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Tax For Military

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Tax For Military

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

How quickly will I get my refund?
We issue most refunds in less than 21 calendar days.

What is the best and fastest way to get information about my refund?
Use the IRS2Go mobile app or the Where’s My Refund? tool. You can start checking on the status of your tax return within 24 hours after we have received your e-filed return or 4 weeks after you mail a paper return.

Will I see a date for my refund right away?
Where’s My Refund? will not give you a refund date right away. We must first receive your tax return and then we have to process it and approve your refund. Where’s My Refund? will give you a personalized date once your refund is approved. 

Will calling the IRS help me get my refund any faster?
Calling us will not speed up your refund. Our phone and walk-in representatives can only research the status of your refund if it has been 21 days or more since you filed electronically, more than 6 weeks since you mailed your paper return, or Where’s My Refund? directs you to contact us. If we need more information to process your tax return, we will contact you by mail. Otherwise Where’s My Refund? has the most up to date information available about your refund. Use the IRS2Go mobile app or use the Where’s My Refund? tool. Both are available 24 hours a day, 7 days a week.

How will I know if IRS received my tax return and if my refund is being processed?
Use the Where’s My Refund? tool to follow your tax return from receipt to issuance of your refund. While your tax return is being processed you can follow it through three stages: Return Received, Refund Approved and Refund Sent.

When can I start checking on my refund status?
You can start checking on the status of your return within 24 hours after we have received your electronically filed tax return or 4 weeks after you mail a paper tax return.

How often does Where’s My Refund? update?
Where’s My Refund? updates are made no more than once per day, usually at night. So there is no need to check more often.

What is happening when Where’s My Refund? shows the status of my refund is: Return Received?
This means we have your tax return and are processing it. Your personalized refund date will be available as soon as we finish processing your return and confirm that your refund has been approved. We issue most refunds  in less than 21 days.

How long will it take for my status to change from “Return Received” to Refund Approved?
Sometimes your status may change from “Return Received” to “Refund Approved” in just a few days, but it could take longer and a date will not be provided until your refund has been approved. However, if Where’s My Refund? shows the status of your refund is: Return Received we have received your tax return and we are processing it.

Does Where’s My Refund always display my refund status with the tracker showing three steps?  
No. In some cases the tracker graphic will not be shown if your return is being reviewed prior to step two: “Refund Approved,” and instead an explanation or instructions will be provided depending on the situation. This can happen even if you previously checked Where’s My Refund and it showed the status as “Return Received” along with the tracker. In these cases be assured that we have your tax return and we are processing it. Please follow the directions provided by Where’s My Refund. Otherwise if we need more information we will contact you – usually by mail. If we send you a letter about your return, please follow the instructions in the letter as soon as possible.

Will ordering a transcript help you determine when you’ll get your refund?
No, a tax transcript will not help you determine when you will get your refund. This is among the common myths and misconceptions that are often repeated in social media. The codes listed on tax transcripts do not provide any early insight into when a refund will be issued. The best way to check on your refund is by visiting “Where’s My Refund?” While transcripts include a lot of detailed information regarding actions taken on your account, the codes do not mean the same thing for everyone and they do not necessarily reflect how any of these actions do or do not impact the amount or timing of your refund. IRS transcripts are best and most often used to validate past income and tax filing status for mortgage, student and small business loan applications and to help with tax preparation.

What is happening when Where’s My Refund? shows the status of my refund is:  Refund Approved?
This means the IRS has processed your return and your refund has been approved. The IRS is now preparing to send your refund to your bank or directly to you in the mail if you requested a paper check. This status will tell you when your refund is scheduled to be sent to your bank and, if you elected the direct deposit option, a date by which it should be credited to your account. Please wait until it’s been five days from the date we sent the refund to your bank to check with your bank about the status of your refund. This time frame is provided to allow for the variations in how and when banks deposit funds.

What is happening when Where’s My Refund? shows the status of my tax return is:  Refund Sent?
This means the IRS has sent your refund to your financial institution for direct deposit. This status will tell you when your refund was sent to your bank. It may take your financial institution 1 – 5 days to deposit the funds into your account. Please wait until it’s been five days from the date we sent the refund to your bank to check with your bank about the status of your refund.  This time frame is provided to allow for the variations in how and when banks deposit funds. If you requested a paper check this means your check has been mailed. It could take several weeks for your check to arrive in the mail.

Why is my refund different than the amount reflected on the tax return I filed?
If you owe past-due federal tax, state income tax, state unemployment compensation debts, child support, spousal support, or certain federal nontax debts, such as student loans, all or part of your refund may be used (offset) to pay the past-due amount. Offsets for federal taxes are made by the IRS. All other offsets are made by the Treasury Department's Bureau of Fiscal Services (BFS) (Formerly the Financial Management Service or FMS). For federal tax offsets, you will receive a notice from the IRS. For all other offsets, you will receive a notice from BFS. To find out if you may have an offset or if you have any questions about it, contact the agency to which you owe the debt. See Tax Topic 203 for more information about refund offsets.

Another reason your refund amount may be different is if we made changes to your tax return that changed your refund amount. In this case you will get a notice in the mail from us explaining the changes. These reasons will be reflected in Where’s My Refund if they apply to your refund.

What if I am counting on my refund for something important? Can I expect to receive it on time? 
Be careful not to count on getting your refund by a certain date to make major purchases or pay other financial obligations. Many different factors can affect the timing of your refund after we receive it for processing. Even though we issue most refunds in less than 21 days, it’s possible your tax return may require additional review and take longer. Also, if you are anticipating a refund, take into consideration the time it takes for your financial institution to post the refund to your account, or for mail delivery.

It's been longer than 21 days since the IRS received my return and I have not gotten my refund. Why?
We work hard to issue refunds as quickly as possible, but some tax returns take longer to process than others for many reasons, including when a return:

  • includes errors,
  • is incomplete,
  • needs further review,
  • is impacted by identity theft or fraud,
  • includes Form 8379, Injured Spouse Allocation, which could take up to 14 weeks to process.

If we need more information to process your tax return, we will contact you by mail.

IRS representatives can only research the status of your return if it’s been 21 days or more since you filed electronically, more than six weeks since you mailed your paper return, or if Where’s My Refund? directs you to contact us. Our general telephone number is 1-800-829-1040. However, given our limited resources, our phone lines are going to be extremely busy this year – and there will frequently be extensive wait times.

Will Where’s My Refund? provide a refund status if I filed an amended return?
No, it does not provide information about amended tax returns. However you can check the status of your Form 1040X (PDF), Amended U.S. Individual Income Tax Return, using the “Where's My Amended Return?” (WMAR) online tool and the new toll-free telephone line 866-464-2050 three weeks after you file your amended return. WMAR provides personalized, automated, and the most up-to-date information on the status of amended returns in both English and Spanish. You can check the status of a Form 1040X filed for the current year and up to three years prior.

 

Page Last Reviewed or Updated: 19-Mar-2014

The Tax For Military

Tax for military 4. Tax for military   Transportation Table of Contents Parking fees. Tax for military Advertising display on car. Tax for military Car pools. Tax for military Hauling tools or instruments. Tax for military Union members' trips from a union hall. Tax for military Car ExpensesStandard Mileage Rate Actual Car Expenses Leasing a Car Disposition of a Car This chapter discusses expenses you can deduct for business transportation when you are not traveling away from home as defined in chapter 1. Tax for military These expenses include the cost of transportation by air, rail, bus, taxi, etc. Tax for military , and the cost of driving and maintaining your car. Tax for military Transportation expenses include the ordinary and necessary costs of all of the following. Tax for military Getting from one workplace to another in the course of your business or profession when you are traveling within the city or general area that is your tax home. Tax for military Tax home is defined in chapter 1. Tax for military Visiting clients or customers. Tax for military Going to a business meeting away from your regular workplace. Tax for military Getting from your home to a temporary workplace when you have one or more regular places of work. Tax for military These temporary workplaces can be either within the area of your tax home or outside that area. Tax for military Transportation expenses do not include expenses you have while traveling away from home overnight. Tax for military Those expenses are travel expenses discussed in chapter 1 . Tax for military However, if you use your car while traveling away from home overnight, use the rules in this chapter to figure your car expense deduction. Tax for military See Car Expenses , later. Tax for military Daily transportation expenses you incur while traveling from home to one or more regular places of business are generally nondeductible commuting expenses. Tax for military However, there may be exceptions to this general rule. Tax for military You can deduct daily transportation expenses incurred going between your residence and a temporary work station outside the metropolitan area where you live. Tax for military Also, daily transportation expenses can be deducted if: (1) you have one or more regular work locations away from your residence or (2) your residence is your principal place of business and you incur expenses going between the residence and another work location in the same trade or business, regardless of whether the work is temporary or permanent and regardless of the distance. Tax for military Illustration of transportation expenses. Tax for military    Figure B , earlier, illustrates the rules that apply for deducting transportation expenses when you have a regular or main job away from your home. Tax for military You may want to refer to it when deciding whether you can deduct your transportation expenses. Tax for military Temporary work location. Tax for military   If you have one or more regular work locations away from your home and you commute to a temporary work location in the same trade or business, you can deduct the expenses of the daily round-trip transportation between your home and the temporary location, regardless of distance. Tax for military   If your employment at a work location is realistically expected to last (and does in fact last) for 1 year or less, the employment is temporary unless there are facts and circumstances that would indicate otherwise. Tax for military   If your employment at a work location is realistically expected to last for more than 1 year or if there is no realistic expectation that the employment will last for 1 year or less, the employment is not temporary, regardless of whether it actually lasts for more than 1 year. Tax for military   If employment at a work location initially is realistically expected to last for 1 year or less, but at some later date the employment is realistically expected to last more than 1 year, that employment will be treated as temporary (unless there are facts and circumstances that would indicate otherwise) until your expectation changes. Tax for military It will not be treated as temporary after the date you determine it will last more than 1 year. Tax for military   If the temporary work location is beyond the general area of your regular place of work and you stay overnight, you are traveling away from home. Tax for military You may have deductible travel expenses as discussed in chapter 1 . Tax for military No regular place of work. Tax for military   If you have no regular place of work but ordinarily work in the metropolitan area where you live, you can deduct daily transportation costs between home and a temporary work site outside that metropolitan area. Tax for military   Generally, a metropolitan area includes the area within the city limits and the suburbs that are considered part of that metropolitan area. Tax for military   You cannot deduct daily transportation costs between your home and temporary work sites within your metropolitan area. Tax for military These are nondeductible commuting expenses. Tax for military Two places of work. Tax for military   If you work at two places in one day, whether or not for the same employer, you can deduct the expense of getting from one workplace to the other. Tax for military However, if for some personal reason you do not go directly from one location to the other, you cannot deduct more than the amount it would have cost you to go directly from the first location to the second. Tax for military   Transportation expenses you have in going between home and a part-time job on a day off from your main job are commuting expenses. Tax for military You cannot deduct them. Tax for military Armed Forces reservists. Tax for military   A meeting of an Armed Forces reserve unit is a second place of business if the meeting is held on a day on which you work at your regular job. Tax for military You can deduct the expense of getting from one workplace to the other as just discussed under Two places of work . Tax for military   You usually cannot deduct the expense if the reserve meeting is held on a day on which you do not work at your regular job. Tax for military In this case, your transportation generally is a nondeductible commuting expense. Tax for military However, you can deduct your transportation expenses if the location of the meeting is temporary and you have one or more regular places of work. Tax for military   If you ordinarily work in a particular metropolitan area but not at any specific location and the reserve meeting is held at a temporary location outside that metropolitan area, you can deduct your transportation expenses. Tax for military   If you travel away from home overnight to attend a guard or reserve meeting, you can deduct your travel expenses. Tax for military These expenses are discussed in chapter 1 . Tax for military   If you travel more than 100 miles away from home in connection with your performance of services as a member of the reserves, you may be able to deduct some of your reserve-related travel costs as an adjustment to gross income rather than as an itemized deduction. Tax for military For more information, see Armed Forces Reservists Traveling More Than 100 Miles From Home under Special Rules, in chapter 6. Tax for military Commuting expenses. Tax for military   You cannot deduct the costs of taking a bus, trolley, subway, or taxi, or of driving a car between your home and your main or regular place of work. Tax for military These costs are personal commuting expenses. Tax for military You cannot deduct commuting expenses no matter how far your home is from your regular place of work. Tax for military You cannot deduct commuting expenses even if you work during the commuting trip. Tax for military Example. Tax for military You sometimes use your cell phone to make business calls while commuting to and from work. Tax for military Sometimes business associates ride with you to and from work, and you have a business discussion in the car. Tax for military These activities do not change the trip from personal to business. Tax for military You cannot deduct your commuting expenses. Tax for military Parking fees. Tax for military    Fees you pay to park your car at your place of business are nondeductible commuting expenses. Tax for military You can, however, deduct business-related parking fees when visiting a customer or client. Tax for military Advertising display on car. Tax for military   Putting display material that advertises your business on your car does not change the use of your car from personal use to business use. Tax for military If you use this car for commuting or other personal uses, you still cannot deduct your expenses for those uses. Tax for military Car pools. Tax for military   You cannot deduct the cost of using your car in a nonprofit car pool. Tax for military Do not include payments you receive from the passengers in your income. Tax for military These payments are considered reimbursements of your expenses. Tax for military However, if you operate a car pool for a profit, you must include payments from passengers in your income. Tax for military You can then deduct your car expenses (using the rules in this publication). Tax for military Hauling tools or instruments. Tax for military   Hauling tools or instruments in your car while commuting to and from work does not make your car expenses deductible. Tax for military However, you can deduct any additional costs you have for hauling tools or instruments (such as for renting a trailer you tow with your car). Tax for military Union members' trips from a union hall. Tax for military   If you get your work assignments at a union hall and then go to your place of work, the costs of getting from the union hall to your place of work are nondeductible commuting expenses. Tax for military Although you need the union to get your work assignments, you are employed where you work, not where the union hall is located. Tax for military Office in the home. Tax for military   If you have an office in your home that qualifies as a principal place of business, you can deduct your daily transportation costs between your home and another work location in the same trade or business. Tax for military (See Publication 587, Business Use of Your Home, for information on determining if your home office qualifies as a principal place of business. Tax for military ) Examples of deductible transportation. Tax for military   The following examples show when you can deduct transportation expenses based on the location of your work and your home. Tax for military Example 1. Tax for military You regularly work in an office in the city where you live. Tax for military Your employer sends you to a 1-week training session at a different office in the same city. Tax for military You travel directly from your home to the training location and return each day. Tax for military You can deduct the cost of your daily round-trip transportation between your home and the training location. Tax for military Example 2. Tax for military Your principal place of business is in your home. Tax for military You can deduct the cost of round-trip transportation between your qualifying home office and your client's or customer's place of business. Tax for military Example 3. Tax for military You have no regular office, and you do not have an office in your home. Tax for military In this case, the location of your first business contact inside the metropolitan area is considered your office. Tax for military Transportation expenses between your home and this first contact are nondeductible commuting expenses. Tax for military Transportation expenses between your last business contact and your home are also nondeductible commuting expenses. Tax for military While you cannot deduct the costs of these trips, you can deduct the costs of going from one client or customer to another. Tax for military Car Expenses If you use your car for business purposes, you ordinarily can deduct car expenses. Tax for military You generally can use one of the two following methods to figure your deductible expenses. Tax for military Standard mileage rate. Tax for military Actual car expenses. Tax for military If you use actual expenses to figure your deduction for a car you lease, there are rules that affect the amount of your lease payments you can deduct. Tax for military See Leasing a Car , later. Tax for military In this publication, “car” includes a van, pickup, or panel truck. Tax for military For the definition of “car” for depreciation purposes, see Car defined under Actual Car Expenses, later. Tax for military Rural mail carriers. Tax for military   If you are a rural mail carrier, you may be able to treat the qualified reimbursement you received as your allowable expense. Tax for military Because the qualified reimbursement is treated as paid under an accountable plan, your employer should not include the reimbursement in your income. Tax for military   If your vehicle expenses are more than the amount of your reimbursement, you can deduct the unreimbursed expenses as an itemized deduction on Schedule A (Form 1040). Tax for military You must complete Form 2106 and attach it to your Form 1040, U. Tax for military S. Tax for military Individual Income Tax Return. Tax for military   A “qualified reimbursement” is the reimbursement you receive that meets both of the following conditions. Tax for military It is given as an equipment maintenance allowance (EMA) to employees of the U. Tax for military S. Tax for military Postal Service. Tax for military It is at the rate contained in the 1991 collective bargaining agreement. Tax for military Any later agreement cannot increase the qualified reimbursement amount by more than the rate of inflation. Tax for military See your employer for information on your reimbursement. Tax for military    If you are a rural mail carrier and received a qualified reimbursement, you cannot use the standard mileage rate. Tax for military Standard Mileage Rate You may be able to use the standard mileage rate to figure the deductible costs of operating your car for business purposes. Tax for military For 2013, the standard mileage rate for the cost of operating your car for business use is 56½ cents per mile. Tax for military If you use the standard mileage rate for a year, you cannot deduct your actual car expenses for that year. Tax for military You cannot deduct depreciation, lease payments, maintenance and repairs, gasoline (including gasoline taxes), oil, insurance, or vehicle registration fees. Tax for military See Choosing the standard mileage rate and Standard mileage rate not allowed, later. Tax for military You generally can use the standard mileage rate whether or not you are reimbursed and whether or not any reimbursement is more or less than the amount figured using the standard mileage rate. Tax for military See chapter 6 for more information on reimbursements . Tax for military Choosing the standard mileage rate. Tax for military   If you want to use the standard mileage rate for a car you own, you must choose to use it in the first year the car is available for use in your business. Tax for military Then, in later years, you can choose to use either the standard mileage rate or actual expenses. Tax for military   If you want to use the standard mileage rate for a car you lease, you must use it for the entire lease period. Tax for military For leases that began on or before December 31, 1997, the standard mileage rate must be used for the entire portion of the lease period (including renewals) that is after 1997. Tax for military   You must make the choice to use the standard mileage rate by the due date (including extensions) of your return. Tax for military You cannot revoke the choice. Tax for military However, in later years, you can switch from the standard mileage rate to the actual expenses method. Tax for military If you change to the actual expenses method in a later year, but before your car is fully depreciated, you have to estimate the remaining useful life of the car and use straight line depreciation. Tax for military Example. Tax for military Larry is an employee who occasionally uses his own car for business purposes. Tax for military He purchased the car in 2011, but he did not claim any unreimbursed employee expenses on his 2011 tax return. Tax for military Because Larry did not use the standard mileage rate the first year the car was available for business use, he cannot use the standard mileage rate in 2013 to claim unreimbursed employee business expenses. Tax for military   For more information about depreciation included in the standard mileage rate, see Exception under Methods of depreciation, later. Tax for military Standard mileage rate not allowed. Tax for military   You cannot use the standard mileage rate if you: Use five or more cars at the same time (such as in fleet operations), Claimed a depreciation deduction for the car using any method other than straight line, for example, MACRS (as discussed later under Depreciation Deduction), Claimed a section 179 deduction (discussed later) on the car, Claimed the special depreciation allowance on the car, Claimed actual car expenses after 1997 for a car you leased, or Are a rural mail carrier who received a qualified reimbursement. Tax for military (See Rural mail carriers , earlier. Tax for military ) Note. Tax for military You can elect to use the standard mileage rate if you used a car for hire (such as a taxi) unless the standard mileage rate is otherwise not allowed, as discussed above. Tax for military Five or more cars. Tax for military   If you own or lease five or more cars that are used for business at the same time, you cannot use the standard mileage rate for the business use of any car. Tax for military However, you may be able to deduct your actual expenses for operating each of the cars in your business. Tax for military See Actual Car Expenses , later, for information on how to figure your deduction. Tax for military   You are not using five or more cars for business at the same time if you alternate using (use at different times) the cars for business. Tax for military   The following examples illustrate the rules for when you can and cannot use the standard mileage rate for five or more cars. Tax for military Example 1. Tax for military Marcia, a salesperson, owns three cars and two vans that she alternates using for calling on her customers. Tax for military She can use the standard mileage rate for the business mileage of the three cars and the two vans because she does not use them at the same time. Tax for military Example 2. Tax for military Tony and his employees use his four pickup trucks in his landscaping business. Tax for military During the year, he traded in two of his old trucks for two newer ones. Tax for military Tony can use the standard mileage rate for the business mileage of all six of the trucks he owned during the year. Tax for military Example 3. Tax for military Chris owns a repair shop and an insurance business. Tax for military He and his employees use his two pickup trucks and van for the repair shop. Tax for military Chris alternates using his two cars for the insurance business. Tax for military No one else uses the cars for business purposes. Tax for military Chris can use the standard mileage rate for the business use of the pickup trucks, van, and the cars because he never has more than four vehicles used for business at the same time. Tax for military Example 4. Tax for military Maureen owns a car and four vans that are used in her housecleaning business. Tax for military Her employees use the vans, and she uses the car to travel to various customers. Tax for military Maureen cannot use the standard mileage rate for the car or the vans. Tax for military This is because all five vehicles are used in Maureen's business at the same time. Tax for military She must use actual expenses for all vehicles. Tax for military Interest. Tax for military   If you are an employee, you cannot deduct any interest paid on a car loan. Tax for military This applies even if you use the car 100% for business as an employee. Tax for military   However, if you are self-employed and use your car in your business, you can deduct that part of the interest expense that represents your business use of the car. Tax for military For example, if you use your car 60% for business, you can deduct 60% of the interest on Schedule C (Form 1040). Tax for military You cannot deduct the part of the interest expense that represents your personal use of the car. Tax for military    If you use a home equity loan to purchase your car, you may be able to deduct the interest. Tax for military See Publication 936, Home Mortgage Interest Deduction, for more information. Tax for military Personal property taxes. Tax for military   If you itemize your deductions on Schedule A (Form 1040), you can deduct on line 7 state and local personal property taxes on motor vehicles. Tax for military You can take this deduction even if you use the standard mileage rate or if you do not use the car for business. Tax for military   If you are self-employed and use your car in your business, you can deduct the business part of state and local personal property taxes on motor vehicles on Schedule C (Form 1040), Schedule C-EZ (Form 1040), or Schedule F (Form 1040). Tax for military If you itemize your deductions, you can include the remainder of your state and local personal property taxes on the car on Schedule A (Form 1040). Tax for military Parking fees and tolls. Tax for military   In addition to using the standard mileage rate, you can deduct any business-related parking fees and tolls. Tax for military (Parking fees you pay to park your car at your place of work are nondeductible commuting expenses. Tax for military ) Sale, trade-in, or other disposition. Tax for military   If you sell, trade in, or otherwise dispose of your car, you may have a gain or loss on the transaction or an adjustment to the basis of your new car. Tax for military See Disposition of a Car , later. Tax for military Actual Car Expenses If you do not use the standard mileage rate, you may be able to deduct your actual car expenses. Tax for military If you qualify to use both methods, you may want to figure your deduction both ways to see which gives you a larger deduction. Tax for military Actual car expenses include: Depreciation Licenses Lease  payments Registration  fees Gas Insurance Repairs Oil Garage rent Tires Tolls Parking fees   If you have fully depreciated a car that you still use in your business, you can continue to claim your other actual car expenses. Tax for military Continue to keep records, as explained later in chapter 5 . Tax for military Business and personal use. Tax for military   If you use your car for both business and personal purposes, you must divide your expenses between business and personal use. Tax for military You can divide your expense based on the miles driven for each purpose. Tax for military Example. Tax for military You are a sales representative for a clothing firm and drive your car 20,000 miles during the year: 12,000 miles for business and 8,000 miles for personal use. Tax for military You can claim only 60% (12,000 ÷ 20,000) of the cost of operating your car as a business expense. Tax for military Employer-provided vehicle. Tax for military   If you use a vehicle provided by your employer for business purposes, you can deduct your actual unreimbursed car expenses. Tax for military You cannot use the standard mileage rate. Tax for military See Vehicle Provided by Your Employer in chapter 6. Tax for military Interest on car loans. Tax for military   If you are an employee, you cannot deduct any interest paid on a car loan. Tax for military This interest is treated as personal interest and is not deductible. Tax for military If you are self-employed and use your car in that business, see Interest , earlier, under Standard Mileage Rate. Tax for military Taxes paid on your car. Tax for military   If you are an employee, you can deduct personal property taxes paid on your car if you itemize deductions. Tax for military Enter the amount paid on line 7 of Schedule A (Form 1040). Tax for military Sales taxes. Tax for military   Generally, sales taxes on your car are part of your car's basis and are recovered through depreciation, discussed later. Tax for military Fines and collateral. Tax for military   You cannot deduct fines you pay or collateral you forfeit for traffic violations. Tax for military Casualty and theft losses. Tax for military   If your car is damaged, destroyed, or stolen, you may be able to deduct part of the loss not covered by insurance. Tax for military See Publication 547, Casualties, Disasters, and Thefts, for information on deducting a loss on your car. Tax for military Depreciation and section 179 deductions. Tax for military   Generally, the cost of a car, plus sales tax and improvements, is a capital expense. Tax for military Because the benefits last longer than 1 year, you generally cannot deduct a capital expense. Tax for military However, you can recover this cost through the section 179 deduction (the deduction allowed by section 179 of the Internal Revenue Code), special depreciation allowance, and depreciation deductions. Tax for military Depreciation allows you to recover the cost over more than 1 year by deducting part of it each year. Tax for military The section 179 deduction , special depreciation allowance , and depreciation deductions are discussed later. Tax for military   Generally, there are limits on these deductions. Tax for military Special rules apply if you use your car 50% or less in your work or business. Tax for military   You can claim a section 179 deduction and use a depreciation method other than straight line only if you do not use the standard mileage rate to figure your business-related car expenses in the year you first place a car in service. Tax for military   If, in the year you first place a car in service, you claim either a section 179 deduction or use a depreciation method other than straight line for its estimated useful life, you cannot use the standard mileage rate on that car in any future year. Tax for military Car defined. Tax for military   For depreciation purposes, a car is any four-wheeled vehicle (including a truck or van) made primarily for use on public streets, roads, and highways. Tax for military Its unloaded gross vehicle weight must not be more than 6,000 pounds. Tax for military A car includes any part, component, or other item physically attached to it or usually included in the purchase price. Tax for military   A car does not include: An ambulance, hearse, or combination ambulance-hearse used directly in a business, A vehicle used directly in the business of transporting persons or property for pay or hire, or A truck or van that is a qualified nonpersonal use vehicle. Tax for military Qualified nonpersonal use vehicles. Tax for military   These are vehicles that by their nature are not likely to be used more than a minimal amount for personal purposes. Tax for military They include trucks and vans that have been specially modified so that they are not likely to be used more than a minimal amount for personal purposes, such as by installation of permanent shelving and painting the vehicle to display advertising or the company's name. Tax for military Delivery trucks with seating only for the driver, or only for the driver plus a folding jump seat, are qualified nonpersonal use vehicles. Tax for military More information. Tax for military   See Depreciation Deduction , later, for more information on how to depreciate your vehicle. Tax for military Section 179 Deduction The section 179 deduction allows you to treat a portion or all of the cost of a car as a current expense. Tax for military If you choose to deduct all or part of the cost as a current expense, you must reduce your depreciable basis in the car by the amount of the section 179 deduction. Tax for military There is a limit on the total section 179 deduction, special depreciation allowance, and depreciation deduction for cars, trucks, and vans that may reduce or eliminate any benefit from claiming the section 179 deduction. Tax for military See Depreciation Limits, later. Tax for military You can claim the section 179 deduction only in the year you place the car in service. Tax for military For this purpose, a car is placed in service when it is ready and available for a specifically assigned use, whether in a trade or business, a tax-exempt activity, a personal activity, or for the production of income. Tax for military Even if you are not using the property, it is in service when it is ready and available for its specifically assigned use. Tax for military A car first used for personal purposes cannot qualify for the deduction in a later year when its use changes to business. Tax for military Example. Tax for military In 2012, you bought a new car and used it for personal purposes. Tax for military In 2013, you began to use it for business. Tax for military Changing its use to business use does not qualify the cost of your car for a section 179 deduction in 2013. Tax for military However, you can claim a depreciation deduction for the business use of the car starting in 2013. Tax for military See Depreciation Deduction , later. Tax for military More than 50% business use requirement. Tax for military   You must use the property more than 50% for business to claim any section 179 deduction. Tax for military If you used the property more than 50% for business, multiply the cost of the property by the percentage of business use. Tax for military The result is the cost of the property that can qualify for the section 179 deduction. Tax for military Example. Tax for military Peter purchased a car in April 2013 for $24,500 and used it 60% for business. Tax for military Based on his business usage, the total cost of Peter's car that qualifies for the section 179 deduction is $14,700 ($24,500 cost × 60% business use). Tax for military But see Limit on total section 179, special depreciation allowance, and depreciation deduction , discussed later. Tax for military Limits. Tax for military   There are limits on: The amount of the section 179 deduction, The section 179 deduction for sport utility and certain other vehicles, and The total amount of the section 179 deduction, special depreciation allowance, and depreciation deduction (discussed later ) you can claim for a qualified property. Tax for military Limit on the amount of the section 179 deduction. Tax for military   For 2013, the total amount you can choose to deduct under section 179 generally cannot be more than $500,000. Tax for military   If the cost of your section 179 property placed in service in 2013 is over $2,000,000, you must reduce the $500,000 dollar limit (but not below zero) by the amount of cost over $2,000,000. Tax for military If the cost of your section 179 property placed in service during 2013 is $2,500,000 or more, you cannot take a section 179 deduction. Tax for military   The total amount you can deduct under section 179 each year after you apply the limits listed above cannot be more than the taxable income from the active conduct of any trade or business during the year. Tax for military   If you are married and file a joint return, you and your spouse are treated as one taxpayer in determining any reduction to the dollar limit, regardless of which of you purchased the property or placed it in service. Tax for military   If you and your spouse file separate returns, you are treated as one taxpayer for the dollar limit. Tax for military You must allocate the dollar limit (after any reduction) between you. Tax for military   For more information on the above section 179 deduction limits, see Publication 946. Tax for military Limit for sport utility and certain other vehicles. Tax for military   For sport utility and certain other vehicles placed in service in 2013, the portion of the vehicle's cost taken into account in figuring your section 179 deduction is limited to $25,000. Tax for military This rule applies to any four-wheeled vehicle primarily designed or used to carry passengers over public streets, roads, or highways, that is not subject to any of the passenger automobile limits explained under Depreciation Limits , later, and that is rated at no more than 14,000 pounds gross vehicle weight. Tax for military However, the $25,000 limit does not apply to any vehicle: Designed to have a seating capacity of more than nine persons behind the driver's seat, Equipped with a cargo area of at least 6 feet in interior length that is an open area or is designed for use as an open area but is enclosed by a cap and is not readily accessible directly from the passenger compartment, or That has an integral enclosure, fully enclosing the driver compartment and load carrying device, does not have seating rearward of the driver's seat, and has no body section protruding more than 30 inches ahead of the leading edge of the windshield. Tax for military    Limit on total section 179, special depreciation allowance, and depreciation deduction. Tax for military   Generally, the total amount of section 179, special depreciation allowance, and depreciation deduction you can claim for a car that is qualified property and that you placed in service in 2013 is $11,160. Tax for military The limit is reduced if your business use of the car is less than 100%. Tax for military See Depreciation Limits , later, for more information. Tax for military Example. Tax for military In the earlier example under More than 50% business use requirement, Peter had a car with a cost (for purposes of the section 179 deduction) of $14,700. Tax for military However, based on Peter's business usage of his car, the total of his section 179, special depreciation allowance, and depreciation deductions is limited to $6,696 ($11,160 limit x 60% business use). Tax for military Cost of car. Tax for military   For purposes of the section 179 deduction, the cost of the car does not include any amount figured by reference to any other property held by you at any time. Tax for military For example, if you buy (for cash and a trade-in) a new car to use in your business, your cost for purposes of the section 179 deduction does not include your adjusted basis in the car you trade in for the new car. Tax for military Your cost includes only the cash you paid. Tax for military Basis of car for depreciation. Tax for military   The amount of the section 179 deduction reduces your basis in your car. Tax for military If you choose the section 179 deduction, you must subtract the amount of the deduction from the cost of your car. Tax for military The resulting amount is the basis in your car you use to figure your depreciation deduction. Tax for military When to choose. Tax for military   If you want to take the section 179 deduction, you must make the choice in the tax year you place the car in service for business or work. Tax for military How to choose. Tax for military    Employees use Form 2106 to make this choice and report the section 179 deduction. Tax for military All others use Form 4562. Tax for military   File the appropriate form with either of the following. Tax for military Your original tax return filed for the year the property was placed in service (whether or not you file it timely). Tax for military An amended return filed within the time prescribed by law. Tax for military An election made on an amended return must specify the item of section 179 property to which the election applies and the part of the cost of each such item to be taken into account. Tax for military The amended return must also include any resulting adjustments to taxable income. Tax for military    You must keep records that show the specific identification of each piece of qualifying section 179 property. Tax for military These records must show how you acquired the property, the person you acquired it from, and when you placed it in service. Tax for military Revoking an election. Tax for military   An election (or any specification made in the election) to take a section 179 deduction for 2013 can only be revoked with the Commissioner's approval. Tax for military Recapture of section 179 deduction. Tax for military   To be eligible to claim the section 179 deduction, you must use your car more than 50% for business or work in the year you acquired it. Tax for military If your business use of the car is 50% or less in a later tax year during the recovery period, you have to recapture (include in income) in that later year any excess depreciation. Tax for military Any section 179 deduction claimed on the car is included in calculating the excess depreciation. Tax for military For information on this calculation, see Excess depreciation , later in this chapter under Car Used 50% or Less for Business. Tax for military Dispositions. Tax for military   If you dispose of a car on which you had claimed the section 179 deduction, the amount of that deduction is treated as a depreciation deduction for recapture purposes. Tax for military You treat any gain on the disposition of the property as ordinary income up to the amount of the section 179 deduction and any allowable depreciation (unless you establish the amount actually allowed). Tax for military For information on the disposition of a car, see Disposition of a Car , later. Tax for military Special Depreciation Allowance You may be able to claim the special depreciation allowance for your car, truck, or van, if it is qualified property and was placed in service in 2013. Tax for military The allowance is an additional depreciation deduction of 50% of the car's depreciable basis (after any section 179 deduction, but before figuring your regular depreciation deduction under MACRS). Tax for military The special depreciation allowance applies only for the first year the car is placed in service. Tax for military To qualify for the allowance more than 50% of the use of the car must be in a qualified business use (as defined under Depreciation Deduction, later). Tax for military Combined depreciation. Tax for military   Your combined section 179 deduction, special depreciation allowance, and regular MACRS depreciation deduction is limited to the maximum allowable depreciation deduction for cars of $11,160 ($3,160 if you elect not to claim the special depreciation allowance). Tax for military For trucks and vans, the first-year limit remains at $11,360 ($3,360 if you elect not to claim the special depreciation allowance). Tax for military See Depreciation Limits , later in this chapter. Tax for military Qualified car. Tax for military   To be a qualified car (including trucks and vans), the car must meet all of the following tests. Tax for military You purchased the car new on or after January 1, 2008, but only if no binding written contract to acquire the car existed before January 1, 2008, You placed the car in service in your trade or business before January 1, 2014, You used the car more than 50% in a qualified business use. Tax for military Election not to claim the special depreciation allowance. Tax for military   You can elect not to claim the special depreciation allowance for your car, truck, or van, that is qualified property. Tax for military If you make this election, it applies to all 5-year property placed in service during the year. Tax for military   To make the election, attach a statement to your timely filed return (including extensions) indicating the class of property (5-year for cars) for which you are making the election and that you are electing not to claim the special depreciation allowance for qualified property acquired on or after January 1, 2008. Tax for military    Unless you elect not to claim the special depreciation allowance, you must reduce the car's adjusted basis by the amount of the allowance, even if the allowance was not claimed. Tax for military Depreciation Deduction If you use actual car expenses to figure your deduction for a car you own and use in your business, you can claim a depreciation deduction. Tax for military This means you can deduct a certain amount each year as a recovery of your cost or other basis in your car. Tax for military You generally need to know the following things about the car you intend to depreciate. Tax for military Your basis in the car. Tax for military The date you place the car in service. Tax for military The method of depreciation and recovery period you will use. Tax for military Basis. Tax for military   Your basis in a car for figuring depreciation is generally its cost. Tax for military This includes any amount you borrow or pay in cash, other property, or services. Tax for military   Generally, you figure depreciation on your car, truck, or van using your unadjusted basis (see Unadjusted basis , later). Tax for military However, in some situations you will use your adjusted basis (your basis reduced by depreciation allowed or allowable in earlier years). Tax for military For one of these situations see Exception under Methods of depreciation, later. Tax for military   If you change the use of a car from personal to business, your basis for depreciation is the lesser of the fair market value or your adjusted basis in the car on the date of conversion. Tax for military Additional rules concerning basis are discussed later in this chapter under Unadjusted basis . Tax for military Placed in service. Tax for military   You generally place a car in service when it is available for use in your work or business, in an income-producing activity, or in a personal activity. Tax for military Depreciation begins when the car is placed in service for use in your work or business or for the production of income. Tax for military   For purposes of computing depreciation, if you first start using the car only for personal use and later convert it to business use, you place the car in service on the date of conversion. Tax for military Car placed in service and disposed of in the same year. Tax for military   If you place a car in service and dispose of it in the same tax year, you cannot claim any depreciation deduction for that car. Tax for military Methods of depreciation. Tax for military   Generally, you figure depreciation on cars using the Modified Accelerated Cost Recovery System (MACRS). Tax for military MACRS is discussed later in this chapter. Tax for military Exception. Tax for military   If you used the standard mileage rate in the first year of business use and change to the actual expenses method in a later year, you cannot depreciate your car under the MACRS rules. Tax for military You must use straight line depreciation over the estimated remaining useful life of the car. Tax for military   To figure depreciation under the straight line method, you must reduce your basis in the car (but not below zero) by a set rate per mile for all miles for which you used the standard mileage rate. Tax for military The rate per mile varies depending on the year(s) you used the standard mileage rate. Tax for military For the rate(s) to use, see Depreciation adjustment when you used the standard mileage rate under Disposition of a Car, later. Tax for military   This reduction of basis is in addition to those basis adjustments described later under Unadjusted basis . Tax for military You must use your adjusted basis in your car to figure your depreciation deduction. Tax for military For additional information on the straight line method of depreciation, see Publication 946. Tax for military More-than-50%-use test. Tax for military   Generally, you must use your car more than 50% for qualified business use (defined next) during the year to use MACRS. Tax for military You must meet this more-than-50%-use test each year of the recovery period (6 years under MACRS) for your car. Tax for military   If your business use is 50% or less, you must use the straight line method to depreciate your car. Tax for military This is explained later under Car Used 50% or Less for Business . Tax for military Qualified business use. Tax for military   A qualified business use is any use in your trade or business. Tax for military It does not include use for the production of income (investment use). Tax for military However, you do combine your business and investment use to compute your depreciation deduction for the tax year. Tax for military Use of your car by another person. Tax for military   Do not treat any use of your car by another person as use in your trade or business unless that use meets one of the following conditions. Tax for military It is directly connected with your business. Tax for military It is properly reported by you as income to the other person (and, if you have to, you withhold tax on the income). Tax for military It results in a payment of fair market rent. Tax for military This includes any payment to you for the use of your car. Tax for military Business use changes. Tax for military   If you used your car more than 50% in qualified business use in the year you placed it in service, but 50% or less in a later year (including the year of disposition), you have to change to the straight line method of depreciation. Tax for military See Qualified business use 50% or less in a later year under Car Used 50% or Less for Business, later. Tax for military    Property does not cease to be used more than 50% in qualified business use by reason of a transfer at death. Tax for military Use for more than one purpose. Tax for military   If you use your car for more than one purpose during the tax year, you must allocate the use to the various purposes. Tax for military You do this on the basis of mileage. Tax for military Figure the percentage of qualified business use by dividing the number of miles you drive your car for business purposes during the year by the total number of miles you drive the car during the year for any purpose. Tax for military Change from personal to business use. Tax for military   If you change the use of a car from 100% personal use to business use during the tax year, you may not have mileage records for the time before the change to business use. Tax for military In this case, you figure the percentage of business use for the year as follows. Tax for military Determine the percentage of business use for the period following the change. Tax for military Do this by dividing business miles by total miles driven during that period. Tax for military Multiply the percentage in (1) by a fraction. Tax for military The numerator (top number) is the number of months the car is used for business and the denominator (bottom number) is 12. Tax for military Example. Tax for military You use a car only for personal purposes during the first 6 months of the year. Tax for military During the last 6 months of the year, you drive the car a total of 15,000 miles of which 12,000 miles are for business. Tax for military This gives you a business use percentage of 80% (12,000 ÷ 15,000) for that period. Tax for military Your business use for the year is 40% (80% × 6/12). Tax for military Limits. Tax for military   The amount you can claim for section 179, special depreciation allowance, and depreciation deductions may be limited. Tax for military The maximum amount you can claim depends on the year in which you placed your car in service. Tax for military You have to reduce the maximum amount if you did not use the car exclusively for business. Tax for military See Depreciation Limits , later. Tax for military Unadjusted basis. Tax for military   You use your unadjusted basis (often referred to as your basis or your basis for depreciation) to figure your depreciation using the MACRS depreciation chart, explained later under Modified Accelerated Cost Recovery System (MACRS) . Tax for military Your unadjusted basis for figuring depreciation is your original basis increased or decreased by certain amounts. Tax for military   To figure your unadjusted basis, begin with your car's original basis, which generally is its cost. Tax for military Cost includes sales taxes (see Sales taxes , earlier), destination charges, and dealer preparation. Tax for military Increase your basis by any substantial improvements you make to your car, such as adding air conditioning or a new engine. Tax for military Decrease your basis by any section 179 deduction, special depreciation allowance, gas guzzler tax, clean-fuel vehicle deduction (for vehicles placed in service before Jan. Tax for military 1, 2006), and alternative motor vehicle credit. Tax for military   See Form 8910 for information on the alternative motor vehicle credit. Tax for military If your business use later falls to 50% or less, you may have to recapture (include in your income) any excess depreciation. Tax for military See Car Used 50% or Less for Business, later, for more information. Tax for military If you acquired the car by gift or inheritance, see Publication 551, Basis of Assets, for information on your basis in the car. Tax for military Improvements. Tax for military   A major improvement to a car is treated as a new item of 5-year recovery property. Tax for military It is treated as placed in service in the year the improvement is made. Tax for military It does not matter how old the car is when the improvement is added. Tax for military Follow the same steps for depreciating the improvement as you would for depreciating the original cost of the car. Tax for military However, you must treat the improvement and the car as a whole when applying the limits on the depreciation deductions. Tax for military Your car's depreciation deduction for the year (plus any section 179 deduction, special depreciation allowance, and depreciation on any improvements) cannot be more than the depreciation limit that applies for that year. Tax for military See Depreciation Limits , later. Tax for military Car trade-in. Tax for military   If you traded one car (the “old car”) for another car (the “new car”) in 2013, there are two ways you can treat the transaction. Tax for military You can elect to treat the transaction as a tax-free disposition of the old car and the purchase of the new car. Tax for military If you make this election, you treat the old car as disposed of at the time of the trade-in. Tax for military The depreciable basis of the new car is the adjusted basis of the old car (figured as if 100% of the car's use had been for business purposes) plus any additional amount you paid for the new car. Tax for military You then figure your depreciation deduction for the new car beginning with the date you placed it in service. Tax for military You make this election by completing Form 2106, Part II, Section D. Tax for military This method is explained later, beginning at Effect of trade-in on basis . Tax for military If you do not make the election described in (1), you must figure depreciation separately for the remaining basis of the old car and for any additional amount you paid for the new car. Tax for military You must apply two depreciation limits (see Depreciation Limits , later). Tax for military The limit that applies to the remaining basis of the old car generally is the amount that would have been allowed had you not traded in the old car. Tax for military The limit that applies to the additional amount you paid for the new car generally is the limit that applies for the tax year, reduced by the depreciation allowance for the remaining basis of the old car. Tax for military You must use Form 4562 to compute your depreciation deduction. Tax for military You cannot use Form 2106, Part II, Section D. Tax for military This method is explained in Publication 946. Tax for military   If you elect to use the method described in (1), you must do so on a timely filed tax return (including extensions). Tax for military Otherwise, you must use the method described in (2). Tax for military Effect of trade-in on basis. Tax for military   The discussion that follows applies to trade-ins of cars in 2013, where the election was made to treat the transaction as a tax-free disposition of the old car and the purchase of the new car. Tax for military For information on how to figure depreciation for cars involved in a like-kind exchange (trade-in) in 2013, for which the election was not made, see Publication 946 and Regulations section 1. Tax for military 168(i)-6(d)(3). Tax for military Traded car used only for business. Tax for military   If you trade in a car you used only in your business for another car that will be used only in your business, your original basis in the new car is your adjusted basis in the old car, plus any additional amount you pay for the new car. Tax for military Example. Tax for military Paul trades in a car that has an adjusted basis of $5,000 for a new car. Tax for military In addition, he pays cash of $20,000 for the new car. Tax for military His original basis of the new car is $25,000 (his $5,000 adjusted basis in the old car plus the $20,000 cash paid). Tax for military Paul's unadjusted basis is $25,000 unless he claims the section 179 deduction, special depreciation allowance, or has other increases or decreases to his original basis, discussed under Unadjusted basis , earlier. Tax for military Traded car used partly in business. Tax for military   If you trade in a car you used partly in your business for a new car you will use in your business, you must make a “trade-in” adjustment for the personal use of the old car. Tax for military This adjustment has the effect of reducing your basis in your old car, but not below zero, for purposes of figuring your depreciation deduction for the new car. Tax for military (This adjustment is not used, however, when you determine the gain or loss on the later disposition of the new car. Tax for military See Publication 544, Sales and Other Dispositions of Assets, for information on how to report the disposition of your car. Tax for military )   To figure the unadjusted basis of your new car for depreciation, first add to your adjusted basis in the old car any additional amount you pay for the new car. Tax for military Then subtract from that total the excess, if any, of: The total of the amounts that would have been allowable as depreciation during the tax years before the trade if 100% of the use of the car had been business and investment use, over The total of the amounts actually allowed as depreciation during those years. Tax for military For information about figuring depreciation, see Modified Accelerated Cost Recovery System (MACRS) , which follows Example 2, later. Tax for military Modified Accelerated Cost Recovery System (MACRS). Tax for military   The Modified Accelerated Cost Recovery System (MACRS) is the name given to the tax rules for getting back (recovering) through depreciation deductions the cost of property used in a trade or business or to produce income. Tax for military   The maximum amount you can deduct is limited, depending on the year you placed your car in service. Tax for military See Depreciation Limits , later. Tax for military Recovery period. Tax for military   Under MACRS, cars are classified as 5-year property. Tax for military You actually depreciate the cost of a car, truck, or van over a period of 6 calendar years. Tax for military This is because your car is generally treated as placed in service in the middle of the year, and you claim depreciation for one-half of both the first year and the sixth year. Tax for military Depreciation deduction for certain Indian reservation property. Tax for military   Shorter recovery periods are provided under MACRS for qualified Indian reservation property placed in service on Indian reservations after 1993 and before 2014. Tax for military The recovery that applies for a business-use car is 3 years instead of 5 years. Tax for military However, the depreciation limits, discussed later, will still apply. Tax for military   For more information on the qualifications for this shorter recovery period and the percentages to use in figuring the depreciation deduction, see chapter 4 of Publication 946. Tax for military Depreciation methods. Tax for military   You can use one of the following methods to depreciate your car. Tax for military The 200% declining balance method (200% DB) over a 5-year recovery period that switches to the straight line method when that method provides an equal or greater deduction. Tax for military The 150% declining balance method (150% DB) over a 5-year recovery period that switches to the straight line method when that method provides an equal or greater deduction. Tax for military The straight line method (SL) over a 5-year recovery period. Tax for military    If you use Table 4-1 (discussed later under MACRS depreciation chart) to determine your depreciation rate for 2013, you do not need to determine in what year using the straight line method provides an equal or greater deduction. Tax for military This is because the chart has the switch to the straight line method built into its rates. Tax for military   Before choosing a method, you may wish to consider the following facts. Tax for military Using the straight line method provides equal yearly deductions throughout the recovery period. Tax for military Using the declining balance methods provides greater deductions during the earlier recovery years with the deductions generally getting smaller each year. Tax for military MACRS depreciation chart. Tax for military   A 2013 MACRS Depreciation Chart and instructions are included in this chapter as Table 4-1 . Tax for military Using this table will make it easy for you to figure the 2013 depreciation deduction for your car. Tax for military A similar chart appears in the Instructions for Form 2106. Tax for military    You may have to use the tables in Publication 946 instead of using this MACRS Depreciation Chart. Tax for military   You must use the Depreciation Tables in Publication 946 rather than the 2013 MACRS Depreciation Chart in this publication if any one of the following four conditions applies to you. Tax for military You file your return on a fiscal year basis. Tax for military You file your return for a short tax year (less than 12 months). Tax for military During the year, all of the following conditions apply. Tax for military You placed some property in service from January through September. Tax for military You placed some property in service from October through December. Tax for military Your basis in the property you placed in service from October through December (excluding nonresidential real property, residential rental property, and property placed in service and disposed of in the same year) was more than 40% of your total bases in all property you placed in service during the year. Tax for military   You placed qualified property in service on an Indian reservation. Tax for military Depreciation in future years. Tax for military   If you use the percentages from the chart, you generally must continue to use them for the entire recovery period of your car. Tax for military However, you cannot continue to use the chart if your basis in your car is adjusted because of a casualty. Tax for military In that case, for the year of the adjustment and the remaining recovery period, figure the depreciation without the chart using your adjusted basis in the car at the end of the year of the adjustment and over the remaining recovery period. Tax for military See Figuring the Deduction Without Using the Tables in chapter 4 of Publication 946. Tax for military    In future years, do not use the chart in this edition of the publication. Tax for military Instead, use the chart in the publication or the form instructions for those future years. Tax for military Disposition of car during recovery period. Tax for military   If you dispose of the car before the end of the recovery period, you are generally allowed a half year of depreciation in the year of disposition unless you purchased the car during the last quarter of a year. Tax for military See Depreciation deduction for the year of disposition under Disposition of a Car, later, for information on how to figure the depreciation allowed in the year of disposition. Tax for military How to use the 2013 chart. Tax for military   To figure your depreciation deduction for 2013, find the percentage in the column of Table 4-1 based on the date that you first placed the car in service and the depreciation method that you are using. Tax for military Multiply the unadjusted basis of your car (defined earlier) by that percentage to determine the amount of your depreciation deduction. Tax for military If you prefer to figure your depreciation deduction without the help of the chart, see Publication 946. Tax for military    Your deduction cannot be more than the maximum depreciation limit for cars. Tax for military See Depreciation Limits, later. Tax for military Example. Tax for military Phil bought a used truck in February 2012 to use exclusively in his landscape business. Tax for military He paid $9,200 for the truck with no trade-in. Tax for military Phil did not claim any section 179 deduction, the truck did not qualify for the special depreciation allowance, and he chose to use the 200% DB method to get the largest depreciation deduction in the early years. Tax for military Phil used the MACRS depreciation chart in 2012 to find his percentage. Tax for military The unadjusted basis of his truck equals its cost because Phil used it exclusively for business. Tax for military He multiplied the unadjusted basis of his truck, $9,200, by the percentage that applied, 20%, to figure his 2012 depreciation deduction of $1,840. Tax for military In 2013, Phil used the truck for personal purposes when he repaired his father's cabin. Tax for military His records show that the business use of his truck was 90% in 2013. Tax for military Phil used Table 4-1 to find his percentage. Tax for military Reading down the first column for the date placed in service and across to the 200% DB column, he locates his percentage, 32%. Tax for military He multiplies the unadjusted basis of his truck, $8,280 ($9,200 cost × 90% business use), by 32% to figure his 2013 depreciation deduction of $2,650. Tax for military Depreciation Limits There are limits on the amount you can deduct for depreciation of your car, truck, or van. Tax for military The section 179 deduction and special depreciation allowance are treated as depreciation for purposes of the limits. Tax for military The maximum amount you can deduct each year depends on the year you place the car in service. Tax for military These limits are shown in the following tables. Tax for military   Maximum Depreciation Deduction for Cars Date       4th & Placed 1st 2nd 3rd Later In Service Year Year Year Years 2012–2013 $11,1601 $5,100 $3,050 $1,875 2010–2011 11,0602 4,900 2,950 1,775 2008–2009 10,9603 4,800 2,850 1,775 2007 3,060 4,900 2,850 1,775 2006 2,960 4,800 2,850 1,775 2005 2,960 4,700 2,850 1,675 2004 10,6103 4,800 2,850 1,675 5/06/2003– 12/31/2003 10,7104 4,900 2,950 1,775 1/01/2003– 5/05/2003 7,6605 4,900 2,950 1,775 2001–2002 7,6605 4,900 2,950 1,775 2000 3,060 4,900 2,950 1,775 1$3,160 if the car is not qualified property or if you elect not to claim the special depreciation allowance. Tax for military 2$3,060 if the car is not qualified property or if you elect not to claim the special depreciation allowance. Tax for military 3$2,960 if the car is not qualified property or if you elect not to claim the special depreciation allowance. Tax for military 4$7,660 if you acquired the car before 5/6/2003. Tax for military $3,060 if the car is not qualified property or if you elect not to claim any special depreciation allowance. Tax for military 5$3,060 if you acquired the car before 9/11/2001, the car is not qualified property, or you elect not to claim the special depreciation allowance. Tax for military Trucks and vans. Tax for military   For 2013, the maximum depreciation deductions for trucks and vans are generally higher than those for cars. Tax for military A truck or van is a passenger automobile that is classified by the manufacturer as a truck or van and rated at 6,000 pounds gross vehicle weight or less. Tax for military For trucks and vans placed in service before 2003, use the Maximum Depreciation Deduction for Cars table. Tax for military Maximum Depreciation Deduction for Trucks and Vans Date       4th & Placed 1st 2nd 3rd Later In Service Year Year Year Years 2013 $11,3601 $5,400 $3,250 $1,975 2012 $11,3601 $5,300 $3,150 $1,875 2011 11,2601 5,200 3,150 1,875 2010 11,1601 5,100 3,050 1,875 2009 11,0601 4,900 2,950 1,775 2008 11,1601 5,100 3,050 1,875 2007 3,260 5,200 3,050 1,875 2005–2006 3,260 5,200 3,150 1,875 2004 10,9101 5,300 3,150 1,875 2003 11,0101,2 5,400 3,250 1,975 1If the special depreciation allowance does not apply or you make the election not to claim the special depreciation allowance, the first-year limit is $3,360 for 2012 and 2013, $3,260 for 2011, $3,160 for 2010, $3,060 for 2009, $3,160 for 2008, $3,260 for 2004, and $3,360 for 2003. Tax for military 2If the truck or van was acquired before 5/06/2003, the truck or van is qualified property, and you claim the special depreciation allowance for the truck or van, the maximum deduction is $7,960. Tax for military Car used less than full year. Tax for military   The depreciation limits are not reduced if you use a car for less than a full year. Tax for military This means that you do not reduce the limit when you either place a car in service or dispose of a car during the year. Tax for military However, the depreciation limits are reduced if you do not use the car exclusively for business and investment purposes. Tax for military See Reduction for personal use , next. Tax for military Reduction for personal use. Tax for military   The depreciation limits are reduced based on your percentage of personal use. Tax for military If you use a car less than 100% in your business or work, you must determine the depreciation deduction limit by multiplying the limit amount by the percentage of business and investment use during the tax year. Tax for military Section 179 deduction. Tax for military   The section 179 deduction is treated as a depreciation deduction. Tax for military If you place a car that is not a truck or van in service in 2013, use it only for business, and choose the section 179 deduction, the special depreciation allowance, and the depreciation deduction for that car for 2013 is limited to $11,160. Tax for military Example. Tax for military On September 4, 2013, Jack bought a used car for $10,000 and placed it in service. Tax for military He used it 80% for his business, and he chooses to take a section 179 deduction for the car. Tax for military The car is not qualified property for purposes of the special depreciation allowance. Tax for military Before applying the limit, Jack figures his maximum section 179 deduction to be $8,000. Tax for military This is the cost of his qualifying property (up to the maximum $500,000 amount) multiplied by his business use ($10,000 × 80%). Tax for military Jack then figures that his section 179 deduction for 2013 is limited to $2,528 (80% of $3,160). Tax for military He then figures his unadjusted basis of $5,472 (($10,000 × 80%) − $2,528) for determining his depreciation deduction. Tax for military Jack has reached his maximum depreciation deduction for 2013. Tax for military For 2014, Jack will use his unadjusted basis of $5,472 to figure his depreciation deduction. Tax for military Deductions in years after the recovery period. Tax for military   If the depreciation deductions for your car are reduced under the passenger automobile limits (discussed earlier), you will have unrecovered basis in your car at the end of the recovery period. Tax for military If you continue to use your car for business, you can deduct that unrecovered basis (subject to depreciation limits) after the recovery period ends. Tax for military Unrecovered basis. Tax for military   This is your cost or other basis in the car reduced by any clean-fuel vehicle deduction (for vehicles placed in service before January 1, 2006), alternative motor vehicle credit, electric vehicle credit, gas guzzler tax, and depreciation (including any special depreciation allowance , discussed earlier, unless you elect not to claim it) and section 179 deductions that would have been allowable if you had used the car 100% for business and investment use. Tax for military The recovery period. Tax for military   For 5-year property, your recovery period is 6 calendar years. Tax for military A part year's depreciation is allowed in the first calendar year, a full year's depreciation is allowed in each of the next 4 calendar years, and a part year's depreciation is allowed in the 6th calendar year. Tax for military   Under MACRS, your recovery period is the same whether you use declining balance or straight line depreciation. Tax for military You determine your unrecovered basis in the 7th year after you placed the car in service. Tax for military How to treat unrecovered basis. Tax for military   If you continue to use your car for business after the recovery period, you can claim a depreciation deduction in each succeeding tax year until you recover your basis in the car. Tax for military The maximum amount you can deduct each year is determined by the date you placed the car in service and your business-use percentage. Tax for military For example, no deduction is allowed for a year you use your car 100% for personal purposes. Tax for military Example. Tax for military In April 2007, Bob bought and placed in service a car he used exclusively in his business. Tax for military The car cost $31,500. Tax for military Bob did not claim a section 179 deduction or the special depreciation allowance for the car. Tax for military He continued to use the car 100% in his business throughout the recovery period (2007 through 2012). Tax for military For those years, Bob used the MACRS Depreciation Chart (200% declining balance method) and the Maximum Depreciation Deduction for Cars table, earlier, for the applicable tax year to compute his depreciation deductions during the recovery period. Tax for military Bob's depreciation deductions were subject to the depreciation limits so he will have unrecovered basis at the end of the recovery period as shown in the following table. Tax for military      MACRS     Deprec. Tax for military Year % Amount Limit Allowed 2007 20. Tax for military 00 $6,300 $3,060 $ 3,060 2008 32. Tax for military 00 10,080 4,900 4,900 2009 19. Tax for military 20 6,048 2,850 2,850 2010 11. Tax for military 52 3,629 1,775 1,775 2011 11. Tax for military 52 3,629 1,775 1,775 2012 5. Tax for military 76 1,814 1,775 1,775 Total $31,500   16,135 For the correct limit, see Maximum Depreciation Deduction for Cars under “Depreciation Limits,” earlier, for the maximum amount of depreciation allowed each year. Tax for military   At the end of 2012, Bob had an unrecovered basis in the car of $15,365 ($31,500 – $16,135). Tax for military If Bob continued to use the car 100% for business in 2013 and later years, he can claim a depreciation deduction equal to the lesser of $1,775 or his remaining unrecovered basis. Tax for military   If Bob's business use of the car was less than 100% during any year, his depreciation deduction would be less than the maximum amount allowable for that year. Tax for military However, in determining his unrecovered basis in the car, he would still reduce his original basis by the maximum amount allowable as if the business use had been 100%. Tax for military For example, if Bob had used his car 60% for business instead of 100%, his allowable depreciation deductions would have been $9,681 ($16,135 × 60%), but he still would have to reduce his basis by $16,135 to determine his unrecovered basis. Tax for military Table 4-1. Tax for military 2013 MACRS Depreciation Chart (Use to Figure Depreciation for 2013. Tax for military ) If you claim actual expenses for your car, use the chart below to find the depreciation method and percentage to use for your 2013 return for cars placed in service in 2013. Tax for military   First, using the left column, find the date you first placed the car in service in 2013. Tax for military Then select the depreciation method and percentage from column (a), (b), or (c) following the rules explained in this chapter. Tax for military For cars placed in service before 2013, you must use the same method you used on last year's return unless a decline in your business use requires you to change to the straight line method. Tax for military Refer back to the MACRS Depreciation Chart for the year you placed the car in service. Tax for military (See Car Used 50% or Less for Business . Tax for military )  Multiply the unadjusted basis of your car by your business use percentage. Tax for military Multiply the result by the percentage you found in the chart to find the amount of your depreciation deduction for 2013. Tax for military (Also see Depreciation Limits . Tax for military )   If you placed your car in service after September of any year and you placed other business property in service during the same year, you may have to use the Jan. Tax for military 1—Sept. Tax for military 30 percentage instead of the Oct. Tax for military 1—Dec. Tax for military 31 percentage for your car. Tax for military               To find out if this applies to you, determine: 1) the basis of all business property you placed in service after September of that year and 2) the basis of all business property you placed in service during that entire year. Tax for military If the basis of the property placed in service after September is not more than 40% of the basis of all property (certain property is excluded) placed in service for the entire year, use the percentage for Jan. Tax for military 1—Sept. Tax for military 30 for figuring depreciation for your car. Tax for military See Which Convention Applies? in chapter 4 of Publication 946 for more details. Tax for military               Example. Tax for military You buy machinery (basis of $32,000) in May 2013 and a new van (basis of $20,000) in October 2013, both used 100% in your business. Tax for military You