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Military Tax Free Zones

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Military Tax Free Zones

Military tax free zones Publication 587 - Main Content Table of Contents Qualifying for a DeductionExclusive Use Regular Use Trade or Business Use Principal Place of Business Place To Meet Patients, Clients, or Customers Separate Structure Figuring the DeductionUsing Actual Expenses Using the Simplified Method Daycare Facility Standard meal and snack rates. Military tax free zones Sale or Exchange of Your HomeGain on Sale Depreciation Basis Adjustment Reporting the Sale More Information Business Furniture and EquipmentListed Property Property Bought for Business Use Personal Property Converted to Business Use Recordkeeping Where To DeductSelf-Employed Persons Employees Partners How To Get Tax HelpLow Income Taxpayer Clinics Worksheet To Figure the Deduction for Business Use of Your HomeInstructions for the Worksheet Worksheets To Figure the Deduction for Business Use of Your Home (Simplified Method) Instructions for the Simplified Method Worksheet Instructions for the Daycare Facility Worksheet Instructions for the Area Adjustment Worksheet Qualifying for a Deduction Generally, you cannot deduct items related to your home, such as mortgage interest, real estate taxes, utilities, maintenance, rent, depreciation, or property insurance, as business expenses. Military tax free zones However, you may be able to deduct expenses related to the business use of part of your home if you meet specific requirements. Military tax free zones Even then, the deductible amount of these types of expenses may be limited. Military tax free zones Use this section and Figure A, later, to decide if you can deduct expenses for the business use of your home. Military tax free zones To qualify to deduct expenses for business use of your home, you must use part of your home: Exclusively and regularly as your principal place of business (defined later), Exclusively and regularly as a place where you meet or deal with patients, clients, or customers in the normal course of your trade or business, In the case of a separate structure which is not attached to your home, in connection with your trade or business, On a regular basis for certain storage use (see Storage of inventory or product samples , later), For rental use (see Publication 527), or As a daycare facility (see Daycare Facility , later). Military tax free zones Additional tests for employee use. Military tax free zones   If you are an employee and you use a part of your home for business, you may qualify for a deduction for its business use. Military tax free zones You must meet the tests discussed earlier plus: Your business use must be for the convenience of your employer, and You must not rent any part of your home to your employer and use the rented portion to perform services as an employee for that employer. Military tax free zones If the use of the home office is merely appropriate and helpful, you cannot deduct expenses for the business use of your home. Military tax free zones Exclusive Use To qualify under the exclusive use test, you must use a specific area of your home only for your trade or business. Military tax free zones The area used for business can be a room or other separately identifiable space. Military tax free zones The space does not need to be marked off by a permanent partition. Military tax free zones You do not meet the requirements of the exclusive use test if you use the area in question both for business and for personal purposes. Military tax free zones Example. Military tax free zones You are an attorney and use a den in your home to write legal briefs and prepare clients' tax returns. Military tax free zones Your family also uses the den for recreation. Military tax free zones The den is not used exclusively in your trade or business, so you cannot claim a deduction for the business use of the den. Military tax free zones Exceptions to Exclusive Use You do not have to meet the exclusive use test if either of the following applies. Military tax free zones You use part of your home for the storage of inventory or product samples (discussed next). Military tax free zones You use part of your home as a daycare facility, discussed later under Daycare Facility . Military tax free zones Note. Military tax free zones With the exception of these two uses, any portion of the home used for business purposes must meet the exclusive use test. Military tax free zones Storage of inventory or product samples. Military tax free zones    If you use part of your home for storage of inventory or product samples, you can deduct expenses for the business use of your home without meeting the exclusive use test. Military tax free zones However, you must meet all the following tests. Military tax free zones You sell products at wholesale or retail as your trade or business. Military tax free zones You keep the inventory or product samples in your home for use in your trade or business. Military tax free zones Your home is the only fixed location of your trade or business. Military tax free zones You use the storage space on a regular basis. Military tax free zones The space you use is a separately identifiable space suitable for storage. Military tax free zones Example. Military tax free zones Your home is the only fixed location of your business of selling mechanics' tools at retail. Military tax free zones You regularly use half of your basement for storage of inventory and product samples. Military tax free zones You sometimes use the area for personal purposes. Military tax free zones The expenses for the storage space are deductible even though you do not use this part of your basement exclusively for business. Military tax free zones Regular Use To qualify under the regular use test, you must use a specific area of your home for business on a regular basis. Military tax free zones Incidental or occasional business use is not regular use. Military tax free zones You must consider all facts and circumstances in determining whether your use is on a regular basis. Military tax free zones Trade or Business Use To qualify under the trade-or-business-use test, you must use part of your home in connection with a trade or business. Military tax free zones If you use your home for a profit-seeking activity that is not a trade or business, you cannot take a deduction for its business use. Military tax free zones Example. Military tax free zones You use part of your home exclusively and regularly to read financial periodicals and reports, clip bond coupons, and carry out similar activities related to your own investments. Military tax free zones You do not make investments as a broker or dealer. Military tax free zones So, your activities are not part of a trade or business and you cannot take a deduction for the business use of your home. Military tax free zones Principal Place of Business You can have more than one business location, including your home, for a single trade or business. Military tax free zones To qualify to deduct the expenses for the business use of your home under the principal place of business test, your home must be your principal place of business for that trade or business. Military tax free zones To determine whether your home is your principal place of business, you must consider: The relative importance of the activities performed at each place where you conduct business, and The amount of time spent at each place where you conduct business. Military tax free zones Your home office will qualify as your principal place of business if you meet the following requirements. Military tax free zones You use it exclusively and regularly for administrative or management activities of your trade or business. Military tax free zones You have no other fixed location where you conduct substantial administrative or management activities of your trade or business. Military tax free zones If, after considering your business locations, your home cannot be identified as your principal place of business, you cannot deduct home office expenses. Military tax free zones However, see the later discussions under Place To Meet Patients, Clients, or Customers and Separate Structure for other ways to qualify to deduct home office expenses. Military tax free zones Administrative or management activities. Military tax free zones   There are many activities that are administrative or managerial in nature. Military tax free zones The following are a few examples. Military tax free zones Billing customers, clients, or patients. Military tax free zones Keeping books and records. Military tax free zones Ordering supplies. Military tax free zones Setting up appointments. Military tax free zones Forwarding orders or writing reports. Military tax free zones Administrative or management activities performed at other locations. Military tax free zones   The following activities performed by you or others will not disqualify your home office from being your principal place of business. Military tax free zones You have others conduct your administrative or management activities at locations other than your home. Military tax free zones (For example, another company does your billing from its place of business. Military tax free zones ) You conduct administrative or management activities at places that are not fixed locations of your business, such as in a car or a hotel room. Military tax free zones You occasionally conduct minimal administrative or management activities at a fixed location outside your home. Military tax free zones You conduct substantial nonadministrative or nonmanagement business activities at a fixed location outside your home. Military tax free zones (For example, you meet with or provide services to customers, clients, or patients at a fixed location of the business outside your home. Military tax free zones ) You have suitable space to conduct administrative or management activities outside your home, but choose to use your home office for those activities instead. Military tax free zones Please click here for the text description of the image. Military tax free zones Can you deduct business use of the home expenses? Example 1. Military tax free zones John is a self-employed plumber. Military tax free zones Most of John's time is spent at customers' homes and offices installing and repairing plumbing. Military tax free zones He has a small office in his home that he uses exclusively and regularly for the administrative or management activities of his business, such as phoning customers, ordering supplies, and keeping his books. Military tax free zones John writes up estimates and records of work completed at his customers' premises. Military tax free zones He does not conduct any substantial administrative or management activities at any fixed location other than his home office. Military tax free zones John does not do his own billing. Military tax free zones He uses a local bookkeeping service to bill his customers. Military tax free zones John's home office qualifies as his principal place of business for deducting expenses for its use. Military tax free zones He uses the home office for the administrative or managerial activities of his plumbing business and he has no other fixed location where he conducts these administrative or managerial activities. Military tax free zones His choice to have his billing done by another company does not disqualify his home office from being his principal place of business. Military tax free zones He meets all the qualifications, including principal place of business, so he can deduct expenses (subject to certain limitations, explained later) for the business use of his home. Military tax free zones Example 2. Military tax free zones Pamela is a self-employed sales representative for several different product lines. Military tax free zones She has an office in her home that she uses exclusively and regularly to set up appointments and write up orders and other reports for the companies whose products she sells. Military tax free zones She occasionally writes up orders and sets up appointments from her hotel room when she is away on business overnight. Military tax free zones Pamela's business is selling products to customers at various locations throughout her territory. Military tax free zones To make these sales, she regularly visits customers to explain the available products and take orders. Military tax free zones Pamela's home office qualifies as her principal place of business for deducting expenses for its use. Military tax free zones She conducts administrative or management activities there and she has no other fixed location where she conducts substantial administrative or management activities. Military tax free zones The fact that she conducts some administrative or management activities in her hotel room (not a fixed location) does not disqualify her home office from being her principal place of business. Military tax free zones She meets all the qualifications, including principal place of business, so she can deduct expenses (subject to certain limitations, explained later) for the business use of her home. Military tax free zones Example 3. Military tax free zones Paul is a self-employed anesthesiologist. Military tax free zones He spends the majority of his time administering anesthesia and postoperative care in three local hospitals. Military tax free zones One of the hospitals provides him with a small shared office where he could conduct administrative or management activities. Military tax free zones Paul very rarely uses the office the hospital provides. Military tax free zones He uses a room in his home that he has converted to an office. Military tax free zones He uses this room exclusively and regularly to conduct all the following activities. Military tax free zones Contacting patients, surgeons, and hospitals regarding scheduling. Military tax free zones Preparing for treatments and presentations. Military tax free zones Maintaining billing records and patient logs. Military tax free zones Satisfying continuing medical education requirements. Military tax free zones Reading medical journals and books. Military tax free zones Paul's home office qualifies as his principal place of business for deducting expenses for its use. Military tax free zones He conducts administrative or management activities for his business as an anesthesiologist there and he has no other fixed location where he conducts substantial administrative or management activities for this business. Military tax free zones His choice to use his home office instead of the one provided by the hospital does not disqualify his home office from being his principal place of business. Military tax free zones His performance of substantial nonadministrative or nonmanagement activities at fixed locations outside his home also does not disqualify his home office from being his principal place of business. Military tax free zones He meets all the qualifications, including principal place of business, so he can deduct expenses (subject to certain limitations, explained later) for the business use of his home. Military tax free zones Example 4. Military tax free zones Kathleen is employed as a teacher. Military tax free zones She is required to teach and meet with students at the school and to grade papers and tests. Military tax free zones The school provides her with a small office where she can work on her lesson plans, grade papers and tests, and meet with parents and students. Military tax free zones The school does not require her to work at home. Military tax free zones Kathleen prefers to use the office she has set up in her home and does not use the one provided by the school. Military tax free zones She uses this home office exclusively and regularly for the administrative duties of her teaching job. Military tax free zones Kathleen must meet the convenience-of-the-employer test, even if her home qualifies as her principal place of business for deducting expenses for its use. Military tax free zones Her employer provides her with an office and does not require her to work at home, so she does not meet the convenience-of-the-employer test and cannot claim a deduction for the business use of her home. Military tax free zones More Than One Trade or Business The same home office can be the principal place of business for two or more separate business activities. Military tax free zones Whether your home office is the principal place of business for more than one business activity must be determined separately for each of your trade or business activities. Military tax free zones You must use the home office exclusively and regularly for one or more of the following purposes. Military tax free zones As the principal place of business for one or more of your trades or businesses. Military tax free zones As a place to meet or deal with patients, clients, or customers in the normal course of one or more of your trades or businesses. Military tax free zones If your home office is a separate structure, in connection with one or more of your trades or businesses. Military tax free zones You can use your home office for more than one business activity, but you cannot use it for any nonbusiness (i. Military tax free zones e. Military tax free zones , personal) activities. Military tax free zones If you are an employee, any use of the home office in connection with your employment must be for the convenience of your employer. Military tax free zones See Rental to employer , later, if you rent part of your home to your employer. Military tax free zones Example. Military tax free zones Tracy White is employed as a teacher. Military tax free zones Her principal place of work is the school, which provides her office space to do her school work. Military tax free zones She also has a mail order jewelry business. Military tax free zones All her work in the jewelry business is done in her home office and the office is used exclusively for that business. Military tax free zones If she meets all the other tests, she can deduct expenses for the business use of her home for the jewelry business. Military tax free zones If Tracy also uses the office for work related to her teaching, she must meet the exclusive use test for both businesses to qualify for the deduction. Military tax free zones As an employee, Tracy must also meet the convenience-of-the-employer test to qualify for the deduction. Military tax free zones She does not meet this test for her work as a teacher, so she cannot claim a deduction for the business use of her home for either activity. Military tax free zones Place To Meet Patients, Clients, or Customers If you meet or deal with patients, clients, or customers in your home in the normal course of your business, even though you also carry on business at another location, you can deduct your expenses for the part of your home used exclusively and regularly for business if you meet both the following tests. Military tax free zones You physically meet with patients, clients, or customers on your premises. Military tax free zones Their use of your home is substantial and integral to the conduct of your business. Military tax free zones Doctors, dentists, attorneys, and other professionals who maintain offices in their homes generally will meet this requirement. Military tax free zones Using your home for occasional meetings and telephone calls will not qualify you to deduct expenses for the business use of your home. Military tax free zones The part of your home you use exclusively and regularly to meet patients, clients, or customers does not have to be your principal place of business. Military tax free zones Example. Military tax free zones June Quill, a self-employed attorney, works 3 days a week in her city office. Military tax free zones She works 2 days a week in her home office used only for business. Military tax free zones She regularly meets clients there. Military tax free zones Her home office qualifies for a business deduction because she meets clients there in the normal course of her business. Military tax free zones Separate Structure You can deduct expenses for a separate free-standing structure, such as a studio, workshop, garage, or barn, if you use it exclusively and regularly for your business. Military tax free zones The structure does not have to be your principal place of business or a place where you meet patients, clients, or customers. Military tax free zones Example. Military tax free zones John Berry operates a floral shop in town. Military tax free zones He grows the plants for his shop in a greenhouse behind his home. Military tax free zones He uses the greenhouse exclusively and regularly in his business, so he can deduct the expenses for its use, subject to certain limitations, explained later. Military tax free zones Figuring the Deduction After you determine that you meet the tests under Qualifying for a Deduction , you can begin to figure how much you can deduct. Military tax free zones When figuring the amount you can deduct for the business use of your home, you will use either your actual expenses or a simplified method. Military tax free zones Electing to use the simplified method. Military tax free zones   The simplified method is an alternative to the calculation, allocation, and substantiation of actual expenses. Military tax free zones You choose whether or not to figure your deduction using the simplified method each taxable year. Military tax free zones See Using the Simplified Method , later. Military tax free zones Rental to employer. Military tax free zones   If you rent part of your home to your employer and you use the rented part in performing services for your employer as an employee, your deduction for the business use of your home is limited. Military tax free zones You can deduct mortgage interest, qualified mortgage insurance premiums, real estate taxes, and personal casualty losses for the rented part, subject to any limitations. Military tax free zones However, you cannot deduct otherwise allowable trade or business expenses, business casualty losses, or depreciation related to the use of your home (or use the simplified method as an alternative to deducting these actual expenses) in performing services for your employer. Military tax free zones Using Actual Expenses If you do not or cannot elect to use the simplified method for a home, you will figure your deduction for that home using your actual expenses. Military tax free zones You will also need to figure the percentage of your home used for business and the limit on the deduction. Military tax free zones If you are an employee or a partner, or you use your home in your farming business and you file Schedule F (Form 1040), you can use the Worksheet To Figure the Deduction for Business Use of Your Home, near the end of this publication, to help you figure your deduction. Military tax free zones If you use your home in a trade or business and you file Schedule C (Form 1040), you will use Form 8829 to figure your deduction. Military tax free zones Part-year use. Military tax free zones   You cannot deduct expenses for the business use of your home incurred during any part of the year you did not use your home for business purposes. Military tax free zones For example, if you begin using part of your home for business on July 1, and you meet all the tests from that date until the end of the year, consider only your expenses for the last half of the year in figuring your allowable deduction. Military tax free zones Expenses related to tax-exempt income. Military tax free zones   Generally, you cannot deduct expenses that are related to tax-exempt allowances. Military tax free zones However, if you receive a tax-exempt parsonage allowance or a tax-exempt military allowance, your expenses for mortgage interest and real estate taxes are deductible under the normal rules. Military tax free zones No deduction is allowed for other expenses related to the tax-exempt allowance. Military tax free zones   If your housing is provided free of charge and the value of the housing is tax exempt, you cannot deduct the rental value of any portion of the housing. Military tax free zones Actual Expenses You must divide the expenses of operating your home between personal and business use. Military tax free zones The part of a home operating expense you can use to figure your deduction depends on both of the following. Military tax free zones Whether the expense is direct, indirect, or unrelated. Military tax free zones The percentage of your home used for business. Military tax free zones Table 1, next, describes the types of expenses you may have and the extent to which they are deductible. Military tax free zones Table 1. Military tax free zones Types of Expenses  Expense  Description  Deductibility Direct Expenses only for  the business part  of your home. Military tax free zones Deductible in full. Military tax free zones *   Examples:  Painting or repairs  only in the area  used for business. Military tax free zones Exception: May be only partially  deductible in a daycare facility. Military tax free zones See Daycare Facility , later. Military tax free zones Indirect Expenses for  keeping up and running your  entire home. Military tax free zones Deductible based on the percentage of your home used for business. Military tax free zones *   Examples:  Insurance, utilities, and  general repairs. Military tax free zones   Unrelated Expenses only for  the parts of your  home not used  for business. Military tax free zones Not deductible. Military tax free zones   Examples:  Lawn care or painting  a room not used  for business. Military tax free zones   *Subject to the deduction limit, discussed later. Military tax free zones Form 8829 and the Worksheet To Figure the Deduction for Business Use of Your Home have separate columns for direct and indirect expenses. Military tax free zones Certain expenses are deductible whether or not you use your home for business. Military tax free zones If you qualify to deduct business use of the home expenses, use the business percentage of these expenses to figure your total business use of the home deduction. Military tax free zones These expenses include the following. Military tax free zones Real estate taxes. Military tax free zones Qualified mortgage insurance premiums. Military tax free zones Deductible mortgage interest. Military tax free zones Casualty losses. Military tax free zones Other expenses are deductible only if you use your home for business. Military tax free zones You can use the business percentage of these expenses to figure your total business use of the home deduction. Military tax free zones These expenses generally include (but are not limited to) the following. Military tax free zones Depreciation (covered under Depreciating Your Home , later). Military tax free zones Insurance. Military tax free zones Rent paid for the use of property you do not own but use in your trade or business. Military tax free zones Repairs. Military tax free zones Security system. Military tax free zones Utilities and services. Military tax free zones Real estate taxes. Military tax free zones   To figure the business part of your real estate taxes, multiply the real estate taxes paid by the percentage of your home used for business. Military tax free zones   For more information on the deduction for real estate taxes, see Publication 530, Tax Information for Homeowners. Military tax free zones Deductible mortgage interest. Military tax free zones   To figure the business part of your deductible mortgage interest, multiply this interest by the percentage of your home used for business. Military tax free zones You can include interest on a second mortgage in this computation. Military tax free zones If your total mortgage debt is more than $1,000,000 or your home equity debt is more than $100,000, your deduction may be limited. Military tax free zones For more information on what interest is deductible, see Publication 936, Home Mortgage Interest Deduction. Military tax free zones Qualified mortgage insurance premiums. Military tax free zones   To figure the business part of your qualified mortgage insurance premiums, multiply the premiums by the percentage of your home used for business. Military tax free zones You can include premiums for insurance on a second mortgage in this computation. Military tax free zones If your adjusted gross income is more than $100,000 ($50,000 if your filing status is married filing separately), your deduction may be limited. Military tax free zones For more information, see Publication 936, and Line 13 in the Instructions for Schedule A (Form 1040). Military tax free zones Casualty losses. Military tax free zones    If you have a casualty loss on your home that you use for business, treat the casualty loss as a direct expense, an indirect expense, or an unrelated expense, depending on the property affected. Military tax free zones A direct expense is the loss on the portion of the property you use only in your business. Military tax free zones Use the entire loss to figure the business use of the home deduction. Military tax free zones An indirect expense is the loss on property you use for both business and personal purposes. Military tax free zones Use only the business portion to figure the deduction. Military tax free zones An unrelated expense is the loss on property you do not use in your business. Military tax free zones Do not use any of the loss to figure the deduction. Military tax free zones Example. Military tax free zones You meet the rules to take a deduction for an office in your home that is 10% of the total area of your house. Military tax free zones A storm damages your roof. Military tax free zones This is an indirect expense as the roof is part of the whole house and is considered to be used both for business and personal purposes. Military tax free zones You would complete Form 4684, Casualties and Thefts, to report your loss. Military tax free zones You complete both section A (Personal Use Property) and section B (Business and Income-Producing Property) as your home is used both for business and personal purposes. Military tax free zones Since you use 90% of your home for personal purposes, use 90% of the cost or adjusted basis of your home, insurance or other reimbursement, and fair market value, both before and after the storm, to figure the amounts to enter on lines 2, 3, 5, and 6 of Form 4684. Military tax free zones Since you use 10% of your home for business purposes, use 10% of the cost or adjusted basis of your home, insurance or other reimbursement, and fair market value, both before and after the storm, to figure the amounts to enter on lines 20, 21, 23, and 24 of Form 4684. Military tax free zones Forms and worksheets to use. Military tax free zones   If you are filing Schedule C (Form 1040), get Form 8829 and follow the instructions for casualty losses. Military tax free zones If you are an employee or a partner, or you file Schedule F (Form 1040), use the Worksheet To Figure the Deduction for Business Use of Your Home, near the end of this publication. Military tax free zones You will also need to get Form 4684. Military tax free zones More information. Military tax free zones   For more information on casualty losses, see Publication 547, Casualties, Disasters, and Thefts. Military tax free zones Insurance. Military tax free zones   You can deduct the cost of insurance that covers the business part of your home. Military tax free zones However, if your insurance premium gives you coverage for a period that extends past the end of your tax year, you can deduct only the business percentage of the part of the premium that gives you coverage for your tax year. Military tax free zones You can deduct the business percentage of the part that applies to the following year in that year. Military tax free zones Rent. Military tax free zones   If you rent the home you occupy and meet the requirements for business use of the home, you can deduct part of the rent you pay. Military tax free zones To figure your deduction, multiply your rent payments by the percentage of your home used for business. Military tax free zones   If you own your home, you cannot deduct the fair rental value of your home. Military tax free zones However, see Depreciating Your Home , later. Military tax free zones Repairs. Military tax free zones   The cost of repairs that relate to your business, including labor (other than your own labor), is a deductible expense. Military tax free zones For example, a furnace repair benefits the entire home. Military tax free zones If you use 10% of your home for business, you can deduct 10% of the cost of the furnace repair. Military tax free zones   Repairs keep your home in good working order over its useful life. Military tax free zones Examples of common repairs are patching walls and floors, painting, wallpapering, repairing roofs and gutters, and mending leaks. Military tax free zones However, repairs are sometimes treated as a permanent improvement and are not deductible. Military tax free zones See Permanent improvements , later, under Depreciating Your Home. Military tax free zones Security system. Military tax free zones   If you install a security system that protects all the doors and windows in your home, you can deduct the business part of the expenses you incur to maintain and monitor the system. Military tax free zones You also can take a depreciation deduction for the part of the cost of the security system relating to the business use of your home. Military tax free zones Utilities and services. Military tax free zones   Expenses for utilities and services, such as electricity, gas, trash removal, and cleaning services, are primarily personal expenses. Military tax free zones However, if you use part of your home for business, you can deduct the business part of these expenses. Military tax free zones Generally, the business percentage for utilities is the same as the percentage of your home used for business. Military tax free zones Telephone. Military tax free zones   The basic local telephone service charge, including taxes, for the first telephone line into your home (i. Military tax free zones e. Military tax free zones , landline) is a nondeductible personal expense. Military tax free zones However, charges for business long-distance phone calls on that line, as well as the cost of a second line into your home used exclusively for business, are deductible business expenses. Military tax free zones Do not include these expenses as a cost of using your home for business. Military tax free zones Deduct these charges separately on the appropriate form or schedule. Military tax free zones For example, if you file Schedule C (Form 1040), deduct these expenses on line 25, Utilities (instead of line 30, Expenses for business use of your home). Military tax free zones Depreciating Your Home If you own your home and qualify to deduct expenses for its business use, you can claim a deduction for depreciation. Military tax free zones Depreciation is an allowance for the wear and tear on the part of your home used for business. Military tax free zones You cannot depreciate the cost or value of the land. Military tax free zones You recover its cost when you sell or otherwise dispose of the property. Military tax free zones Before you figure your depreciation deduction, you need to know the following information. Military tax free zones The month and year you started using your home for business. Military tax free zones The adjusted basis and fair market value of your home (excluding land) at the time you began using it for business. Military tax free zones The cost of any improvements before and after you began using the property for business. Military tax free zones The percentage of your home used for business. Military tax free zones See Business Percentage , later. Military tax free zones Adjusted basis defined. Military tax free zones   The adjusted basis of your home is generally its cost, plus the cost of any permanent improvements you made to it, minus any casualty losses or depreciation deducted in earlier tax years. Military tax free zones For a discussion of adjusted basis, see Publication 551. Military tax free zones Permanent improvements. Military tax free zones   A permanent improvement increases the value of property, adds to its life, or gives it a new or different use. Military tax free zones Examples of improvements are replacing electric wiring or plumbing, adding a new roof or addition, paneling, or remodeling. Military tax free zones    You must carefully distinguish between repairs and improvements. Military tax free zones See Repairs , earlier, under Actual Expenses. Military tax free zones You also must keep accurate records of these expenses. Military tax free zones These records will help you decide whether an expense is a deductible or a capital (added to the basis) expense. Military tax free zones However, if you make repairs as part of an extensive remodeling or restoration of your home, the entire job is an improvement. Military tax free zones Example. Military tax free zones You buy an older home and fix up two rooms as a beauty salon. Military tax free zones You patch the plaster on the ceilings and walls, paint, repair the floor, install an outside door, and install new wiring, plumbing, and other equipment. Military tax free zones Normally, the patching, painting, and floor work are repairs and the other expenses are permanent improvements. Military tax free zones However, because the work gives your property a new use, the entire remodeling job is a permanent improvement and its cost is added to the basis of the property. Military tax free zones You cannot deduct any portion of it as a repair expense. Military tax free zones Adjusting for depreciation deducted in earlier years. Military tax free zones   Decrease the basis of your property by the depreciation you deducted, or could have deducted, on your tax returns under the method of depreciation you properly selected. Military tax free zones If you deducted less depreciation than you could have under the method you selected, decrease the basis by the amount you could have deducted under that method. Military tax free zones If you did not deduct any depreciation, decrease the basis by the amount you could have deducted. Military tax free zones   If you deducted more depreciation than you should have, decrease your basis by the amount you should have deducted, plus the part of the excess depreciation you deducted that actually decreased your tax liability for any year. Military tax free zones   If you deducted the incorrect amount of depreciation, see Publication 946. Military tax free zones Fair market value defined. Military tax free zones   The fair market value of your home is the price at which the property would change hands between a buyer and a seller, neither having to buy or sell, and both having reasonable knowledge of all necessary facts. Military tax free zones Sales of similar property, on or about the date you begin using your home for business, may be helpful in determining the property's fair market value. Military tax free zones Figuring the depreciation deduction for the current year. Military tax free zones   If you began using your home for business before 2013, continue to use the same depreciation method you used in past tax years. Military tax free zones   If you began using your home for business for the first time in 2013, depreciate the business part as nonresidential real property under the modified accelerated cost recovery system (MACRS). Military tax free zones Under MACRS, nonresidential real property is depreciated using the straight line method over 39 years. Military tax free zones For more information on MACRS and other methods of depreciation, see Publication 946. Military tax free zones   To figure the depreciation deduction, you must first figure the part of the cost of your home that can be depreciated (depreciable basis). Military tax free zones The depreciable basis is figured by multiplying the percentage of your home used for business by the smaller of the following. Military tax free zones The adjusted basis of your home (excluding land) on the date you began using your home for business. Military tax free zones The fair market value of your home (excluding land) on the date you began using your home for business. Military tax free zones Depreciation table. Military tax free zones   If 2013 was the first year you used your home for business, you can figure your 2013 depreciation for the business part of your home by using the appropriate percentage from the following table. Military tax free zones Table 2. Military tax free zones MACRS Percentage Table for 39-Year Nonresidential Real Property Month First Used for Business Percentage To Use 1 2. Military tax free zones 461% 2 2. Military tax free zones 247% 3 2. Military tax free zones 033% 4 1. Military tax free zones 819% 5 1. Military tax free zones 605% 6 1. Military tax free zones 391% 7 1. Military tax free zones 177% 8 0. Military tax free zones 963% 9 0. Military tax free zones 749% 10 0. Military tax free zones 535% 11 0. Military tax free zones 321% 12 0. Military tax free zones 107%   Multiply the depreciable basis of the business part of your home by the percentage from the table for the first month you use your home for business. Military tax free zones See Publication 946 for the percentages for the remaining tax years of the recovery period. Military tax free zones Example. Military tax free zones In May, George Miller began to use one room in his home exclusively and regularly to meet clients. Military tax free zones This room is 8% of the square footage of his home. Military tax free zones He bought the home in 2003 for $125,000. Military tax free zones He determined from his property tax records that his adjusted basis in the house (exclusive of land) is $115,000. Military tax free zones In May, the house had a fair market value of $165,000. Military tax free zones He multiplies his adjusted basis of $115,000 (which is less than the fair market value) by 8%. Military tax free zones The result is $9,200, his depreciable basis for the business part of the house. Military tax free zones George files his return based on the calendar year. Military tax free zones May is the 5th month of his tax year. Military tax free zones He multiplies his depreciable basis of $9,200 by 1. Military tax free zones 605% (. Military tax free zones 01605), the percentage from the table for the 5th month. Military tax free zones His depreciation deduction is $147. Military tax free zones 66. Military tax free zones Depreciating permanent improvements. Military tax free zones   Add the costs of permanent improvements made before you began using your home for business to the basis of your property. Military tax free zones Depreciate these costs as part of the cost of your home as explained earlier. Military tax free zones The costs of improvements made after you begin using your home for business (that affect the business part of your home, such as a new roof) are depreciated separately. Military tax free zones Multiply the cost of the improvement by the business-use percentage and depreciate the result over the recovery period that would apply to your home if you began using it for business at the same time as the improvement. Military tax free zones For improvements made this year, the recovery period is 39 years. Military tax free zones For the percentage to use for the first year, see Table 2, earlier. Military tax free zones For more information on recovery periods, see Publication 946. Military tax free zones Business Percentage To find the business percentage, compare the size of the part of your home that you use for business to your whole house. Military tax free zones Use the resulting percentage to figure the business part of the expenses for operating your entire home. Military tax free zones You can use any reasonable method to determine the business percentage. Military tax free zones The following are two commonly used methods for figuring the percentage. Military tax free zones Divide the area (length multiplied by the width) used for business by the total area of your home. Military tax free zones If the rooms in your home are all about the same size, you can divide the number of rooms used for business by the total number of rooms in your home. Military tax free zones Example 1. Military tax free zones Your office is 240 square feet (12 feet × 20 feet). Military tax free zones Your home is 1,200 square feet. Military tax free zones Your office is 20% (240 ÷ 1,200) of the total area of your home. Military tax free zones Your business percentage is 20%. Military tax free zones Example 2. Military tax free zones You use one room in your home for business. Military tax free zones Your home has 10 rooms, all about equal size. Military tax free zones Your office is 10% (1 ÷ 10) of the total area of your home. Military tax free zones Your business percentage is 10%. Military tax free zones Use lines 1-7 of Form 8829, or lines 1-3 on the Worksheet To Figure the Deduction for Business Use of Your Home (near the end of this publication) to figure your business percentage. Military tax free zones Deduction Limit If your gross income from the business use of your home equals or exceeds your total business expenses (including depreciation), you can deduct all your business expenses related to the use of your home. Military tax free zones If your gross income from the business use of your home is less than your total business expenses, your deduction for certain expenses for the business use of your home is limited. Military tax free zones Your deduction of otherwise nondeductible expenses, such as insurance, utilities, and depreciation of your home (with depreciation of your home taken last), that are allocable to the business, is limited to the gross income from the business use of your home minus the sum of the following. Military tax free zones The business part of expenses you could deduct even if you did not use your home for business (such as mortgage interest, real estate taxes, and casualty and theft losses that are allowable as itemized deductions on Schedule A (Form 1040)). Military tax free zones These expenses are discussed in detail under Actual Expenses , earlier. Military tax free zones The business expenses that relate to the business activity in the home (for example, business phone, supplies, and depreciation on equipment), but not to the use of the home itself. Military tax free zones If you are self-employed, do not include in (2) above your deduction for one-half of your self-employment tax. Military tax free zones Carryover of unallowed expenses. Military tax free zones   If your deductions are greater than the current year's limit, you can carry over the excess to the next year in which you use actual expenses. Military tax free zones They are subject to the deduction limit for that year, whether or not you live in the same home during that year. Military tax free zones Figuring the deduction limit and carryover. Military tax free zones   If you are an employee or a partner, or you file Schedule F (Form 1040), use the Worksheet To Figure the Deduction for Business Use of Your Home, near the end of this publication. Military tax free zones If you file Schedule C (Form 1040), figure your deduction limit and carryover on Form 8829. Military tax free zones Example. Military tax free zones You meet the requirements for deducting expenses for the business use of your home. Military tax free zones You use 20% of your home for business. Military tax free zones In 2013, your business expenses and the expenses for the business use of your home are deducted from your gross income in the following order. Military tax free zones    Gross income from business $6,000 Minus:   Deductible mortgage interest and real estate taxes (20%) 3,000 Business expenses not related to the use of your home (100%) (business phone, supplies, and depreciation on equipment) 2,000 Deduction limit $1,000 Minus other expenses allocable to business use of home:   Maintenance, insurance, and utilities (20%) 800 Depreciation allowed (20% = $1,600 allowable, but subject to balance of deduction limit) 200 Other expenses up to the deduction limit $1,000 Depreciation carryover to 2014 ($1,600 − $200) (subject to deduction limit in 2014) $1,400   You can deduct all of the business part of your deductible mortgage interest and real estate taxes ($3,000). Military tax free zones You also can deduct all of your business expenses not related to the use of your home ($2,000). Military tax free zones Additionally, you can deduct all of the business part of your expenses for maintenance, insurance, and utilities, because the total ($800) is less than the $1,000 deduction limit. Military tax free zones Your deduction for depreciation for the business use of your home is limited to $200 ($1,000 minus $800) because of the deduction limit. Military tax free zones You can carry over the $1,400 balance and add it to your depreciation for 2014, subject to your deduction limit in 2014. Military tax free zones More than one place of business. Military tax free zones   If part of the gross income from your trade or business is from the business use of part of your home and part is from a place other than your home, you must determine the part of your gross income from the business use of your home before you figure the deduction limit. Military tax free zones In making this determination, consider the time you spend at each location, the business investment in each location, and any other relevant facts and circumstances. Military tax free zones If your home office qualifies as your principal place of business, you can deduct your daily transportation costs between your home and another work location in the same trade or business. Military tax free zones For more information on transportation costs, see Publication 463, Travel, Entertainment, Gift, and Car Expenses. Military tax free zones Using the Simplified Method The simplified method is an alternative to the calculation, allocation, and substantiation of actual expenses. Military tax free zones In most cases, you will figure your deduction by multiplying $5, the prescribed rate, by the area of your home used for a qualified business use. Military tax free zones The area you use to figure your deduction is limited to 300 square feet. Military tax free zones See Simplified Amount , later, for information about figuring the amount of the deduction. Military tax free zones For more information about the simplified method, see Revenue Procedure 2013-13, 2013-06 I. Military tax free zones R. Military tax free zones B. Military tax free zones 478, available at www. Military tax free zones irs. Military tax free zones gov/irb/2013-06_IRB/ar09. Military tax free zones html. Military tax free zones Actual expenses and depreciation of your home. Military tax free zones   If you elect to use the simplified method, you cannot deduct any actual expenses for the business except for business expenses that are not related to the use of the home. Military tax free zones You also cannot deduct any depreciation (including any additional first-year depreciation) or section 179 expense for the portion of the home that is used for a qualified business use. Military tax free zones The depreciation deduction allowable for that portion of the home is deemed to be zero for a year you use the simplified method. Military tax free zones If you figure your deduction for business use of the home using actual expenses in a subsequent year, you will have to use the appropriate optional depreciation table for MACRS to figure your depreciation. Military tax free zones More information. Military tax free zones   For more information about claiming depreciation in a subsequent year, see Revenue Procedure 2013-13, 2013-06 I. Military tax free zones R. Military tax free zones B. Military tax free zones 478, available at www. Military tax free zones irs. Military tax free zones gov/irb/2013-06_IRB/ar09. Military tax free zones html. Military tax free zones See Publication 946 for the optional depreciation tables Although you cannot deduct any depreciation or section 179 expense for the portion of your home used for a qualified business use, you may still claim depreciation or the section 179 expense deduction on other assets used in the business (for example, furniture and equipment). Military tax free zones Expenses deductible without regard to business use. Military tax free zones   When using the simplified method, treat as personal expenses those business expenses related to the use of the home that are deductible without regard to whether there is a qualified business use of the home. Military tax free zones These expenses include mortgage interest, real estate taxes, and casualty losses, subject to any limitations. Military tax free zones See Where To Deduct , later. Military tax free zones If you also rent part of your home, you must still allocate these expenses between rental use and personal use (for this purpose, personal use includes business use reported using the simplified method). Military tax free zones No deduction of carryover of actual expenses. Military tax free zones   If you used actual expenses to figure your deduction for business use of the home in a prior year and your deduction was limited, you cannot deduct the disallowed amount carried over from the prior year during a year you figure your deduction using the simplified method. Military tax free zones Instead, you will continue to carry over the disallowed amount to the next year that you use actual expenses to figure your deduction. Military tax free zones Electing the Simplified Method You choose whether or not to figure your deduction using the simplified method each taxable year. Military tax free zones Make the election for a home by using the simplified method to figure the deduction for the qualified business use of that home on a timely filed, original federal income tax return. Military tax free zones An election for a taxable year, once made, is irrevocable. Military tax free zones A change from using the simplified method in one year to actual expenses in a succeeding taxable year, or vice-versa, is not a change in method of accounting and does not require the consent of the Commissioner. Military tax free zones Shared use. Military tax free zones   If you share your home with someone else who also uses the home in a business that qualifies for this deduction, each of you make your own election. Military tax free zones More than one qualified business use. Military tax free zones   If you conduct more than one business that qualifies for this deduction in your home, your election to use the simplified method applies to all your qualified business uses of that home. Military tax free zones More than one home. Military tax free zones   If you used more than one home during the year (for example, you moved during the year), you can elect to use the simplified method for only one of the homes. Military tax free zones You must figure the deduction for any other home using actual expenses. Military tax free zones Simplified Amount Your deduction for the qualified business use of a home is the sum of each amount you figure for a separate qualified business use of your home. Military tax free zones To figure your deduction for the business use of a home using the simplified method, you will need to know the following information for each qualified business use of the home. Military tax free zones The allowable area of your home used in conducting the business. Military tax free zones If you did not conduct the business for the entire year in the home or the area changed during the year, you will need to know the allowable area you used and the number of days you conducted the business for each month. Military tax free zones The gross income from the business use of your home. Military tax free zones The amount of the business expenses that are not related to the use of your home. Military tax free zones If the qualified business use is for a daycare facility that uses space in your home on a regular (but not exclusive) basis, you will also need to know the percentage of time that part of your home is used for daycare. Military tax free zones To figure the amount you can deduct for qualified business use of your home using the simplified method, follow these 3 steps. Military tax free zones Multiply the allowable area by $5 (or less than $5 if the qualified business use is for a daycare that uses space in your home on a regular, but not exclusive, basis). Military tax free zones See Allowable area and Space used regularly for daycare , later. Military tax free zones Subtract the expenses from the business that are not related to the use of the home from the gross income related to the business use of the home. Military tax free zones If these expenses are greater than the gross income from the business use of the home, then you cannot take a deduction for this business use of the home. Military tax free zones See Gross income limitation , later. Military tax free zones Take the smaller of the amounts from (1) and (2). Military tax free zones This is the amount you can deduct for this qualified business use of your home using the simplified method. Military tax free zones If you are an employee or a partner, or you use your home in your farming business and file Schedule F (Form 1040), you can use the Simplified Method Worksheet, near the end of this publication, to help you figure your deduction. Military tax free zones If you use your home in a trade or business and you file Schedule C (Form 1040), you will use the Simplified Method Worksheet in your Instructions for Schedule C to figure your deduction. Military tax free zones Allowable area. Military tax free zones   In most cases, the allowable area is the smaller of the actual area (in square feet) of your home used in conducting the business and 300 square feet. Military tax free zones Your allowable area may be smaller if you conducted the business as a qualified joint venture with your spouse, the area used by the business was shared with another qualified business use, you used the home for the business for only part of the year, or the area used by the business changed during the year. Military tax free zones You can use the Area Adjustment Worksheet (for simplified method), near the end of this publication, to help you figure your allowable area for a qualified business use. Military tax free zones Area used by a qualified joint venture. Military tax free zones   If the qualified business use of the home is also a qualified joint venture, you and your spouse will figure the deduction for the business use separately. Military tax free zones Split the actual area used in conducting business between you and your spouse in the same manner you split your other tax attributes. Military tax free zones Then, each spouse will figure the allowable area separately. Military tax free zones For more information about qualified joint ventures, see Qualified Joint Venture in the Instructions for Schedule C. Military tax free zones Shared use. Military tax free zones   If you share your home with someone else who uses the home to conduct business that also qualifies for this deduction, you may not include the same square feet to figure your deduction as the other person. Military tax free zones You must allocate the shared space between you and the other person in a reasonable manner. Military tax free zones Example. Military tax free zones Kristin and Lindsey are roommates. Military tax free zones Kristin uses 300 square feet of their home for a qualified business use. Military tax free zones Lindsey uses 200 square feet of their home for a separate qualified business use. Military tax free zones The qualified business uses share 100 square feet. Military tax free zones In addition to the portion that they do not share, Kristin and Lindsey can both claim 50 of the 100 square feet or divide the 100 square feet between them in any reasonable manner. Military tax free zones If divided evenly, Kristin could claim 250 square feet using the simplified method and Lindsey could claim 150 square feet. Military tax free zones More than one qualified business use. Military tax free zones   If you conduct more than one business qualifying for the deduction, you are limited to a maximum of 300 square feet for all of the businesses. Military tax free zones Allocate the actual square footage used (up to the maximum of 300 square feet) among your qualified business uses in a reasonable manner. Military tax free zones However, do not allocate more square feet to a qualified business use than you actually use for that business. Military tax free zones Rental use. Military tax free zones   The simplified method does not apply to rental use. Military tax free zones A rental use that qualifies for the deduction must be figured using actual expenses. Military tax free zones If the rental use and a qualified business use share the same area, you will have to allocate the actual area used between the two uses. Military tax free zones You cannot use the same area to figure a deduction for the qualified business use as you are using to figure the deduction for the rental use. Military tax free zones Part-year use or area changes. Military tax free zones   If your qualified business use was for a portion of the taxable year (for example, a seasonal business or a business that begins during the taxable year) or you changed the square footage of your qualified business use, your deduction is limited to the average monthly allowable square footage. Military tax free zones You calculate the average monthly allowable square footage by adding the amount of allowable square feet you used in each month and dividing the sum by 12. Military tax free zones When determining the average monthly allowable square footage, you cannot take more than 300 square feet into account for any one month. Military tax free zones Additionally, if your qualified business use was less than 15 days in a month, you must use -0- for that month. Military tax free zones Example 1. Military tax free zones Andy files his federal income tax return on a calendar year basis. Military tax free zones On July 20, he began using 420 square feet of his home for a qualified business use. Military tax free zones He continued to use the 420 square feet until the end of the year. Military tax free zones His average monthly allowable square footage is 125 square feet, which is figured using 300 square feet for each month August through December divided by the number of months in the taxable year ((0 + 0 + 0 + 0 + 0 + 0 + 0 + 300 + 300 + 300 + 300 + 300)/12). Military tax free zones Example 2. Military tax free zones Amy files her federal income tax return on a calendar year basis. Military tax free zones On April 20, she began using 100 square feet of her home for a qualified business use. Military tax free zones On August 5, she expanded the area of her qualified use to 330 square feet. Military tax free zones Amy continued to use the 330 square feet until the end of the year. Military tax free zones Her average monthly allowable square footage is 150 square feet, which is figured using 100 square feet for May through July and 300 square feet for August through December divided by the number of months in the taxable year ((0 + 0 + 0 + 0 + 100 + 100 +100 + 300 + 300 + 300 + 300 + 300)/12). Military tax free zones Gross income limitation. Military tax free zones   Your deduction for business use of the home is limited to an amount equal to the gross income derived from the qualified business use of the home reduced by the business deductions that are unrelated to the use of your home. Military tax free zones If the business deductions that are unrelated to the use of your home are greater than the gross income derived from the qualified business use of your home, then you cannot take a deduction for this qualified business use of your home. Military tax free zones Business expenses not related to use of the home. Military tax free zones   These expenses relate to the business activity in the home, but not to the use of the home itself. Military tax free zones You can still deduct business expenses that are unrelated to the use of the home. Military tax free zones See Where To Deduct , later. Military tax free zones Examples of business expenses that are unrelated to the use of the home are advertising, wages, supplies, dues, and depreciation for equipment. Military tax free zones Space used regularly for daycare. Military tax free zones   If you do not use the area of your home exclusively for daycare, you must reduce the prescribed rate (maximum $5 per square foot) before figuring your deduction. Military tax free zones The reduced rate will equal the prescribed rate times a fraction. Military tax free zones The numerator of the fraction is the number of hours that the space was used during the year for daycare and the denominator is the total number of hours during the year that the space was available for all uses. Military tax free zones You can use the Daycare Facility Worksheet (for simplified method), near the end of this publication, to help you figure the reduced rate. Military tax free zones    If you used at least 300 square feet for daycare regularly and exclusively during the year, then you do not need to reduce the prescribed rate or complete the Daycare Facility Worksheet. Military tax free zones Daycare Facility If you use space in your home on a regular basis for providing daycare, you may be able to claim a deduction for that part of your home even if you use the same space for nonbusiness purposes. Military tax free zones To qualify for this exception to the exclusive use rule, you must meet both of the following requirements. Military tax free zones You must be in the trade or business of providing daycare for children, persons age 65 or older, or persons who are physically or mentally unable to care for themselves. Military tax free zones You must have applied for, been granted, or be exempt from having, a license, certification, registration, or approval as a daycare center or as a family or group daycare home under state law. Military tax free zones You do not meet this requirement if your application was rejected or your license or other authorization was revoked. Military tax free zones Figuring the deduction. Military tax free zones   If you elect to use the simplified method for your home, figure your deduction as described earlier in Using the Simplified Method under Figuring the Deduction. Military tax free zones    If you are figuring your deduction using actual expenses and you regularly use part of your home for daycare, figure what part is used for daycare, as explained in Business Percentage , earlier, under Figuring the Deduction. Military tax free zones If you also use that part exclusively for daycare, deduct all the allocable expenses, subject to the deduction limit, as explained earlier. Military tax free zones   If the use of part of your home as a daycare facility is regular, but not exclusive, you must figure the percentage of time that part of your home is used for daycare. Military tax free zones A room that is available for use throughout each business day and that you regularly use in your business is considered to be used for daycare throughout each business day. Military tax free zones You do not have to keep records to show the specific hours the area was used for business. Military tax free zones You can use the area occasionally for personal reasons. Military tax free zones However, a room you use only occasionally for business does not qualify for the deduction. Military tax free zones To find the percentage of time you actually use your home for business, compare the total time used for business to the total time that part of your home can be used for all purposes. Military tax free zones You can compare the hours of business use in a week with the number of hours in a week (168). Military tax free zones Or you can compare the hours of business use for the year with the number of hours in the year (8,760 in 2013). Military tax free zones If you started or stopped using your home for daycare in 2013, you must prorate the number of hours based on the number of days the home was available for daycare. Military tax free zones Example 1. Military tax free zones Mary Lake used her basement to operate a daycare business for children. Military tax free zones She figures the business percentage of the basement as follows. Military tax free zones Square footage of the basement Square footage of her home = 1,600 3,200 = 50%           She used the basement for daycare an average of 12 hours a day, 5 days a week, for 50 weeks a year. Military tax free zones During the other 12 hours a day, the family could use the basement. Military tax free zones She figures the percentage of time the basement was used for daycare as follows. Military tax free zones Number of hours used for daycare (12 x 5 x 50) Total number of hours in the year (24 x 365) = 3,000 8,760 = 34. Military tax free zones 25%           Mary can deduct 34. Military tax free zones 25% of any direct expenses for the basement. Military tax free zones However, because her indirect expenses are for the entire house, she can deduct only 17. Military tax free zones 13% of the indirect expenses. Military tax free zones She figures the percentage for her indirect expenses as follows. Military tax free zones Business percentage of the basement 50% Multiplied by: Percentage of time used for daycare × 34. Military tax free zones 25% Percentage for indirect expenses 17. Military tax free zones 13% Mary completes Form 8829, Part I, figuring the percentage of her home used for business, including the percentage of time the basement was used. Military tax free zones In Part II, Mary figures her deductible expenses. Military tax free zones She uses the following information to complete Part II. Military tax free zones Gross income from her daycare business $50,000 Expenses not related to the business use of the home $25,000 Tentative profit $25,000 Rent $8,400 Utilities $850 Painting the basement $500 Mary enters her tentative profit, $25,000, on line 8. Military tax free zones (This figure is the same as the amount on line 29 of her Schedule C (Form 1040). Military tax free zones ) The expenses she paid for rent and utilities relate to her entire home. Military tax free zones Therefore, she enters the amount paid for rent on line 18, column (b), and the amount paid for utilities on line 20, column (b). Military tax free zones She shows the total of these expenses on line 22, column (b). Military tax free zones For line 23, she multiplies the amount on line 22, column (b) by the percentage on line 7 and enters the result, $1,585. Military tax free zones Mary paid $500 to have the basement painted. Military tax free zones The painting is a direct expense. Military tax free zones However, because she did not use the basement exclusively for daycare, she must multiply $500 by the percentage of time the basement was used for daycare (34. Military tax free zones 25% – line 6). Military tax free zones She enters $171 (34. Military tax free zones 25% × $500) on line 19, column (a). Military tax free zones She adds line 22, column (a), and line 23 and enters $1,756 ($171 + $1,585) on line 25. Military tax free zones This is less than her deduction limit (line 15), so she can deduct the entire amount. Military tax free zones She follows the instructions to complete the rest of Part II and enters $1,756 on lines 33 and 35. Military tax free zones She then carries the $1,756 to line 30 of her Schedule C (Form 1040). Military tax free zones Example 2. Military tax free zones Assume the same facts as in Example 1 except that Mary also has another room that was available each business day for children to take naps in. Military tax free zones Although she did not keep a record of the number of hours the room was actually used for naps, it was used for part of each business day. Military tax free zones Since the room was available for business use during regular operating hours each business day and was used regularly in the business, it is considered used for daycare throughout each business day. Military tax free zones The basement and room are 60% of the total area of her home. Military tax free zones In figuring her expenses, 34. Military tax free zones 25% of any direct expenses for the basement and room are deductible. Military tax free zones In addition, 20. Military tax free zones 55% (34. Military tax free zones 25% × 60%) of her indirect expenses are deductible. Military tax free zones Example 3. Military tax free zones Assume the same facts as in Example 1 except that Mary stopped using her home for a daycare facility on June 24, 2013. Military tax free zones She used the basement for daycare an average of 12 hours a day, 5 days a week, but for only 25 weeks of the year. Military tax free zones During the other 12 hours a day, the family could still use the basement. Military tax free zones She figures the percentage of time the basement was used for business as follows. Military tax free zones Number of hours used for daycare (12 x 5 x 25) Total number of hours during period used (24 x 175) = 1,500 4,200 = 35. Military tax free zones 71%           Mary can deduct 35. Military tax free zones 71% of any direct expenses for the basement. Military tax free zones However, because her indirect expenses are for the entire house, she can deduct only 17. Military tax free zones 86% of the indirect expenses. Military tax free zones She figures the percentage for her indirect expenses as follows. Military tax free zones Business percentage of the basement 50% Multiplied by: Percentage of time used for daycare × 35. Military tax free zones 71% Percentage for indirect expenses 17. Military tax free zones 86% Meals. Military tax free zones   If you provide food for your daycare recipients, do not include the expense as a cost of using your home for business. Military tax free zones Claim it as a separate deduction on your Schedule C (Form 1040). Military tax free zones You can never deduct the cost of food consumed by you or your family. Military tax free zones You can deduct as a business expense 100% of the actual cost of food consumed by your daycare recipients (see Standard meal and snack rates , later, for an optional method for eligible children) and generally only 50% of the cost of food consumed by your employees. Military tax free zones However, you can deduct 100% of the cost of food consumed by your employees if its value can be excluded from their wages as a de minimis fringe benefit. Military tax free zones For more information on meals that meet these requirements, see Meals in chapter 2 of Publication 15-B, Employer's Tax Guide to Fringe Benefits. Military tax free zones   If you deduct the actual cost of food for your daycare business, keep a separate record (with receipts) of your family's food costs. Military tax free zones   Reimbursements you receive from a sponsor under the Child and Adult Care Food Program of the Department of Agriculture are taxable only to the extent they exceed your expenses for food for eligible children. Military tax free zones If your reimbursements are more than your expenses for food, show the difference as income in Part I of Schedule C (Form 1040). Military tax free zones If your food expenses are greater than the reimbursements, show the difference as an expense in Part V of Schedule C (Form 1040). Military tax free zones Do not include payments or expenses for your own children if they are eligible for the program. Military tax free zones Follow this procedure even if you receive a Form 1099-MISC, Miscellaneous Income, reporting a payment from the sponsor. Military tax free zones Standard meal and snack rates. Military tax free zones   If you qualify as a family daycare provider, you can use the standard meal and snack rates, instead of actual costs, to compute the deductible cost of meals and snacks provided to eligible children. Military tax free zones For these purposes: A family daycare provider is a person engaged in the business of providing family daycare. Military tax free zones Family daycare is childcare provided to eligible children in the home of the family daycare provider. Military tax free zones The care must be non-medical, not involve a transfer of legal custody, and generally last less than 24 hours each day. Military tax free zones Eligible children are minor children receiving family daycare in the home of the family daycare provider. Military tax free zones Eligible children do not include children who are full-time or part-time residents in the home where the childcare is provided or children whose parents or guardians are residents of the same home. Military tax free zones Eligible children do not include children who receive daycare services for personal reasons of the provider. Military tax free zones For example, if a provider provides daycare services for a relative as a favor to that relative, that child is not an eligible child. Military tax free zones   You can compute the deductible cost of each meal and snack you actually purchased and served to an eligible child during the time period you provided family daycare using the standard meal and snack rates shown in Table 3, later. Military tax free zones You can use the standard meal and snack rates for a maximum of one breakfast, one lunch, one dinner, and three snacks per eligible child per day. Military tax free zones If you receive reimbursement for a particular meal or snack, you can deduct only the portion of the applicable standard meal or snack rate that is more than the amount of the reimbursement. Military tax free zones   You can use either the standard meal and snack rates or actual costs to calculate the deductible cost of food provided to eligible children in the family daycare for any particular tax year. Military tax free zones If you choose to use the standard meal and snack rates for a particular tax year, you must use the rates for all your deductible food costs for eligible children during that tax year. Military tax free zones However, if you use the standard meal and snack rates in any tax year, you can use actual costs to compute the deductible cost of food in any other tax year. Military tax free zones   If you use the standard meal and snack rates, you must maintain records to substantiate the computation of the total amount deducted for the cost of food provided to eligible children. Military tax free zones The records kept should include the name of each child, dates and hours of attendance in the daycare, and the type and quantity of meals and snacks served. Military tax free zones This information can be recorded in a log similar to the one shown in Exhibit A, near the end of this publication. Military tax free zones   The standard meal and snack rates include beverages, but do not include non-food supplies used for food preparation, service, or storage, such as containers, paper products, or utensils. Military tax free zones These expenses can be claimed as a separate deduction on your Schedule C (Form 1040). Military tax free zones     Table 3. Military tax free zones Standard Meal and Snack Rates1 Location of Family Daycare Provider Breakfast Lunch Dinner Snack States other than Alaska an
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Affordable Care Act (ACA) Tax Provisions

 Individuals
 & Families
 
 Employers
 
Other Organizations

 
The health care law addresses health insurance coverage and financial assistance options for individuals and families, including the premium tax credit. It also includes the individual shared responsibility provision and exemptions from that provision.The IRS administers the tax provisions included in the law. Visit HealthCare.gov for more information on coverage options and assistance.
 


 

   
The health care law contains many tax and other provisions for employers. The IRS administers the tax provisions included in the law. Visit HealthCare.gov and SBA.gov/healthcare for more information on other provisions.
 


 

 
  • Insurers
  • Certain Business Types
  • Tax-Exempt & Government Organizations

 


 

 

The Military Tax Free Zones

Military tax free zones Publication 596SP - Introductory Material Table of Contents Acontecimientos Futuros ¿Qué es el Crédito por Ingreso del Trabajo (EIC)? ¿Puedo Reclamar el Crédito por Ingreso del Trabajo (EIC)? ¿Necesito esta Publicación? ¿Hay que Tener un Hijo para Tener Derecho al Crédito por Ingreso del Trabajo (EIC)? ¿Cómo Calculo la Cantidad del Crédito por Ingreso del Trabajo (EIC)? ¿Cómo Puedo Encontrar Rápidamente Información Específica? ¿Hay Ayuda Disponible en Internet? Qué Hay de Nuevo para el año 2013 Recordatorios Acontecimientos Futuros Para la información más actualizada sobre los acontecimientos que afectan la Publicación 596(SP), tales como legislación promulgada después de su publicación, visite www. Military tax free zones irs. Military tax free zones gov/pub596sp, en inglés. Military tax free zones ¿Qué es el Crédito por Ingreso del Trabajo (EIC)? El crédito por ingreso del trabajo (EIC, por sus siglas en inglés) es un crédito tributario para aquellas personas que trabajan y que reciben ingreso del trabajo inferior a $51,567. Military tax free zones Un crédito tributario significa que va a tener más dinero disponible porque reduce la cantidad de impuesto a pagar. Military tax free zones El crédito por ingreso del trabajo (EIC) también podría proporcionarle un reembolso. Military tax free zones ¿Puedo Reclamar el Crédito por Ingreso del Trabajo (EIC)? Para tener derecho al crédito por ingreso del trabajo (EIC), tiene que cumplir determinados requisitos. Military tax free zones Dichos requisitos se resumen en la Tabla 1. Military tax free zones Tabla 1. Military tax free zones Síntesis del Crédito por Ingreso del Trabajo Primero, tiene que cumplir todos los requisitos de esta columna. Military tax free zones Segundo, tiene que cumplir todos los requisitos de una de estas columnas, la que le corresponda. Military tax free zones Tercero, tiene que cumplir el requisito de esta columna. Military tax free zones Capítulo 1. Military tax free zones  Requisitos para Todos Capítulo 2. Military tax free zones  Requisitos que Tiene que Cumplir si Tiene un Hijo Calificado Capítulo 3. Military tax free zones  Requisitos que Tiene que Cumplir si no Tiene un Hijo Calificado Capítulo 4. Military tax free zones  Calcular y Reclamar el Crédito por Ingreso del Trabajo (EIC) 1. Military tax free zones Tiene que tener  ingresos brutos ajustados (AGI, por sus siglas en inglés) inferiores a:  • $46,227 ($51,567 para casados que presentan una declaración conjunta) si tiene tres o más hijos calificados,  • $43,038 ($48,378 para casados que presentan una declaración conjunta) si tiene dos hijos calificados,  • $37,870 ($43,210 para casados que presentan una declaración conjunta) si tiene un hijo calificado o  • $14,340 ($19,680 para casados que presentan una declaración conjunta) si no tiene un hijo calificado. Military tax free zones 2. Military tax free zones Tiene que tener un número de Seguro Social válido. Military tax free zones   3. Military tax free zones Su estado civil para efectos de la declaración no puede ser  “casado que presenta la declaración por separado”. Military tax free zones   4. Military tax free zones Tiene que ser ciudadano de los Estados Unidos o extranjero residente durante todo el año. Military tax free zones   5. Military tax free zones No puede presentar el Formulario 2555 ni el Formulario 2555-EZ (relacionado con el ingreso del trabajo en el extranjero). Military tax free zones   6. Military tax free zones Sus ingresos procedentes de inversiones tienen que ser de $3,300 o menos. Military tax free zones    7. Military tax free zones Tiene que haber recibido ingreso del trabajo. Military tax free zones 8. Military tax free zones Su hijo tiene que cumplir los requisitos de parentesco, edad, residencia y de declaración conjunta. Military tax free zones   9. Military tax free zones Soló una persona puede utilizar su hijo calificado para fines de reclamar el crédito por ingreso del trabajo (EIC). Military tax free zones   10. Military tax free zones Usted no puede ser el hijo calificado de otra persona. Military tax free zones 11. Military tax free zones Tiene que tener por lo menos 25 años de edad pero menos de 65 años de edad. Military tax free zones   12. Military tax free zones Usted no puede ser dependiente de otra persona. Military tax free zones   13. Military tax free zones Usted no puede ser el hijo calificado de otra persona. Military tax free zones   14. Military tax free zones Tiene que haber vivido en los Estados Unidos durante más de la mitad del año. Military tax free zones 15. Military tax free zones Tiene que tener ingresos del trabajo inferiores a:  • $46,227 ($51,567 para casados que presentan una declaración conjunta) si tiene tres o más hijos calificados,  • $43,038 ($48,378 para casados que presentan una declaración conjunta) si tiene dos hijos calificados,  • $37,870 ($43,210 para casados que presentan una declaración conjunta) si tiene un hijo calificado o  • $14,340 ($19,680 para casados que presentan una declaración conjunta) si no tiene un hijo calificado. Military tax free zones ¿Necesito esta Publicación? Algunas personas que presenten el Formulario 1040 tienen que usar la Hoja de Trabajo 1 de esta publicación, en vez de consultar el Paso 2 de las instrucciones para el Formulario 1040, para determinar si pueden reclamar el crédito por ingreso del trabajo (EIC). Military tax free zones Usted se encuentra en esta categoría si alguna de las siguientes situaciones le corresponde para el año 2013. Military tax free zones Presenta el Anexo E (Formulario 1040). Military tax free zones Declara ingresos provenientes del alquiler de bienes inmuebles/muebles que no son utilizados en un oficio o negocio. Military tax free zones Declara ingresos en la línea 21 del Formulario 1040 que provienen del Formulario 8814 (relacionados con la elección de declarar los intereses y dividendos recibidos por un hijo). Military tax free zones Declara una cantidad en la línea 13 del Formulario 1040 que incluye una cantidad del Formulario 4797. Military tax free zones Si ninguna de las situaciones que aparecen anteriormente le corresponde, las instrucciones del formulario de impuestos contienen toda la información que necesita para saber si puede reclamar el crédito por ingreso del trabajo (EIC) y para calcular la cantidad del mismo. Military tax free zones No necesita esta publicación, pero puede leerla para saber si puede reclamar el crédito por ingreso del trabajo (EIC) y para aprender más sobre este crédito. Military tax free zones ¿Hay que Tener un Hijo para Tener Derecho al Crédito por Ingreso del Trabajo (EIC)? No. Military tax free zones Puede reunir los requisitos del crédito por ingreso del trabajo (EIC) aunque no tenga un hijo calificado si usted tiene como mínimo 25 años de edad pero menos de 65 años y tiene ingresos del trabajo inferiores a $14,340 ($19,680 si es casado que presenta una declaración conjunta). Military tax free zones Vea el capítulo 3 para información adicional. Military tax free zones ¿Cómo Calculo la Cantidad del Crédito por Ingreso del Trabajo (EIC)? Si puede reclamar el crédito por ingreso del trabajo (EIC), tiene la opción de solicitar que el IRS le calcule la cantidad del crédito o puede calcularlo usted mismo. Military tax free zones Para calcularlo usted mismo, puede llenar la hoja de trabajo que se encuentra en las instrucciones del formulario que presente. Military tax free zones Para saber cómo solicitar que el IRS le calcule la cantidad del crédito, vea el capítulo 4. Military tax free zones ¿Cómo Puedo Encontrar Rápidamente Información Específica? Puede utilizar el índice para buscar información específica. Military tax free zones En la mayoría de los casos, el índice hace referencia a títulos, tablas u hojas de trabajo. Military tax free zones ¿Hay Ayuda Disponible en Internet? Sí. Military tax free zones Puede utilizar el Asistente EITC en el sitio web www. Military tax free zones irs. Military tax free zones gov/espanol para saber si tiene derecho al crédito. Military tax free zones El Asistente EITC está disponible en español y en inglés. Military tax free zones Qué Hay de Nuevo para el año 2013 La cantidad de ingresos del trabajo ha aumentado. Military tax free zones La cantidad máxima de ingresos que usted puede ganar y aún obtener el crédito ha aumentado. Military tax free zones Tal vez pueda reclamar el crédito si: Tiene tres o más hijos calificados y gana menos de $46,227 ($51,567 si es casado que presenta una declaración conjunta), Tiene dos hijos calificados y gana menos de $43,038 ($48,378 si es casado que presenta una declaración conjunta), Tiene un hijo calificado y gana menos de $37,870 ($43,210 si es casado que presenta una declaración conjunta) o No tiene un hijo calificado y gana menos de $14,340 ($19,680 si es casado que presenta una declaración conjunta). Military tax free zones Además, tiene que tener ingresos brutos ajustados inferiores a la cantidad que le corresponda de la lista anterior. Military tax free zones Para más información, vea los Requisitos 1 y 15. Military tax free zones La cantidad de ingresos de inversiones ha aumentado. Military tax free zones La cantidad máxima de ingresos de inversiones que usted puede ganar y aún obtener el crédito ha aumentado a $3,300. Military tax free zones Vea el Requisito 6 —Tiene que tener ingresos de inversiones de $3,300 o menos . Military tax free zones Recordatorios Aumento del crédito por ingreso del trabajo (EIC) en ciertas declaraciones conjuntas. Military tax free zones  Una persona casada que presente una declaración conjunta podría recibir un crédito mayor que el que recibe otra persona que tenga los mismos ingresos pero con un estado civil diferente para efectos de la declaración. Military tax free zones Por lo tanto, la Tabla del Crédito por Ingreso del Trabajo (EIC) tiene columnas distintas para las personas casadas que presenten una declaración conjunta que para los demás. Military tax free zones Cuando busque su crédito por ingreso del trabajo en la Tabla del Crédito por Ingreso del Trabajo (EIC), asegúrese de usar la columna correcta para su estado civil para efectos de la declaración y el número de hijos que tenga. Military tax free zones El crédito por ingreso del trabajo (EIC) no afecta ciertos pagos de bienestar social. Military tax free zones  Todo reembolso que reciba por el crédito por ingreso del trabajo (EIC) no se considera ingreso al determinar si usted u otra persona tiene derecho a recibir beneficios de los programas de asistencia social que se indican a continuación, ni al determinar la cantidad que usted u otra persona puede recibir de algún programa federal, o algún programa estatal o local que recibe todo o parte de sus fondos de fuentes federales. Military tax free zones Tales programas incluyen los siguientes: Asistencia Temporal para Familias Necesitadas (TANF, por sus siglas en inglés). Military tax free zones Seguro Medicaid. Military tax free zones Seguridad de Ingreso Suplementario (SSI, por sus siglas en inglés). Military tax free zones Programas de Asistencia Suplementaria de Alimentación (SNAP, por sus siglas en inglés) (cupones para alimentos). Military tax free zones Viviendas para personas de bajos ingresos. Military tax free zones Además, cuando determine la elegibilidad, el reembolso no podrá ser contado como una fuente de ingresos, durante por lo menos 12 meses después que usted lo reciba. Military tax free zones Hable con el coordinador de beneficios local para averiguar si su reembolso afectará sus beneficios. Military tax free zones No se olvide del crédito estatal. Military tax free zones  Si reúne los requisitos para reclamar el crédito por ingreso del trabajo (EIC) en la declaración de impuestos federales sobre los ingresos, podría tener también derecho a reclamar un crédito parecido en la declaración de impuestos estatales o locales sobre los ingresos. Military tax free zones Para ver una lista de estados que ofrecen el crédito estatal por ingreso del trabajo, visite www. Military tax free zones irs. Military tax free zones gov/eitc. Military tax free zones En caso de que el IRS cuestione el crédito por ingreso del trabajo (EIC). Military tax free zones  El IRS puede pedirle que entregue documentos para comprobar que usted tiene derecho al crédito por ingreso del trabajo (EIC). Military tax free zones Le informaremos cuáles documentos debe enviarnos. Military tax free zones Éstos pueden incluir actas de nacimiento, expedientes académicos, expedientes médicos, etc. Military tax free zones El proceso para determinar su derecho al crédito demorará su reembolso. Military tax free zones Fotografías de niños desaparecidos. Military tax free zones  El IRS se complace en colaborar con el Centro Nacional de Niños Desaparecidos y Explotados (National Center for Missing and Exploited Children). Military tax free zones Esta publicación puede contener fotografías de niños desaparecidos seleccionadas por el Centro en páginas que de otra manera estarían en blanco. Military tax free zones Usted puede ayudar a que estos niños regresen a su hogar si al mirar sus fotografías los identifica y llama gratis al 1-800-THE-LOST (1-800-843-5678). Military tax free zones Comentarios y sugerencias. Military tax free zones  Agradeceremos sus comentarios acerca de esta publicación, así como sus sugerencias para ediciones futuras. Military tax free zones Nos puede escribir a la dirección siguiente:  Internal Revenue Service Tax Forms and Publications 1111 Constitution Ave. Military tax free zones NW, IR-6526 Washington, DC 20224 Contestamos muchas cartas por teléfono. Military tax free zones Por lo tanto, sería útil que incluyera en la correspondencia su número de teléfono, con el código de área, para llamar durante el día. Military tax free zones Usted nos puede enviar comentarios desde la página web en www. Military tax free zones irs. Military tax free zones gov/formspubs, en inglés. Military tax free zones Pulse sobre “More Information,” (Más información) y seleccionando “Give us feedback. Military tax free zones ” (Proveer comentarios). Military tax free zones Aunque no podemos contestar individualmente cada comentario, agradecemos sus comentarios y sugerencias y los tendremos en cuenta para ediciones futuras de nuestros productos tributarios. Military tax free zones Para pedir formularios y publicaciones. Military tax free zones  Visite www. Military tax free zones irs. Military tax free zones gov/formspubs para descargar formularios y publicaciones, llame al 1-800-829-3676 para pedir formularios y publicaciones o escriba a la dirección a continuación para recibir una respuesta dentro de los 10 días después de recibir su solicitud. Military tax free zones  Internal Revenue Service 1201 N. Military tax free zones Mitsubishi Motorway Bloomington, IL 61705-6613 Preguntas sobre los impuestos. Military tax free zones  Si tiene una pregunta sobre los impuestos, verifique la información disponible en IRS. Military tax free zones gov/espanol o llame al 1-800-829-1040. Military tax free zones No podemos contestar preguntas sobre impuestos enviadas a ninguna de las dos direcciones anteriores. Military tax free zones Prev  Up  Next   Home   More Online Publications