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Tax Unemployed

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Tax Unemployed

Tax unemployed Publication 541 - Introductory Material Table of Contents Reminder IntroductionTax questions. Tax unemployed Ordering forms and publications. Tax unemployed Useful Items - You may want to see: Reminder Photographs of missing children. Tax unemployed  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Tax unemployed Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Tax unemployed You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Tax unemployed Introduction This publication provides supplemental federal income tax information for partnerships and partners. Tax unemployed It supplements the information provided in the Instructions for Form 1065, U. Tax unemployed S. Tax unemployed Return of Partnership Income, and the Partner's Instructions for Schedule K-1 (Form 1065). Tax unemployed Generally, a partnership does not pay tax on its income but “passes through” any profits or losses to its partners. Tax unemployed Partners must include partnership items on their tax returns. Tax unemployed For a discussion of business expenses a partnership can deduct, see Publication 535, Business Expenses. Tax unemployed Members of oil and gas partnerships should read about the deduction for depletion in chapter 9 of that publication. Tax unemployed Certain partnerships must have a tax matters partner (TMP) who is also a general partner. Tax unemployed For information on the rules for designating a TMP, see Designation of Tax Matters Partner (TMP) in the Form 1065 instructions and section 301. Tax unemployed 6231(a)(7)-1 of the regulations. Tax unemployed Many rules in this publication do not apply to partnerships that file Form 1065-B, U. Tax unemployed S. Tax unemployed Return of Income for Electing Large Partnerships. Tax unemployed For the rules that apply to these partnerships, see the instructions for Form 1065-B. Tax unemployed However, the partners of electing large partnerships can use the rules in this publication except as otherwise noted. Tax unemployed Withholding on foreign partner or firm. Tax unemployed   If a partnership acquires a U. Tax unemployed S. Tax unemployed real property interest from a foreign person or firm, the partnership may have to withhold tax on the amount it pays for the property (including cash, the fair market value of other property, and any assumed liability). Tax unemployed If a partnership has income effectively connected with a trade or business in the United States, it must withhold on the income allocable to its foreign partners. Tax unemployed A partnership may have to withhold tax on a foreign partner's distributive share of fixed or determinable income not effectively connected with a U. Tax unemployed S. Tax unemployed trade or business. Tax unemployed A partnership that fails to withhold may be held liable for the tax, applicable penalties, and interest. Tax unemployed   For more information, see Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities. Tax unemployed Comments and suggestions. Tax unemployed   We welcome your comments about this publication and your suggestions for future editions. Tax unemployed   You can write to: Internal Revenue Service Tax Forms and Publications  SE:W:CAR:MP:TFP 1111 Constitution Ave. Tax unemployed NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Tax unemployed Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Tax unemployed    You can send us comments from www. Tax unemployed irs. Tax unemployed gov/formspubs. Tax unemployed Click on “More Information” and then on “Comment on Tax Forms and Publications. Tax unemployed ”   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Tax unemployed Tax questions. Tax unemployed   If you have a tax question, check the information available at IRS. Tax unemployed gov or call 1-800-829-4933. Tax unemployed We cannot answer tax questions at the address listed above. Tax unemployed Ordering forms and publications. Tax unemployed    Visit www. Tax unemployed irs. Tax unemployed gov/formspubs to download forms and publications, call 1-800-829-3676, or write to one of the addresses shown under How To Get Tax Help in the back of this publication. Tax unemployed Useful Items - You may want to see: Publication 334 Tax Guide for Small Business 505 Tax Withholding and Estimated Tax 535 Business Expenses 537 Installment Sales 538 Accounting Periods and Methods 544 Sales and Other Dispositions of Assets 551 Basis of Assets 925 Passive Activity and At-Risk Rules 946 How To Depreciate Property See How To Get Tax Help near the end of this publication for information about getting publications and forms. Tax unemployed Prev  Up  Next   Home   More Online Publications
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The Tax Unemployed

Tax unemployed Depreciation Table of Contents Introduction Special Depreciation AllowanceQualified Property Election Not To Claim the Allowance Rules for Returns Filed Before June 1, 2002 Passenger Automobiles New York Liberty Zone BenefitsSpecial Liberty Zone Depreciation Allowance Increased Section 179 Deduction Liberty Zone Leasehold Improvement Property If you depreciate business property that you acquired and placed in service after September 10, 2001, new law contains provisions that may affect your depreciation deduction for that property. Tax unemployed Publication 946, How To Depreciate Property, contains information on depreciation. Tax unemployed However, Publication 946 does not contain the new provisions because it was printed before the law was enacted. Tax unemployed The new provisions are in the Supplement to Publication 946, which is reprinted below. Tax unemployed Supplement to Publication 946 How To Depreciate Property   Introduction After Publication 946 was printed, the Job Creation and Worker Assistance Act of 2002 was signed into law by the President. Tax unemployed The new law made several changes in the tax rules explained in the publication. Tax unemployed Some of the changes apply to property placed in service during 2001. Tax unemployed This supplemental publication describes those changes and explains what you should do if you are affected by them. Tax unemployed The situations and examples in Publication 946 do not reflect any of the changes made by the Job Creation and Worker Assistance Act of 2002. Tax unemployed The new law contains the following provisions. Tax unemployed 30% depreciation deductions (special depreciation allowance and special New York Liberty Zone (Liberty Zone) depreciation allowance) for the year qualified property is placed in service after September 10, 2001. Tax unemployed An increased dollar limit on the section 179 deduction for qualified Liberty Zone property purchased after September 10, 2001. Tax unemployed A shorter recovery period for qualified Liberty Zone leasehold improvement property placed in service after September 10, 2001. Tax unemployed An increase in the maximum depreciation deduction for 2001 for a qualified passenger automobile placed in service after September 10, 2001. Tax unemployed If you believe you qualify for an increased deduction under any of these new rules, you must file the revised 2001 Form 4562 (dated March 2002) for 2001 calendar or fiscal years and 2000 fiscal years ending after September 10, 2001. Tax unemployed If you have already filed a tax return, this supplemental publication explains how to claim these benefits and how to elect not to claim the special depreciation allowance or special Liberty Zone depreciation allowance. Tax unemployed See Table 2 at the end of the supplement for an overview of the rules that apply if you filed your return before June 1, 2002. Tax unemployed Special Depreciation Allowance You can take a special depreciation allowance for qualified property you place in service after September 10, 2001. Tax unemployed The allowance is an additional deduction of 30% of the property's depreciable basis. Tax unemployed To figure the depreciable basis, you must first multiply the property's cost or other basis by the percentage of business/investment use and then reduce that amount by any section 179 deduction and certain other deductions and credits for the property. Tax unemployed See What Is the Basis for Depreciation? on page 23 in Publication 946 for more information on figuring depreciable basis. Tax unemployed The allowance is deductible for both regular tax and alternative minimum tax (AMT) purposes. Tax unemployed There is no AMT adjustment required for any depreciation figured on the remaining basis of the property. Tax unemployed In the year you claim the allowance (generally the year you place the property in service), you must reduce the depreciable basis of the property by the allowance before figuring your regular depreciation deduction. Tax unemployed Example 1. Tax unemployed On November 1, 2001, you bought and placed in service in your business qualified property that cost $100,000. Tax unemployed You did not elect to claim a section 179 deduction. Tax unemployed You can deduct 30% of the cost ($30,000) as a special depreciation allowance for 2001. Tax unemployed You use the remaining $70,000 of cost to figure your regular depreciation deduction for 2001 and later years. Tax unemployed Example 2. Tax unemployed The facts are the same as in Example 1, except that you choose to deduct $24,000 of the property's cost as a section 179 deduction. Tax unemployed You use the remaining $76,000 of cost to figure your special depreciation allowance of $22,800 ($76,000 × 30%). Tax unemployed You use the remaining $53,200 of cost to figure your regular depreciation deduction for 2001 and later years. Tax unemployed Qualified Property To qualify for the special depreciation allowance, your property must meet the following requirements. Tax unemployed It is new property of one of the following types. Tax unemployed Property depreciated under the modified accelerated cost recovery system (MACRS) with a recovery period of 20 years or less. Tax unemployed See Can You Use MACRS To Depreciate Your Property and Which Recovery Period Applies? on pages 7 and 23, respectively, in Publication 946. Tax unemployed Water utility property. Tax unemployed See 25-year property on page 22 in Publication 946. Tax unemployed Computer software that is not a section 197 intangible as described in Computer software on page 5 in Publication 946. Tax unemployed (The cost of some computer software is treated as part of the cost of hardware and is depreciated under MACRS. Tax unemployed ) Qualified leasehold improvement property (defined later). Tax unemployed It meets the following tests (explained later under Tests To Be Met). Tax unemployed Acquisition date test. Tax unemployed Placed in service date test. Tax unemployed Original use test. Tax unemployed It is not excepted property (explained later under Excepted Property). Tax unemployed Qualified leasehold improvement property. Tax unemployed    Generally, this is any improvement to an interior part of a building that is nonresidential real property, provided all of the following requirements are met. Tax unemployed The improvement is made under or pursuant to a lease by the lessee (or any sublessee) or the lessor of that part of the building. Tax unemployed That part of the building is to be occupied exclusively by the lessee (or any sublessee) of that part. Tax unemployed The improvement is placed in service more than 3 years after the date the building was first placed in service. Tax unemployed   However, a qualified leasehold improvement does not include any improvement for which the expenditure is attributable to any of the following. Tax unemployed The enlargement of the building. Tax unemployed Any elevator or escalator. Tax unemployed Any structural component benefiting a common area. Tax unemployed The internal structural framework of the building. Tax unemployed   Generally, a binding commitment to enter into a lease is treated as a lease and the parties to the commitment are treated as the lessor and lessee. Tax unemployed However, a binding commitment between related persons is not treated as a lease. Tax unemployed Related persons. Tax unemployed   For this purpose, the following are related persons. Tax unemployed Members of an affiliated group. Tax unemployed The persons listed in items (1) through (9) under Related persons on page 8 of Publication 946 (except that “80% or more” should be substituted for “more than 10%” each place it appears). Tax unemployed An executor and a beneficiary of the same estate. Tax unemployed Tests To Be Met To qualify for the special depreciation allowance, the property must meet all of the following tests. Tax unemployed Acquisition date test. Tax unemployed    Generally, you must have acquired the property either: After September 10, 2001, and before September 11, 2004, but only if no written binding contract for the acquisition was in effect before September 11, 2001, or Pursuant to a written binding contract entered into after September 10, 2001, and before September 11, 2004. Tax unemployed   Property you manufacture, construct, or produce for your own use meets this test if you began the manufacture, construction, or production of the property after September 10, 2001, and before September 11, 2004. Tax unemployed Placed in service date test. Tax unemployed   Generally, the property must be placed in service for use in your trade or business or for the production of income after September 10, 2001, and before January 1, 2005. Tax unemployed   If you sold property you placed in service after September 10, 2001, and you leased it back within 3 months after the property was originally placed in service, the property is treated as placed in service no earlier than the date it is used under the leaseback. Tax unemployed Original use test. Tax unemployed   The original use of the property must have begun with you after September 10, 2001. Tax unemployed “Original use” means the first use to which the property is put, whether or not by you. Tax unemployed Additional capital expenditures you incurred after September 10, 2001, to recondition or rebuild your property meet the original use test. Tax unemployed Excepted Property The following property does not qualify for the special depreciation allowance. Tax unemployed Property used by any person before September 11, 2001. Tax unemployed Property required to be depreciated using ADS. Tax unemployed This includes listed property used 50% or less in a qualified business use. Tax unemployed Qualified New York Liberty Zone leasehold improvement property (defined next). Tax unemployed Qualified New York Liberty Zone leasehold improvement property. Tax unemployed   This is any qualified leasehold improvement property (as defined earlier) if all of the following requirements are met. Tax unemployed The improvement is to a building located in the New York Liberty Zone (defined later under New York Liberty Zone Benefits). Tax unemployed The improvement is placed in service after September 10, 2001, and before January 1, 2007. Tax unemployed No written binding contract for the improvement was in effect before September 11, 2001. Tax unemployed Election Not To Claim the Allowance You can elect not to claim the special depreciation allowance for qualified property. Tax unemployed If you make this election for any property, it applies to all property in the same property class placed in service during the year. Tax unemployed To make this election, attach a statement to your return indicating you elect not to claim the allowance and the class of property for which you are making the election. Tax unemployed When to make election. Tax unemployed   Generally, you must make the election on a timely filed tax return (including extensions) for the year in which you place the property in service. Tax unemployed   However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the original return (not including extensions). Tax unemployed Attach the election statement to the amended return. Tax unemployed At the top of the election statement, write “Filed pursuant to section 301. Tax unemployed 9100–2. Tax unemployed ” Revoking an election. Tax unemployed   Once you elect not to deduct the special depreciation allowance for a class of property, you cannot revoke the election without IRS consent. Tax unemployed A request to revoke the election is subject to a user fee. Tax unemployed Rules for Returns Filed Before June 1, 2002 The following rules apply if you placed qualified property in service after September 10, 2001, and filed your return before June 1, 2002. Tax unemployed The rules apply to returns for the following years. Tax unemployed 2000 fiscal years that end after September 10, 2001. Tax unemployed 2001 calendar and fiscal years. Tax unemployed Claiming the allowance. Tax unemployed   If you did not claim the allowance on your return and did not make the election not to claim the allowance, you can do either of the following to claim the allowance. Tax unemployed File an amended return by the due date (not including extensions) of your return for the year following the year the property was placed in service. Tax unemployed Write “Filed Pursuant to Rev. Tax unemployed Proc. Tax unemployed 2002–33” at the top of the amended return. Tax unemployed File Form 3115, Application for Change in Accounting Method, with your return for the year following the year the property was placed in service. Tax unemployed Your return must be filed by the due date (including extensions). Tax unemployed Write “Automatic Change Filed Under Rev. Tax unemployed Proc. Tax unemployed 2002–33” on the appropriate line of Form 3115. Tax unemployed You must also file a copy (with signature) of the completed Form 3115 with the IRS National Office no later than when you file the original with your return. Tax unemployed For more information about filing Form 3115, including the address to send it to, see Revenue Procedure 2002–9, Revenue Procedure 2002–19, and Revenue Procedure 2002–33. Tax unemployed Example 1. Tax unemployed You are an individual and you use the calendar year. Tax unemployed You placed qualified property in service for your business in December 2001. Tax unemployed You filed your 2001 income tax return before April 15, 2002. Tax unemployed You did not claim the special depreciation allowance for the property and did not make the election not to claim the allowance. Tax unemployed You can claim the special allowance by filing an amended 2001 return by April 15, 2003, with “Filed Pursuant to Rev. Tax unemployed Proc. Tax unemployed 2002–33” at the top of the amended return. Tax unemployed You must file an amended return by April 15, 2003, even if you get an extension of time to file your 2002 tax return. Tax unemployed Example 2. Tax unemployed The facts concerning your 2001 return are the same as in Example 1. Tax unemployed In addition, you got an automatic 4-month extension of time (to August 15, 2003) to file your 2002 return. Tax unemployed You can claim the special allowance by filing a Form 3115 (with “Filed Pursuant to Rev. Tax unemployed Proc. Tax unemployed 2002–33” on the appropriate line) with your 2002 return by August 15, 2003. Tax unemployed You must also file a copy of this Form 3115 with the IRS National Office no later than when you file your 2002 return. Tax unemployed Electing not to claim the allowance. Tax unemployed   Generally, you have elected not to claim the special depreciation allowance for a class of property if you: Filed your return timely (including extensions) for the year you placed qualified property in service and indicated on a statement with the return that you are not claiming the allowance, or Filed your return timely and filed an amended return within 6 months of the due date of the original return (not including extensions) and indicated on a statement with the amended return that you are not claiming the allowance. Tax unemployed The statement must indicate that you are not deducting the special depreciation allowance and the class of property to which the election applies. Tax unemployed The statement can be either attached to or written on the return. Tax unemployed You can, for example, write “not deducting 30%” on Form 4562. Tax unemployed Deemed election. Tax unemployed   If you have not followed either of the procedures described above to elect not to claim the allowance, you may still be treated as making the election. Tax unemployed You will be treated as making the election if you meet both of the following conditions. Tax unemployed You filed your return for the year you placed the property in service and claimed depreciation, but not the special allowance, for any class of property. Tax unemployed You do not file an amended return or a Form 3115 within the time prescribed for claiming the special allowance. Tax unemployed See Claiming the allowance, earlier. Tax unemployed Passenger Automobiles The limit on your depreciation deduction (including any section 179 deduction) for any passenger automobile that is qualified property (defined earlier) placed in service after September 10, 2001, and for which you claim the special depreciation allowance is increased. Tax unemployed Generally, the limit is increased from $3,060 to $7,660. Tax unemployed However, if the automobile is a qualified electric car, the limit is increased from $9,280 to $23,080 ($22,980 if placed in service in 2002). Tax unemployed Table 1 shows the maximum deduction amounts for 2001. Tax unemployed Table 1. Tax unemployed Maximum Deduction for 2001 Qualified Vehicle Placed in Service Before Sept. Tax unemployed 11 Placed in Service After Sept. Tax unemployed 10 Passenger automobile $3,060 $7,660 Electric car 9,280 23,080 1 1$22,980 if you place an electric car in service in 2002. Tax unemployed Election not to claim the allowance. Tax unemployed   The increased maximum depreciation deduction does not apply if you elected not to claim the special depreciation allowance as explained earlier under Election Not To Claim the Allowance and Rules for Returns Filed Before June 1, 2002. Tax unemployed New York Liberty Zone Benefits Several benefits are available for property you place in service in the New York Liberty Zone (Liberty Zone). Tax unemployed They include a special depreciation allowance for the year you place the property in service, an increased section 179 deduction, and the classification of certain leasehold improvement property as 5-year property. Tax unemployed Area defined. Tax unemployed   The New York Liberty Zone is the area located on or south of Canal Street, East Broadway (east of its intersection with Canal Street), or Grand Street (east of its intersection with East Broadway) in the Borough of Manhattan in the City of New York, New York. Tax unemployed Special Liberty Zone Depreciation Allowance You can take a special depreciation allowance for qualified Liberty Zone property you place in service after September 10, 2001. Tax unemployed The allowance is an additional deduction of 30% of the property's depreciable basis. Tax unemployed To figure the depreciable basis, you must first multiply the property's cost or other basis by the percentage of business/investment use and then reduce that amount by any section 179 deduction and certain other deductions and credits for the property. Tax unemployed See What Is the Basis for Depreciation? on page 23 in Publication 946 for more information on figuring depreciable basis. Tax unemployed The allowance is deductible for both regular tax and alternative minimum tax (AMT) purposes. Tax unemployed There is no AMT adjustment required for any depreciation figured on the remaining basis of the property. Tax unemployed In the year you claim the allowance (generally the year you place the property in service), you must reduce the depreciable basis of the property by the allowance before figuring your regular depreciation deduction. Tax unemployed You cannot claim the special Liberty Zone depreciation allowance for property eligible for the special depreciation allowance explained earlier in Qualified Property under Special Depreciation Allowance. Tax unemployed Qualified property is eligible for only one special depreciation allowance. Tax unemployed Example 1. Tax unemployed On November 1, 2001, you bought and placed in service in your business, which is in the Liberty Zone, qualified Liberty Zone property that cost $200,000. Tax unemployed You did not elect to claim a section 179 deduction. Tax unemployed You can deduct 30% of the cost ($60,000) as a special Liberty Zone depreciation allowance for 2001. Tax unemployed You use the remaining $140,000 of cost to figure your regular depreciation deduction for 2001 and later years. Tax unemployed Example 2. Tax unemployed The facts are the same as in Example 1, except that you choose to deduct $59,000 of the property's cost as a section 179 deduction. Tax unemployed (See Increased Section 179 Deduction, later, for information concerning how this section 179 deduction amount is figured). Tax unemployed You use the remaining $141,000 of cost to figure your special Liberty Zone depreciation allowance of $42,300 ($141,000 × 30%). Tax unemployed You use the remaining $98,700 of cost to figure your regular depreciation deduction for 2001 and later years. Tax unemployed Qualified Liberty Zone Property For a 2001 calendar or fiscal year and a 2000 fiscal year that ends after September 10, 2001, property qualifies for the special Liberty Zone depreciation allowance if it meets the following requirements. Tax unemployed It is one of the following types of property. Tax unemployed Used property depreciated under MACRS with a recovery period of 20 years or less. Tax unemployed See Can You Use MACRS To Depreciate Your Property and Which Recovery Period Applies? on pages 7 and 23, respectively, in Publication 946. Tax unemployed Used water utility property. Tax unemployed See 25-year property on page 22 in Publication 946. Tax unemployed Used computer software that is not a section 197 intangible as described in Computer software on page 5 in Publication 946. Tax unemployed (The cost of some computer software is treated as part of the cost of hardware and is depreciated under MACRS. Tax unemployed ) Certain nonresidential real property and residential rental property (defined later). Tax unemployed It meets the following tests (explained later under Tests to be met). Tax unemployed Acquisition date test. Tax unemployed Placed in service date test. Tax unemployed Substantial use test. Tax unemployed Original use test. Tax unemployed It is not excepted property (explained later under Excepted property). Tax unemployed Nonresidential real property and residential rental property. Tax unemployed   This property is qualifying property only to the extent it rehabilitates real property damaged, or replaces real property destroyed or condemned, as a result of the terrorist attack of September 11, 2001. Tax unemployed Property is treated as replacing destroyed or condemned property if, as part of an integrated plan, such property replaces real property included in a continuous area that includes real property destroyed or condemned. Tax unemployed   For these purposes, real property is considered destroyed (or condemned) only if an entire building or structure was destroyed (or condemned) as a result of the terrorist attack. Tax unemployed Otherwise, the property is considered damaged real property. Tax unemployed For example, if certain structural components of a building (such as walls, floors, or plumbing fixtures) are damaged or destroyed as a result of the terrorist attack, but the building is not destroyed (or condemned), then only costs related to replacing the damaged or destroyed structural components qualify for the special Liberty Zone depreciation allowance. Tax unemployed Tests to be met. Tax unemployed   To qualify for the special Liberty Zone depreciation allowance, your property must meet all of the following tests. Tax unemployed Acquisition date test. Tax unemployed   You must have acquired the property by purchase after September 10, 2001, and there must not have been a binding written contract for the acquisition in effect before September 11, 2001. Tax unemployed   For information on the acquisition of property by purchase, see Property Acquired by Purchase on page 15 of Publication 946. Tax unemployed   Property you manufacture, construct, or produce for your own use meets this test if you began the manufacture, construction, or production of the property after September 10, 2001. Tax unemployed Placed in service date test. Tax unemployed   Generally, the property must be placed in service for use in your trade or business or for the production of income before January 1, 2007 (January 1, 2010, in the case of qualifying nonresidential real property and residential rental property). Tax unemployed   If you sold property you placed in service after September 10, 2001, and you leased it back within 3 months after the property was originally placed in service, the property is treated as placed in service no earlier than the date it is used under the leaseback. Tax unemployed Substantial use test. Tax unemployed   Substantially all use of the property must be in the Liberty Zone and in the active conduct of your trade or business in the Liberty Zone. Tax unemployed Original use test. Tax unemployed   The original use of the property in the Liberty Zone must have begun with you after September 10, 2001. Tax unemployed   Used property can be qualified Liberty Zone property if it has not previously been used within the Liberty Zone. Tax unemployed Also, additional capital expenditures you incurred after September 10, 2001, to recondition or rebuild your property meet the original use test if the original use of the property in the Liberty Zone began with you. Tax unemployed Excepted property. Tax unemployed   The following property does not qualify for the special Liberty Zone depreciation allowance. Tax unemployed Property eligible for the special depreciation allowance explained earlier in Qualified Property under Special Depreciation Allowance. Tax unemployed Property required to be depreciated using ADS. Tax unemployed This includes listed property used 50% or less in a qualified business use. Tax unemployed Qualified New York Liberty Zone leasehold improvement property (defined earlier in Excepted Property under Special Depreciation Allowance). Tax unemployed Example. Tax unemployed In December 2001, you bought and placed in service in your business in the Liberty Zone the following property. Tax unemployed New office furniture with a MACRS recovery period of 7 years. Tax unemployed A used computer with a MACRS recovery period of 5 years. Tax unemployed The computer had not previously been used within the Liberty Zone. Tax unemployed Because the office furniture is new property, it qualifies for the special depreciation allowance, but not the special Liberty Zone depreciation allowance. Tax unemployed Because the computer is used property that had not previously been used in the Liberty Zone, it qualifies for the special Liberty Zone depreciation allowance, but not the special depreciation allowance. Tax unemployed Election Not To Claim the Liberty Zone Allowance You can elect not to claim the special Liberty Zone depreciation allowance for qualified property. Tax unemployed If you make this election for any property, it applies to all property in the same property class placed in service during the year. Tax unemployed To make this election, attach a statement to your return indicating you elect not to claim the allowance and the class of property for which you are making the election. Tax unemployed When to make the election. Tax unemployed   Generally, you must make the election on a timely filed tax return (including extensions) for the year in which you place the property in service. Tax unemployed   However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the original return (not including extensions). Tax unemployed Attach the election statement to the amended return. Tax unemployed At the top of the election statement, write “Filed pursuant to section 301. Tax unemployed 9100–2. Tax unemployed ” Revoking an election. Tax unemployed   Once you elect not to deduct the special Liberty Zone depreciation allowance for a class of property, you cannot revoke the election without IRS consent. Tax unemployed A request to revoke the election is subject to a user fee. Tax unemployed Returns filed before June 1, 2002. Tax unemployed   The rules that apply to the special depreciation allowance discussed earlier in Rules for Returns Filed Before June 1, 2002 under Special Depreciation Allowance also apply to the special Liberty Zone depreciation allowance. Tax unemployed Increased Section 179 Deduction Under section 179 of the Internal Revenue Code, you can choose to recover all or part of the cost of certain qualifying property, up to a limit, by deducting it in the year you place the property in service. Tax unemployed For tax years beginning in 2000, that limit was $20,000. Tax unemployed For tax years beginning in 2001 and 2002, that limit is generally $24,000. Tax unemployed If the cost of qualifying section 179 property placed in service in a year is over $200,000, you must reduce the dollar limit (but not below zero) by the amount of the cost over $200,000. Tax unemployed Increased Dollar Limit The dollar limit on the section 179 deduction is increased for certain property placed in service in the Liberty Zone. Tax unemployed The increase is the smaller of the following amounts. Tax unemployed $35,000. Tax unemployed The cost of section 179 property that is qualified Liberty Zone property placed in service during the year. Tax unemployed If you use the revised 2001 Form 4562 (dated March 2002) for a tax year beginning in 2000, you must reduce the section 179 dollar limit to $20,000 before adding the additional amount for qualified property. Tax unemployed Qualified property. Tax unemployed   To qualify for the increased section 179 deduction, your property must be section 179 property that is either: Qualified Liberty Zone property, or Property that would be qualified Liberty Zone property except that it is eligible for the special depreciation allowance. Tax unemployed Qualified Liberty Zone property is explained earlier in Qualified Liberty Zone Property under Special Liberty Zone Depreciation Allowance. Tax unemployed Property eligible for the special depreciation allowance is explained earlier in Qualified Property under Special Depreciation Allowance. Tax unemployed For information on the requirements that must be met for property to qualify for the section 179 deduction, see What Property Qualifies? on page 14 of Publication 946. Tax unemployed Example 1. Tax unemployed In 2002, you place in service in your business, which is in the Liberty Zone, qualified property (defined earlier) costing $25,000. Tax unemployed Because this cost is less than $35,000, the dollar limit on the section 179 deduction is increased by $25,000 to $49,000 ($24,000 + $25,000). Tax unemployed Example 2. Tax unemployed In 2002, you place in service in your business, which is in the Liberty Zone, qualified property (defined earlier) costing $75,000. Tax unemployed Because $35,000 is less than the cost of the property you place in service, the dollar limit on the section 179 deduction you can claim is increased by $35,000 to $59,000 ($24,000 + $35,000). Tax unemployed Reduced Dollar Limit Generally, you must reduce the dollar limit for a year by the cost of qualifying section 179 property placed in service in the year that is more than $200,000. Tax unemployed However, if the cost of your Liberty Zone property exceeds $200,000, you take into account only 50% (instead of 100%) of the cost of qualified property placed in service in a year. Tax unemployed Example. Tax unemployed In 2002, you place in service in your business, which is in the Liberty Zone, qualified property costing $460,000. Tax unemployed Your increased dollar limit is $59,000 ($35,000 + $24,000). Tax unemployed Because 50% of the cost of the property you place in service ($230,000) is $30,000 more than $200,000, you must reduce your $59,000 dollar limit to $29,000 ($59,000 - $30,000). Tax unemployed Recapture Rules Rules similar to those explained on page 20 of Publication 946 under When Must You Recapture the Deduction? apply with respect to any qualified property you stop using in the Liberty Zone. Tax unemployed Returns Filed Before June 1, 2002 If you filed a return before June 1, 2002, and did not deduct the increased section 179 amount for qualified property placed in service after September 10, 2001, you can deduct the increased amount by filing an amended return by the due date (not including extensions) of the return for the year after the year the property was placed in service. Tax unemployed This rule applies to returns for the following years. Tax unemployed 2000 fiscal years that end after September 10, 2001. Tax unemployed 2001 calendar and fiscal years. Tax unemployed On the amended return, write “Filed Pursuant to Rev. Tax unemployed Proc. Tax unemployed 2002–33. Tax unemployed ” Liberty Zone Leasehold Improvement Property Qualified Liberty Zone leasehold improvement property (described earlier in Qualified Property under Special Depreciation Allowance) is 5-year property. Tax unemployed This means that it is depreciated over a recovery period of 5 years. Tax unemployed For information about recovery periods, see Which Recovery Period Applies? on page 23 of Publication 946. Tax unemployed The straight-line method must be used with respect to qualified Liberty Zone leasehold improvement property. Tax unemployed Under ADS, the recovery period for qualified Liberty Zone leasehold improvement property is 9 years. Tax unemployed Returns Filed Before June 1, 2002 If you filed either of the following returns before June 1, 2002, and did not depreciate qualified Liberty Zone leasehold improvement property placed in service during the tax year as 5-year property using the straight line method, you should file an amended return before you file your return for the year after the year the property was placed in service. Tax unemployed Your 2000 fiscal year return (for a 2000 fiscal year that ends after September 10, 2001). Tax unemployed Your 2001 calendar or fiscal year return. Tax unemployed On the amended return, write “Filed Pursuant to Rev. Tax unemployed Proc. Tax unemployed 2002–33. Tax unemployed ” Table 2. Tax unemployed Rules for Returns Filed Before June 1, 2002 Note:This chart highlights the rules for returns affected by the Job Creation and Worker Assistance Act of 2002 that were filed before June 1, 2002, without accounting for any of the new benefits under the law. Tax unemployed See the text for definitions and examples. Tax unemployed Do not rely on this chart alone. Tax unemployed IF you want to. Tax unemployed . Tax unemployed . Tax unemployed THEN you. Tax unemployed . Tax unemployed . Tax unemployed BY. Tax unemployed . Tax unemployed . Tax unemployed claim the special depreciation allowance or special Liberty Zone depreciation allowance • must file an amended return • the due date (not including extensions) of your return for the year after the year the property was placed in service, or • must file Form 3115, Application for Change in Accounting Method, with your return for the year after the year the property was placed in service • the due date (including extensions) of your return for the year after the year the property was placed in service, and • must file a copy of your completed Form 3115 with the IRS National Office • the date you file the original Form 3115 with your return for the year after the year the property was placed in service. Tax unemployed elect not to claim the special depreciation allowance or the special Liberty Zone depreciation allowance 1 • must have filed your return timely for the year the property was placed in service, and   • must file an amended return stating you are not claiming the allowance • the date that is 6 months after the due date of the original return (not including extensions). Tax unemployed deduct the increased section 179 amount • must file an amended return • the due date (not including extensions) of your return for the year after the year the property was placed in service. Tax unemployed use a 5-year recovery period for depreciating qualified Liberty Zone leasehold improvement property • should file an amended return • the date you file your return for the year after the year the property was placed in service. Tax unemployed 1See also Deemed election under Rules for Returns Filed Before June 1, 2002, earlier. Tax unemployed Prev  Up  Next   Home   More Online Publications