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

1. Get Answers

Your online questions are customized to your unique tax situation.

2. Maximize your Refund

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

3. E-File for FREE

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

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

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

Tax Table

Irs Form 2011Free Federal And State Tax Filing 2014H&r Block Printable CouponTaxact 2010 Free VersionH&r Block Free File ReviewStandard Deduction For Form 10401040 Ez 2011 Tax FormForm 1040nr 20111040ez Form Instructions1040x Online FormFree E File Tax Extension1040 Ez Tax FormFile Taxes Online FreeHow Do You File 2011 Taxes In 2013Free Taxes Preparation2011 Income Tax Forms 1040ezIrsfreefileWww H&r Block At HomeFederal Tax Forms 2011 EzI Need To File My State Taxes OnlyFree Federal Tax PreparationFree Tax FilingFree Tax Filing For SeniorsI Need To Amend My 2012 TaxesFiling Amended Tax Return OnlineMilitary Tax Deductions 2011File 2010 Taxes Online LateCan I File My Back Taxes Online FreeState Tax ReturnsFile Taxes Online Free 2012990 Ez FormWww Irs Gov Free FileFederal Income Tax AmendmentWww Irs Gov Efile Index HtmlCan I File My 2011 Taxes OnlineFree Amended Tax Return OnlineAmended 1040 Tax ReturnState Tax Forms To Print Out1040ez E-fileOnline State Tax Filing

Tax Table

Tax table Publication 517 - Main Content Table of Contents Social Security CoverageCoverage of Members of the Clergy Coverage of Religious Workers (Church Employees) U. Tax table S. Tax table Citizens and Resident and Nonresident Aliens Ministerial ServicesMinisters Members of Religious Orders Christian Science Practitioners and Readers Exemption From Self-Employment (SE) TaxMembers of the Clergy Members of Recognized Religious Sects Self-Employment Tax: Figuring Net EarningsRegular Method Nonfarm Optional Method Income Tax: Income and ExpensesIncome Items Expense Items Income Tax Withholding and Estimated Tax Filing Your Return Retirement Savings ArrangementsDeducting contributions to tax-sheltered annuity plans. Tax table Full-time student. Tax table Adjusted gross income. Tax table More information. Tax table Earned Income Credit Comprehensive ExampleForm W-2 From Church Form W-2 From College Schedule C-EZ (Form 1040) Form 2106-EZ Schedule A (Form 1040) Schedule SE (Form 1040) Form 1040 Attachment 1 Attachment 2 How To Get Tax HelpLow Income Taxpayer Clinics Social Security Coverage This section gives information about which system (SECA or FICA) is used to collect social security and Medicare taxes from members of the clergy (ministers, members of a religious order, and Christian Science practitioners and readers) and religious workers (church employees). Tax table Coverage of Members of the Clergy The services you perform in the exercise of your ministry, of the duties required by your religious order, or of your profession as a Christian Science practitioner or reader are covered by social security and Medicare under SECA. Tax table Your earnings for these ministerial services (defined later) are subject to self-employment (SE) tax unless one of the following applies. Tax table You are a member of a religious order who has taken a vow of poverty. Tax table You ask the Internal Revenue Service (IRS) for an exemption from SE tax for your services and the IRS approves your request. Tax table See Exemption From Self-Employment (SE) Tax , later. Tax table You are subject only to the social security laws of a foreign country under the provisions of a social security agreement between the United States and that country. Tax table For more information, see Bilateral Social Security (Totalization) Agreements in Publication 54. Tax table Your earnings that are not from ministerial services may be subject to social security tax under FICA or SECA according to the rules that apply to taxpayers in general. Tax table See Ministerial Services , later. Tax table Ministers If you are a minister of a church, your earnings for the services you perform in your capacity as a minister are subject to SE tax, even if you perform these services as an employee of that church. Tax table However, you can request that the IRS grant you an exemption, as discussed under Exemption From Self-Employment (SE) Tax , later. Tax table For the specific services covered, see Ministerial Services , later. Tax table Ministers defined. Tax table   Ministers are individuals who are duly ordained, commissioned, or licensed by a religious body constituting a church or church denomination. Tax table Ministers have the authority to conduct religious worship, perform sacerdotal functions, and administer ordinances or sacraments according to the prescribed tenets and practices of that church or denomination. Tax table   If a church or denomination ordains some ministers and licenses or commissions others, anyone licensed or commissioned must be able to perform substantially all the religious functions of an ordained minister to be treated as a minister for social security purposes. Tax table Employment status for other tax purposes. Tax table   Even though all of your income from performing ministerial services is subject to self-employment tax for social security tax purposes, you may be an employee for income tax or retirement plan purposes in performing those same services. Tax table For income tax or retirement plan purposes, your income earned as an employee will be considered wages. Tax table Common-law employee. Tax table   Under common-law rules, you are considered either an employee or a self-employed person. Tax table Generally, you are an employee if you perform services for someone who has the legal right to control both what you do and how you do it, even if you have considerable discretion and freedom of action. Tax table For more information about the common-law rules, see Publication 15-A, Employer's Supplemental Tax Guide. Tax table   If a congregation employs you and pays you a salary, you are generally a common-law employee and income from the exercise of your ministry is wages for income tax purposes. Tax table However, amounts received directly from members of the congregation, such as fees for performing marriages, baptisms, or other personal services, are not wages; such amounts are self-employment income for both income tax purposes and social security tax purposes. Tax table Example. Tax table A church hires and pays you a salary to perform ministerial services subject to its control. Tax table Under the common-law rules, you are an employee of the church while performing those services. Tax table Form SS-8. Tax table   If you are not certain whether you are an employee or a self-employed person, you can get a determination from the IRS by filing Form SS-8. Tax table Members of Religious Orders If you are a member of a religious order who has not taken a vow of poverty, your earnings for ministerial services you perform as a member of the order are subject to SE tax. Tax table See Ministerial Services , later. Tax table However, you can request that the IRS grant you an exemption as discussed under Exemption From Self-Employment (SE) Tax , later. Tax table Vow of poverty. Tax table   If you are a member of a religious order and have taken a vow of poverty, you are already exempt from paying SE tax on your earnings for ministerial services you perform as an agent of your church or its agencies. Tax table You do not need to request a separate exemption. Tax table For income tax purposes, the earnings are tax free to you. Tax table Your earnings are considered the income of the religious order. Tax table Services covered under FICA at the election of the order. Tax table   However, even if you have taken a vow of poverty, the services you perform for your church or its agencies may be covered under social security. Tax table Your services are covered if your order, or an autonomous subdivision of the order, elects social security coverage for its current and future vow-of-poverty members. Tax table   The order or subdivision elects coverage by filing Form SS-16. Tax table The election may cover certain vow-of-poverty members for a retroactive period of up to 20 calendar quarters before the quarter in which it files the certificate. Tax table If the election is made, the order or subdivision pays both the employer's and employee's share of the tax. Tax table You do not pay any of the FICA tax. Tax table Services performed outside the order. Tax table   Even if you are a member of a religious order who has taken a vow of poverty and the order requires you to turn over amounts you earn, your earnings are subject to federal income tax and either SE tax or FICA tax (including estimated tax payments and/or withholding) if you: Are self-employed or an employee of an organization outside your religious community, and Perform work not required by, or done on behalf of, the order. Tax table   In these cases, your income from self-employment or as an employee of that outside organization is taxable to you directly. Tax table You may, however, be able to take a charitable deduction for the amount you turn over to the order. Tax table See Publication 526, Charitable Contributions. Tax table Rulings. Tax table   Organizations and individuals may request rulings from the IRS on whether they are religious orders, or members of a religious order, respectively, for FICA tax, SE tax, and federal income tax withholding purposes. Tax table To request a ruling, follow the procedures in Revenue Procedure 2014-1, 2014-1 I. Tax table R. Tax table B. Tax table 1, available at www. Tax table irs. Tax table gov/irb/2014-1_IRB/ar05. Tax table html. Tax table Christian Science Practitioners and Readers Generally, your earnings from services you perform in your profession as a Christian Science practitioner or reader are subject to SE tax. Tax table However, you can request an exemption as discussed under Exemption From Self-Employment (SE) Tax , later. Tax table Practitioners. Tax table   Christian Science practitioners are members in good standing of the Mother Church, The First Church of Christ, Scientist, in Boston, Massachusetts, who practice healing according to the teachings of Christian Science. Tax table State law specifically exempts Christian Science practitioners from licensing requirements. Tax table   Some Christian Science practitioners also are Christian Science teachers or lecturers. Tax table Income from teaching or lecturing is considered the same as income from their work as practitioners. Tax table Readers. Tax table   For tax purposes, Christian Science readers are considered the same as ordained, commissioned, or licensed ministers. Tax table Coverage of Religious Workers (Church Employees) If you are a religious worker (a church employee) and are not in one of the classes already discussed, your wages are generally subject to social security and Medicare tax under FICA, not SECA. Tax table Some exceptions are discussed next. Tax table Election by Church To Exclude Its Employees From FICA Coverage Churches and qualified church-controlled organizations (church organizations) that are opposed for religious reasons to the payment of social security and Medicare taxes can elect to exclude their employees from FICA coverage. Tax table If your employer makes this election, it does not pay the employer's portion of the FICA taxes or withhold from your pay your portion of the FICA taxes. Tax table Instead, your wages are subject to SECA and you must pay SE tax on your wages if they exceed $108. Tax table 28 during the tax year. Tax table However, you can request an exemption from SE tax if you are a member of a recognized religious sect, as discussed below. Tax table Churches and church organizations make this election by filing two copies of Form 8274. Tax table For more information about making this election, see Form 8274. Tax table Election by Certain Church Employees Who Are Opposed to Social Security and Medicare You may be able to choose to be exempt from social security and Medicare taxes, including the SE tax, if you are a member of a recognized religious sect or division and work for a church (or church-controlled nonprofit division) that does not pay the employer's part of the social security tax on wages. Tax table This exemption does not apply to your service, if any, as a minister of a church or as a member of a religious order. Tax table Make this choice by filing Form 4029. Tax table See Requesting Exemption—Form 4029 , later, under Members of Recognized Religious Sects. Tax table U. Tax table S. Tax table Citizens and Resident and Nonresident Aliens To be covered under the SE tax provisions (SECA), individuals generally must be citizens or resident aliens of the United States. Tax table Nonresident aliens are not covered under SECA unless a social security agreement in effect between the United States and the foreign country determines that you are covered under the U. Tax table S. Tax table social security system. Tax table To determine your alien status, see Publication 519, U. Tax table S. Tax table Tax Guide for Aliens. Tax table Residents of Puerto Rico, the U. Tax table S. Tax table Virgin Islands, Guam, the CNMI, and American Samoa. Tax table   If you are a resident of one of these U. Tax table S. Tax table possessions but not a U. Tax table S. Tax table citizen, for SE tax purposes you are treated the same as a citizen or resident alien of the United States. Tax table For information on figuring the tax, see Self-Employment Tax: Figuring Net Earnings , later. Tax table Ministerial Services Ministerial services, in general, are the services you perform in the exercise of your ministry, in the exercise of your duties as required by your religious order, or in the exercise of your profession as a Christian Science practitioner or reader. Tax table Income you receive for performing ministerial services is subject to SE tax unless you have an exemption as explained later. Tax table Even if you have an exemption, only the income you receive for performing ministerial services is exempt. Tax table The exemption does not apply to any other income. Tax table The following discussions provide more detailed information on ministerial services of ministers, members of a religious order, and Christian Science practitioners and readers. Tax table Ministers Most services you perform as a minister, priest, rabbi, etc. Tax table , are ministerial services. Tax table These services include: Performing sacerdotal functions, Conducting religious worship, and Controlling, conducting, and maintaining religious organizations (including the religious boards, societies, and other integral agencies of such organizations) that are under the authority of a religious body that is a church or denomination. Tax table You are considered to control, conduct, and maintain a religious organization if you direct, manage, or promote the organization's activities. Tax table A religious organization is under the authority of a religious body that is a church or denomination if it is organized for and dedicated to carrying out the principles of a faith according to the requirements governing the creation of institutions of the faith. Tax table Services for nonreligious organizations. Tax table   Your services for a nonreligious organization are ministerial services if the services are assigned or designated by your church. Tax table Assigned or designated services qualify even if they do not involve performing sacerdotal functions or conducting religious worship. Tax table   If your services are not assigned or designated by your church, they are ministerial services only if they involve performing sacerdotal functions or conducting religious worship. Tax table Services that are not part of your ministry. Tax table   Income from services you perform as an employee that are not ministerial services is subject to social security and Medicare tax withholding under FICA (not SECA) under the rules that apply to employees in general. Tax table The following are not ministerial services. Tax table Services you perform for nonreligious organizations other than the services stated above. Tax table Services you perform as a duly ordained, commissioned, or licensed minister of a church as an employee of the United States, the District of Columbia, a foreign government, or any of their political subdivisions. Tax table These services are not ministerial services even if you are performing sacerdotal functions or conducting religious worship. Tax table (For example, if you perform services as a chaplain in the Armed Forces of the United States, those services are not ministerial services. Tax table ) Services you perform in a government-owned and operated hospital. Tax table (These services are considered performed by a government employee, not by a minister as part of the ministry. Tax table ) However, services that you perform at a church-related hospital or health and welfare institution, or a private nonprofit hospital, are considered to be part of the ministry and are considered ministerial services. Tax table Books or articles. Tax table   Writing religious books or articles is considered to be in the exercise of your ministry and is considered a ministerial service. Tax table   This rule also applies to members of religious orders and to Christian Science practitioners and readers. Tax table Members of Religious Orders Services you perform as a member of a religious order in the exercise of duties required by the order are ministerial services. Tax table The services are considered ministerial because you perform them as an agent of the order. Tax table For example, if the order directs you to perform services for another agency of the supervising church or an associated institution, you are considered to perform the services as an agent of the order. Tax table However, if the order directs you to work outside the order, this employment will not be considered a duty required by the order unless: Your services are the kind that are ordinarily performed by members of the order, and Your services are part of the duties that must be exercised for, or on behalf of, the religious order as its agent. Tax table Effect of employee status. Tax table   Ordinarily, if your services are not considered directed or required of you by the order, you and the outside party for whom you work are considered employee and employer. Tax table In this case, your earnings from the services are taxed under the rules that apply to employees in general, not under the rules for services provided as agent for the order. Tax table This result is true even if you have taken a vow of poverty. Tax table Example. Tax table Pat Brown and Chris Green are members of a religious order and have taken vows of poverty. Tax table They renounce all claims to their earnings. Tax table The earnings belong to the order. Tax table Pat is a licensed attorney. Tax table The superiors of the order instructed her to get a job with a law firm. Tax table Pat joined a law firm as an employee and, as she requested, the firm made the salary payments directly to the order. Tax table Chris is a secretary. Tax table The superiors of the order instructed him to accept a job with the business office of the church that supervises the order. Tax table Chris took the job and gave all his earnings to the order. Tax table Pat's services are not duties required by the order. Tax table Her earnings are subject to social security and Medicare tax under FICA and to federal income tax. Tax table Chris' services are duties required by the order. Tax table He is acting as an agent of the order and not as an employee of a third party. Tax table He does not include the earnings in gross income, and they are not subject to income tax withholding or to social security and Medicare tax under FICA or SECA. Tax table Christian Science Practitioners and Readers Services you perform as a Christian Science practitioner or reader in the exercise of your profession are ministerial services. Tax table Amounts you receive for performing these services are generally subject to SE tax. Tax table You may request an exemption from SE tax, discussed next, which applies only to those services. Tax table Exemption From Self-Employment (SE) Tax You can request an exemption from SE tax if you are a member of the clergy (minister, member of a religious order, or Christian Science practitioner or reader) or a member of a recognized religious sect. Tax table Generally, members of religious orders who have taken a vow of poverty are already exempt from paying SE tax, as discussed earlier under Members of Religious Orders under Social Security Coverage. Tax table They do not have to request the exemption. Tax table Who cannot be exempt. Tax table   You cannot be exempt from SE tax if you made one of the following elections to be covered under social security. Tax table These elections are irrevocable. Tax table You elected to be covered under social security by filing Form 2031, Revocation of Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders, and Christian Science Practitioners, for your 1986, 1987, 2000, or 2001 tax year. Tax table You elected before 1968 to be covered under social security for your ministerial services. Tax table Requesting exemption. Tax table    Table 2, earlier, briefly summarizes the procedure for requesting exemption from the SE tax. Tax table More detailed explanations follow. Tax table If you are a minister, member of a religious order, or Christian Science practitioner, an approved exemption only applies to earnings you receive for ministerial services, discussed earlier. Tax table It does not apply to any other self-employment income. Tax table Table 2. Tax table The Self-Employment Tax Exemption Application and Approval Process   Who Can Apply Members of the Clergy Members of Recognized  Religious Sects How File Form 4361 File Form 4029 When File by the due date (including extensions) of your income tax return for the second tax year in which you had at least $400 of net earnings from self-employment (at least part from ministerial services) File anytime Approval If approved, you will receive an approved copy of Form 4361 If approved, you will receive an approved copy of Form 4029 Effective Date For all tax years after 1967 in which you have at least $400 of net earnings from self-employment For all tax years beginning with the first year you meet the eligibility requirements discussed later Members of the Clergy To claim the exemption from SE tax, you must meet all of the following conditions. Tax table You file Form 4361, described below under Requesting Exemption—Form 4361 . Tax table You are conscientiously opposed to public insurance because of your individual religious considerations (not because of your general conscience), or you are opposed because of the principles of your religious denomination. Tax table You file for other than economic reasons. Tax table You inform the ordaining, commissioning, or licensing body of your church or order that you are opposed to public insurance if you are a minister or a member of a religious order (other than a vow-of-poverty member). Tax table This requirement does not apply to Christian Science practitioners or readers. Tax table You establish that the organization that ordained, commissioned, or licensed you, or your religious order, is a tax-exempt religious organization. Tax table You establish that the organization is a church or a convention or association of churches. Tax table You did not make an election discussed earlier under Who cannot be exempt . Tax table You sign and return the statement the IRS mails to you to certify that you are requesting an exemption based on the grounds listed on the statement. Tax table Requesting Exemption—Form 4361 To request exemption from SE tax, file Form 4361 in triplicate (original and two copies) with the IRS. Tax table The IRS will return to you a copy of the Form 4361 that you filed indicating whether it has approved your exemption. Tax table If it is approved, keep the approved copy of Form 4361 in your permanent records. Tax table When to file. Tax table   File Form 4361 by the date your income tax return is due, including extensions, for the second tax year in which both of the following are true. Tax table You have net earnings from self-employment of at least $400. Tax table Any part of those net earnings was from ministerial services you performed as a: Minister, Member of a religious order, or Christian Science practitioner or reader. Tax table The 2 years do not have to be consecutive tax years. Tax table    The approval process can take some time, so you should file Form 4361 as soon as possible. Tax table Example 1. Tax table Rev. Tax table Lawrence Jaeger, a clergyman ordained in 2013, has net self-employment earnings as a minister of $450 in 2013 and $500 in 2014. Tax table He must file his application for exemption by the due date, including extensions, for his 2014 income tax return. Tax table However, if Rev. Tax table Jaeger does not receive IRS approval for an exemption by April 15, 2015, his SE tax for 2014 is due by that date. Tax table Example 2. Tax table Rev. Tax table Louise Wolfe has only $300 in net self-employment earnings as a minister in 2013, but earned more than $400 in 2012 and expects to earn more than $400 in 2014. Tax table She must file her application for exemption by the due date, including extensions, for her 2014 income tax return. Tax table However, if she does not receive IRS approval for an exemption by April 15, 2015, her SE tax for 2014 is due by that date. Tax table Example 3. Tax table In 2011, Rev. Tax table David Moss was ordained a minister and had $700 in net self-employment earnings as a minister. Tax table In 2012, he received $1,000 as a minister, but his related expenses were over $1,000. Tax table Therefore, he had no net self-employment earnings as a minister in 2012. Tax table Also in 2012, he opened a book store and had $8,000 in net self-employment earnings from the store. Tax table In 2013, he had net self-employment earnings of $1,500 as a minister and $10,000 net self-employment earnings from the store. Tax table Rev. Tax table Moss had net earnings from self-employment in 2011 and 2013 that were $400 or more each year, and part of the self-employment earnings in each of those years was for his services as a minister. Tax table Thus, he must file his application for exemption by the due date, including extensions, for his 2013 income tax return. Tax table Death of individual. Tax table   The right to file an application for exemption ends with an individual's death. Tax table A surviving spouse, executor, or administrator cannot file an exemption application for a deceased clergy member. Tax table Effective date of exemption. Tax table   An approved exemption is effective for all tax years after 1967 in which you have $400 or more of net earnings from self-employment and any part of those earnings is for services as a member of the clergy. Tax table Once the exemption is approved, it is irrevocable. Tax table Example. Tax table Rev. Tax table Trudy Austin, ordained in 2010, had $400 or more in net self-employment earnings as a minister in both 2010 and 2013. Tax table She files an application for exemption on February 20, 2014. Tax table If an exemption is granted, it is effective for 2010 and the following years. Tax table Refunds of SE tax. Tax table   If, after receiving an approved Form 4361, you find that you overpaid SE tax, you can file a claim for refund on Form 1040X. Tax table Generally, for a refund, you must file Form 1040X within 3 years from the date you filed the return or within 2 years from the date you paid the tax, whichever is later. Tax table A return you filed, or tax you paid, before the due date is considered to have been filed or paid on the due date. Tax table   If you file a claim after the 3-year period but within 2 years from the time you paid the tax, the credit or refund will not be more than the tax you paid within the 2 years immediately before you file the claim. Tax table Members of Recognized Religious Sects If you are a member of a recognized religious sect, or a division of a recognized religious sect, you can apply for an exemption from payment of social security and Medicare taxes on both your self-employment income and the wages you earn from an employer who also has an exemption. Tax table Exception. Tax table   If you received social security benefits or payments, or anyone else received these benefits or payments based on your wages or self-employment income, you cannot apply. Tax table However, if you pay your benefits back, you may be considered for exemption. Tax table Contact your local Social Security Administration office to find out the amount you must pay back. Tax table Eligibility requirements. Tax table   To claim this exemption from SE tax, all the following requirements must be met. Tax table You must file Form 4029, discussed later under Requesting Exemption—Form 4029 . Tax table As a follower of the established teachings of the sect or division, you must be conscientiously opposed to accepting benefits of any private or public insurance that makes payments for death, disability, old age, retirement, or medical care, or provides services for medical care. Tax table You must waive all rights to receive any social security payment or benefit and agree that no benefits or payments will be made to anyone else based on your wages and self-employment income. Tax table The Commissioner of Social Security must determine that: Your sect or division has the established teachings as described in (2) above, It is the practice, and has been for a substantial period of time, for members of the sect or division to provide for their dependent members in a manner that is reasonable in view of the members' general level of living, and The sect or division has existed at all times since December 31, 1950. Tax table Requesting Exemption—Form 4029 To request the exemption, file Form 4029 in triplicate (original and two copies) with the Social Security Administration at the address shown on the form. Tax table The sect or division must complete part of the form. Tax table The IRS will return to you a copy of the Form 4029 that you filed indicating whether it has approved your exemption. Tax table If it is approved, keep the approved copy of Form 4029 in your permanent records. Tax table When to file. Tax table   You can file Form 4029 at any time. Tax table   If you have an approved exemption from SE tax and for some reason that approved exemption ended, you must file a new Form 4029 if you subsequently meet the eligibility requirements, discussed earlier. Tax table See Effective date of exemption next for information on when the newly approved exemption would become effective. Tax table    If you have a previously approved exemption from SE tax and you change membership to another recognized religious sect, without any change to your eligibility requirements, then you do not need to file a new Form 4029. Tax table Effective date of exemption. Tax table   An approved exemption from SE tax generally is effective for all tax years beginning with the first year you meet the eligibility requirements discussed earlier. Tax table (For example, if you meet the eligibility requirements in 2011, you file Form 4029 in 2012, and the IRS approves your exemption in 2013, your exemption is effective for tax year 2011 and all later years. Tax table )   The exemption will end if you fail to meet the eligibility requirements or if the Commissioner of Social Security determines that the sect or division fails to meet them. Tax table You must notify the IRS within 60 days if you are no longer a member of the religious group, or if you no longer follow the established teachings of this group. Tax table The exemption will end for the tax year where you or your sect/division first fails to meet the eligibility requirements. Tax table Refunds of SE tax paid. Tax table    To get a refund of any SE tax you paid while the exemption was in effect, file Form 1040X. Tax table For information on filing this form, see Refunds of SE tax under Requesting Exemption—Form 4361, earlier. Tax table Exemption From FICA Taxes Generally, under FICA, the employer and the employee each pay half of the social security and Medicare tax. Tax table Both the employee and the employer, if they meet the eligibility requirements discussed earlier, can apply to be exempt from their share of FICA taxes on wages paid by the employer to the employee. Tax table A partnership in which each partner holds a religious exemption from social security and Medicare is an employer for this purpose. Tax table If the employer's application is approved, the exemption will apply only to FICA taxes on wages paid to employees who also received an approval of identical applications. Tax table Information for employers. Tax table   If you have an approved Form 4029 and you have an employee who has an approved Form 4029, do not report wages you paid to the employee as social security and Medicare wages. Tax table   If you have an employee who does not have an approved Form 4029, you must withhold the employee's share of social security and Medicare taxes and pay the employer's share. Tax table Form W-2. Tax table   When preparing a Form W-2 for an employee with an approved Form 4029, enter “Form 4029” in box 14, “Other. Tax table ” Do not make any entries in boxes 3, 4, 5, or 6. Tax table Forms 941, 943, and 944. Tax table   If both you and your employee have received approved Forms 4029, do not include these exempt wages on the following forms. Tax table Instead, follow the instructions given below. Tax table Form 941, Employer's QUARTERLY Federal Tax Return: check the box on line 4 and enter “Form 4029” in the empty space below the check box. Tax table Form 943, Employer's Annual Federal Tax Return for Agricultural Employees: enter “Form 4029” on the dotted line next to the lines 2 and 4 entry spaces. Tax table Form 944, Employer's ANNUAL Federal Tax Return: check the box on line 3 and enter “Form 4029” in the empty space below the check box. Tax table Effective date. Tax table   An approved exemption from FICA becomes effective on the first day of the first calendar quarter after the quarter in which you file Form 4029. Tax table The exemption will end on the last day of the calendar quarter before the quarter in which the employer, employee, sect, or division fails to meet the requirements. Tax table Self-Employment Tax: Figuring Net Earnings There are two methods for figuring your net earnings from self-employment as a member of the clergy or a religious worker. Tax table Regular method. Tax table Nonfarm optional method. Tax table You may find Worksheets 1 through 4 helpful in figuring your net earnings from self-employment. Tax table Blank worksheets are in the back of this publication, after the Comprehensive Example. Tax table Regular Method Most people use the regular method. Tax table Under this method, figure your net earnings from self-employment by totaling your gross income for services you performed as a minister, a member of a religious order who has not taken a vow of poverty, or a Christian Science practitioner or reader. Tax table Then, subtract your allowable business deductions and multiply the difference by 92. Tax table 35% (. Tax table 9235). Tax table Use Schedule SE (Form 1040) to figure your net earnings and SE tax. Tax table If you are an employee of a church that elected to exclude you from FICA coverage, figure net earnings by multiplying your church wages shown on Form W-2 by 92. Tax table 35% (. Tax table 9235). Tax table Do not reduce your wages by any business deductions when making this computation. Tax table Use Schedule SE (Form 1040), Section B, to figure your net earnings and SE tax. Tax table If you have an approved exemption, or you are automatically exempt, do not include the income or deductions from ministerial services in figuring your net earnings from self-employment. Tax table Amounts included in gross income. Tax table   To figure your net earnings from self-employment (on Schedule SE (Form 1040)), include in gross income: Salaries and fees for your ministerial services (discussed earlier), Offerings you receive for marriages, baptisms, funerals, masses, etc. Tax table , The value of meals and lodging provided to you, your spouse, and your dependents for your employer's convenience, The fair rental value of a parsonage provided to you (including the cost of utilities that are furnished) and the rental allowance (including an amount for payment of utilities) paid to you, and Any amount a church pays toward your income tax or SE tax, other than withholding the amount from your salary. Tax table This amount is also subject to income tax. Tax table   For the income tax treatment of items (2) and (4), see Income Tax: Income and Expenses , later. Tax table Example. Tax table Pastor Roger Adams receives an annual salary of $39,000 as a full-time minister. Tax table The $39,000 includes $5,000 that is designated as a rental allowance to pay utilities. Tax table His church owns a parsonage that has a fair rental value of $12,000 per year. Tax table The church gives Pastor Adams the use of the parsonage. Tax table He is not exempt from SE tax. Tax table He must include $51,000 ($39,000 plus $12,000) when figuring his net earnings for SE tax purposes. Tax table The results would be the same if, instead of the use of the parsonage and receipt of the rental allowance for utilities, Pastor Adams had received an annual salary of $51,000 of which $17,000 ($5,000 plus $12,000) per year was designated as a rental allowance. Tax table Overseas duty. Tax table   Your net earnings from self-employment are determined without any foreign earned income exclusion or the foreign housing exclusion or deduction if you are a U. Tax table S. Tax table citizen or resident alien serving abroad and living in a foreign country. Tax table   For information on excluding foreign earned income or the foreign housing amount, see Publication 54. Tax table Example. Tax table Diane Jones was the minister of a U. Tax table S. Tax table church in Mexico. Tax table She earned $35,000 in that position and was able to exclude it all for income tax purposes under the foreign earned income exclusion. Tax table The United States does not have a social security agreement with Mexico, so Mrs. Tax table Jones is subject to U. Tax table S. Tax table SE tax and must include $35,000 when figuring net earnings from self-employment. Tax table Specified U. Tax table S. Tax table possessions. Tax table    The exclusion from gross income for amounts derived from American Samoa or Puerto Rico does not apply in computing net earnings from self-employment. Tax table Also see Residents of Puerto Rico, the U. Tax table S. Tax table Virgin Islands, Guam, the CNMI, and American Samoa , earlier, under U. Tax table S. Tax table Citizens and Resident and Nonresident Aliens. Tax table Amounts not included in gross income. Tax table   Do not include the following amounts in gross income when figuring your net earnings from self-employment. Tax table Offerings that others made to the church. Tax table Contributions by your church to a tax-sheltered annuity plan set up for you, including any salary reduction contributions (elective deferrals) that are not included in your gross income. Tax table Pension payments or retirement allowances you receive for your past ministerial services. Tax table The rental value of a parsonage or a parsonage allowance provided to you after you retire. Tax table Allowable deductions. Tax table   When figuring your net earnings from self-employment, deduct all your expenses related to your ministerial services performed as a self-employed person. Tax table These are ministerial expenses you incurred while working other than as a common-law employee of the church. Tax table They include expenses incurred in performing marriages and baptisms, and in delivering speeches. Tax table Deduct these expenses on Schedule C or C-EZ (Form 1040), and carry the net amount to line 2 of Schedule SE (Form 1040), Section A or B. Tax table   Wages earned as a common-law employee (explained earlier) of a church are generally subject to self-employment tax unless an exemption is requested, as discussed earlier under Exemption From Self-Employment (SE) Tax . Tax table Subtract any allowable expenses (including unreimbursed employee business expenses) from those wages, include the net amount on line 2 of Schedule SE (Form 1040), Section A or B, and attach an explanation. Tax table Do not complete Schedule C or C-EZ (Form 1040). Tax table However, for income tax purposes, the expenses are allowed only as an itemized deduction on Schedule A (Form 1040) to the extent they exceed 2% of adjusted gross income. Tax table Employee reimbursement arrangements. Tax table   If you received an advance, allowance, or reimbursement for your employee expenses, how you report this amount and your employee expenses depends on whether your employer reimbursed you under an accountable plan or a nonaccountable plan. Tax table Ask your employer if you are not sure if it reimburses you using an accountable or a nonaccountable plan. Tax table Accountable plans. Tax table   To be an accountable plan, your employer's reimbursement arrangement must include all three of the following rules. Tax table Your expenses must have a business connection—that is, you must have paid or incurred deductible expenses while performing services as an employee of your employer. Tax table You must adequately account to your employer for these expenses within a reasonable period of time. Tax table You must return any excess reimbursement or allowance within a reasonable period of time. Tax table   The reimbursement is not reported on your Form W-2. Tax table Generally, if your expenses equal your reimbursement, you have no deduction. Tax table If your expenses are more than your reimbursement, you can deduct your excess expenses for SE tax and income tax purposes. Tax table Nonaccountable plan. Tax table   A nonaccountable plan is a reimbursement arrangement that does not meet all three of the rules listed under Accountable plans above. Tax table In addition, even if your employer has an accountable plan, the following payments will be treated as being paid under a nonaccountable plan. Tax table Excess reimbursements you fail to return to your employer. Tax table Reimbursement of nondeductible expenses related to your employer's business. Tax table   Your employer will combine any reimbursement paid to you under a nonaccountable plan with your wages, salary, or other compensation and report the combined total in box 1 of your Form W-2. Tax table Since reimbursements under a nonaccountable plan are included in your gross income, you can deduct your related expenses (for SE tax and income tax purposes) regardless of whether they are more than, less than, or equal to your reimbursement. Tax table   For more information on accountable and nonaccountable plans, see Publication 463, Travel, Entertainment, Gift, and Car Expenses. Tax table Married Couple Missionary Team If both spouses are duly ordained, commissioned, or licensed ministers of a church and have an agreement that each will perform specific services for which they are paid jointly or separately, they must divide the self-employment income according to the agreement. Tax table If the agreement is with one spouse only and the other spouse is not paid for any specific duties, amounts received for their services are included only in the self-employment income of the spouse having the agreement. Tax table Earnings Subject to SE Tax For 2013, the maximum net earnings from self-employment subject to social security (old age, survivors, and disability insurance) tax is $113,700 minus any wages and tips you earned that were subject to social security tax. Tax table The tax rate for the social security part is 12. Tax table 4%. Tax table In addition, all of your net earnings are subject to the Medicare (hospital insurance) part of the SE tax. Tax table This tax rate is 2. Tax table 9%. Tax table The combined self-employment tax rate is 15. Tax table 3%. Tax table Additional Medicare Tax. Tax table   Beginning in 2013, a 0. Tax table 9% Additional Medicare Tax applies to Medicare wages, railroad retirement (RRTA) compensation, and self-employment income that are more than: $125,000 if married filing separately, $250,000 if married filing jointly, or $200,000 for any other filing status. Tax table Medicare wages and self-employment income are combined to determine if income exceeds the threshold. Tax table A self-employment loss is not considered for purposes of this tax. Tax table RRTA compensation is separately compared to the threshold. Tax table For more information, see Form 8959, Additional Medicare Tax, and its separate instructions. Tax table Nonfarm Optional Method You may be able to use the nonfarm optional method for figuring your net earnings from self-employment. Tax table In general, the nonfarm optional method is intended to permit continued coverage for social security and Medicare purposes when your income for the tax year is low. Tax table You may use the nonfarm optional method if you meet all the following tests. Tax table You are self-employed on a regular basis. Tax table You meet this test if your actual net earnings from self-employment were $400 or more in at least 2 of the 3 tax years before the one for which you use this method. Tax table The net earnings can be from either farm or nonfarm earnings or both. Tax table You have used this method less than 5 prior years. Tax table (There is a 5-year lifetime limit. Tax table ) The years do not have to be consecutive. Tax table Your net nonfarm profits were: Less than $5,024, and Less than 72. Tax table 189% of your gross nonfarm income. Tax table If you meet all three tests, use Table 3 to figure your net earnings from self-employment under the nonfarm optional method. Tax table Table 3. Tax table Figuring Nonfarm Net Earnings IF your gross nonfarm income is . Tax table . Tax table . Tax table THEN your net earnings are equal to . Tax table . Tax table . Tax table $6,960 or less Two-thirds of your gross nonfarm income. Tax table More than $6,960 $4,640. Tax table Actual net earnings. Tax table   Multiply your total earnings subject to SE tax by 92. Tax table 35% (. Tax table 9235) to get actual net earnings. Tax table Actual net earnings are equivalent to net earnings under the “Regular Method. Tax table ” More information. Tax table   For more information on the nonfarm optional method, see Publication 334, Tax Guide for Small Business, and the Schedule SE (Form 1040) instructions. Tax table Income Tax: Income and Expenses Some income and expense items are treated the same for both income tax and SE tax purposes and some are treated differently. Tax table Note. Tax table For purposes of this section, references to members of the clergy are only to ministers or members of a religious order. Tax table Income Items The tax treatment of offerings and fees, outside earnings, rental allowances, rental value of a parsonage, earnings of members of religious orders, and foreign earned income is discussed here. Tax table Offerings and Fees If you are a member of the clergy, you must include in your income offerings and fees you receive for marriages, baptisms, funerals, masses, etc. Tax table , in addition to your salary. Tax table If the offering is made to the religious institution, it is not taxable to you. Tax table Outside Earnings If you are a member of a religious organization and you give your outside earnings to the organization, you still must include the earnings in your income. Tax table However, you may be entitled to a charitable contribution deduction for the amount paid to the organization. Tax table For more information, see Publication 526. Tax table Exclusion of Rental Allowance and Fair Rental Value of a Parsonage Ordained, commissioned, or licensed ministers of the gospel may be able to exclude from income tax the rental allowance or fair rental value of a parsonage that is provided to them as pay for their services. Tax table Services include: Ministerial services, discussed earlier, Administrative duties and teaching at theological seminaries, and The ordinary duties of a minister performed as an employee of the United States (other than as a chaplain in the Armed Forces), a state, possession, political subdivision, or the District of Columbia. Tax table This exclusion applies only for income tax purposes. Tax table It does not apply for SE tax purposes, as discussed earlier under Amounts included in gross income under Self-Employment Tax: Figuring Net Earnings. Tax table Designation requirement. Tax table   The church or organization that employs you must officially designate the payment as a housing allowance before it makes the payment. Tax table It must designate a definite amount. Tax table It cannot determine the amount of the housing allowance at a later date. Tax table If the church or organization does not officially designate a definite amount as a housing allowance, you must include your total salary in your income. Tax table   If you are employed and paid by a local congregation, a resolution by a national church agency of your denomination does not effectively designate a housing allowance for you. Tax table The local congregation must officially designate the part of your salary that is a housing allowance. Tax table However, a resolution of a national church agency can designate your housing allowance if you are directly employed by the national agency. Tax table Rental allowances. Tax table   If you receive in your salary an amount officially designated as a rental allowance (including an amount to pay utility costs), you can exclude the allowance from your gross income if: You use the amount to provide or rent a home, and The amount is not more than reasonable pay for your services. Tax table   The amount you exclude cannot be more than the fair rental value of the home, including furnishings, plus the cost of utilities. Tax table Fair rental value of parsonage. Tax table   You can exclude from gross income the fair rental value of a house or parsonage, including utilities, furnished to you as part of your earnings. Tax table However, the exclusion cannot be more than the reasonable pay for your services. Tax table If you pay for the utilities, you can exclude any allowance designated for utility costs, up to your actual cost. Tax table Example. Tax table Rev. Tax table Joanna Baker is a full-time minister. Tax table The church allows her to use a parsonage that has an annual fair rental value of $24,000. Tax table The church pays her an annual salary of $67,000, of which $7,500 is designated for utility costs. Tax table Her actual utility costs during the year were $7,000. Tax table For income tax purposes, Rev. Tax table Baker excludes $31,000 from gross income ($24,000 fair rental value of the parsonage plus $7,000 from the allowance for utility costs). Tax table She will report $60,000 ($59,500 salary plus $500 of unused utility allowance). Tax table Her income for SE tax purposes, however, is $91,000 ($67,000 salary + $24,000 fair rental value of the parsonage). Tax table Home ownership. Tax table   If you own your home and you receive as part of your salary a housing or rental allowance, you may exclude from gross income the smallest of: The amount actually used to provide a home, The amount officially designated as a rental allowance, or The fair rental value of the home, including furnishings, utilities, garage, etc. Tax table Excess rental allowance. Tax table   You must include in gross income the amount of any rental allowance that is more than the smallest of: Your reasonable salary, The fair rental value of the home plus utilities, or The amount actually used to provide a home. Tax table   Include in the total on Form 1040, line 7. Tax table On the dotted line next to line 7, enter “Excess allowance” and the amount. Tax table You may deduct the home mortgage interest and real estate taxes paid on your home even though you pay all or part of those expenses with funds you get through a tax-free rental or parsonage allowance. Tax table However, you can only deduct these expenses as itemized deductions on Schedule A (Form 1040). Tax table Retired ministers. Tax table   If you are a retired minister, you can exclude from your gross income the rental value of a home (plus utilities) furnished to you by your church as a part of your pay for past services, or the part of your pension that was designated as a rental allowance. Tax table However, a minister's surviving spouse cannot exclude the rental value unless the rental value is for ministerial services he or she performs or performed. Tax table Teachers or administrators. Tax table   If you are a minister employed as a teacher or administrator by a church school, college, or university, you are performing ministerial services for purposes of the housing exclusion. Tax table However, if you perform services as a teacher or administrator on the faculty of a nonchurch college, you cannot exclude from your income a housing allowance or the value of a home that the college provides to you. Tax table    If you live in faculty lodging as an employee of an educational institution or academic health center, all or part of the value of that lodging may be nontaxable under a different rule. Tax table In Publication 525, see Faculty lodging in the discussion on meals and lodging under Fringe Benefits. Tax table   If you serve as a minister of music or minister of education, or serve in an administrative or other function of your religious organization, but are not authorized to perform substantially all of the religious duties of an ordained minister in your church (even if you are commissioned as a minister of the gospel), the housing exclusion does not apply to you. Tax table Theological students. Tax table   If you are a theological student serving a required internship as a part-time or assistant pastor, you cannot exclude a parsonage or rental allowance from your income unless you are ordained, commissioned, or licensed as a minister. Tax table Traveling evangelists. Tax table   You can exclude a designated rental allowance from out-of-town churches if you meet all of the following requirements. Tax table You are an ordained minister. Tax table You perform ministerial services at churches located away from your community. Tax table You actually use the rental allowance to maintain your permanent home. Tax table Cantors. Tax table   If you have a bona fide commission and your congregation employs you on a full-time basis to perform substantially all the religious functions of the Jewish faith, you can exclude a rental allowance from your gross income. Tax table Earnings—Members of Religious Orders Your earnings may be exempt from both income tax and SE tax if you are a member of a religious order who: Has taken a vow of poverty, Receives earnings for services performed as an agent of the order and in the exercise of duties required by the order, and Renounces the earnings and gives them to the order. Tax table See Members of Religious Orders , earlier, under Social Security Coverage. Tax table Foreign Earned Income Certain income may be exempt from income tax if you work in a foreign country or in a specified U. Tax table S. Tax table possession. Tax table Publication 54 discusses the foreign earned income exclusion. Tax table Publication 570, Tax Guide for Individuals With Income From U. Tax table S. Tax table Possessions, covers the rules for taxpayers with income from U. Tax table S. Tax table possessions. Tax table You can get these free publications from the Internal Revenue Service at IRS. Tax table gov or from most U. Tax table S. Tax table Embassies or consulates. Tax table Expense Items The tax treatment of ministerial trade or business expenses, expenses allocable to tax-free income, and health insurance costs is discussed here. Tax table Ministerial Trade or Business Expenses as an Employee When you figure your income tax, you must itemize your deductions on Schedule A (Form 1040) to claim allowable deductions for ministerial trade or business expenses incurred while working as an employee. Tax table You also may have to file Form 2106, Employee Business Expenses (or Form 2106-EZ, Unreimbursed Employee Business Expenses). Tax table You claim these expenses as miscellaneous itemized deductions that are subject to the 2%-of-adjusted-gross-income (AGI) limit. Tax table See Publication 529 for more information on this limit. Tax table However, you cannot deduct any of your employee business expenses that are allocable to tax-free income (discussed next). Tax table Expenses Allocable to Tax-Free Income If you receive a rental or parsonage allowance that is exempt from income tax (tax free), you must allocate a portion of the expenses of operating your ministry to that tax-free income. Tax table You cannot deduct the portion of your expenses that you allocate to your tax-free rental or parsonage allowance. Tax table Exception. Tax table   This rule does not apply to your deductions for home mortgage interest or real estate taxes on your home. Tax table Figuring the allocation. Tax table   Figure the portion of your otherwise deductible expenses that you cannot deduct (because you must allocate that portion to tax-free income) by multiplying the expenses by the following fraction:      Tax-free rental or parsonage allowance     All income (taxable and tax free) earned from your ministry           When figuring the allocation, include the income and expenses related to the ministerial duties you perform both as an employee and as a self-employed person. Tax table    Reduce your otherwise deductible expenses only in figuring your income tax, not your SE tax. Tax table Example. Tax table Rev. Tax table Charles Ashford received $40,000 in earnings for ministerial services consisting of a $28,000 salary for ministerial services performed as an employee, $2,000 for weddings and baptisms performed as a self-employed person, and a $10,000 tax-free parsonage allowance. Tax table He incurred $4,000 of unreimbursed expenses connected with his earnings for ministerial services. Tax table $3,500 of the $4,000 is for employee expenses related to his ministerial salary, and $500 is related to the weddings and baptisms he performed as a self-employed person. Tax table Rev. Tax table Ashford figures the nondeductible (tax-free) portion of expenses related to his ministerial salary as follows: ($10,000 ÷ $40,000) x $3,500 = $875   Rev. Tax table Ashford figures the nondeductible (tax-free) portion of expenses related to his wedding and baptism income as follows: ($10,000 ÷ $40,000) x $500 = $125 Required statement. Tax table   If you receive a tax-free rental or parsonage allowance and have ministerial expenses, attach a statement to your tax return. Tax table The statement must contain all of the following information. Tax table A list of each item of taxable ministerial income by source (such as wages, salary, weddings, baptisms, etc. Tax table ) plus the amount. Tax table A list of each item of tax-free ministerial income by source (parsonage allowance) plus the amount. Tax table A list of each item of otherwise deductible ministerial expenses plus the amount. Tax table How you figured the nondeductible part of your otherwise deductible expenses. Tax table A statement that the other deductions claimed on your tax return are not allocable to your tax-free income. Tax table   See the attachments prepared for the Comprehensive Example , later. Tax table Following the example, you will find blank worksheets for your own use. Tax table Health Insurance Costs of Self-Employed Ministers If you are self-employed, you may be able to deduct the amount you paid in 2013 for medical and dental insurance and qualified long-term care insurance for you, your spouse, and your dependents. Tax table If you qualify, you can take this deduction as an adjustment to income on Form 1040, line 29. Tax table See the Instructions for Form 1040 to figure your deduction. Tax table The following special rules apply to the self-employed health insurance deduction. Tax table You cannot take a medical expense deduction on Schedule A (Form 1040) for any expenses you claim for purposes of the self-employed health insurance deduction. Tax table You cannot take the deduction for any month you are eligible to participate in a subsidized plan of your (or your spouse's) employer. Tax table The deduction cannot exceed your net earnings from the business under which the insurance plan is established. Tax table Your net earnings under this rule do not include the income you earned as a common-law employee (discussed earlier) of a church. Tax table More information. Tax table   For more information about the self-employed health insurance deduction, see chapter 6 in Publication 535. Tax table Deduction for SE Tax You can deduct one-half of your SE tax in figuring adjusted gross income. Tax table This is an income tax deduction only, on Form 1040, line 27. Tax table Do not claim this deduction in figuring net earnings from self-employment subject to SE tax. Tax table Income Tax Withholding and Estimated Tax The federal income tax is a pay-as-you-go tax. Tax table You must pay the tax as you earn or receive income during the year. Tax table An employee usually has income tax withheld from his or her wages or salary. Tax table However, your salary is not subject to federal income tax withholding if both of the following conditions apply. Tax table You are a duly ordained, commissioned, or licensed minister, a member of a religious order (who has not taken a vow of poverty), or a Christian Science practitioner or reader. Tax table Your salary is for ministerial services (see Ministerial Services , earlier). Tax table If your salary is not subject to withholding, or if you do not pay enough tax through withholding, you may need to make estimated tax payments to avoid penalties for not paying enough tax as you earn your income. Tax table You generally must make estimated tax payments if you expect to owe taxes, including SE tax, of $1,000 or more, when you file your return. Tax table Determine your estimated tax by using the worksheets in Publication 505, Tax Withholding and Estimated Tax. Tax table Pay the entire estimated tax for 2014 or the first installment by April 15, 2014. Tax table See Form 1040-ES for the different payment methods. Tax table The April 15 date applies whether or not your tax home and your abode are outside the United States and Puerto Rico. Tax table For more information, see chapter 2 of Publication 505. Tax table If you perform your services as a common-law employee of the church and your salary is not subject to income tax withholding, you can enter into a voluntary withholding agreement with the church to cover any income and SE tax that may be due. Tax table Filing Your Return You must file an income tax return for 2013 if your gross income was at least the amount shown in the third column of Table 4 above. Tax table Table 4. Tax table 2013 Filing Requirements for Most Taxpayers IF your filing status is . Tax table . Tax table . Tax table AND at the end of 2013 you were* . Tax table . Tax table . Tax table THEN file a return if your gross income** was at least . Tax table . Tax table . Tax table single under age 65 65 or older   $10,000 $11,500   married filing jointly*** under 65 (both spouses) 65 or older (one spouse) 65 or older (both spouses)   $20,000  $21,200  $22,400   married filing separately any age   $3,900   head of household under 65 65 or older   $12,850 $14,350   qualifying widow(er) with dependent child under 65 65 or older   $16,100  $17,300   * If you were born on January 1, 1949, you are considered to be age 65 at the end of 2013. Tax table ** Gross income means all income you received in the form of money, goods, property, and services that is not exempt from tax, including any income from sources outside the United States or from the sale of your main home (even if you can exclude part or all of it). Tax table Do not include any social security benefits unless (a) you are married filing a separate return and you lived with your spouse at any time in 2013, or (b) one-half of your social security benefits plus your other gross income and any tax-exempt interest is more than $25,000 ($32,000 if married filing jointly). Tax table If (a) or (b) applies, see the instructions for Form 1040, lines 20a and 20b, to figure the taxable part of social security benefits you must include in gross income. Tax table Gross income includes gains, but not losses, reported on Form 8949 or Schedule D (Form 1040). Tax table Gross income from a business means, for example, the amount on Schedule C (Form 1040), line 7, or Schedule F (Form 1040), line 9. Tax table But, in figuring gross income, do not reduce your income by any losses, including any loss on Schedule C (Form 1040), line 7, or Schedule F (Form 1040), line 9. Tax table *** If you did not live with your spouse at the end of 2013 (or on the date your spouse died) and your gross income was at least $3,900, you must file a return regardless of your age. Tax table Additional requirements. Tax table   Even if your income was less than the amount shown in Table 4, you must file an income tax return on Form 1040, and attach a completed Schedule SE (Form 1040), if:    You are not exempt from SE tax, and you have net earnings from self-employment (discussed earlier under Self-Employment Tax: Figuring Net Earnings ) of $400 or more in the tax year, You are exempt from SE tax on earnings from ministerial services and you have $400 or more of other net earnings subject to SE tax, or You had wages of $108. Tax table 28 or more from an electing church or church-controlled organization (see Coverage of Religious Workers (Church Employees) , earlier, under Social Security Coverage). Tax table Self-employment tax. Tax table   If you are liable for SE tax, you must file Schedule SE (Form 1040) with your return. Tax table   If you filed Form 4361 and did not receive approval from the IRS, you must pay SE tax on your ministerial earnings, as explained earlier. Tax table You should report ministerial earnings and expenses from nonemployee ministerial services on Schedule C or C-EZ (Form 1040). Tax table You should then carry the net amount over to line 2 of Schedule SE (Form 1040), Section A or B. Tax table However, if you were a duly ordained minister who was an employee of a church and you must pay SE tax on the wages you earned for those services, do not report those wages on Schedule C or C-EZ (Form 1040). Tax table Instead, report those wages less any allowable expenses (including any unreimbursed employee business expenses), on line 2 of Schedule SE (Form 1040), Section A or B, and attach an explanation. Tax table Note. Tax table For income tax purposes, the unreimbursed employee business expenses that you incurred as an employee of the church and subtracted from your wages on line 2 of Schedule SE (Form 1040) are allowed only as an itemized deduction on Schedule A (Form 1040) if they exceed 2% of your adjusted gross income. Tax table You cannot deduct these expenses on Schedule C or C-EZ (Form 1040) as a trade or business expense. Tax table Exemption from SE tax. Tax table   If you filed Form 4361 and received IRS approval not to be taxed on your ministerial earnings, and you do not have any other income subject to SE tax, do not file Schedule SE (Form 1040). Tax table Instead, enter “Exempt—Form 4361” on the dotted line next to Form 1040, line 56. Tax table However, if you had net earnings from another trade or business of $400 or more subject to SE tax, see line A at the top of Schedule SE (Form 1040), Section B. Tax table    If you filed Form 4029 and received IRS approval not to be taxed on those earnings, and you do not have any other income subject to SE tax, do not file Schedule SE (Form 1040). Tax table Instead, enter “Exempt—Form 4029” on the dotted line next to Form 1040, line 56. Tax table More information. Tax table   For more information on filing your return, including when and where to file it, see the Instructions for Form 1040. Tax table Retirement Savings Arrangements Retirement savings arrangements are plans that offer you a tax-favored way to save for your retirement. Tax table You generally can deduct your contributions to the plan. Tax table Your contributions and the earnings on them are not taxed until they are distributed. Tax table Retirement plans for the self-employed. Tax table   To set up one of the following plans you must be self-employed. Tax table SEP (simplified employee pension) plan. Tax table SIMPLE (savings incentive match plan for employees) plan. Tax table Qualified retirement plan (also called a Keogh or H. Tax table R. Tax table 10 plan). Tax table   The common-law rules determine whether you are an employee or a self-employed person for purposes of setting up a retirement plan. Tax table See Employment status for other tax purposes under Coverage of Members of the Clergy, earlier. Tax table This result is true even if your compensation for ministerial services (defined earlier) is subject to SE tax. Tax table   For example, if a congregation pays you a salary for performing ministerial services and you are subject to the congregation's control, you generally are a common-law employee. Tax table You are not a self-employed person for purposes of setting up a retirement plan. Tax table This result is true even if your salary is subject to SE tax. Tax table   On the other hand, amounts received directly from members of the congregation, such as fees for performing marriages, baptisms, or other personal services that you report on Schedule C or C-EZ (Form 1040), are earnings from self-employment for all tax purposes. Tax table   For more information on establishing a SEP, SIMPLE, or qualified retirement plan, see Publication 560, Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans). Tax table Individual retirement arrangements (IRAs). Tax table   The traditional IRA and the Roth IRA are two individual retirement arrangements you can use to save money for your retirement. Tax table Generally, your maximum contribution for 2013 to either of these plans (or to a combination of the two) is the smaller of your taxable compensation or $5,500 ($6,500 if you are age 50 or older). Tax table   However, your maximum contribution to a Roth IRA will be further reduced or eliminated if your adjusted gross income is above a certain amount. Tax table You cannot deduct Roth IRA contributions, but if you satisfy certain requirements, all earnings in the Roth IRA are tax free and neither your nondeductible contributions nor any earnings on them are taxable when distributed. Tax table   If you contribute to a traditional IRA, your contribution may be deductible. Tax table However, your deduction may be reduced or eliminated if you or your spouse is covered by an employer retirement plan (including, but not limited to, a SEP, SIMPLE, or qualified retirement plan). Tax table   For more information on IRAs, see Publication 590. Tax table Tax-sheltered annuity plans. Tax table   Church employees, members of religious orders, and duly ordained, commissioned, or licensed ministers working as ministers or chaplains can participate in tax-sheltered annuity (403(b)) plans. Tax table For more
Print - Click this link to Print this page

Accessibility Features of the Website

Most visitors will be able to view the IRS website using the most popular browsers. Some of the accessibility features of the site are listed below.

  • Text Descriptions Provided for Images and Pictures - When the mouse pointer or pointer alternative moves over an image, a small window pops up to give you a description of the image. This description is also provided to visitors who are using screen readers to access information on the page.
  • Style Sheets Used to Format Page Content on this site are designed using cascading style sheets. This allows visitors to disable the formatting provided and apply their own formatting if they choose. Style sheets are disabled within an Internet browser's settings or preferences options.
  • The latest version of several web browsers allow users to easily increase the font size for better readability. Hold down the Ctrl key (Command key on a Macintosh) and press the + (plus) key. You can also decrease the font size by holding down the Ctrl or Command key and pressing the - (minus) key.
  • Persons using screen-reading devices, who generally cannot directly read documents in PDF format, will find a HTML version of many of the tax instructions and publications on the IRS site. IRS also makes sure that new PDF Forms are accessible.
  • Direct Links to Main Sections of Each Page are provided for those using Screen Readers - Screen readers tend to read pages from left to right and from top to bottom. The pages in IRS.gov provide internal bookmarks so that screen reader users can jump directly to specific sections of the page. This feature is referred to as a navigation menu bypass.

The IRS, in an effort to serve the needs of all who visit our website, will continue to make content accessible for persons using special assistive technology. We invite you to  comment on our web site accessibility policies .

Page Last Reviewed or Updated: 04-Sep-2013

The Tax Table

Tax table 4. Tax table   Transportation Table of Contents Parking fees. Tax table Advertising display on car. Tax table Car pools. Tax table Hauling tools or instruments. Tax table Union members' trips from a union hall. Tax table 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 table These expenses include the cost of transportation by air, rail, bus, taxi, etc. Tax table , and the cost of driving and maintaining your car. Tax table Transportation expenses include the ordinary and necessary costs of all of the following. Tax table 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 table Tax home is defined in chapter 1. Tax table Visiting clients or customers. Tax table Going to a business meeting away from your regular workplace. Tax table Getting from your home to a temporary workplace when you have one or more regular places of work. Tax table These temporary workplaces can be either within the area of your tax home or outside that area. Tax table Transportation expenses do not include expenses you have while traveling away from home overnight. Tax table Those expenses are travel expenses discussed in chapter 1 . Tax table 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 table See Car Expenses , later. Tax table Daily transportation expenses you incur while traveling from home to one or more regular places of business are generally nondeductible commuting expenses. Tax table However, there may be exceptions to this general rule. Tax table You can deduct daily transportation expenses incurred going between your residence and a temporary work station outside the metropolitan area where you live. Tax table 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 table Illustration of transportation expenses. Tax table    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 table You may want to refer to it when deciding whether you can deduct your transportation expenses. Tax table Temporary work location. Tax table   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 table   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 table   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 table   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 table It will not be treated as temporary after the date you determine it will last more than 1 year. Tax table   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 table You may have deductible travel expenses as discussed in chapter 1 . Tax table No regular place of work. Tax table   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 table   Generally, a metropolitan area includes the area within the city limits and the suburbs that are considered part of that metropolitan area. Tax table   You cannot deduct daily transportation costs between your home and temporary work sites within your metropolitan area. Tax table These are nondeductible commuting expenses. Tax table Two places of work. Tax table   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 table 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 table   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 table You cannot deduct them. Tax table Armed Forces reservists. Tax table   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 table You can deduct the expense of getting from one workplace to the other as just discussed under Two places of work . Tax table   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 table In this case, your transportation generally is a nondeductible commuting expense. Tax table 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 table   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 table   If you travel away from home overnight to attend a guard or reserve meeting, you can deduct your travel expenses. Tax table These expenses are discussed in chapter 1 . Tax table   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 table For more information, see Armed Forces Reservists Traveling More Than 100 Miles From Home under Special Rules, in chapter 6. Tax table Commuting expenses. Tax table   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 table These costs are personal commuting expenses. Tax table You cannot deduct commuting expenses no matter how far your home is from your regular place of work. Tax table You cannot deduct commuting expenses even if you work during the commuting trip. Tax table Example. Tax table You sometimes use your cell phone to make business calls while commuting to and from work. Tax table Sometimes business associates ride with you to and from work, and you have a business discussion in the car. Tax table These activities do not change the trip from personal to business. Tax table You cannot deduct your commuting expenses. Tax table Parking fees. Tax table    Fees you pay to park your car at your place of business are nondeductible commuting expenses. Tax table You can, however, deduct business-related parking fees when visiting a customer or client. Tax table Advertising display on car. Tax table   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 table If you use this car for commuting or other personal uses, you still cannot deduct your expenses for those uses. Tax table Car pools. Tax table   You cannot deduct the cost of using your car in a nonprofit car pool. Tax table Do not include payments you receive from the passengers in your income. Tax table These payments are considered reimbursements of your expenses. Tax table However, if you operate a car pool for a profit, you must include payments from passengers in your income. Tax table You can then deduct your car expenses (using the rules in this publication). Tax table Hauling tools or instruments. Tax table   Hauling tools or instruments in your car while commuting to and from work does not make your car expenses deductible. Tax table 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 table Union members' trips from a union hall. Tax table   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 table Although you need the union to get your work assignments, you are employed where you work, not where the union hall is located. Tax table Office in the home. Tax table   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 table (See Publication 587, Business Use of Your Home, for information on determining if your home office qualifies as a principal place of business. Tax table ) Examples of deductible transportation. Tax table   The following examples show when you can deduct transportation expenses based on the location of your work and your home. Tax table Example 1. Tax table You regularly work in an office in the city where you live. Tax table Your employer sends you to a 1-week training session at a different office in the same city. Tax table You travel directly from your home to the training location and return each day. Tax table You can deduct the cost of your daily round-trip transportation between your home and the training location. Tax table Example 2. Tax table Your principal place of business is in your home. Tax table 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 table Example 3. Tax table You have no regular office, and you do not have an office in your home. Tax table In this case, the location of your first business contact inside the metropolitan area is considered your office. Tax table Transportation expenses between your home and this first contact are nondeductible commuting expenses. Tax table Transportation expenses between your last business contact and your home are also nondeductible commuting expenses. Tax table While you cannot deduct the costs of these trips, you can deduct the costs of going from one client or customer to another. Tax table Car Expenses If you use your car for business purposes, you ordinarily can deduct car expenses. Tax table You generally can use one of the two following methods to figure your deductible expenses. Tax table Standard mileage rate. Tax table Actual car expenses. Tax table 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 table See Leasing a Car , later. Tax table In this publication, “car” includes a van, pickup, or panel truck. Tax table For the definition of “car” for depreciation purposes, see Car defined under Actual Car Expenses, later. Tax table Rural mail carriers. Tax table   If you are a rural mail carrier, you may be able to treat the qualified reimbursement you received as your allowable expense. Tax table Because the qualified reimbursement is treated as paid under an accountable plan, your employer should not include the reimbursement in your income. Tax table   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 table You must complete Form 2106 and attach it to your Form 1040, U. Tax table S. Tax table Individual Income Tax Return. Tax table   A “qualified reimbursement” is the reimbursement you receive that meets both of the following conditions. Tax table It is given as an equipment maintenance allowance (EMA) to employees of the U. Tax table S. Tax table Postal Service. Tax table It is at the rate contained in the 1991 collective bargaining agreement. Tax table Any later agreement cannot increase the qualified reimbursement amount by more than the rate of inflation. Tax table See your employer for information on your reimbursement. Tax table    If you are a rural mail carrier and received a qualified reimbursement, you cannot use the standard mileage rate. Tax table 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 table For 2013, the standard mileage rate for the cost of operating your car for business use is 56½ cents per mile. Tax table If you use the standard mileage rate for a year, you cannot deduct your actual car expenses for that year. Tax table You cannot deduct depreciation, lease payments, maintenance and repairs, gasoline (including gasoline taxes), oil, insurance, or vehicle registration fees. Tax table See Choosing the standard mileage rate and Standard mileage rate not allowed, later. Tax table 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 table See chapter 6 for more information on reimbursements . Tax table Choosing the standard mileage rate. Tax table   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 table Then, in later years, you can choose to use either the standard mileage rate or actual expenses. Tax table   If you want to use the standard mileage rate for a car you lease, you must use it for the entire lease period. Tax table 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 table   You must make the choice to use the standard mileage rate by the due date (including extensions) of your return. Tax table You cannot revoke the choice. Tax table However, in later years, you can switch from the standard mileage rate to the actual expenses method. Tax table 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 table Example. Tax table Larry is an employee who occasionally uses his own car for business purposes. Tax table He purchased the car in 2011, but he did not claim any unreimbursed employee expenses on his 2011 tax return. Tax table 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 table   For more information about depreciation included in the standard mileage rate, see Exception under Methods of depreciation, later. Tax table Standard mileage rate not allowed. Tax table   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 table (See Rural mail carriers , earlier. Tax table ) Note. Tax table 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 table Five or more cars. Tax table   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 table However, you may be able to deduct your actual expenses for operating each of the cars in your business. Tax table See Actual Car Expenses , later, for information on how to figure your deduction. Tax table   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 table   The following examples illustrate the rules for when you can and cannot use the standard mileage rate for five or more cars. Tax table Example 1. Tax table Marcia, a salesperson, owns three cars and two vans that she alternates using for calling on her customers. Tax table 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 table Example 2. Tax table Tony and his employees use his four pickup trucks in his landscaping business. Tax table During the year, he traded in two of his old trucks for two newer ones. Tax table Tony can use the standard mileage rate for the business mileage of all six of the trucks he owned during the year. Tax table Example 3. Tax table Chris owns a repair shop and an insurance business. Tax table He and his employees use his two pickup trucks and van for the repair shop. Tax table Chris alternates using his two cars for the insurance business. Tax table No one else uses the cars for business purposes. Tax table 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 table Example 4. Tax table Maureen owns a car and four vans that are used in her housecleaning business. Tax table Her employees use the vans, and she uses the car to travel to various customers. Tax table Maureen cannot use the standard mileage rate for the car or the vans. Tax table This is because all five vehicles are used in Maureen's business at the same time. Tax table She must use actual expenses for all vehicles. Tax table Interest. Tax table   If you are an employee, you cannot deduct any interest paid on a car loan. Tax table This applies even if you use the car 100% for business as an employee. Tax table   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 table For example, if you use your car 60% for business, you can deduct 60% of the interest on Schedule C (Form 1040). Tax table You cannot deduct the part of the interest expense that represents your personal use of the car. Tax table    If you use a home equity loan to purchase your car, you may be able to deduct the interest. Tax table See Publication 936, Home Mortgage Interest Deduction, for more information. Tax table Personal property taxes. Tax table   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 table You can take this deduction even if you use the standard mileage rate or if you do not use the car for business. Tax table   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 table 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 table Parking fees and tolls. Tax table   In addition to using the standard mileage rate, you can deduct any business-related parking fees and tolls. Tax table (Parking fees you pay to park your car at your place of work are nondeductible commuting expenses. Tax table ) Sale, trade-in, or other disposition. Tax table   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 table See Disposition of a Car , later. Tax table Actual Car Expenses If you do not use the standard mileage rate, you may be able to deduct your actual car expenses. Tax table 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 table 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 table Continue to keep records, as explained later in chapter 5 . Tax table Business and personal use. Tax table   If you use your car for both business and personal purposes, you must divide your expenses between business and personal use. Tax table You can divide your expense based on the miles driven for each purpose. Tax table Example. Tax table 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 table You can claim only 60% (12,000 ÷ 20,000) of the cost of operating your car as a business expense. Tax table Employer-provided vehicle. Tax table   If you use a vehicle provided by your employer for business purposes, you can deduct your actual unreimbursed car expenses. Tax table You cannot use the standard mileage rate. Tax table See Vehicle Provided by Your Employer in chapter 6. Tax table Interest on car loans. Tax table   If you are an employee, you cannot deduct any interest paid on a car loan. Tax table This interest is treated as personal interest and is not deductible. Tax table If you are self-employed and use your car in that business, see Interest , earlier, under Standard Mileage Rate. Tax table Taxes paid on your car. Tax table   If you are an employee, you can deduct personal property taxes paid on your car if you itemize deductions. Tax table Enter the amount paid on line 7 of Schedule A (Form 1040). Tax table Sales taxes. Tax table   Generally, sales taxes on your car are part of your car's basis and are recovered through depreciation, discussed later. Tax table Fines and collateral. Tax table   You cannot deduct fines you pay or collateral you forfeit for traffic violations. Tax table Casualty and theft losses. Tax table   If your car is damaged, destroyed, or stolen, you may be able to deduct part of the loss not covered by insurance. Tax table See Publication 547, Casualties, Disasters, and Thefts, for information on deducting a loss on your car. Tax table Depreciation and section 179 deductions. Tax table   Generally, the cost of a car, plus sales tax and improvements, is a capital expense. Tax table Because the benefits last longer than 1 year, you generally cannot deduct a capital expense. Tax table 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 table Depreciation allows you to recover the cost over more than 1 year by deducting part of it each year. Tax table The section 179 deduction , special depreciation allowance , and depreciation deductions are discussed later. Tax table   Generally, there are limits on these deductions. Tax table Special rules apply if you use your car 50% or less in your work or business. Tax table   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 table   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 table Car defined. Tax table   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 table Its unloaded gross vehicle weight must not be more than 6,000 pounds. Tax table A car includes any part, component, or other item physically attached to it or usually included in the purchase price. Tax table   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 table Qualified nonpersonal use vehicles. Tax table   These are vehicles that by their nature are not likely to be used more than a minimal amount for personal purposes. Tax table 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 table Delivery trucks with seating only for the driver, or only for the driver plus a folding jump seat, are qualified nonpersonal use vehicles. Tax table More information. Tax table   See Depreciation Deduction , later, for more information on how to depreciate your vehicle. Tax table 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 table 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 table 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 table See Depreciation Limits, later. Tax table You can claim the section 179 deduction only in the year you place the car in service. Tax table 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 table Even if you are not using the property, it is in service when it is ready and available for its specifically assigned use. Tax table A car first used for personal purposes cannot qualify for the deduction in a later year when its use changes to business. Tax table Example. Tax table In 2012, you bought a new car and used it for personal purposes. Tax table In 2013, you began to use it for business. Tax table Changing its use to business use does not qualify the cost of your car for a section 179 deduction in 2013. Tax table However, you can claim a depreciation deduction for the business use of the car starting in 2013. Tax table See Depreciation Deduction , later. Tax table More than 50% business use requirement. Tax table   You must use the property more than 50% for business to claim any section 179 deduction. Tax table If you used the property more than 50% for business, multiply the cost of the property by the percentage of business use. Tax table The result is the cost of the property that can qualify for the section 179 deduction. Tax table Example. Tax table Peter purchased a car in April 2013 for $24,500 and used it 60% for business. Tax table 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 table But see Limit on total section 179, special depreciation allowance, and depreciation deduction , discussed later. Tax table Limits. Tax table   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 table Limit on the amount of the section 179 deduction. Tax table   For 2013, the total amount you can choose to deduct under section 179 generally cannot be more than $500,000. Tax table   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 table 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 table   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 table   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 table   If you and your spouse file separate returns, you are treated as one taxpayer for the dollar limit. Tax table You must allocate the dollar limit (after any reduction) between you. Tax table   For more information on the above section 179 deduction limits, see Publication 946. Tax table Limit for sport utility and certain other vehicles. Tax table   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 table 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 table 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 table    Limit on total section 179, special depreciation allowance, and depreciation deduction. Tax table   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 table The limit is reduced if your business use of the car is less than 100%. Tax table See Depreciation Limits , later, for more information. Tax table Example. Tax table 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 table 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 table Cost of car. Tax table   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 table 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 table Your cost includes only the cash you paid. Tax table Basis of car for depreciation. Tax table   The amount of the section 179 deduction reduces your basis in your car. Tax table If you choose the section 179 deduction, you must subtract the amount of the deduction from the cost of your car. Tax table The resulting amount is the basis in your car you use to figure your depreciation deduction. Tax table When to choose. Tax table   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 table How to choose. Tax table    Employees use Form 2106 to make this choice and report the section 179 deduction. Tax table All others use Form 4562. Tax table   File the appropriate form with either of the following. Tax table Your original tax return filed for the year the property was placed in service (whether or not you file it timely). Tax table An amended return filed within the time prescribed by law. Tax table 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 table The amended return must also include any resulting adjustments to taxable income. Tax table    You must keep records that show the specific identification of each piece of qualifying section 179 property. Tax table These records must show how you acquired the property, the person you acquired it from, and when you placed it in service. Tax table Revoking an election. Tax table   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 table Recapture of section 179 deduction. Tax table   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 table 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 table Any section 179 deduction claimed on the car is included in calculating the excess depreciation. Tax table For information on this calculation, see Excess depreciation , later in this chapter under Car Used 50% or Less for Business. Tax table Dispositions. Tax table   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 table 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 table For information on the disposition of a car, see Disposition of a Car , later. Tax table 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 table 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 table The special depreciation allowance applies only for the first year the car is placed in service. Tax table 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 table Combined depreciation. Tax table   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 table 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 table See Depreciation Limits , later in this chapter. Tax table Qualified car. Tax table   To be a qualified car (including trucks and vans), the car must meet all of the following tests. Tax table 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 table Election not to claim the special depreciation allowance. Tax table   You can elect not to claim the special depreciation allowance for your car, truck, or van, that is qualified property. Tax table If you make this election, it applies to all 5-year property placed in service during the year. Tax table   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 table    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 table 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 table This means you can deduct a certain amount each year as a recovery of your cost or other basis in your car. Tax table You generally need to know the following things about the car you intend to depreciate. Tax table Your basis in the car. Tax table The date you place the car in service. Tax table The method of depreciation and recovery period you will use. Tax table Basis. Tax table   Your basis in a car for figuring depreciation is generally its cost. Tax table This includes any amount you borrow or pay in cash, other property, or services. Tax table   Generally, you figure depreciation on your car, truck, or van using your unadjusted basis (see Unadjusted basis , later). Tax table However, in some situations you will use your adjusted basis (your basis reduced by depreciation allowed or allowable in earlier years). Tax table For one of these situations see Exception under Methods of depreciation, later. Tax table   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 table Additional rules concerning basis are discussed later in this chapter under Unadjusted basis . Tax table Placed in service. Tax table   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 table Depreciation begins when the car is placed in service for use in your work or business or for the production of income. Tax table   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 table Car placed in service and disposed of in the same year. Tax table   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 table Methods of depreciation. Tax table   Generally, you figure depreciation on cars using the Modified Accelerated Cost Recovery System (MACRS). Tax table MACRS is discussed later in this chapter. Tax table Exception. Tax table   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 table You must use straight line depreciation over the estimated remaining useful life of the car. Tax table   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 table The rate per mile varies depending on the year(s) you used the standard mileage rate. Tax table For the rate(s) to use, see Depreciation adjustment when you used the standard mileage rate under Disposition of a Car, later. Tax table   This reduction of basis is in addition to those basis adjustments described later under Unadjusted basis . Tax table You must use your adjusted basis in your car to figure your depreciation deduction. Tax table For additional information on the straight line method of depreciation, see Publication 946. Tax table More-than-50%-use test. Tax table   Generally, you must use your car more than 50% for qualified business use (defined next) during the year to use MACRS. Tax table You must meet this more-than-50%-use test each year of the recovery period (6 years under MACRS) for your car. Tax table   If your business use is 50% or less, you must use the straight line method to depreciate your car. Tax table This is explained later under Car Used 50% or Less for Business . Tax table Qualified business use. Tax table   A qualified business use is any use in your trade or business. Tax table It does not include use for the production of income (investment use). Tax table However, you do combine your business and investment use to compute your depreciation deduction for the tax year. Tax table Use of your car by another person. Tax table   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 table It is directly connected with your business. Tax table It is properly reported by you as income to the other person (and, if you have to, you withhold tax on the income). Tax table It results in a payment of fair market rent. Tax table This includes any payment to you for the use of your car. Tax table Business use changes. Tax table   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 table See Qualified business use 50% or less in a later year under Car Used 50% or Less for Business, later. Tax table    Property does not cease to be used more than 50% in qualified business use by reason of a transfer at death. Tax table Use for more than one purpose. Tax table   If you use your car for more than one purpose during the tax year, you must allocate the use to the various purposes. Tax table You do this on the basis of mileage. Tax table 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 table Change from personal to business use. Tax table   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 table In this case, you figure the percentage of business use for the year as follows. Tax table Determine the percentage of business use for the period following the change. Tax table Do this by dividing business miles by total miles driven during that period. Tax table Multiply the percentage in (1) by a fraction. Tax table The numerator (top number) is the number of months the car is used for business and the denominator (bottom number) is 12. Tax table Example. Tax table You use a car only for personal purposes during the first 6 months of the year. Tax table 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 table This gives you a business use percentage of 80% (12,000 ÷ 15,000) for that period. Tax table Your business use for the year is 40% (80% × 6/12). Tax table Limits. Tax table   The amount you can claim for section 179, special depreciation allowance, and depreciation deductions may be limited. Tax table The maximum amount you can claim depends on the year in which you placed your car in service. Tax table You have to reduce the maximum amount if you did not use the car exclusively for business. Tax table See Depreciation Limits , later. Tax table Unadjusted basis. Tax table   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 table Your unadjusted basis for figuring depreciation is your original basis increased or decreased by certain amounts. Tax table   To figure your unadjusted basis, begin with your car's original basis, which generally is its cost. Tax table Cost includes sales taxes (see Sales taxes , earlier), destination charges, and dealer preparation. Tax table Increase your basis by any substantial improvements you make to your car, such as adding air conditioning or a new engine. Tax table 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 table 1, 2006), and alternative motor vehicle credit. Tax table   See Form 8910 for information on the alternative motor vehicle credit. Tax table If your business use later falls to 50% or less, you may have to recapture (include in your income) any excess depreciation. Tax table See Car Used 50% or Less for Business, later, for more information. Tax table If you acquired the car by gift or inheritance, see Publication 551, Basis of Assets, for information on your basis in the car. Tax table Improvements. Tax table   A major improvement to a car is treated as a new item of 5-year recovery property. Tax table It is treated as placed in service in the year the improvement is made. Tax table It does not matter how old the car is when the improvement is added. Tax table Follow the same steps for depreciating the improvement as you would for depreciating the original cost of the car. Tax table However, you must treat the improvement and the car as a whole when applying the limits on the depreciation deductions. Tax table 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 table See Depreciation Limits , later. Tax table Car trade-in. Tax table   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 table You can elect to treat the transaction as a tax-free disposition of the old car and the purchase of the new car. Tax table If you make this election, you treat the old car as disposed of at the time of the trade-in. Tax table 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 table You then figure your depreciation deduction for the new car beginning with the date you placed it in service. Tax table You make this election by completing Form 2106, Part II, Section D. Tax table This method is explained later, beginning at Effect of trade-in on basis . Tax table 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 table You must apply two depreciation limits (see Depreciation Limits , later). Tax table 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 table 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 table You must use Form 4562 to compute your depreciation deduction. Tax table You cannot use Form 2106, Part II, Section D. Tax table This method is explained in Publication 946. Tax table   If you elect to use the method described in (1), you must do so on a timely filed tax return (including extensions). Tax table Otherwise, you must use the method described in (2). Tax table Effect of trade-in on basis. Tax table   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 table 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 table 168(i)-6(d)(3). Tax table Traded car used only for business. Tax table   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 table Example. Tax table Paul trades in a car that has an adjusted basis of $5,000 for a new car. Tax table In addition, he pays cash of $20,000 for the new car. Tax table 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 table 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 table Traded car used partly in business. Tax table   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 table 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 table (This adjustment is not used, however, when you determine the gain or loss on the later disposition of the new car. Tax table See Publication 544, Sales and Other Dispositions of Assets, for information on how to report the disposition of your car. Tax table )   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 table 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 table For information about figuring depreciation, see Modified Accelerated Cost Recovery System (MACRS) , which follows Example 2, later. Tax table Modified Accelerated Cost Recovery System (MACRS). Tax table   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 table   The maximum amount you can deduct is limited, depending on the year you placed your car in service. Tax table See Depreciation Limits , later. Tax table Recovery period. Tax table   Under MACRS, cars are classified as 5-year property. Tax table You actually depreciate the cost of a car, truck, or van over a period of 6 calendar years. Tax table 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 table Depreciation deduction for certain Indian reservation property. Tax table   Shorter recovery periods are provided under MACRS for qualified Indian reservation property placed in service on Indian reservations after 1993 and before 2014. Tax table The recovery that applies for a business-use car is 3 years instead of 5 years. Tax table However, the depreciation limits, discussed later, will still apply. Tax table   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 table Depreciation methods. Tax table   You can use one of the following methods to depreciate your car. Tax table 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 table 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 table The straight line method (SL) over a 5-year recovery period. Tax table    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 table This is because the chart has the switch to the straight line method built into its rates. Tax table   Before choosing a method, you may wish to consider the following facts. Tax table Using the straight line method provides equal yearly deductions throughout the recovery period. Tax table Using the declining balance methods provides greater deductions during the earlier recovery years with the deductions generally getting smaller each year. Tax table MACRS depreciation chart. Tax table   A 2013 MACRS Depreciation Chart and instructions are included in this chapter as Table 4-1 . Tax table Using this table will make it easy for you to figure the 2013 depreciation deduction for your car. Tax table A similar chart appears in the Instructions for Form 2106. Tax table    You may have to use the tables in Publication 946 instead of using this MACRS Depreciation Chart. Tax table   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 table You file your return on a fiscal year basis. Tax table You file your return for a short tax year (less than 12 months). Tax table During the year, all of the following conditions apply. Tax table You placed some property in service from January through September. Tax table You placed some property in service from October through December. Tax table 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 table   You placed qualified property in service on an Indian reservation. Tax table Depreciation in future years. Tax table   If you use the percentages from the chart, you generally must continue to use them for the entire recovery period of your car. Tax table However, you cannot continue to use the chart if your basis in your car is adjusted because of a casualty. Tax table 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 table See Figuring the Deduction Without Using the Tables in chapter 4 of Publication 946. Tax table    In future years, do not use the chart in this edition of the publication. Tax table Instead, use the chart in the publication or the form instructions for those future years. Tax table Disposition of car during recovery period. Tax table   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 table 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 table How to use the 2013 chart. Tax table   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 table Multiply the unadjusted basis of your car (defined earlier) by that percentage to determine the amount of your depreciation deduction. Tax table If you prefer to figure your depreciation deduction without the help of the chart, see Publication 946. Tax table    Your deduction cannot be more than the maximum depreciation limit for cars. Tax table See Depreciation Limits, later. Tax table Example. Tax table Phil bought a used truck in February 2012 to use exclusively in his landscape business. Tax table He paid $9,200 for the truck with no trade-in. Tax table 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 table Phil used the MACRS depreciation chart in 2012 to find his percentage. Tax table The unadjusted basis of his truck equals its cost because Phil used it exclusively for business. Tax table 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 table In 2013, Phil used the truck for personal purposes when he repaired his father's cabin. Tax table His records show that the business use of his truck was 90% in 2013. Tax table Phil used Table 4-1 to find his percentage. Tax table Reading down the first column for the date placed in service and across to the 200% DB column, he locates his percentage, 32%. Tax table 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 table Depreciation Limits There are limits on the amount you can deduct for depreciation of your car, truck, or van. Tax table The section 179 deduction and special depreciation allowance are treated as depreciation for purposes of the limits. Tax table The maximum amount you can deduct each year depends on the year you place the car in service. Tax table These limits are shown in the following tables. Tax table   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 table 2$3,060 if the car is not qualified property or if you elect not to claim the special depreciation allowance. Tax table 3$2,960 if the car is not qualified property or if you elect not to claim the special depreciation allowance. Tax table 4$7,660 if you acquired the car before 5/6/2003. Tax table $3,060 if the car is not qualified property or if you elect not to claim any special depreciation allowance. Tax table 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 table Trucks and vans. Tax table   For 2013, the maximum depreciation deductions for trucks and vans are generally higher than those for cars. Tax table 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 table For trucks and vans placed in service before 2003, use the Maximum Depreciation Deduction for Cars table. Tax table 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 table 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 table Car used less than full year. Tax table   The depreciation limits are not reduced if you use a car for less than a full year. Tax table 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 table However, the depreciation limits are reduced if you do not use the car exclusively for business and investment purposes. Tax table See Reduction for personal use , next. Tax table Reduction for personal use. Tax table   The depreciation limits are reduced based on your percentage of personal use. Tax table 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 table Section 179 deduction. Tax table   The section 179 deduction is treated as a depreciation deduction. Tax table 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 table Example. Tax table On September 4, 2013, Jack bought a used car for $10,000 and placed it in service. Tax table He used it 80% for his business, and he chooses to take a section 179 deduction for the car. Tax table The car is not qualified property for purposes of the special depreciation allowance. Tax table Before applying the limit, Jack figures his maximum section 179 deduction to be $8,000. Tax table This is the cost of his qualifying property (up to the maximum $500,000 amount) multiplied by his business use ($10,000 × 80%). Tax table Jack then figures that his section 179 deduction for 2013 is limited to $2,528 (80% of $3,160). Tax table He then figures his unadjusted basis of $5,472 (($10,000 × 80%) − $2,528) for determining his depreciation deduction. Tax table Jack has reached his maximum depreciation deduction for 2013. Tax table For 2014, Jack will use his unadjusted basis of $5,472 to figure his depreciation deduction. Tax table Deductions in years after the recovery period. Tax table   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 table 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 table Unrecovered basis. Tax table   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 table The recovery period. Tax table   For 5-year property, your recovery period is 6 calendar years. Tax table 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 table   Under MACRS, your recovery period is the same whether you use declining balance or straight line depreciation. Tax table You determine your unrecovered basis in the 7th year after you placed the car in service. Tax table How to treat unrecovered basis. Tax table   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 table 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 table For example, no deduction is allowed for a year you use your car 100% for personal purposes. Tax table Example. Tax table In April 2007, Bob bought and placed in service a car he used exclusively in his business. Tax table The car cost $31,500. Tax table Bob did not claim a section 179 deduction or the special depreciation allowance for the car. Tax table He continued to use the car 100% in his business throughout the recovery period (2007 through 2012). Tax table 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 table 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 table      MACRS     Deprec. Tax table Year % Amount Limit Allowed 2007 20. Tax table 00 $6,300 $3,060 $ 3,060 2008 32. Tax table 00 10,080 4,900 4,900 2009 19. Tax table 20 6,048 2,850 2,850 2010 11. Tax table 52 3,629 1,775 1,775 2011 11. Tax table 52 3,629 1,775 1,775 2012 5. Tax table 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 table   At the end of 2012, Bob had an unrecovered basis in the car of $15,365 ($31,500 – $16,135). Tax table 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 table   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 table 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 table 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 table Table 4-1. Tax table 2013 MACRS Depreciation Chart (Use to Figure Depreciation for 2013. Tax table ) 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 table   First, using the left column, find the date you first placed the car in service in 2013. Tax table Then select the depreciation method and percentage from column (a), (b), or (c) following the rules explained in this chapter. Tax table 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 table Refer back to the MACRS Depreciation Chart for the year you placed the car in service. Tax table (See Car Used 50% or Less for Business . Tax table )  Multiply the unadjusted basis of your car by your business use percentage. Tax table Multiply the result by the percentage you found in the chart to find the amount of your depreciation deduction for 2013. Tax table (Also see Depreciation Limits . Tax table )   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 table 1—Sept. Tax table 30 percentage instead of the Oct. Tax table 1—Dec. Tax table 31 percentage for your car. Tax table               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 table 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 table 1—Sept. Tax table 30 for figuring depreciation for your car. Tax table See Which Convention Applies? in chapter 4 of Publication 946 for more details. Tax table               Example. Tax table 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 table You