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Taxes For College Students

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Taxes For College Students

Taxes for college students Car Expenses Table of Contents Introduction Depreciation of CarSpecial Depreciation Allowance Depreciation Limit Amended Return Election Not To Claim Special Allowance If you purchased a car after September 10, 2001, for use in your business (or as an employee) and figure your deductible expenses using the actual car expense method, new law contains provisions that may affect your depreciation deduction for that car. Taxes for college students Publication 463, Travel, Entertainment, Gift, and Car Expenses, contains information on figuring depreciation on your car. Taxes for college students However, Publication 463 does not contain the new provisions because it was printed before the law was enacted. Taxes for college students The new provisions are in the Supplement to Publication 463, which is reprinted below. Taxes for college students Supplement to Publication 463 Travel, Entertainment, Gift, and Car Expenses   Introduction This supplemental publication is for taxpayers who purchased a car for business purposes after September 10, 2001, and figure their deductible expenses, including a deduction for depreciation, using the actual car expense method. Taxes for college students After Publication 463 was printed, the Job Creation and Worker Assistance Act of 2002 was signed into law by the President. Taxes for college students Certain provisions of this new law may reduce your taxes for 2001. Taxes for college students The new law contains the following provisions. Taxes for college students A new depreciation deduction, the special depreciation allowance. Taxes for college students An increase in the limit on depreciation for any car for which you claim the new special depreciation allowance. Taxes for college students If you have already filed your 2001 return, you may wish to file an amended return to claim any of these benefits. Taxes for college students See Amended Return, later. Taxes for college students Depreciation of Car If you used the actual car expense method to figure your deduction for a car you own and use in your business (or as an employee), you generally can claim a depreciation deduction. Taxes for college students However, there is a limit on the depreciation deduction you can take for your car each year. Taxes for college students See Depreciation Limit later. Taxes for college students Special Depreciation Allowance The new law allows you to claim a special depreciation allowance. Taxes for college students This special allowance is a deduction equal to 30% of the depreciable basis of qualified property. Taxes for college students You figure the amount of the special depreciation allowance after any section 179 deduction you choose to claim, but before figuring your regular depreciation deduction under the Modified Accelerated Cost Recovery System (MACRS). Taxes for college students See Depreciation Deduction under Actual Car Expenses in chapter 4 of Publication 463 for information about MACRS. Taxes for college students You can claim the special depreciation allowance only for the year the qualified property is placed in service. Taxes for college students Qualified property. Taxes for college students   Qualified property includes a car (any four-wheeled vehicle, including a truck or van not more than 6,000 pounds, that is made primarily for use on public streets, roads, and highways) that meets all of the following requirements. Taxes for college students You bought it new. Taxes for college students You bought it after September 10, 2001. Taxes for college students (But a car is not qualified property if a binding written contract for you to buy the car was in effect before September 11, 2001. Taxes for college students ) You began using it for business after September 10, 2001, and used it more than 50% in a qualified business use. Taxes for college students Example. Taxes for college students Bob bought a new car on October 15, 2001, for $20,000 and placed it in service immediately, using it 75% for business. Taxes for college students Bob's car is qualified property. Taxes for college students Bob chooses not to take a section 179 deduction for the car. Taxes for college students He does claim the new special depreciation allowance. Taxes for college students Bob first must figure the car's depreciable basis, which is $15,000 ($20,000 × . Taxes for college students 75). Taxes for college students He then figures the special depreciation allowance of $4,500 ($15,000 × . Taxes for college students 30). Taxes for college students The remaining depreciable basis of $10,500 ($15,000 - $4,500) is depreciated using MACRS (200% declining balance method, half-year convention) and results in a deduction of $2,100 ($10,500 × . Taxes for college students 20), for a total depreciation deduction for 2001 of $6,600 ($4,500 + $2,100). Taxes for college students However, Bob's depreciation deduction is limited to $5,745 ($7,660 × . Taxes for college students 75), as discussed next. Taxes for college students Depreciation Limit The limit on your depreciation deduction for 2001 is increased to $7,660 for a car that is qualified property (defined above) and for which you claim the special depreciation allowance. Taxes for college students The limit is increased to $23,080 if the car is an electric car. Taxes for college students The section 179 deduction is treated as depreciation for purposes of this limit. Taxes for college students If you use a car less than 100% in your business or work, the limit is $7,660 (or $23,080 for an electric car) multiplied by the percentage of business and investment use during the year. Taxes for college students For cars that do not qualify for (or for which you choose not to claim) the special depreciation allowance, the limit remains $3,060 ($9,280 for electric cars). Taxes for college students Amended Return If you filed your 2001 calendar year return before June 1, 2002, and did not claim the new special depreciation allowance for a qualified car, you can claim it by filing an amended return on Form 1040X, Amended U. Taxes for college students S. Taxes for college students Individual Income Tax Return, by April 15, 2003. Taxes for college students At the top of the Form 1040X, print “Filed pursuant to Revenue Procedure 2002–33. Taxes for college students ” If you are an employee, attach Form 2106, Employee Business Expenses (revised March 2002). Taxes for college students If you are self-employed, attach Form 4562, Depreciation and Amortization (revised March 2002). Taxes for college students Or, you can claim the special depreciation allowance by filing Form 3115, Application for Change in Accounting Method, with your 2002 return. Taxes for college students For details, see Revenue Procedure 2002–33. Taxes for college students (But, filing Form 1040X for 2001 enables you to claim the special allowance earlier than attaching Form 3115 to your 2002 return. Taxes for college students ) You cannot claim the special depreciation allowance on an amended return (or by using Form 3115) if you made, or are treated as having made, the election not to claim it described later. Taxes for college students Example. Taxes for college students The facts are the same as in the previous example except that Bob filed his original 2001 income tax return on April 15, 2002, and claimed a $3,000 ($20,000 x . Taxes for college students 75 x . Taxes for college students 20) depreciation deduction for his new car using MACRS. Taxes for college students Bob now wishes to claim the special depreciation allowance for his new car on an amended 2001 return. Taxes for college students Bob, who is an employee, files Form 1040X, by April 15, 2003, with an updated Form 2106 (revised March 2002) attached, increasing his total depreciation deduction to $5,745, as figured in the earlier example. Taxes for college students Bob's new filled-in Form 2106 is shown later. Taxes for college students Election Not To Claim Special Allowance You can elect not to claim the special depreciation allowance for a car by making a statement attached to, or written on, your return indicating that you are electing not to claim the special depreciation allowance for 5-year property. Taxes for college students As a general rule, you must make this election by the due date (including extensions) of your return. Taxes for college students You can have an automatic extension of 6 months from the due date of your return (excluding extensions) to make the election with an amended return. Taxes for college students To get this extension, you must have filed your original return by the due date (including extensions). Taxes for college students At the top of the statement, print “Filed pursuant to section 301. Taxes for college students 9100–2. Taxes for college students ” If you elect not to claim the special depreciation allowance for a car, you cannot claim it for any other 5-year property placed in service during the same year. Taxes for college students Unless you elect (or are treated as electing) 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. Taxes for college students Deemed election for return filed before June 1, 2002. Taxes for college students   If you did not make the election not to claim the special depreciation allowance in the time and manner described above, you will still be treated as electing not to claim it if all of the following apply. Taxes for college students You filed your 2001 return before June 1, 2002. Taxes for college students You claimed depreciation on your return but did not claim the special depreciation allowance. Taxes for college students You did not file an amended 2001 return by April 15, 2003, or a Form 3115 with your 2002 return, to claim the special depreciation allowance. Taxes for college students Form 2106, Page 1, for Bob Smith Form 2106, Page 2, for Bob Smith Prev  Up  Next   Home   More Online Publications
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Top 10 Tax Time Tips from the IRS

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IRS Tax Tip 2014-40, March 25, 2014                                                  

The tax filing season is almost over. You can make tax time easier if you don’t wait until the last minute. Here are 10 important tax time tips:

  1. Gather your records.  Collect all tax records you need to file your taxes. This includes receipts, canceled checks and records that support income, deductions or tax credits that you claim on your tax return. Store them in a safe place.

  2. Report all your income.  You will need to report your income from all of your Forms W-2, Wage and Tax Statements, and Form 1099 income statements when you file your tax return.

  3. Get answers.  Use the Interactive Tax Assistant tool on the IRS website to get answers to many of your questions about tax credits, deductions and many more topics.

  4. Use Free File.  You can prepare and e-file a tax return for free using IRS Free File, available exclusively on IRS.gov. If your income was $58,000 or less, you qualify to use free tax software. If your income was higher, or if you’re comfortable doing your own tax return, you can use Free File Fillable Forms, the electronic version of IRS paper forms. Visit IRS.gov/freefile to check your options.

  5. Try IRS e-file.  Electronic filing is the best way to file a tax return. It’s accurate, safe and easy. Last year, more than 122 million taxpayers used IRS e-file. If you owe taxes, you have the option to file early and pay by April 15.

  6. Weigh your filing options.  You have several options for filing your tax return. You can prepare it yourself or go to a tax preparer. You may be eligible for free, face-to-face help at a Volunteer Income Tax Assistance or Tax Counseling for the Elderly site. Weigh your options and choose the one that works best for you.

  7. Use direct deposit.  Combining e-file with direct deposit is the fastest and safest way to get your tax refund.

  8. Visit the IRS website 24/7.  IRS.gov is a great place to get everything you need to file your tax return. Visit ‘1040 Central’ for online tools, filing tips, answers to frequently asked questions and IRS forms and publications. Get them all anytime, day or night.

  9. Check out number 17.  IRS Publication 17, Your Federal Income Tax, is a complete tax resource. It contains helpful information such as whether you need to file a tax return and how to choose your filing status.

  10. Review your return.  Mistakes slow down the receipt of your tax refund. Be sure to check all Social Security numbers and math calculations on your return, as these are the most common errors. If you run into a problem, remember the IRS is here to help. Start with IRS.gov.

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Page Last Reviewed or Updated: 27-Mar-2014

The Taxes For College Students

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