transfer of property reduced by any amount for which you remain personally liable immediately after the transfer of property $315,000. Internal revenue tax forms 2012 00 2. Internal revenue tax forms 2012 Enter the fair market value of the transferred property $290,000. Internal revenue tax forms 2012 00 3. Internal revenue tax forms 2012 Ordinary income from the cancellation of debt upon foreclosure or repossession. Internal revenue tax forms 2012 * Subtract line 2 from line 1. Internal revenue tax forms 2012 If less than zero, enter zero. Internal revenue tax forms 2012 Next, go to Part 2 $ 25,000. Internal revenue tax forms 2012 00 Part 2. Internal revenue tax forms 2012 Gain or loss from foreclosure or repossession. Internal revenue tax forms 2012   4. Internal revenue tax forms 2012 Enter the smaller of line 1 or line 2. Internal revenue tax forms 2012 If you did not complete Part 1 (because you were not personally liable for the debt), enter the amount of outstanding debt immediately before the transfer of property $290,000. Internal revenue tax forms 2012 00 5. Internal revenue tax forms 2012 Enter any proceeds you received from the foreclosure sale   6. Internal revenue tax forms 2012 Add line 4 and line 5 $290,000. Internal revenue tax forms 2012 00 7. Internal revenue tax forms 2012 Enter the adjusted basis of the transferred property $335,000. Internal revenue tax forms 2012 00 8. Internal revenue tax forms 2012 Gain or loss from foreclosure or repossession. Internal revenue tax forms 2012 Subtract line 7 from line 6 ($ 45,000. Internal revenue tax forms 2012 00) * The income may not be taxable. Internal revenue tax forms 2012 See chapter 1 for more details. Internal revenue tax forms 2012 Insolvency Worksheet—John and Mary Elm Date debt was canceled (mm/dd/yy) 03/01/13 Part I. Internal revenue tax forms 2012 Total liabilities immediately before the cancellation (do not include the same liability in more than one category) Liabilities (debts) Amount Owed Immediately Before the Cancellation 1. Internal revenue tax forms 2012 Credit card debt $ 5,500 2. Internal revenue tax forms 2012 Mortgage(s) on real property (including first and second mortgages and home equity loans) (mortgage(s) can be on personal residence, any additional residence, or property held for investment or used in a trade or business) $ 315,000 3. Internal revenue tax forms 2012 Car and other vehicle loans $ 4. Internal revenue tax forms 2012 Medical bills owed $ 5. Internal revenue tax forms 2012 Student loans $ 6. Internal revenue tax forms 2012 Accrued or past-due mortgage interest $ 7. Internal revenue tax forms 2012 Accrued or past-due real estate taxes $ 8. Internal revenue tax forms 2012 Accrued or past-due utilities (water, gas, electric) $ 9. Internal revenue tax forms 2012 Accrued or past-due child care costs $ 10. Internal revenue tax forms 2012 Federal or state income taxes remaining due (for prior tax years) $ 11. Internal revenue tax forms 2012 Judgments $ 12. Internal revenue tax forms 2012 Business debts (including those owed as a sole proprietor or partner) $ 13. Internal revenue tax forms 2012 Margin debt on stocks and other debt to purchase or secured by investment assets other than real property $ 14. Internal revenue tax forms 2012 Other liabilities (debts) not included above $ 15. Internal revenue tax forms 2012 Total liabilities immediately before the cancellation. Internal revenue tax forms 2012 Add lines 1 through 14. Internal revenue tax forms 2012 $ 320,500 Part II. Internal revenue tax forms 2012 Fair market value (FMV) of assets owned immediately before the cancellation (do not include the FMV of the same asset in more than one category) Assets FMV Immediately Before  the Cancellation 16. Internal revenue tax forms 2012 Cash and bank account balances $ 6,000 17. Internal revenue tax forms 2012 Real property, including the value of land (can be main home, any additional home, or property held for investment or used in a trade or business) $ 290,000 18. Internal revenue tax forms 2012 Cars and other vehicles $ 19. Internal revenue tax forms 2012 Computers $ 20. Internal revenue tax forms 2012 Household goods and furnishings (for example, appliances, electronics, furniture, etc. Internal revenue tax forms 2012 ) $ 21. Internal revenue tax forms 2012 Tools $ 22. Internal revenue tax forms 2012 Jewelry $ 23. Internal revenue tax forms 2012 Clothing $ 24. Internal revenue tax forms 2012 Books $ 25. Internal revenue tax forms 2012 Stocks and bonds $ 26. Internal revenue tax forms 2012 Investments in coins, stamps, paintings, or other collectibles $ 27. Internal revenue tax forms 2012 Firearms, sports, photographic, and other hobby equipment $ 28. Internal revenue tax forms 2012 Interest in retirement accounts (IRA accounts, 401(k) accounts, and other retirement accounts) $ 13,000 29. Internal revenue tax forms 2012 Interest in a pension plan $ 30. Internal revenue tax forms 2012 Interest in education accounts $ 31. Internal revenue tax forms 2012 Cash value of life insurance $ 32. Internal revenue tax forms 2012 Security deposits with landlords, utilities, and others $ 33. Internal revenue tax forms 2012 Interests in partnerships $ 34. Internal revenue tax forms 2012 Value of investment in a business $ 35. Internal revenue tax forms 2012 Other investments (for example, annuity contracts, guaranteed investment contracts, mutual funds, commodity accounts, interests in hedge funds, and options) $ 36. Internal revenue tax forms 2012 Other assets not included above $ 37. Internal revenue tax forms 2012 FMV of total assets immediately before the cancellation. Internal revenue tax forms 2012 Add lines 16 through 36. Internal revenue tax forms 2012 $ 309,000 Part III. Internal revenue tax forms 2012 Insolvency 38. Internal revenue tax forms 2012 Amount of Insolvency. Internal revenue tax forms 2012 Subtract line 37 from line 15. Internal revenue tax forms 2012 If zero or less, you are not insolvent. Internal revenue tax forms 2012 $ 11,500 John and Mary's Form 982 This image is too large to be displayed in the current screen. Internal revenue tax forms 2012 Please click the link to view the image. Internal revenue tax forms 2012 Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment)          Example 3—Mortgage loan foreclosure with debt exceeding $2 million limit. Internal revenue tax forms 2012    In 2011, Kathy and Frank Willow got married and entered into a contract with Hive Construction Corporation to build a house for $3,000,000 to be used as their main home. Internal revenue tax forms 2012 Kathy and Frank made a $400,000 down payment and took out a $2,600,000 mortgage to finance the remaining cost of the house. Internal revenue tax forms 2012 Kathy and Frank are personally liable for the mortgage loan, which is secured by the home. Internal revenue tax forms 2012   In November 2013, when the outstanding principal balance on the mortgage loan was $2,500,000, the FMV of the property fell to $1,750,000 and Kathy and Frank abandoned the property by permanently moving out. Internal revenue tax forms 2012 The lender foreclosed on the property and, on December 5, 2013, sold the property to another buyer for $1,750,000. Internal revenue tax forms 2012 On December 26, 2013, the lender canceled the remaining debt. Internal revenue tax forms 2012 Kathy and Frank have no tax attributes other than basis of personal-use property. Internal revenue tax forms 2012   The lender issued a 2013 Form 1099-C to Kathy and Frank showing canceled debt of $750,000 in box 2 (the remaining balance on the $2,500,000 mortgage debt after application of the foreclosure sale proceeds) and $1,750,000 in box 7 (FMV of the property). Internal revenue tax forms 2012 Identifiable event code "D" appears in box 6. Internal revenue tax forms 2012 This box shows the reason the creditor has filed Form 1099-C. Internal revenue tax forms 2012 Although Kathy and Frank abandoned the property, the lender did not need to also file a Form 1099-A because the lender canceled the debt in connection with the foreclosure in the same calendar year. Internal revenue tax forms 2012 Kathy and Frank are filing a joint return for 2013. Internal revenue tax forms 2012   Because the foreclosure occurred prior to the debt cancellation, Kathy and Frank first calculate their gain or loss from the foreclosure using Table 1-1. Internal revenue tax forms 2012 Because Kathy and Frank remained personally liable for the $750,000 debt remaining after the foreclosure ($2,500,000 outstanding debt immediately before the foreclosure minus $1,750,000 satisfied through the sale of the home), Kathy and Frank enter $1,750,000 on line 1 of Table 1-1 ($2,500,000 outstanding debt immediately before the foreclosure minus the $750,000 for which they remained liable). Internal revenue tax forms 2012 Completing Table 1-1, Kathy and Frank find that they have no ordinary income from the cancellation of debt upon foreclosure and that they have a $1,250,000 loss. Internal revenue tax forms 2012 Because this loss relates to their home, it is a nondeductible loss. Internal revenue tax forms 2012   Because the lender later canceled the remaining amount of the debt, Kathy and Frank must also determine whether that canceled debt is taxable. Internal revenue tax forms 2012 Immediately before the cancellation, Kathy and Frank had $15,000 in a savings account, household furnishings with an FMV of $17,000, a car with an FMV of $10,000, and $18,000 in credit card debt. Internal revenue tax forms 2012 Kathy and Frank also had the $750,000 remaining balance on the mortgage loan at that time. Internal revenue tax forms 2012 The household furnishings originally cost $30,000. Internal revenue tax forms 2012 The car had been fully paid off (so there was no related outstanding debt) and was originally purchased for $16,000. Internal revenue tax forms 2012 Kathy and Frank had no adjustments to the cost basis of the car. Internal revenue tax forms 2012 Kathy and Frank had no other assets or liabilities at the time of the cancellation. Internal revenue tax forms 2012 Kathy and Frank complete the insolvency worksheet to calculate that they were insolvent to the extent of $726,000 immediately before the cancellation ($768,000 of total liabilities minus $42,000 FMV of total assets). Internal revenue tax forms 2012   At the beginning of 2014, Kathy and Frank had $9,000 in their savings account and $15,000 in credit card debt. Internal revenue tax forms 2012 Kathy and Frank also owned the same car at that time (still with an FMV of $10,000 and basis of $16,000) and the same household furnishings (still with an FMV of $17,000 and a basis of $30,000). Internal revenue tax forms 2012 Kathy and Frank had no other assets or liabilities at that time. Internal revenue tax forms 2012 Kathy and Frank no longer own the home because the lender foreclosed on it in 2013. Internal revenue tax forms 2012   Because the canceled debt is qualified principal residence indebtedness, the insolvency exclusion does not apply unless Kathy and Frank elect to apply the insolvency exclusion instead of the qualified principal residence indebtedness exclusion. Internal revenue tax forms 2012 The maximum amount that Kathy and Frank can treat as qualified principal residence indebtedness is $2,000,000. Internal revenue tax forms 2012 The remaining $500,000 ($2,500,000 outstanding mortgage loan minus $2,000,000 limit on qualified principal residence indebtedness) is not qualified principal residence indebtedness. Internal revenue tax forms 2012 Because only a part of the loan is qualified principal residence indebtedness, Kathy and Frank must apply the ordering rule to the canceled debt. Internal revenue tax forms 2012 Under the ordering rule, the qualified principal residence indebtedness exclusion applies only to the extent that the amount canceled ($750,000) exceeds the amount of the loan (immediately before the cancellation) that is not qualified principal residence indebtedness ($500,000). Internal revenue tax forms 2012 This means that Kathy and Frank can only exclude $250,000 ($750,000 amount canceled minus $500,000 nonqualified debt) under the qualified principal residence indebtedness exclusion. Internal revenue tax forms 2012   Kathy and Frank do not elect to have the insolvency exclusion apply instead of the qualified principal residence exclusion. Internal revenue tax forms 2012 Nonetheless, they can still apply the insolvency exclusion to the $500,000 nonqualified debt because it is not qualified principal residence indebtedness. Internal revenue tax forms 2012 Kathy and Frank can exclude the remaining $500,000 canceled debt under the insolvency exclusion because they were insolvent immediately before the cancellation to the extent of $726,000. Internal revenue tax forms 2012 Thus, Kathy and Frank check the boxes on lines 1b and 1e of Form 982 and enter $750,000 on line 2 ($250,000 excluded under the qualified principal residence indebtedness exclusion plus $500,000 excluded under the insolvency exclusion). Internal revenue tax forms 2012   Next, Kathy and Frank reduce their tax attributes using Part II of Form 982. Internal revenue tax forms 2012 Because Kathy and Frank no longer own the home due to the foreclosure, Kathy and Frank have no remaining basis in the home at the time of the debt cancellation. Internal revenue tax forms 2012 Thus, Kathy and Frank leave line 10b of Form 982 blank. Internal revenue tax forms 2012 However, Kathy and Frank are also excluding nonqualified debt under the insolvency exclusion. Internal revenue tax forms 2012 As a result, Kathy and Frank must reduce the basis of property they own based on the amount of canceled debt they are excluding from income under the insolvency rules. Internal revenue tax forms 2012 Because Kathy and Frank have no tax attributes other than basis of personal-use property to reduce, Kathy and Frank figure the amount they must include on line 10a of Form 982 by taking the smallest of: The $46,000 bases of their personal-use property held at the beginning of 2014 ($16,000 basis in the car plus $30,000 basis in household furnishings), The $500,000 of the nonbusiness debt (other than qualified principal residence indebtedness) that they are excluding from income on line 2 of Form 982, or The $43,000 excess of the total bases of the property and the amount of money they held immediately after the cancellation over their total liabilities immediately after the cancellation ($15,000 in savings account plus $30,000 basis in household furnishings plus $16,000 adjusted basis in car minus $18,000 credit card debt). Internal revenue tax forms 2012 Kathy and Frank enter $43,000 on Form 982, line 10a and reduce their bases in the car and the household furnishings in proportion to the total adjusted bases in all their property. Internal revenue tax forms 2012 Kathy and Frank reduce the basis in the car by $14,956. Internal revenue tax forms 2012 52 ($43,000 x $16,000/$46,000). Internal revenue tax forms 2012 And they reduce the basis in the household furnishings by $28,043. Internal revenue tax forms 2012 48 ($43,000 x $30,000/$46,000). Internal revenue tax forms 2012   Following are Kathy and Frank's sample forms and worksheets. Internal revenue tax forms 2012 Frank and Kathy's 2013 Form 1099-C, Cancellation of Debt This image is too large to be displayed in the current screen. Internal revenue tax forms 2012 Please click the link to view the image. Internal revenue tax forms 2012 Form 1099-C, Cancellation of Debt Table 1-1. Internal revenue tax forms 2012 Worksheet for Foreclosures and Repossessions (for Frank and Kathy Willow) Part 1. Internal revenue tax forms 2012 Complete Part 1 only if you were personally liable for the debt (even if none of the debt was canceled). Internal revenue tax forms 2012 Otherwise, go to Part 2. Internal revenue tax forms 2012 1. Internal revenue tax forms 2012 Enter the amount of outstanding debt immediately before the transfer of property reduced by any amount for which you remain personally liable immediately after the transfer of property $1,750,000. Internal revenue tax forms 2012 00 2. Internal revenue tax forms 2012 Enter the fair market value of the transferred property $1,750,000. Internal revenue tax forms 2012 00 3. Internal revenue tax forms 2012 Ordinary income from the cancellation of debt upon foreclosure or repossession. Internal revenue tax forms 2012 * Subtract line 2 from line 1. Internal revenue tax forms 2012 If less than zero, enter zero. Internal revenue tax forms 2012 Next, go to Part 2 $0. Internal revenue tax forms 2012 00 Part 2. Internal revenue tax forms 2012 Gain or loss from foreclosure or repossession. Internal revenue tax forms 2012   4. Internal revenue tax forms 2012 Enter the smaller of line 1 or line 2. Internal revenue tax forms 2012 If you did not complete Part 1 (because you were not personally liable for the debt), enter the amount of outstanding debt immediately before the transfer of property. Internal revenue tax forms 2012 $1,750,000. Internal revenue tax forms 2012 00 5. Internal revenue tax forms 2012 Enter any proceeds you received from the foreclosure sale   6. Internal revenue tax forms 2012 Add line 4 and line 5 $1,750,000. Internal revenue tax forms 2012 00 7. Internal revenue tax forms 2012 Enter the adjusted basis of the transferred property $3,000,000. Internal revenue tax forms 2012 00 8. Internal revenue tax forms 2012 Gain or loss from foreclosure or repossession. Internal revenue tax forms 2012 Subtract line 7 from line 6 ($1,250,000. Internal revenue tax forms 2012 00) * The income may not be taxable. Internal revenue tax forms 2012 See chapter 1 for more details. Internal revenue tax forms 2012    Insolvency Worksheet—Frank and Kathy Willow Date debt was canceled (mm/dd/yy) 12/26/13 Part I. Internal revenue tax forms 2012 Total liabilities immediately before the cancellation (do not include the same liability in more than one category) Liabilities (debts) Amount Owed Immediately Before the Cancellation 1. Internal revenue tax forms 2012 Credit card debt $ 18,000 2. Internal revenue tax forms 2012 Mortgage(s) on real property (including first and second mortgages and home equity loans) (mortgage(s) can be on personal residence, any additional residence, or property held for investment or used in a trade or business) $ 750,000 3. Internal revenue tax forms 2012 Car and other vehicle loans $ 4. Internal revenue tax forms 2012 Medical bills owed $ 5. Internal revenue tax forms 2012 Student loans $ 6. Internal revenue tax forms 2012 Accrued or past-due mortgage interest $ 7. Internal revenue tax forms 2012 Accrued or past-due real estate taxes $ 8. Internal revenue tax forms 2012 Accrued or past-due utilities (water, gas, electric) $ 9. Internal revenue tax forms 2012 Accrued or past-due child care costs $ 10. Internal revenue tax forms 2012 Federal or state income taxes remaining due (for prior tax years) $ 11. Internal revenue tax forms 2012 Judgments $ 12. Internal revenue tax forms 2012 Business debts (including those owed as a sole proprietor or partner) $ 13. Internal revenue tax forms 2012 Margin debt on stocks and other debt to purchase or secured by investment assets other than real property $ 14. Internal revenue tax forms 2012 Other liabilities (debts) not included above $ 15. Internal revenue tax forms 2012 Total liabilities immediately before the cancellation. Internal revenue tax forms 2012 Add lines 1 through 14. Internal revenue tax forms 2012 $ 768,000 Part II. Internal revenue tax forms 2012 Fair market value (FMV) of assets owned immediately before the cancellation (do not include the FMV of the same asset in more than one category) Assets FMV Immediately Before  the Cancellation 16. Internal revenue tax forms 2012 Cash and bank account balances $ 15,000 17. Internal revenue tax forms 2012 Real property, including the value of land (can be main home, any additional home, or property held for investment or used in a trade or business) $ 18. Internal revenue tax forms 2012 Cars and other vehicles $ 10,000 19. Internal revenue tax forms 2012 Computers $ 20. Internal revenue tax forms 2012 Household goods and furnishings (for example, appliances, electronics, furniture, etc. Internal revenue tax forms 2012 ) $ 17,000 21. Internal revenue tax forms 2012 Tools $ 22. Internal revenue tax forms 2012 Jewelry $ 23. Internal revenue tax forms 2012 Clothing $ 24. Internal revenue tax forms 2012 Books $ 25. Internal revenue tax forms 2012 Stocks and bonds $ 26. Internal revenue tax forms 2012 Investments in coins, stamps, paintings, or other collectibles $ 27. Internal revenue tax forms 2012 Firearms, sports, photographic, and other hobby equipment $ 28. Internal revenue tax forms 2012 Interest in retirement accounts (IRA accounts, 401(k) accounts, and other retirement accounts) $ 29. Internal revenue tax forms 2012 Interest in a pension plan $ 30. Internal revenue tax forms 2012 Interest in education accounts $ 31. Internal revenue tax forms 2012 Cash value of life insurance $ 32. Internal revenue tax forms 2012 Security deposits with landlords, utilities, and others $ 33. Internal revenue tax forms 2012 Interests in partnerships $ 34. Internal revenue tax forms 2012 Value of investment in a business $ 35. Internal revenue tax forms 2012 Other investments (for example, annuity contracts, guaranteed investment contracts, mutual funds, commodity accounts, interests in hedge funds, and options) $ 36. Internal revenue tax forms 2012 Other assets not included above $ 37. Internal revenue tax forms 2012 FMV of total assets immediately before the cancellation. Internal revenue tax forms 2012 Add lines 16 through 36. Internal revenue tax forms 2012 $ 42,000 Part III. Internal revenue tax forms 2012 Insolvency 38. Internal revenue tax forms 2012 Amount of Insolvency. Internal revenue tax forms 2012 Subtract line 37 from line 15. Internal revenue tax forms 2012 If zero or less, you are not insolvent. Internal revenue tax forms 2012 $ 726,000    Frank and Kathy's Form 982 This image is too large to be displayed in the current screen. Internal revenue tax forms 2012 Please click the link to view the image. Internal revenue tax forms 2012 Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment) Prev  Up  Next   Home   More Online Publications
Español

Holocaust Memorial Museum

A living memorial to the victims of the Holocaust, the Memorial Museum was built on donated federal land and is funded through private donations.

Contact the Agency or Department

Website: Holocaust Memorial Museum

Address: 100 Raoul Wallenberg Place SW
Washington, DC 20024-2126

Phone Number: (202) 488-0400

TTY: (202) 488-0406

The Internal Revenue Tax Forms 2012

Internal revenue tax forms 2012 4. Internal revenue tax forms 2012   Transportation Table of Contents Parking fees. Internal revenue tax forms 2012 Advertising display on car. Internal revenue tax forms 2012 Car pools. Internal revenue tax forms 2012 Hauling tools or instruments. Internal revenue tax forms 2012 Union members' trips from a union hall. Internal revenue tax forms 2012 Car ExpensesStandard Mileage Rate Actual Car Expenses Leasing a Car Disposition of a Car This chapter discusses expenses you can deduct for business transportation when you are not traveling away from home as defined in chapter 1. Internal revenue tax forms 2012 These expenses include the cost of transportation by air, rail, bus, taxi, etc. Internal revenue tax forms 2012 , and the cost of driving and maintaining your car. Internal revenue tax forms 2012 Transportation expenses include the ordinary and necessary costs of all of the following. Internal revenue tax forms 2012 Getting from one workplace to another in the course of your business or profession when you are traveling within the city or general area that is your tax home. Internal revenue tax forms 2012 Tax home is defined in chapter 1. Internal revenue tax forms 2012 Visiting clients or customers. Internal revenue tax forms 2012 Going to a business meeting away from your regular workplace. Internal revenue tax forms 2012 Getting from your home to a temporary workplace when you have one or more regular places of work. Internal revenue tax forms 2012 These temporary workplaces can be either within the area of your tax home or outside that area. Internal revenue tax forms 2012 Transportation expenses do not include expenses you have while traveling away from home overnight. Internal revenue tax forms 2012 Those expenses are travel expenses discussed in chapter 1 . Internal revenue tax forms 2012 However, if you use your car while traveling away from home overnight, use the rules in this chapter to figure your car expense deduction. Internal revenue tax forms 2012 See Car Expenses , later. Internal revenue tax forms 2012 Daily transportation expenses you incur while traveling from home to one or more regular places of business are generally nondeductible commuting expenses. Internal revenue tax forms 2012 However, there may be exceptions to this general rule. Internal revenue tax forms 2012 You can deduct daily transportation expenses incurred going between your residence and a temporary work station outside the metropolitan area where you live. Internal revenue tax forms 2012 Also, daily transportation expenses can be deducted if: (1) you have one or more regular work locations away from your residence or (2) your residence is your principal place of business and you incur expenses going between the residence and another work location in the same trade or business, regardless of whether the work is temporary or permanent and regardless of the distance. Internal revenue tax forms 2012 Illustration of transportation expenses. Internal revenue tax forms 2012    Figure B , earlier, illustrates the rules that apply for deducting transportation expenses when you have a regular or main job away from your home. Internal revenue tax forms 2012 You may want to refer to it when deciding whether you can deduct your transportation expenses. Internal revenue tax forms 2012 Temporary work location. Internal revenue tax forms 2012   If you have one or more regular work locations away from your home and you commute to a temporary work location in the same trade or business, you can deduct the expenses of the daily round-trip transportation between your home and the temporary location, regardless of distance. Internal revenue tax forms 2012   If your employment at a work location is realistically expected to last (and does in fact last) for 1 year or less, the employment is temporary unless there are facts and circumstances that would indicate otherwise. Internal revenue tax forms 2012   If your employment at a work location is realistically expected to last for more than 1 year or if there is no realistic expectation that the employment will last for 1 year or less, the employment is not temporary, regardless of whether it actually lasts for more than 1 year. Internal revenue tax forms 2012   If employment at a work location initially is realistically expected to last for 1 year or less, but at some later date the employment is realistically expected to last more than 1 year, that employment will be treated as temporary (unless there are facts and circumstances that would indicate otherwise) until your expectation changes. Internal revenue tax forms 2012 It will not be treated as temporary after the date you determine it will last more than 1 year. Internal revenue tax forms 2012   If the temporary work location is beyond the general area of your regular place of work and you stay overnight, you are traveling away from home. Internal revenue tax forms 2012 You may have deductible travel expenses as discussed in chapter 1 . Internal revenue tax forms 2012 No regular place of work. Internal revenue tax forms 2012   If you have no regular place of work but ordinarily work in the metropolitan area where you live, you can deduct daily transportation costs between home and a temporary work site outside that metropolitan area. Internal revenue tax forms 2012   Generally, a metropolitan area includes the area within the city limits and the suburbs that are considered part of that metropolitan area. Internal revenue tax forms 2012   You cannot deduct daily transportation costs between your home and temporary work sites within your metropolitan area. Internal revenue tax forms 2012 These are nondeductible commuting expenses. Internal revenue tax forms 2012 Two places of work. Internal revenue tax forms 2012   If you work at two places in one day, whether or not for the same employer, you can deduct the expense of getting from one workplace to the other. Internal revenue tax forms 2012 However, if for some personal reason you do not go directly from one location to the other, you cannot deduct more than the amount it would have cost you to go directly from the first location to the second. Internal revenue tax forms 2012   Transportation expenses you have in going between home and a part-time job on a day off from your main job are commuting expenses. Internal revenue tax forms 2012 You cannot deduct them. Internal revenue tax forms 2012 Armed Forces reservists. Internal revenue tax forms 2012   A meeting of an Armed Forces reserve unit is a second place of business if the meeting is held on a day on which you work at your regular job. Internal revenue tax forms 2012 You can deduct the expense of getting from one workplace to the other as just discussed under Two places of work . Internal revenue tax forms 2012   You usually cannot deduct the expense if the reserve meeting is held on a day on which you do not work at your regular job. Internal revenue tax forms 2012 In this case, your transportation generally is a nondeductible commuting expense. Internal revenue tax forms 2012 However, you can deduct your transportation expenses if the location of the meeting is temporary and you have one or more regular places of work. Internal revenue tax forms 2012   If you ordinarily work in a particular metropolitan area but not at any specific location and the reserve meeting is held at a temporary location outside that metropolitan area, you can deduct your transportation expenses. Internal revenue tax forms 2012   If you travel away from home overnight to attend a guard or reserve meeting, you can deduct your travel expenses. Internal revenue tax forms 2012 These expenses are discussed in chapter 1 . Internal revenue tax forms 2012   If you travel more than 100 miles away from home in connection with your performance of services as a member of the reserves, you may be able to deduct some of your reserve-related travel costs as an adjustment to gross income rather than as an itemized deduction. Internal revenue tax forms 2012 For more information, see Armed Forces Reservists Traveling More Than 100 Miles From Home under Special Rules, in chapter 6. Internal revenue tax forms 2012 Commuting expenses. Internal revenue tax forms 2012   You cannot deduct the costs of taking a bus, trolley, subway, or taxi, or of driving a car between your home and your main or regular place of work. Internal revenue tax forms 2012 These costs are personal commuting expenses. Internal revenue tax forms 2012 You cannot deduct commuting expenses no matter how far your home is from your regular place of work. Internal revenue tax forms 2012 You cannot deduct commuting expenses even if you work during the commuting trip. Internal revenue tax forms 2012 Example. Internal revenue tax forms 2012 You sometimes use your cell phone to make business calls while commuting to and from work. Internal revenue tax forms 2012 Sometimes business associates ride with you to and from work, and you have a business discussion in the car. Internal revenue tax forms 2012 These activities do not change the trip from personal to business. Internal revenue tax forms 2012 You cannot deduct your commuting expenses. Internal revenue tax forms 2012 Parking fees. Internal revenue tax forms 2012    Fees you pay to park your car at your place of business are nondeductible commuting expenses. Internal revenue tax forms 2012 You can, however, deduct business-related parking fees when visiting a customer or client. Internal revenue tax forms 2012 Advertising display on car. Internal revenue tax forms 2012   Putting display material that advertises your business on your car does not change the use of your car from personal use to business use. Internal revenue tax forms 2012 If you use this car for commuting or other personal uses, you still cannot deduct your expenses for those uses. Internal revenue tax forms 2012 Car pools. Internal revenue tax forms 2012   You cannot deduct the cost of using your car in a nonprofit car pool. Internal revenue tax forms 2012 Do not include payments you receive from the passengers in your income. Internal revenue tax forms 2012 These payments are considered reimbursements of your expenses. Internal revenue tax forms 2012 However, if you operate a car pool for a profit, you must include payments from passengers in your income. Internal revenue tax forms 2012 You can then deduct your car expenses (using the rules in this publication). Internal revenue tax forms 2012 Hauling tools or instruments. Internal revenue tax forms 2012   Hauling tools or instruments in your car while commuting to and from work does not make your car expenses deductible. Internal revenue tax forms 2012 However, you can deduct any additional costs you have for hauling tools or instruments (such as for renting a trailer you tow with your car). Internal revenue tax forms 2012 Union members' trips from a union hall. Internal revenue tax forms 2012   If you get your work assignments at a union hall and then go to your place of work, the costs of getting from the union hall to your place of work are nondeductible commuting expenses. Internal revenue tax forms 2012 Although you need the union to get your work assignments, you are employed where you work, not where the union hall is located. Internal revenue tax forms 2012 Office in the home. Internal revenue tax forms 2012   If you have an office in your home that qualifies as a principal place of business, you can deduct your daily transportation costs between your home and another work location in the same trade or business. Internal revenue tax forms 2012 (See Publication 587, Business Use of Your Home, for information on determining if your home office qualifies as a principal place of business. Internal revenue tax forms 2012 ) Examples of deductible transportation. Internal revenue tax forms 2012   The following examples show when you can deduct transportation expenses based on the location of your work and your home. Internal revenue tax forms 2012 Example 1. Internal revenue tax forms 2012 You regularly work in an office in the city where you live. Internal revenue tax forms 2012 Your employer sends you to a 1-week training session at a different office in the same city. Internal revenue tax forms 2012 You travel directly from your home to the training location and return each day. Internal revenue tax forms 2012 You can deduct the cost of your daily round-trip transportation between your home and the training location. Internal revenue tax forms 2012 Example 2. Internal revenue tax forms 2012 Your principal place of business is in your home. Internal revenue tax forms 2012 You can deduct the cost of round-trip transportation between your qualifying home office and your client's or customer's place of business. Internal revenue tax forms 2012 Example 3. Internal revenue tax forms 2012 You have no regular office, and you do not have an office in your home. Internal revenue tax forms 2012 In this case, the location of your first business contact inside the metropolitan area is considered your office. Internal revenue tax forms 2012 Transportation expenses between your home and this first contact are nondeductible commuting expenses. Internal revenue tax forms 2012 Transportation expenses between your last business contact and your home are also nondeductible commuting expenses. Internal revenue tax forms 2012 While you cannot deduct the costs of these trips, you can deduct the costs of going from one client or customer to another. Internal revenue tax forms 2012 Car Expenses If you use your car for business purposes, you ordinarily can deduct car expenses. Internal revenue tax forms 2012 You generally can use one of the two following methods to figure your deductible expenses. Internal revenue tax forms 2012 Standard mileage rate. Internal revenue tax forms 2012 Actual car expenses. Internal revenue tax forms 2012 If you use actual expenses to figure your deduction for a car you lease, there are rules that affect the amount of your lease payments you can deduct. Internal revenue tax forms 2012 See Leasing a Car , later. Internal revenue tax forms 2012 In this publication, “car” includes a van, pickup, or panel truck. Internal revenue tax forms 2012 For the definition of “car” for depreciation purposes, see Car defined under Actual Car Expenses, later. Internal revenue tax forms 2012 Rural mail carriers. Internal revenue tax forms 2012   If you are a rural mail carrier, you may be able to treat the qualified reimbursement you received as your allowable expense. Internal revenue tax forms 2012 Because the qualified reimbursement is treated as paid under an accountable plan, your employer should not include the reimbursement in your income. Internal revenue tax forms 2012   If your vehicle expenses are more than the amount of your reimbursement, you can deduct the unreimbursed expenses as an itemized deduction on Schedule A (Form 1040). Internal revenue tax forms 2012 You must complete Form 2106 and attach it to your Form 1040, U. Internal revenue tax forms 2012 S. Internal revenue tax forms 2012 Individual Income Tax Return. Internal revenue tax forms 2012   A “qualified reimbursement” is the reimbursement you receive that meets both of the following conditions. Internal revenue tax forms 2012 It is given as an equipment maintenance allowance (EMA) to employees of the U. Internal revenue tax forms 2012 S. Internal revenue tax forms 2012 Postal Service. Internal revenue tax forms 2012 It is at the rate contained in the 1991 collective bargaining agreement. Internal revenue tax forms 2012 Any later agreement cannot increase the qualified reimbursement amount by more than the rate of inflation. Internal revenue tax forms 2012 See your employer for information on your reimbursement. Internal revenue tax forms 2012    If you are a rural mail carrier and received a qualified reimbursement, you cannot use the standard mileage rate. Internal revenue tax forms 2012 Standard Mileage Rate You may be able to use the standard mileage rate to figure the deductible costs of operating your car for business purposes. Internal revenue tax forms 2012 For 2013, the standard mileage rate for the cost of operating your car for business use is 56½ cents per mile. Internal revenue tax forms 2012 If you use the standard mileage rate for a year, you cannot deduct your actual car expenses for that year. Internal revenue tax forms 2012 You cannot deduct depreciation, lease payments, maintenance and repairs, gasoline (including gasoline taxes), oil, insurance, or vehicle registration fees. Internal revenue tax forms 2012 See Choosing the standard mileage rate and Standard mileage rate not allowed, later. Internal revenue tax forms 2012 You generally can use the standard mileage rate whether or not you are reimbursed and whether or not any reimbursement is more or less than the amount figured using the standard mileage rate. Internal revenue tax forms 2012 See chapter 6 for more information on reimbursements . Internal revenue tax forms 2012 Choosing the standard mileage rate. Internal revenue tax forms 2012   If you want to use the standard mileage rate for a car you own, you must choose to use it in the first year the car is available for use in your business. Internal revenue tax forms 2012 Then, in later years, you can choose to use either the standard mileage rate or actual expenses. Internal revenue tax forms 2012   If you want to use the standard mileage rate for a car you lease, you must use it for the entire lease period. Internal revenue tax forms 2012 For leases that began on or before December 31, 1997, the standard mileage rate must be used for the entire portion of the lease period (including renewals) that is after 1997. Internal revenue tax forms 2012   You must make the choice to use the standard mileage rate by the due date (including extensions) of your return. Internal revenue tax forms 2012 You cannot revoke the choice. Internal revenue tax forms 2012 However, in later years, you can switch from the standard mileage rate to the actual expenses method. Internal revenue tax forms 2012 If you change to the actual expenses method in a later year, but before your car is fully depreciated, you have to estimate the remaining useful life of the car and use straight line depreciation. Internal revenue tax forms 2012 Example. Internal revenue tax forms 2012 Larry is an employee who occasionally uses his own car for business purposes. Internal revenue tax forms 2012 He purchased the car in 2011, but he did not claim any unreimbursed employee expenses on his 2011 tax return. Internal revenue tax forms 2012 Because Larry did not use the standard mileage rate the first year the car was available for business use, he cannot use the standard mileage rate in 2013 to claim unreimbursed employee business expenses. Internal revenue tax forms 2012   For more information about depreciation included in the standard mileage rate, see Exception under Methods of depreciation, later. Internal revenue tax forms 2012 Standard mileage rate not allowed. Internal revenue tax forms 2012   You cannot use the standard mileage rate if you: Use five or more cars at the same time (such as in fleet operations), Claimed a depreciation deduction for the car using any method other than straight line, for example, MACRS (as discussed later under Depreciation Deduction), Claimed a section 179 deduction (discussed later) on the car, Claimed the special depreciation allowance on the car, Claimed actual car expenses after 1997 for a car you leased, or Are a rural mail carrier who received a qualified reimbursement. Internal revenue tax forms 2012 (See Rural mail carriers , earlier. Internal revenue tax forms 2012 ) Note. Internal revenue tax forms 2012 You can elect to use the standard mileage rate if you used a car for hire (such as a taxi) unless the standard mileage rate is otherwise not allowed, as discussed above. Internal revenue tax forms 2012 Five or more cars. Internal revenue tax forms 2012   If you own or lease five or more cars that are used for business at the same time, you cannot use the standard mileage rate for the business use of any car. Internal revenue tax forms 2012 However, you may be able to deduct your actual expenses for operating each of the cars in your business. Internal revenue tax forms 2012 See Actual Car Expenses , later, for information on how to figure your deduction. Internal revenue tax forms 2012   You are not using five or more cars for business at the same time if you alternate using (use at different times) the cars for business. Internal revenue tax forms 2012   The following examples illustrate the rules for when you can and cannot use the standard mileage rate for five or more cars. Internal revenue tax forms 2012 Example 1. Internal revenue tax forms 2012 Marcia, a salesperson, owns three cars and two vans that she alternates using for calling on her customers. Internal revenue tax forms 2012 She can use the standard mileage rate for the business mileage of the three cars and the two vans because she does not use them at the same time. Internal revenue tax forms 2012 Example 2. Internal revenue tax forms 2012 Tony and his employees use his four pickup trucks in his landscaping business. Internal revenue tax forms 2012 During the year, he traded in two of his old trucks for two newer ones. Internal revenue tax forms 2012 Tony can use the standard mileage rate for the business mileage of all six of the trucks he owned during the year. Internal revenue tax forms 2012 Example 3. Internal revenue tax forms 2012 Chris owns a repair shop and an insurance business. Internal revenue tax forms 2012 He and his employees use his two pickup trucks and van for the repair shop. Internal revenue tax forms 2012 Chris alternates using his two cars for the insurance business. Internal revenue tax forms 2012 No one else uses the cars for business purposes. Internal revenue tax forms 2012 Chris can use the standard mileage rate for the business use of the pickup trucks, van, and the cars because he never has more than four vehicles used for business at the same time. Internal revenue tax forms 2012 Example 4. Internal revenue tax forms 2012 Maureen owns a car and four vans that are used in her housecleaning business. Internal revenue tax forms 2012 Her employees use the vans, and she uses the car to travel to various customers. Internal revenue tax forms 2012 Maureen cannot use the standard mileage rate for the car or the vans. Internal revenue tax forms 2012 This is because all five vehicles are used in Maureen's business at the same time. Internal revenue tax forms 2012 She must use actual expenses for all vehicles. Internal revenue tax forms 2012 Interest. Internal revenue tax forms 2012   If you are an employee, you cannot deduct any interest paid on a car loan. Internal revenue tax forms 2012 This applies even if you use the car 100% for business as an employee. Internal revenue tax forms 2012   However, if you are self-employed and use your car in your business, you can deduct that part of the interest expense that represents your business use of the car. Internal revenue tax forms 2012 For example, if you use your car 60% for business, you can deduct 60% of the interest on Schedule C (Form 1040). Internal revenue tax forms 2012 You cannot deduct the part of the interest expense that represents your personal use of the car. Internal revenue tax forms 2012    If you use a home equity loan to purchase your car, you may be able to deduct the interest. Internal revenue tax forms 2012 See Publication 936, Home Mortgage Interest Deduction, for more information. Internal revenue tax forms 2012 Personal property taxes. Internal revenue tax forms 2012   If you itemize your deductions on Schedule A (Form 1040), you can deduct on line 7 state and local personal property taxes on motor vehicles. Internal revenue tax forms 2012 You can take this deduction even if you use the standard mileage rate or if you do not use the car for business. Internal revenue tax forms 2012   If you are self-employed and use your car in your business, you can deduct the business part of state and local personal property taxes on motor vehicles on Schedule C (Form 1040), Schedule C-EZ (Form 1040), or Schedule F (Form 1040). Internal revenue tax forms 2012 If you itemize your deductions, you can include the remainder of your state and local personal property taxes on the car on Schedule A (Form 1040). Internal revenue tax forms 2012 Parking fees and tolls. Internal revenue tax forms 2012   In addition to using the standard mileage rate, you can deduct any business-related parking fees and tolls. Internal revenue tax forms 2012 (Parking fees you pay to park your car at your place of work are nondeductible commuting expenses. Internal revenue tax forms 2012 ) Sale, trade-in, or other disposition. Internal revenue tax forms 2012   If you sell, trade in, or otherwise dispose of your car, you may have a gain or loss on the transaction or an adjustment to the basis of your new car. Internal revenue tax forms 2012 See Disposition of a Car , later. Internal revenue tax forms 2012 Actual Car Expenses If you do not use the standard mileage rate, you may be able to deduct your actual car expenses. Internal revenue tax forms 2012 If you qualify to use both methods, you may want to figure your deduction both ways to see which gives you a larger deduction. Internal revenue tax forms 2012 Actual car expenses include: Depreciation Licenses Lease  payments Registration  fees Gas Insurance Repairs Oil Garage rent Tires Tolls Parking fees   If you have fully depreciated a car that you still use in your business, you can continue to claim your other actual car expenses. Internal revenue tax forms 2012 Continue to keep records, as explained later in chapter 5 . Internal revenue tax forms 2012 Business and personal use. Internal revenue tax forms 2012   If you use your car for both business and personal purposes, you must divide your expenses between business and personal use. Internal revenue tax forms 2012 You can divide your expense based on the miles driven for each purpose. Internal revenue tax forms 2012 Example. Internal revenue tax forms 2012 You are a sales representative for a clothing firm and drive your car 20,000 miles during the year: 12,000 miles for business and 8,000 miles for personal use. Internal revenue tax forms 2012 You can claim only 60% (12,000 ÷ 20,000) of the cost of operating your car as a business expense. Internal revenue tax forms 2012 Employer-provided vehicle. Internal revenue tax forms 2012   If you use a vehicle provided by your employer for business purposes, you can deduct your actual unreimbursed car expenses. Internal revenue tax forms 2012 You cannot use the standard mileage rate. Internal revenue tax forms 2012 See Vehicle Provided by Your Employer in chapter 6. Internal revenue tax forms 2012 Interest on car loans. Internal revenue tax forms 2012   If you are an employee, you cannot deduct any interest paid on a car loan. Internal revenue tax forms 2012 This interest is treated as personal interest and is not deductible. Internal revenue tax forms 2012 If you are self-employed and use your car in that business, see Interest , earlier, under Standard Mileage Rate. Internal revenue tax forms 2012 Taxes paid on your car. Internal revenue tax forms 2012   If you are an employee, you can deduct personal property taxes paid on your car if you itemize deductions. Internal revenue tax forms 2012 Enter the amount paid on line 7 of Schedule A (Form 1040). Internal revenue tax forms 2012 Sales taxes. Internal revenue tax forms 2012   Generally, sales taxes on your car are part of your car's basis and are recovered through depreciation, discussed later. Internal revenue tax forms 2012 Fines and collateral. Internal revenue tax forms 2012   You cannot deduct fines you pay or collateral you forfeit for traffic violations. Internal revenue tax forms 2012 Casualty and theft losses. Internal revenue tax forms 2012   If your car is damaged, destroyed, or stolen, you may be able to deduct part of the loss not covered by insurance. Internal revenue tax forms 2012 See Publication 547, Casualties, Disasters, and Thefts, for information on deducting a loss on your car. Internal revenue tax forms 2012 Depreciation and section 179 deductions. Internal revenue tax forms 2012   Generally, the cost of a car, plus sales tax and improvements, is a capital expense. Internal revenue tax forms 2012 Because the benefits last longer than 1 year, you generally cannot deduct a capital expense. Internal revenue tax forms 2012 However, you can recover this cost through the section 179 deduction (the deduction allowed by section 179 of the Internal Revenue Code), special depreciation allowance, and depreciation deductions. Internal revenue tax forms 2012 Depreciation allows you to recover the cost over more than 1 year by deducting part of it each year. Internal revenue tax forms 2012 The section 179 deduction , special depreciation allowance , and depreciation deductions are discussed later. Internal revenue tax forms 2012   Generally, there are limits on these deductions. Internal revenue tax forms 2012 Special rules apply if you use your car 50% or less in your work or business. Internal revenue tax forms 2012   You can claim a section 179 deduction and use a depreciation method other than straight line only if you do not use the standard mileage rate to figure your business-related car expenses in the year you first place a car in service. Internal revenue tax forms 2012   If, in the year you first place a car in service, you claim either a section 179 deduction or use a depreciation method other than straight line for its estimated useful life, you cannot use the standard mileage rate on that car in any future year. Internal revenue tax forms 2012 Car defined. Internal revenue tax forms 2012   For depreciation purposes, a car is any four-wheeled vehicle (including a truck or van) made primarily for use on public streets, roads, and highways. Internal revenue tax forms 2012 Its unloaded gross vehicle weight must not be more than 6,000 pounds. Internal revenue tax forms 2012 A car includes any part, component, or other item physically attached to it or usually included in the purchase price. Internal revenue tax forms 2012   A car does not include: An ambulance, hearse, or combination ambulance-hearse used directly in a business, A vehicle used directly in the business of transporting persons or property for pay or hire, or A truck or van that is a qualified nonpersonal use vehicle. Internal revenue tax forms 2012 Qualified nonpersonal use vehicles. Internal revenue tax forms 2012   These are vehicles that by their nature are not likely to be used more than a minimal amount for personal purposes. Internal revenue tax forms 2012 They 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. Internal revenue tax forms 2012 Delivery trucks with seating only for the driver, or only for the driver plus a folding jump seat, are qualified nonpersonal use vehicles. Internal revenue tax forms 2012 More information. Internal revenue tax forms 2012   See Depreciation Deduction , later, for more information on how to depreciate your vehicle. Internal revenue tax forms 2012 Section 179 Deduction The section 179 deduction allows you to treat a portion or all of the cost of a car as a current expense. Internal revenue tax forms 2012 If you choose to deduct all or part of the cost as a current expense, you must reduce your depreciable basis in the car by the amount of the section 179 deduction. Internal revenue tax forms 2012 There is a limit on the total section 179 deduction, special depreciation allowance, and depreciation deduction for cars, trucks, and vans that may reduce or eliminate any benefit from claiming the section 179 deduction. Internal revenue tax forms 2012 See Depreciation Limits, later. Internal revenue tax forms 2012 You can claim the section 179 deduction only in the year you place the car in service. Internal revenue tax forms 2012 For this purpose, a car is placed in service when it is ready and available for a specifically assigned use, whether in a trade or business, a tax-exempt activity, a personal activity, or for the production of income. Internal revenue tax forms 2012 Even if you are not using the property, it is in service when it is ready and available for its specifically assigned use. Internal revenue tax forms 2012 A car first used for personal purposes cannot qualify for the deduction in a later year when its use changes to business. Internal revenue tax forms 2012 Example. Internal revenue tax forms 2012 In 2012, you bought a new car and used it for personal purposes. Internal revenue tax forms 2012 In 2013, you began to use it for business. Internal revenue tax forms 2012 Changing its use to business use does not qualify the cost of your car for a section 179 deduction in 2013. Internal revenue tax forms 2012 However, you can claim a depreciation deduction for the business use of the car starting in 2013. Internal revenue tax forms 2012 See Depreciation Deduction , later. Internal revenue tax forms 2012 More than 50% business use requirement. Internal revenue tax forms 2012   You must use the property more than 50% for business to claim any section 179 deduction. Internal revenue tax forms 2012 If you used the property more than 50% for business, multiply the cost of the property by the percentage of business use. Internal revenue tax forms 2012 The result is the cost of the property that can qualify for the section 179 deduction. Internal revenue tax forms 2012 Example. Internal revenue tax forms 2012 Peter purchased a car in April 2013 for $24,500 and used it 60% for business. Internal revenue tax forms 2012 Based on his business usage, the total cost of Peter's car that qualifies for the section 179 deduction is $14,700 ($24,500 cost × 60% business use). Internal revenue tax forms 2012 But see Limit on total section 179, special depreciation allowance, and depreciation deduction , discussed later. Internal revenue tax forms 2012 Limits. Internal revenue tax forms 2012   There are limits on: The amount of the section 179 deduction, The section 179 deduction for sport utility and certain other vehicles, and The total amount of the section 179 deduction, special depreciation allowance, and depreciation deduction (discussed later ) you can claim for a qualified property. Internal revenue tax forms 2012 Limit on the amount of the section 179 deduction. Internal revenue tax forms 2012   For 2013, the total amount you can choose to deduct under section 179 generally cannot be more than $500,000. Internal revenue tax forms 2012   If the cost of your section 179 property placed in service in 2013 is over $2,000,000, you must reduce the $500,000 dollar limit (but not below zero) by the amount of cost over $2,000,000. Internal revenue tax forms 2012 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 deduction. Internal revenue tax forms 2012   The total amount you can deduct under section 179 each year after you apply the limits listed above cannot be more than the taxable income from the active conduct of any trade or business during the year. Internal revenue tax forms 2012   If you are married and 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. Internal revenue tax forms 2012   If you and your spouse file separate returns, you are treated as one taxpayer for the dollar limit. Internal revenue tax forms 2012 You must allocate the dollar limit (after any reduction) between you. Internal revenue tax forms 2012   For more information on the above section 179 deduction limits, see Publication 946. Internal revenue tax forms 2012 Limit for sport utility and certain other vehicles. Internal revenue tax forms 2012   For sport utility and certain other vehicles placed in service in 2013, the portion of the vehicle's cost taken into account in figuring your section 179 deduction is limited to $25,000. Internal revenue tax forms 2012 This rule applies to any four-wheeled vehicle primarily designed or used to carry passengers over public streets, roads, or highways, that is not subject to any of the passenger automobile limits explained under Depreciation Limits , later, and that is rated at no more than 14,000 pounds gross vehicle weight. Internal revenue tax forms 2012 However, the $25,000 limit does not apply to any vehicle: Designed to have a seating capacity of more than nine persons behind the driver's seat, Equipped with a cargo area of at least 6 feet in interior length that is an open area or is designed for use as an open area but is enclosed by a cap and is not readily accessible directly from the passenger compartment, or That has an integral enclosure, fully enclosing the driver compartment and load carrying device, does not have seating rearward of the driver's seat, and has no body section protruding more than 30 inches ahead of the leading edge of the windshield. Internal revenue tax forms 2012    Limit on total section 179, special depreciation allowance, and depreciation deduction. Internal revenue tax forms 2012   Generally, the total amount of section 179, special depreciation allowance, and depreciation deduction you can claim for a car that is qualified property and that you placed in service in 2013 is $11,160. Internal revenue tax forms 2012 The limit is reduced if your business use of the car is less than 100%. Internal revenue tax forms 2012 See Depreciation Limits , later, for more information. Internal revenue tax forms 2012 Example. Internal revenue tax forms 2012 In the earlier example under More than 50% business use requirement, Peter had a car with a cost (for purposes of the section 179 deduction) of $14,700. Internal revenue tax forms 2012 However, based on Peter's business usage of his car, the total of his section 179, special depreciation allowance, and depreciation deductions is limited to $6,696 ($11,160 limit x 60% business use). Internal revenue tax forms 2012 Cost of car. Internal revenue tax forms 2012   For purposes of the section 179 deduction, the cost of the car does not include any amount figured by reference to any other property held by you at any time. Internal revenue tax forms 2012 For example, if you buy (for cash and a trade-in) a new car to use in your business, your cost for purposes of the section 179 deduction does not include your adjusted basis in the car you trade in for the new car. Internal revenue tax forms 2012 Your cost includes only the cash you paid. Internal revenue tax forms 2012 Basis of car for depreciation. Internal revenue tax forms 2012   The amount of the section 179 deduction reduces your basis in your car. Internal revenue tax forms 2012 If you choose the section 179 deduction, you must subtract the amount of the deduction from the cost of your car. Internal revenue tax forms 2012 The resulting amount is the basis in your car you use to figure your depreciation deduction. Internal revenue tax forms 2012 When to choose. Internal revenue tax forms 2012   If you want to take the section 179 deduction, you must make the choice in the tax year you place the car in service for business or work. Internal revenue tax forms 2012 How to choose. Internal revenue tax forms 2012    Employees use Form 2106 to make this choice and report the section 179 deduction. Internal revenue tax forms 2012 All others use Form 4562. Internal revenue tax forms 2012   File the appropriate form with either of the following. Internal revenue tax forms 2012 Your original tax return filed for the year the property was placed in service (whether or not you file it timely). Internal revenue tax forms 2012 An amended return filed within the time prescribed by law. Internal revenue tax forms 2012 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. Internal revenue tax forms 2012 The amended return must also include any resulting adjustments to taxable income. Internal revenue tax forms 2012    You must keep records that show the specific identification of each piece of qualifying section 179 property. Internal revenue tax forms 2012 These records must show how you acquired the property, the person you acquired it from, and when you placed it in service. Internal revenue tax forms 2012 Revoking an election. Internal revenue tax forms 2012   An election (or any specification made in the election) to take a section 179 deduction for 2013 can only be revoked with the Commissioner's approval. Internal revenue tax forms 2012 Recapture of section 179 deduction. Internal revenue tax forms 2012   To be eligible to claim the section 179 deduction, you must use your car more than 50% for business or work in the year you acquired it. Internal revenue tax forms 2012 If your business use of the car is 50% or less in a later tax year during the recovery period, you have to recapture (include in income) in that later year any excess depreciation. Internal revenue tax forms 2012 Any section 179 deduction claimed on the car is included in calculating the excess depreciation. Internal revenue tax forms 2012 For information on this calculation, see Excess depreciation , later in this chapter under Car Used 50% or Less for Business. Internal revenue tax forms 2012 Dispositions. Internal revenue tax forms 2012   If you dispose of a car on which you had claimed the section 179 deduction, the amount of that deduction is treated as a depreciation deduction for recapture purposes. Internal revenue tax forms 2012 You treat any gain on the disposition of the property as ordinary income up to the amount of the section 179 deduction and any allowable depreciation (unless you establish the amount actually allowed). Internal revenue tax forms 2012 For information on the disposition of a car, see Disposition of a Car , later. Internal revenue tax forms 2012 Special Depreciation Allowance You may be able to claim the special depreciation allowance for your car, truck, or van, if it is qualified property and was placed in service in 2013. Internal revenue tax forms 2012 The allowance is an additional depreciation deduction of 50% of the car's depreciable basis (after any section 179 deduction, but before figuring your regular depreciation deduction under MACRS). Internal revenue tax forms 2012 The special depreciation allowance applies only for the first year the car is placed in service. Internal revenue tax forms 2012 To qualify for the allowance more than 50% of the use of the car must be in a qualified business use (as defined under Depreciation Deduction, later). Internal revenue tax forms 2012 Combined depreciation. Internal revenue tax forms 2012   Your combined section 179 deduction, special depreciation allowance, and regular MACRS depreciation deduction is limited to the maximum allowable depreciation deduction for cars of $11,160 ($3,160 if you elect not to claim the special depreciation allowance). Internal revenue tax forms 2012 For trucks and vans, the first-year limit remains at $11,360 ($3,360 if you elect not to claim the special depreciation allowance). Internal revenue tax forms 2012 See Depreciation Limits , later in this chapter. Internal revenue tax forms 2012 Qualified car. Internal revenue tax forms 2012   To be a qualified car (including trucks and vans), the car must meet all of the following tests. Internal revenue tax forms 2012 You purchased the car new on or after January 1, 2008, but only if no binding written contract to acquire the car existed before January 1, 2008, You placed the car in service in your trade or business before January 1, 2014, You used the car more than 50% in a qualified business use. Internal revenue tax forms 2012 Election not to claim the special depreciation allowance. Internal revenue tax forms 2012   You can elect not to claim the special depreciation allowance for your car, truck, or van, that is qualified property. Internal revenue tax forms 2012 If you make this election, it applies to all 5-year property placed in service during the year. Internal revenue tax forms 2012   To make the election, attach a statement to your timely filed return (including extensions) indicating the class of property (5-year for cars) for which you are making the election and that you are electing not to claim the special depreciation allowance for qualified property acquired on or after January 1, 2008. Internal revenue tax forms 2012    Unless you elect not to claim the special depreciation allowance, you must reduce the car's adjusted basis by the amount of the allowance, even if the allowance was not claimed. Internal revenue tax forms 2012 Depreciation Deduction If you use actual car expenses to figure your deduction for a car you own and use in your business, you can claim a depreciation deduction. Internal revenue tax forms 2012 This means you can deduct a certain amount each year as a recovery of your cost or other basis in your car. Internal revenue tax forms 2012 You generally need to know the following things about the car you intend to depreciate. Internal revenue tax forms 2012 Your basis in the car. Internal revenue tax forms 2012 The date you place the car in service. Internal revenue tax forms 2012 The method of depreciation and recovery period you will use. Internal revenue tax forms 2012 Basis. Internal revenue tax forms 2012   Your basis in a car for figuring depreciation is generally its cost. Internal revenue tax forms 2012 This includes any amount you borrow or pay in cash, other property, or services. Internal revenue tax forms 2012   Generally, you figure depreciation on your car, truck, or van using your unadjusted basis (see Unadjusted basis , later). Internal revenue tax forms 2012 However, in some situations you will use your adjusted basis (your basis reduced by depreciation allowed or allowable in earlier years). Internal revenue tax forms 2012 For one of these situations see Exception under Methods of depreciation, later. Internal revenue tax forms 2012   If you change the use of a car from personal to business, your basis for depreciation is the lesser of the fair market value or your adjusted basis in the car on the date of conversion. Internal revenue tax forms 2012 Additional rules concerning basis are discussed later in this chapter under Unadjusted basis . Internal revenue tax forms 2012 Placed in service. Internal revenue tax forms 2012   You generally place a car in service when it is available for use in your work or business, in an income-producing activity, or in a personal activity. Internal revenue tax forms 2012 Depreciation begins when the car is placed in service for use in your work or business or for the production of income. Internal revenue tax forms 2012   For purposes of computing depreciation, if you first start using the car only for personal use and later convert it to business use, you place the car in service on the date of conversion. Internal revenue tax forms 2012 Car placed in service and disposed of in the same year. Internal revenue tax forms 2012   If you place a car in service and dispose of it in the same tax year, you cannot claim any depreciation deduction for that car. Internal revenue tax forms 2012 Methods of depreciation. Internal revenue tax forms 2012   Generally, you figure depreciation on cars using the Modified Accelerated Cost Recovery System (MACRS). Internal revenue tax forms 2012 MACRS is discussed later in this chapter. Internal revenue tax forms 2012 Exception. Internal revenue tax forms 2012   If you used the standard mileage rate in the first year of business use and change to the actual expenses method in a later year, you cannot depreciate your car under the MACRS rules. Internal revenue tax forms 2012 You must use straight line depreciation over the estimated remaining useful life of the car. Internal revenue tax forms 2012   To figure depreciation under the straight line method, you must reduce your basis in the car (but not below zero) by a set rate per mile for all miles for which you used the standard mileage rate. Internal revenue tax forms 2012 The rate per mile varies depending on the year(s) you used the standard mileage rate. Internal revenue tax forms 2012 For the rate(s) to use, see Depreciation adjustment when you used the standard mileage rate under Disposition of a Car, later. Internal revenue tax forms 2012   This reduction of basis is in addition to those basis adjustments described later under Unadjusted basis . Internal revenue tax forms 2012 You must use your adjusted basis in your car to figure your depreciation deduction. Internal revenue tax forms 2012 For additional information on the straight line method of depreciation, see Publication 946. Internal revenue tax forms 2012 More-than-50%-use test. Internal revenue tax forms 2012   Generally, you must use your car more than 50% for qualified business use (defined next) during the year to use MACRS. Internal revenue tax forms 2012 You must meet this more-than-50%-use test each year of the recovery period (6 years under MACRS) for your car. Internal revenue tax forms 2012   If your business use is 50% or less, you must use the straight line method to depreciate your car. Internal revenue tax forms 2012 This is explained later under Car Used 50% or Less for Business . Internal revenue tax forms 2012 Qualified business use. Internal revenue tax forms 2012   A qualified business use is any use in your trade or business. Internal revenue tax forms 2012 It does not include use for the production of income (investment use). Internal revenue tax forms 2012 However, you do combine your business and investment use to compute your depreciation deduction for the tax year. Internal revenue tax forms 2012 Use of your car by another person. Internal revenue tax forms 2012   Do not treat any use of your car by another person as use in your trade or business unless that use meets one of the following conditions. Internal revenue tax forms 2012 It is directly connected with your business. Internal revenue tax forms 2012 It is properly reported by you as income to the other person (and, if you have to, you withhold tax on the income). Internal revenue tax forms 2012 It results in a payment of fair market rent. Internal revenue tax forms 2012 This includes any payment to you for the use of your car. Internal revenue tax forms 2012 Business use changes. Internal revenue tax forms 2012   If you used your car more than 50% in qualified business use in the year you placed it in service, but 50% or less in a later year (including the year of disposition), you have to change to the straight line method of depreciation. Internal revenue tax forms 2012 See Qualified business use 50% or less in a later year under Car Used 50% or Less for Business, later. Internal revenue tax forms 2012    Property does not cease to be used more than 50% in qualified business use by reason of a transfer at death. Internal revenue tax forms 2012 Use for more than one purpose. Internal revenue tax forms 2012   If you use your car for more than one purpose during the tax year, you must allocate the use to the various purposes. Internal revenue tax forms 2012 You do this on the basis of mileage. Internal revenue tax forms 2012 Figure the percentage of qualified business use by dividing the number of miles you drive your car for business purposes during the year by the total number of miles you drive the car during the year for any purpose. Internal revenue tax forms 2012 Change from personal to business use. Internal revenue tax forms 2012   If you change the use of a car from 100% personal use to business use during the tax year, you may not have mileage records for the time before the change to business use. Internal revenue tax forms 2012 In this case, you figure the percentage of business use for the year as follows. Internal revenue tax forms 2012 Determine the percentage of business use for the period following the change. Internal revenue tax forms 2012 Do this by dividing business miles by total miles driven during that period. Internal revenue tax forms 2012 Multiply the percentage in (1) by a fraction. Internal revenue tax forms 2012 The numerator (top number) is the number of months the car is used for business and the denominator (bottom number) is 12. Internal revenue tax forms 2012 Example. Internal revenue tax forms 2012 You use a car only for personal purposes during the first 6 months of the year. Internal revenue tax forms 2012 During the last 6 months of the year, you drive the car a total of 15,000 miles of which 12,000 miles are for business. Internal revenue tax forms 2012 This gives you a business use percentage of 80% (12,000 ÷ 15,000) for that period. Internal revenue tax forms 2012 Your business use for the year is 40% (80% × 6/12). Internal revenue tax forms 2012 Limits. Internal revenue tax forms 2012   The amount you can claim for section 179, special depreciation allowance, and depreciation deductions may be limited. Internal revenue tax forms 2012 The maximum amount you can claim depends on the year in which you placed your car in service. Internal revenue tax forms 2012 You have to reduce the maximum amount if you did not use the car exclusively for business. Internal revenue tax forms 2012 See Depreciation Limits , later. Internal revenue tax forms 2012 Unadjusted basis. Internal revenue tax forms 2012   You use your unadjusted basis (often referred to as your basis or your basis for depreciation) to figure your depreciation using the MACRS depreciation chart, explained later under Modified Accelerated Cost Recovery System (MACRS) . Internal revenue tax forms 2012 Your unadjusted basis for figuring depreciation is your original basis increased or decreased by certain amounts. Internal revenue tax forms 2012   To figure your unadjusted basis, begin with your car's original basis, which generally is its cost. Internal revenue tax forms 2012 Cost includes sales taxes (see Sales taxes , earlier), destination charges, and dealer preparation. Internal revenue tax forms 2012 Increase your basis by any substantial improvements you make to your car, such as adding air conditioning or a new engine. Internal revenue tax forms 2012 Decrease your basis by any section 179 deduction, special depreciation allowance, gas guzzler tax, clean-fuel vehicle deduction (for vehicles placed in service before Jan. Internal revenue tax forms 2012 1, 2006), and alternative motor vehicle credit. Internal revenue tax forms 2012   See Form 8910 for information on the alternative motor vehicle credit. Internal revenue tax forms 2012 If your business use later falls to 50% or less, you may have to recapture (include in your income) any excess depreciation. Internal revenue tax forms 2012 See Car Used 50% or Less for Business, later, for more information. Internal revenue tax forms 2012 If you acquired the car by gift or inheritance, see Publication 551, Basis of Assets, for information on your basis in the car. Internal revenue tax forms 2012 Improvements. Internal revenue tax forms 2012   A major improvement to a car is treated as a new item of 5-year recovery property. Internal revenue tax forms 2012 It is treated as placed in service in the year the improvement is made. Internal revenue tax forms 2012 It does not matter how old the car is when the improvement is added. Internal revenue tax forms 2012 Follow the same steps for depreciating the improvement as you would for depreciating the original cost of the car. Internal revenue tax forms 2012 However, you must treat the improvement and the car as a whole when applying the limits on the depreciation deductions. Internal revenue tax forms 2012 Your car's depreciation deduction for the year (plus any section 179 deduction, special depreciation allowance, and depreciation on any improvements) cannot be more than the depreciation limit that applies for that year. Internal revenue tax forms 2012 See Depreciation Limits , later. Internal revenue tax forms 2012 Car trade-in. Internal revenue tax forms 2012   If you traded one car (the “old car”) for another car (the “new car”) in 2013, there are two ways you can treat the transaction. Internal revenue tax forms 2012 You can elect to treat the transaction as a tax-free disposition of the old car and the purchase of the new car. Internal revenue tax forms 2012 If you make this election, you treat the old car as disposed of at the time of the trade-in. Internal revenue tax forms 2012 The depreciable basis of the new car is the adjusted basis of the old car (figured as if 100% of the car's use had been for business purposes) plus any additional amount you paid for the new car. Internal revenue tax forms 2012 You then figure your depreciation deduction for the new car beginning with the date you placed it in service. Internal revenue tax forms 2012 You make this election by completing Form 2106, Part II, Section D. Internal revenue tax forms 2012 This method is explained later, beginning at Effect of trade-in on basis . Internal revenue tax forms 2012 If you do not make the election described in (1), you must figure depreciation separately for the remaining basis of the old car and for any additional amount you paid for the new car. Internal revenue tax forms 2012 You must apply two depreciation limits (see Depreciation Limits , later). Internal revenue tax forms 2012 The limit that applies to the remaining basis of the old car generally is the amount that would have been allowed had you not traded in the old car. Internal revenue tax forms 2012 The limit that applies to the additional amount you paid for the new car generally is the limit that applies for the tax year, reduced by the depreciation allowance for the remaining basis of the old car. Internal revenue tax forms 2012 You must use Form 4562 to compute your depreciation deduction. Internal revenue tax forms 2012 You cannot use Form 2106, Part II, Section D. Internal revenue tax forms 2012 This method is explained in Publication 946. Internal revenue tax forms 2012   If you elect to use the method described in (1), you must do so on a timely filed tax return (including extensions). Internal revenue tax forms 2012 Otherwise, you must use the method described in (2). Internal revenue tax forms 2012 Effect of trade-in on basis. Internal revenue tax forms 2012   The discussion that follows applies to trade-ins of cars in 2013, where the election was made to treat the transaction as a tax-free disposition of the old car and the purchase of the new car. Internal revenue tax forms 2012 For information on how to figure depreciation for cars involved in a like-kind exchange (trade-in) in 2013, for which the election was not made, see Publication 946 and Regulations section 1. Internal revenue tax forms 2012 168(i)-6(d)(3). Internal revenue tax forms 2012 Traded car used only for business. Internal revenue tax forms 2012   If you trade in a car you used only in your business for another car that will be used only in your business, your original basis in the new car is your adjusted basis in the old car, plus any additional amount you pay for the new car. Internal revenue tax forms 2012 Example. Internal revenue tax forms 2012 Paul trades in a car that has an adjusted basis of $5,000 for a new car. Internal revenue tax forms 2012 In addition, he pays cash of $20,000 for the new car. Internal revenue tax forms 2012 His original basis of the new car is $25,000 (his $5,000 adjusted basis in the old car plus the $20,000 cash paid). Internal revenue tax forms 2012 Paul's unadjusted basis is $25,000 unless he claims the section 179 deduction, special depreciation allowance, or has other increases or decreases to his original basis, discussed under Unadjusted basis , earlier. Internal revenue tax forms 2012 Traded car used partly in business. Internal revenue tax forms 2012   If you trade in a car you used partly in your business for a new car you will use in your business, you must make a “trade-in” adjustment for the personal use of the old car. Internal revenue tax forms 2012 This adjustment has the effect of reducing your basis in your old car, but not below zero, for purposes of figuring your depreciation deduction for the new car. Internal revenue tax forms 2012 (This adjustment is not used, however, when you determine the gain or loss on the later disposition of the new car. Internal revenue tax forms 2012 See Publication 544, Sales and Other Dispositions of Assets, for information on how to report the disposition of your car. Internal revenue tax forms 2012 )   To figure the unadjusted basis of your new car for depreciation, first add to your adjusted basis in the old car any additional amount you pay for the new car. Internal revenue tax forms 2012 Then subtract from that total the excess, if any, of: The total of the amounts that would have been allowable as depreciation during the tax years before the trade if 100% of the use of the car had been business and investment use, over The total of the amounts actually allowed as depreciation during those years. Internal revenue tax forms 2012 For information about figuring depreciation, see Modified Accelerated Cost Recovery System (MACRS) , which follows Example 2, later. Internal revenue tax forms 2012 Modified Accelerated Cost Recovery System (MACRS). Internal revenue tax forms 2012   The Modified Accelerated Cost Recovery System (MACRS) is the name given to the tax rules for getting back (recovering) through depreciation deductions the cost of property used in a trade or business or to produce income. Internal revenue tax forms 2012   The maximum amount you can deduct is limited, depending on the year you placed your car in service. Internal revenue tax forms 2012 See Depreciation Limits , later. Internal revenue tax forms 2012 Recovery period. Internal revenue tax forms 2012   Under MACRS, cars are classified as 5-year property. Internal revenue tax forms 2012 You actually depreciate the cost of a car, truck, or van over a period of 6 calendar years. Internal revenue tax forms 2012 This is because your car is generally treated as placed in service in the middle of the year, and you claim depreciation for one-half of both the first year and the sixth year. Internal revenue tax forms 2012 Depreciation deduction for certain Indian reservation property. Internal revenue tax forms 2012   Shorter recovery periods are provided under MACRS for qualified Indian reservation property placed in service on Indian reservations after 1993 and before 2014. Internal revenue tax forms 2012 The recovery that applies for a business-use car is 3 years instead of 5 years. Internal revenue tax forms 2012 However, the depreciation limits, discussed later, will still apply. Internal revenue tax forms 2012   For more information on the qualifications for this shorter recovery period and the percentages to use in figuring the depreciation deduction, see chapter 4 of Publication 946. Internal revenue tax forms 2012 Depreciation methods. Internal revenue tax forms 2012   You can use one of the following methods to depreciate your car. Internal revenue tax forms 2012 The 200% declining balance method (200% DB) over a 5-year recovery period that switches to the straight line method when that method provides an equal or greater deduction. Internal revenue tax forms 2012 The 150% declining balance method (150% DB) over a 5-year recovery period that switches to the straight line method when that method provides an equal or greater deduction. Internal revenue tax forms 2012 The straight line method (SL) over a 5-year recovery period. Internal revenue tax forms 2012    If you use Table 4-1 (discussed later under MACRS depreciation chart) to determine your depreciation rate for 2013, you do not need to determine in what year using the straight line method provides an equal or greater deduction. Internal revenue tax forms 2012 This is because the chart has the switch to the straight line method built into its rates. Internal revenue tax forms 2012   Before choosing a method, you may wish to consider the following facts. Internal revenue tax forms 2012 Using the straight line method provides equal yearly deductions throughout the recovery period. Internal revenue tax forms 2012 Using the declining balance methods provides greater deductions during the earlier recovery years with the deductions generally getting smaller each year. Internal revenue tax forms 2012 MACRS depreciation chart. Internal revenue tax forms 2012   A 2013 MACRS Depreciation Chart and instructions are included in this chapter as Table 4-1 . Internal revenue tax forms 2012 Using this table will make it easy for you to figure the 2013 depreciation deduction for your car. Internal revenue tax forms 2012 A similar chart appears in the Instructions for Form 2106. Internal revenue tax forms 2012    You may have to use the tables in Publication 946 instead of using this MACRS Depreciation Chart. Internal revenue tax forms 2012   You must use the Depreciation Tables in Publication 946 rather than the 2013 MACRS Depreciation Chart in this publication if any one of the following four conditions applies to you. Internal revenue tax forms 2012 You file your return on a fiscal year basis. Internal revenue tax forms 2012 You file your return for a short tax year (less than 12 months). Internal revenue tax forms 2012 During the year, all of the following conditions apply. Internal revenue tax forms 2012 You placed some property in service from January through September. Internal revenue tax forms 2012 You placed some property in service from October through December. Internal revenue tax forms 2012 Your basis in the property you placed in service from October through December (excluding nonresidential real property, residential rental property, and property placed in service and disposed of in the same year) was more than 40% of your total bases in all property you placed in service during the year. Internal revenue tax forms 2012   You placed qualified property in service on an Indian reservation. Internal revenue tax forms 2012 Depreciation in future years. Internal revenue tax forms 2012   If you use the percentages from the chart, you generally must continue to use them for the entire recovery period of your car. Internal revenue tax forms 2012 However, you cannot continue to use the chart if your basis in your car is adjusted because of a casualty. Internal revenue tax forms 2012 In that case, for the year of the adjustment and the remaining recovery period, figure the depreciation without the chart using your adjusted basis in the car at the end of the year of the adjustment and over the remaining recovery period. Internal revenue tax forms 2012 See Figuring the Deduction Without Using the Tables in chapter 4 of Publication 946. Internal revenue tax forms 2012    In future years, do not use the chart in this edition of the publication. Internal revenue tax forms 2012 Instead, use the chart in the publication or the form instructions for those future years. Internal revenue tax forms 2012 Disposition of car during recovery period. Internal revenue tax forms 2012   If you dispose of the car before the end of the recovery period, you are generally allowed a half year of depreciation in the year of disposition unless you purchased the car during the last quarter of a year. Internal revenue tax forms 2012 See Depreciation deduction for the year of disposition under Disposition of a Car, later, for information on how to figure the depreciation allowed in the year of disposition. Internal revenue tax forms 2012 How to use the 2013 chart. Internal revenue tax forms 2012   To figure your depreciation deduction for 2013, find the percentage in the column of Table 4-1 based on the date that you first placed the car in service and the depreciation method that you are using. Internal revenue tax forms 2012 Multiply the unadjusted basis of your car (defined earlier) by that percentage to determine the amount of your depreciation deduction. Internal revenue tax forms 2012 If you prefer to figure your depreciation deduction without the help of the chart, see Publication 946. Internal revenue tax forms 2012    Your deduction cannot be more than the maximum depreciation limit for cars. Internal revenue tax forms 2012 See Depreciation Limits, later. Internal revenue tax forms 2012 Example. Internal revenue tax forms 2012 Phil bought a used truck in February 2012 to use exclusively in his landscape business. Internal revenue tax forms 2012 He paid $9,200 for the truck with no trade-in. Internal revenue tax forms 2012 Phil did not claim any section 179 deduction, the truck did not qualify for the special depreciation allowance, and he chose to use the 200% DB method to get the largest depreciation deduction in the early years. Internal revenue tax forms 2012 Phil used the MACRS depreciation chart in 2012 to find his percentage. Internal revenue tax forms 2012 The unadjusted basis of his truck equals its cost because Phil used it exclusively for business. Internal revenue tax forms 2012 He multiplied the unadjusted basis of his truck, $9,200, by the percentage that applied, 20%, to figure his 2012 depreciation deduction of $1,840. Internal revenue tax forms 2012 In 2013, Phil used the truck for personal purposes when he repaired his father's cabin. Internal revenue tax forms 2012 His records show that the business use of his truck was 90% in 2013. Internal revenue tax forms 2012 Phil used Table 4-1 to find his percentage. Internal revenue tax forms 2012 Reading down the first column for the date placed in service and across to the 200% DB column, he locates his percentage, 32%. Internal revenue tax forms 2012 He multiplies the unadjusted basis of his truck, $8,280 ($9,200 cost × 90% business use), by 32% to figure his 2013 depreciation deduction of $2,650. Internal revenue tax forms 2012 Depreciation Limits There are limits on the amount you can deduct for depreciation of your car, truck, or van. Internal revenue tax forms 2012 The section 179 deduction and special depreciation allowance are treated as depreciation for purposes of the limits. Internal revenue tax forms 2012 The maximum amount you can deduct each year depends on the year you place the car in service. Internal revenue tax forms 2012 These limits are shown in the following tables. Internal revenue tax forms 2012   Maximum Depreciation Deduction for Cars Date       4th & Placed 1st 2nd 3rd Later In Service Year Year Year Years 2012–2013 $11,1601 $5,100 $3,050 $1,875 2010–2011 11,0602 4,900 2,950 1,775 2008–2009 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 10,6103 4,800 2,850 1,675 5/06/2003– 12/31/2003 10,7104 4,900 2,950 1,775 1/01/2003– 5/05/2003 7,6605 4,900 2,950 1,775 2001–2002 7,6605 4,900 2,950 1,775 2000 3,060 4,900 2,950 1,775 1$3,160 if the car is not qualified property or if you elect not to claim the special depreciation allowance. Internal revenue tax forms 2012 2$3,060 if the car is not qualified property or if you elect not to claim the special depreciation allowance. Internal revenue tax forms 2012 3$2,960 if the car is not qualified property or if you elect not to claim the special depreciation allowance. Internal revenue tax forms 2012 4$7,660 if you acquired the car before 5/6/2003. Internal revenue tax forms 2012 $3,060 if the car is not qualified property or if you elect not to claim any special depreciation allowance. Internal revenue tax forms 2012 5$3,060 if you acquired the car before 9/11/2001, the car is not qualified property, or you elect not to claim the special depreciation allowance. Internal revenue tax forms 2012 Trucks and vans. Internal revenue tax forms 2012   For 2013, the maximum depreciation deductions for trucks and vans are generally higher than those for cars. Internal revenue tax forms 2012 A truck or van is a passenger automobile that is classified by the manufacturer as a truck or van and rated at 6,000 pounds gross vehicle weight or less. Internal revenue tax forms 2012 For trucks and vans placed in service before 2003, use the Maximum Depreciation Deduction for Cars table. Internal revenue tax forms 2012 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 11,2601 5,200 3,150 1,875 2010 11,1601 5,100 3,050 1,875 2009 11,0601 4,900 2,950 1,775 2008 11,1601 5,100 3,050 1,875 2007 3,260 5,200 3,050 1,875 2005–2006 3,260 5,200 3,150 1,875 2004 10,9101 5,300 3,150 1,875 2003 11,0101,2 5,400 3,250 1,975 1If the special depreciation allowance does not apply or you make the election not to claim the special depreciation allowance, the first-year limit is $3,360 for 2012 and 2013, $3,260 for 2011, $3,160 for 2010, $3,060 for 2009, $3,160 for 2008, $3,260 for 2004, and $3,360 for 2003. Internal revenue tax forms 2012 2If the truck or van was acquired before 5/06/2003, the truck or van is qualified property, and you claim the special depreciation allowance for the truck or van, the maximum deduction is $7,960. Internal revenue tax forms 2012 Car used less than full year. Internal revenue tax forms 2012   The depreciation limits are not reduced if you use a car for less than a full year. Internal revenue tax forms 2012 This means that you do not reduce the limit when you either place a car in service or dispose of a car during the year. Internal revenue tax forms 2012 However, the depreciation limits are reduced if you do not use the car exclusively for business and investment purposes. Internal revenue tax forms 2012 See Reduction for personal use , next. Internal revenue tax forms 2012 Reduction for personal use. Internal revenue tax forms 2012   The depreciation limits are reduced based on your percentage of personal use. Internal revenue tax forms 2012 If you use a car less than 100% in your business or work, you must determine the depreciation deduction limit by multiplying the limit amount by the percentage of business and investment use during the tax year. Internal revenue tax forms 2012 Section 179 deduction. Internal revenue tax forms 2012   The section 179 deduction is treated as a depreciation deduction. Internal revenue tax forms 2012 If you place a car that is not a truck or van in service in 2013, use it only for business, and choose the section 179 deduction, the special depreciation allowance, and the depreciation deduction for that car for 2013 is limited to $11,160. Internal revenue tax forms 2012 Example. Internal revenue tax forms 2012 On September 4, 2013, Jack bought a used car for $10,000 and placed it in service. Internal revenue tax forms 2012 He used it 80% for his business, and he chooses to take a section 179 deduction for the car. Internal revenue tax forms 2012 The car is not qualified property for purposes of the special depreciation allowance. Internal revenue tax forms 2012 Before applying the limit, Jack figures his maximum section 179 deduction to be $8,000. Internal revenue tax forms 2012 This is the cost of his qualifying property (up to the maximum $500,000 amount) multiplied by his business use ($10,000 × 80%). Internal revenue tax forms 2012 Jack then figures that his section 179 deduction for 2013 is limited to $2,528 (80% of $3,160). Internal revenue tax forms 2012 He then figures his unadjusted basis of $5,472 (($10,000 × 80%) − $2,528) for determining his depreciation deduction. Internal revenue tax forms 2012 Jack has reached his maximum depreciation deduction for 2013. Internal revenue tax forms 2012 For 2014, Jack will use his unadjusted basis of $5,472 to figure his depreciation deduction. Internal revenue tax forms 2012 Deductions in years after the recovery period. Internal revenue tax forms 2012   If the depreciation deductions for your car are reduced under the passenger automobile limits (discussed earlier), you will have unrecovered basis in your car at the end of the recovery period. Internal revenue tax forms 2012 If you continue to use your car for business, you can deduct that unrecovered basis (subject to depreciation limits) after the recovery period ends. Internal revenue tax forms 2012 Unrecovered basis. Internal revenue tax forms 2012   This is your cost or other basis in the car reduced by any clean-fuel vehicle deduction (for vehicles placed in service before January 1, 2006), alternative motor vehicle credit, electric vehicle credit, gas guzzler tax, and depreciation (including any special depreciation allowance , discussed earlier, unless you elect not to claim it) and section 179 deductions that would have been allowable if you had used the car 100% for business and investment use. Internal revenue tax forms 2012 The recovery period. Internal revenue tax forms 2012   For 5-year property, your recovery period is 6 calendar years. Internal revenue tax forms 2012 A part year's depreciation is allowed in the first calendar year, a full year's depreciation is allowed in each of the next 4 calendar years, and a part year's depreciation is allowed in the 6th calendar year. Internal revenue tax forms 2012   Under MACRS, your recovery period is the same whether you use declining balance or straight line depreciation. Internal revenue tax forms 2012 You determine your unrecovered basis in the 7th year after you placed the car in service. Internal revenue tax forms 2012 How to treat unrecovered basis. Internal revenue tax forms 2012   If you continue to use your car for business after the recovery period, you can claim a depreciation deduction in each succeeding tax year until you recover your basis in the car. Internal revenue tax forms 2012 The maximum amount you can deduct each year is determined by the date you placed the car in service and your business-use percentage. Internal revenue tax forms 2012 For example, no deduction is allowed for a year you use your car 100% for personal purposes. Internal revenue tax forms 2012 Example. Internal revenue tax forms 2012 In April 2007, Bob bought and placed in service a car he used exclusively in his business. Internal revenue tax forms 2012 The car cost $31,500. Internal revenue tax forms 2012 Bob did not claim a section 179 deduction or the special depreciation allowance for the car. Internal revenue tax forms 2012 He continued to use the car 100% in his business throughout the recovery period (2007 through 2012). Internal revenue tax forms 2012 For those years, Bob used the MACRS Depreciation Chart (200% declining balance method) and the Maximum Depreciation Deduction for Cars table, earlier, for the applicable tax year to compute his depreciation deductions during the recovery period. Internal revenue tax forms 2012 Bob's depreciation deductions were subject to the depreciation limits so he will have unrecovered basis at the end of the recovery period as shown in the following table. Internal revenue tax forms 2012      MACRS     Deprec. Internal revenue tax forms 2012 Year % Amount Limit Allowed 2007 20. Internal revenue tax forms 2012 00 $6,300 $3,060 $ 3,060 2008 32. Internal revenue tax forms 2012 00 10,080 4,900 4,900 2009 19. Internal revenue tax forms 2012 20 6,048 2,850 2,850 2010 11. Internal revenue tax forms 2012 52 3,629 1,775 1,775 2011 11. Internal revenue tax forms 2012 52 3,629 1,775 1,775 2012 5. Internal revenue tax forms 2012 76 1,814 1,775 1,775 Total $31,500   16,135 For the correct limit, see Maximum Depreciation Deduction for Cars under “Depreciation Limits,” earlier, for the maximum amount of depreciation allowed each year. Internal revenue tax forms 2012   At the end of 2012, Bob had an unrecovered basis in the car of $15,365 ($31,500 – $16,135). Internal revenue tax forms 2012 If Bob continued to use the car 100% for business in 2013 and later years, he can claim a depreciation deduction equal to the lesser of $1,775 or his remaining unrecovered basis. Internal revenue tax forms 2012   If Bob's business use of the car was less than 100% during any year, his depreciation deduction would be less than the maximum amount allowable for that year. Internal revenue tax forms 2012 However, in determining his unrecovered basis in the car, he would still reduce his original basis by the maximum amount allowable as if the business use had been 100%. Internal revenue tax forms 2012 For example, if Bob had used his car 60% for business instead of 100%, his allowable depreciation deductions would have been $9,681 ($16,135 × 60%), but he still would have to reduce his basis by $16,135 to determine his unrecovered basis. Internal revenue tax forms 2012 Table 4-1. Internal revenue tax forms 2012 2013 MACRS Depreciation Chart (Use to Figure Depreciation for 2013. Internal revenue tax forms 2012 ) If you claim actual expenses for your car, use the chart below to find the depreciation method and percentage to use for your 2013 return for cars placed in service in 2013. Internal revenue tax forms 2012   First, using the left column, find the date you first placed the car in service in 2013. Internal revenue tax forms 2012 Then select the depreciation method and percentage from column (a), (b), or (c) following the rules explained in this chapter. Internal revenue tax forms 2012 For cars placed in service before 2013, you must use the same method you used on last year's return unless a decline in your business use requires you to change to the straight line method. Internal revenue tax forms 2012 Refer back to the MACRS Depreciation Chart for the year you placed the car in service. Internal revenue tax forms 2012 (See Car Used 50% or Less for Business . Internal revenue tax forms 2012 )  Multiply the unadjusted basis of your car by your business use percentage. Internal revenue tax forms 2012 Multiply the result by the percentage you found in the chart to find the amount of your depreciation deduction for 2013. Internal revenue tax forms 2012 (Also see Depreciation Limits . Internal revenue tax forms 2012 )   If you placed your car in service after September of any year and you placed other business property in service during the same year, you may have to use the Jan. Internal revenue tax forms 2012 1—Sept. Internal revenue tax forms 2012 30 percentage instead of the Oct. Internal revenue tax forms 2012 1—Dec. Internal revenue tax forms 2012 31 percentage for your car. Internal revenue tax forms 2012               To find out if this applies to you, determine: 1) the basis of all business property you placed in service after September of that year and 2) the basis of all business property you placed in service during that entire year. Internal revenue tax forms 2012 If the basis of the property placed in service after September is not more than 40% of the basis of all property (certain property is excluded) placed in service for the entire year, use the percentage for Jan. Internal revenue tax forms 2012 1—Sept. Internal revenue tax forms 2012 30 for figuring depreciation for your car. Internal revenue tax forms 2012 See Which Convention Applies? in chapter 4 of Publication 946 for more details. Internal revenue tax forms 2012               Example. Internal revenue tax forms 2012 You buy machinery (basis of $32,000) in May 2013 and a new van (basis of $20,000) in October 2013, both used 100% in your business. Internal revenue tax forms 2012 You