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Unemployment Tax Forms

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Unemployment Tax Forms

Unemployment tax forms Publication 15-A - Introductory Material Table of Contents Future Developments What's New Reminders Introduction Useful Items - You may want to see: Future Developments For the latest information about developments related to Publication 15-A, such as legislation enacted after it was published, go to www. Unemployment tax forms irs. Unemployment tax forms gov/pub15a. Unemployment tax forms What's New Social security and Medicare tax for 2014. Unemployment tax forms  The social security tax rate is 6. Unemployment tax forms 2% each for the employee and employer, unchanged from 2013. Unemployment tax forms The social security wage base limit is $117,000. Unemployment tax forms The Medicare tax rate is 1. Unemployment tax forms 45% each for the employee and employer, unchanged from 2013. Unemployment tax forms There is no wage base limit for Medicare tax. Unemployment tax forms Social security and Medicare taxes apply to the wages of household workers you pay $1,900 or more in cash or an equivalent form of compensation. Unemployment tax forms Social security and Medicare taxes apply to election workers who are paid $1,600 or more in cash or an equivalent form of compensation. Unemployment tax forms Withholding allowance. Unemployment tax forms  The 2014 amount for one withholding allowance on an annual basis is $3,950. Unemployment tax forms Same-sex marriage. Unemployment tax forms  For federal tax purposes, individuals of the same sex are considered married if they were lawfully married in a state (or foreign country) whose laws authorize the marriage of two individuals of the same sex, even if the state (or foreign country) in which they now live does not recognize same-sex marriage. Unemployment tax forms For more information, see Revenue Ruling 2013-17, 2013-38 I. Unemployment tax forms R. Unemployment tax forms B. Unemployment tax forms 201, available at www. Unemployment tax forms irs. Unemployment tax forms gov/irb/2013-38_IRB/ar07. Unemployment tax forms html. Unemployment tax forms Notice 2013-61 provides special administrative procedures for employers to make claims for refunds or adjustments of overpayments of social security and Medicare taxes with respect to certain same-sex spouse benefits before expiration of the period of limitations. Unemployment tax forms Notice 2013-61, 2013-44 I. Unemployment tax forms R. Unemployment tax forms B. Unemployment tax forms 432, is available at www. Unemployment tax forms irs. Unemployment tax forms gov/irb/2013-44_IRB/ar10. Unemployment tax forms html. Unemployment tax forms Reminders Additional Medicare Tax withholding. Unemployment tax forms . Unemployment tax forms  In addition to withholding Medicare tax at 1. Unemployment tax forms 45%, you must withhold a 0. Unemployment tax forms 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. Unemployment tax forms You are required to begin withholding Additional Medicare Tax in the pay period in which you pay wages in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. Unemployment tax forms Additional Medicare Tax is only imposed on the employee. Unemployment tax forms There is no employer share of Additional Medicare Tax. Unemployment tax forms All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 withholding threshold. Unemployment tax forms For more information on what wages are subject to Medicare tax, see the chart, Special Rules for Various Types of Services and Payments, in section 15 of Publication 15 (Circular E), Employer's Tax Guide. Unemployment tax forms For more information on Additional Medicare Tax, visit IRS. Unemployment tax forms gov and enter “Additional Medicare Tax” in the search box. Unemployment tax forms Work opportunity tax credit for qualified tax-exempt organizations hiring qualified veterans. Unemployment tax forms  The work opportunity tax credit is available for eligible unemployed veterans who begin work on or after November 22, 2011, and before January 1, 2014. Unemployment tax forms Qualified tax-exempt organizations that hire eligible unemployed veterans can claim the work opportunity tax credit against their payroll tax liability using Form 5884-C, Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans. Unemployment tax forms For more information, visit IRS. Unemployment tax forms gov and enter “work opportunity tax credit” in the search box. Unemployment tax forms COBRA premium assistance credit. Unemployment tax forms  The credit for COBRA premium assistance payments applies to premiums paid for employees involuntarily terminated between September 1, 2008, and May 31, 2010, and to premiums paid for up to 15 months. Unemployment tax forms For more information, see COBRA premium assistance credit in Publication 15 (Circular E). Unemployment tax forms Federal tax deposits must be made by electronic funds transfer. Unemployment tax forms  You must use electronic funds transfer to make all federal tax deposits. Unemployment tax forms Generally, electronic fund transfers are made using the Electronic Federal Tax Payment System (EFTPS). Unemployment tax forms If you do not want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make electronic deposits on your behalf. Unemployment tax forms Also, you may arrange for your financial institution to initiate a same-day wire payment on your behalf. Unemployment tax forms EFTPS is a free service provided by the Department of Treasury. Unemployment tax forms Services provided by your tax professional, financial institution, payroll service, or other third party may have a fee. Unemployment tax forms For more information on making federal tax deposits, see How To Deposit in Publication 15 (Circular E). Unemployment tax forms To get more information about EFTPS or to enroll in EFTPS, visit www. Unemployment tax forms eftps. Unemployment tax forms gov or call 1-800-555-4477 or 1-800-733-4829 (TDD). Unemployment tax forms Additional information about EFTPS is also available in Publication 966, Electronic Federal Tax Payment System: A Guide To Getting Started. Unemployment tax forms You must receive written notice from the IRS to file Form 944. Unemployment tax forms  If you have been filing Forms 941, Employer's QUARTERLY Federal Tax Return (or Forms 941-SS, Employer's QUARTERLY Federal Tax Return—American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, and the U. Unemployment tax forms S. Unemployment tax forms Virgin Islands, or Formularios 941-PR, Planilla para la Declaración Federal TRIMESTRAL del Patrono), and believe your employment taxes for the calendar year will be $1,000 or less, and you would like to file Form 944, Employer's ANNUAL Federal Tax Return, instead of Forms 941, you must contact the IRS to request to file Form 944. Unemployment tax forms You must receive written notice from the IRS to file Form 944 instead of Forms 941 before you may file this form. Unemployment tax forms For more information on requesting to file Form 944, visit IRS. Unemployment tax forms gov and enter “file employment taxes annually” in the search box. Unemployment tax forms Employers can request to file Forms 941 instead of Form 944. Unemployment tax forms  If you received notice from the IRS and have been filing Form 944 but would like to file Forms 941 instead, you must contact the IRS to request to file Forms 941. Unemployment tax forms You must receive written notice from the IRS to file Forms 941 instead of Form 944 before you may file these forms. Unemployment tax forms For more information on requesting to file Form 944, visit IRS. Unemployment tax forms gov and enter “file employment taxes annually” in the search box. Unemployment tax forms Aggregate Form 941 filers. Unemployment tax forms  Agents must complete Schedule R (Form 941), Allocation Schedule for Aggregate Form 941 Filers, when filing an aggregate Form 941. Unemployment tax forms Aggregate Forms 941 can only be filed by agents approved by the IRS under section 3504 of the Internal Revenue Code. Unemployment tax forms To request approval to act as an agent for an employer, the agent must file Form 2678, Employer/Payer Appointment of Agent, with the IRS. Unemployment tax forms Aggregate Form 940 filers. Unemployment tax forms  Agents must complete Schedule R (Form 940), Allocation Schedule for Aggregate Form 940 Filers, when filing an aggregate Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return. Unemployment tax forms Aggregate Forms 940 may only be filed by agents acting on behalf of home care service recipients who receive home care services through a program administered by a federal, state, or local government. Unemployment tax forms To request approval to act as an agent on behalf of home care service recipients, the agent must file Form 2678 with the IRS. Unemployment tax forms Electronic filing and payment. Unemployment tax forms  Now, more than ever before, businesses can enjoy the benefits of filing and paying their federal taxes electronically. Unemployment tax forms Whether you rely on a tax professional or handle your own taxes, the IRS offers you convenient programs to make filing and payment easier. Unemployment tax forms Spend less time and worry about taxes and more time running your business. Unemployment tax forms Use e-file and the Electronic Federal Tax Payment System (EFTPS) to your benefit. Unemployment tax forms For e-file, visit www. Unemployment tax forms irs. Unemployment tax forms gov/efile for additional information. Unemployment tax forms For EFTPS, visit www. Unemployment tax forms eftps. Unemployment tax forms gov or call EFTPS Customer Service at 1-800-555-4477 or 1-800-733-4829 (TDD). Unemployment tax forms Electronic submission of Forms W-4, W-4P, W-4S and W-4V. Unemployment tax forms  You may set up a system to electronically receive any or all of the following forms (and their Spanish versions, if available) from an employee or payee. Unemployment tax forms Form W-4, Employee's Withholding Allowance Certificate. Unemployment tax forms Form W-4P, Withholding Certificate for Pension or Annuity Payments. Unemployment tax forms Form W-4S, Request for Federal Income Tax Withholding From Sick Pay. Unemployment tax forms Form W-4V, Voluntary Withholding Request. Unemployment tax forms For each form that you establish an electronic submission system for, you must meet each of the following five requirements. Unemployment tax forms The electronic system must ensure that the information received by the payer is the information sent by the payee. Unemployment tax forms The system must document all occasions of user access that result in a submission. Unemployment tax forms In addition, the design and operation of the electronic system, including access procedures, must make it reasonably certain that the person accessing the system and submitting the form is the person identified on the form. Unemployment tax forms The electronic system must provide exactly the same information as the paper form. Unemployment tax forms The electronic submission must be signed with an electronic signature by the payee whose name is on the form. Unemployment tax forms The electronic signature must be the final entry in the submission. Unemployment tax forms Upon request, you must furnish a hard copy of any completed electronic form to the IRS and a statement that, to the best of the payer's knowledge, the electronic form was submitted by the named payee. Unemployment tax forms The hard copy of the electronic form must provide exactly the same information as, but need not be a facsimile of, the paper form. Unemployment tax forms For Form W-4, the signature must be under penalty of perjury, and must contain the same language that appears on the paper version of the form. Unemployment tax forms The electronic system must inform the employee that he or she must make a declaration contained in the perjury statement and that the declaration is made by signing the Form W-4. Unemployment tax forms You must also meet all recordkeeping requirements that apply to the paper forms. Unemployment tax forms For more information, see: Regulations sections 31. Unemployment tax forms 3402(f)(5)-1(c) (for Form W-4), and Announcement 99-6 (for Forms W-4P, W-4S, and W-4V). Unemployment tax forms You can find Announcement 99-6 on page 24 of Internal Revenue Bulletin 1999-4 at www. Unemployment tax forms irs. Unemployment tax forms gov/pub/irs-irbs/irb99-04. Unemployment tax forms pdf. Unemployment tax forms Additional employment tax information. Unemployment tax forms  Visit the IRS website at www. Unemployment tax forms irs. Unemployment tax forms gov/businesses and click on the Employment Taxes link under Businesses Topics. Unemployment tax forms Telephone help. Unemployment tax forms  You can call the IRS Business and Specialty Tax Line with your employment tax questions at 1-800-829-4933. Unemployment tax forms Help for people with disabilities. Unemployment tax forms  You may call 1-800-829-4059 (TDD/TTY for persons who are deaf, heard of hearing, or have a speech disability) with any tax question or to order forms and publications. Unemployment tax forms You may also use this number for assistance with unresolved tax problems. Unemployment tax forms Furnishing Form W-2 to employees electronically. Unemployment tax forms  You may set up a system to furnish Form W-2, Wage and Tax Statement, electronically. Unemployment tax forms Each employee participating must consent (either electronically or by paper document) to receive his or her Form W-2 electronically, and you must notify the employee of all hardware and software requirements to receive the form. Unemployment tax forms You may not send a Form W-2 electronically to any employee who does not consent or who has revoked consent previously provided. Unemployment tax forms To furnish Forms W-2 electronically, you must meet the following disclosure requirements and provide a clear and conspicuous statement of each requirement to your employees. Unemployment tax forms The employee must be informed that he or she will receive a paper Form W-2 if consent is not given to receive it electronically. Unemployment tax forms The employee must be informed of the scope and duration of the consent. Unemployment tax forms The employee must be informed of any procedure for obtaining a paper copy of his or her Form W-2 and whether or not the request for a paper statement is treated as a withdrawal of his or her consent to receiving his or her Form W-2 electronically. Unemployment tax forms The employee must be notified about how to withdraw a consent and the effective date and manner by which the employer will confirm the withdrawn consent. Unemployment tax forms The employee must also be notified that the withdrawn consent does not apply to the previously issued Forms W-2. Unemployment tax forms The employee must be informed about any conditions under which electronic Forms W-2 will no longer be furnished (for example, termination of employment). Unemployment tax forms The employee must be informed of any procedures for updating his or her contact information that enables the employer to provide electronic Forms W-2. Unemployment tax forms The employer must notify the employee of any changes to the employer's contact information. Unemployment tax forms You must furnish electronic Forms W-2 by the same due date as the paper Forms W-2. Unemployment tax forms For more information on furnishing Form W-2 to employees electronically, see Regulations section 31. Unemployment tax forms 6051-1(j). Unemployment tax forms Photographs of missing children. Unemployment tax forms  The IRS is a proud partner with the National Center for Missing and Exploited Children. Unemployment tax forms Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Unemployment tax forms 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. Unemployment tax forms Introduction This publication supplements Publication 15 (Circular E). Unemployment tax forms It contains specialized and detailed employment tax information supplementing the basic information provided in Publication 15 (Circular E). Unemployment tax forms This publication also contains tables for withholding on distributions of Indian gaming profits to tribal members. Unemployment tax forms Publication 15-B, Employer's Tax Guide to Fringe Benefits, contains information about the employment tax treatment of various types of noncash compensation. Unemployment tax forms Ordering publications and forms. Unemployment tax forms   See Ordering Employer Tax Forms and Publications in Publication 15 (Circular E) and How To Get Tax Help , later, for more information on how to obtain forms and publications. Unemployment tax forms Useful Items - You may want to see: Publication 15-B Employer's Tax Guide to Fringe Benefits 505 Tax Withholding and Estimated Tax 515 Withholding of Tax on Nonresident Aliens and Foreign Entities 583 Starting a Business and Keeping Records 1635 Employer Identification Number: Understanding Your EIN Comments and suggestions. Unemployment tax forms   We welcome your comments about this publication and your suggestions for future editions. Unemployment tax forms    You can write to us at the following address: Internal Revenue Service Tax Forms & Publications Division 1111 Constitution Ave. Unemployment tax forms NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Unemployment tax forms Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Unemployment tax forms   You can also send us comments from www. Unemployment tax forms irs. Unemployment tax forms gov/formspubs. Unemployment tax forms Click on More Information and then click on Comment on Tax Forms and Publications. Unemployment tax forms   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax forms, instructions, and publications. 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The Unemployment Tax Forms

Unemployment tax forms 7. Unemployment tax forms   Depreciation, Depletion, and Amortization Table of Contents What's New for 2013 Introduction Topics - This chapter discusses: Useful Items - You may want to see: Overview of DepreciationWhat Property Can Be Depreciated? What Property Cannot Be Depreciated? When Does Depreciation Begin and End? Can You Use MACRS To Depreciate Your Property? What Is the Basis of Your Depreciable Property? How Do You Treat Repairs and Improvements? Do You Have To File Form 4562? How Do You Correct Depreciation Deductions? Section 179 Expense DeductionWhat Property Qualifies? What Property Does Not Qualify? How Much Can You Deduct? How Do You Elect the Deduction? When Must You Recapture the Deduction? Claiming the Special Depreciation AllowanceWhat is Qualified Property? How Can You Elect Not To Claim the Allowance? When Must You Recapture an Allowance Figuring Depreciation Under MACRSWhich Depreciation System (GDS or ADS) Applies? Which Property Class Applies Under GDS? What Is the Placed-in-Service Date? What Is the Basis for Depreciation? Which Recovery Period Applies? Which Convention Applies? Which Depreciation Method Applies? How Is the Depreciation Deduction Figured? How Do You Use General Asset Accounts? When Do You Recapture MACRS Depreciation? Additional Rules for Listed PropertyWhat Is Listed Property? What Is the Business-Use Requirement? Do the Passenger Automobile Limits Apply? Depletion Who Can Claim Depletion? Figuring Depletion AmortizationBusiness Start-Up Costs Reforestation Costs Section 197 Intangibles What's New for 2013 Increased section 179 expense deduction dollar limits. Unemployment tax forms  The maximum amount you can elect to deduct for most section 179 property you placed in service in 2013 is $500,000. Unemployment tax forms This limit is reduced by the amount by which the cost of the property placed in service during the tax year exceeds $2 million. Unemployment tax forms See Dollar Limits under Section 179 Expense Deduction , later. Unemployment tax forms Extension of special depreciation allowance for certain qualified property acquired after December 31, 2007. Unemployment tax forms . Unemployment tax forms  You may be able to take a 50% special depreciation allowance for certain qualified property acquired after December 31, 2007, and placed in service before January 1, 2014. Unemployment tax forms See Claiming the Special Depreciation Allowance , later. Unemployment tax forms Expiration of the 3- year recovery period for certain race horses. Unemployment tax forms  The 3-year recovery period for race horses two years old or younger will expire for such horses placed in service after December 31, 2013. Unemployment tax forms Introduction If you buy or make improvements to farm property such as machinery, equipment, livestock, or a structure with a useful life of more than a year, you generally cannot deduct its entire cost in one year. Unemployment tax forms Instead, you must spread the cost over the time you use the property and deduct part of it each year. Unemployment tax forms For most types of property, this is called depreciation. Unemployment tax forms This chapter gives information on depreciation methods that generally apply to property placed in service after 1986. Unemployment tax forms For information on depreciating pre-1987 property, see Publication 534, Depreciating Property Placed in Service Before 1987. Unemployment tax forms Topics - This chapter discusses: Overview of depreciation Section 179 expense deduction Special depreciation allowance Modified Accelerated Cost Recovery System (MACRS) Listed property Basic information on cost depletion (including timber depletion) and percentage depletion Amortization of the costs of going into business, reforestation costs, the costs of pollution control facilities, and the costs of section 197 intangibles Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 534 Depreciating Property Placed in Service Before 1987 535 Business Expenses 544 Sales and Other Dispositions of Assets 551 Basis of Assets 946 How To Depreciate Property Form (and Instructions) T (Timber), Forest Activities Schedule 3115 Application for Change in Accounting Method 4562 Depreciation and Amortization 4797 Sales of Business Property See chapter 16 for information about getting publications and forms. Unemployment tax forms It is important to keep good records for property you depreciate. Unemployment tax forms Do not file these records with your return. Unemployment tax forms Instead, you should keep them as part of the permanent records of the depreciated property. Unemployment tax forms They will help you verify the accuracy of the depreciation of assets placed in service in the current and previous tax years. Unemployment tax forms For general information on recordkeeping, see Publication 583, Starting a Business and Keeping Records. Unemployment tax forms For specific information on keeping records for section 179 property and listed property, see Publication 946, How To Depreciate Property. Unemployment tax forms Overview of Depreciation This overview discusses basic information on the following. Unemployment tax forms What property can be depreciated. Unemployment tax forms What property cannot be depreciated. Unemployment tax forms When depreciation begins and ends. Unemployment tax forms Whether MACRS can be used to figure depreciation. Unemployment tax forms What is the basis of your depreciable property. Unemployment tax forms How to treat repairs and improvements. Unemployment tax forms When you must file Form 4562. Unemployment tax forms How you can correct depreciation claimed incorrectly. Unemployment tax forms What Property Can Be Depreciated? You can depreciate most types of tangible property (except land), such as buildings, machinery, equipment, vehicles, certain livestock, and furniture. Unemployment tax forms You can also depreciate certain intangible property, such as copyrights, patents, and computer software. Unemployment tax forms To be depreciable, the property must meet all the following requirements. Unemployment tax forms It must be property you own. Unemployment tax forms It must be used in your business or income-producing activity. Unemployment tax forms It must have a determinable useful life. Unemployment tax forms It must have a useful life that extends substantially beyond the year you place it in service. Unemployment tax forms Property You Own To claim depreciation, you usually must be the owner of the property. Unemployment tax forms You are considered as owning property even if it is subject to a debt. Unemployment tax forms Leased property. Unemployment tax forms   You can depreciate leased property only if you retain the incidents of ownership in the property. Unemployment tax forms This means you bear the burden of exhaustion of the capital investment in the property. Unemployment tax forms Therefore, if you lease property from someone to use in your trade or business or for the production of income, you generally cannot depreciate its cost because you do not retain the incidents of ownership. Unemployment tax forms You can, however, depreciate any capital improvements you make to the leased property. Unemployment tax forms See Additions and Improvements under Which Recovery Period Applies in chapter 4 of Publication 946. Unemployment tax forms   If you lease property to someone, you generally can depreciate its cost even if the lessee (the person leasing from you) has agreed to preserve, replace, renew, and maintain the property. Unemployment tax forms However, you cannot depreciate the cost of the property if the lease provides that the lessee is to maintain the property and return to you the same property or its equivalent in value at the expiration of the lease in as good condition and value as when leased. Unemployment tax forms Life tenant. Unemployment tax forms   Generally, if you hold business or investment property as a life tenant, you can depreciate it as if you were the absolute owner of the property. Unemployment tax forms See Certain term interests in property , later, for an exception. Unemployment tax forms Property Used in Your Business or Income-Producing Activity To claim depreciation on property, you must use it in your business or income-producing activity. Unemployment tax forms If you use property to produce income (investment use), the income must be taxable. Unemployment tax forms You cannot depreciate property that you use solely for personal activities. Unemployment tax forms However, if you use property for business or investment purposes and for personal purposes, you can deduct depreciation based only on the percentage of business or investment use. Unemployment tax forms Example 1. Unemployment tax forms   If you use your car for farm business, you can deduct depreciation based on its percentage of use in farming. Unemployment tax forms If you also use it for investment purposes, you can depreciate it based on its percentage of investment use. Unemployment tax forms Example 2. Unemployment tax forms   If you use part of your home for business, you may be able to deduct depreciation on that part based on its business use. Unemployment tax forms For more information, see Business Use of Your Home in chapter 4. Unemployment tax forms Inventory. Unemployment tax forms   You can never depreciate inventory because it is not held for use in your business. Unemployment tax forms Inventory is any property you hold primarily for sale to customers in the ordinary course of your business. Unemployment tax forms Livestock. Unemployment tax forms   Livestock purchased for draft, breeding, or dairy purposes can be depreciated only if they are not kept in an inventory account. Unemployment tax forms Livestock you raise usually has no depreciable basis because the costs of raising them are deducted and not added to their basis. Unemployment tax forms However, see Immature livestock under When Does Depreciation Begin and End , later, for a special rule. Unemployment tax forms Property Having a Determinable Useful Life To be depreciable, your property must have a determinable useful life. Unemployment tax forms This means it must be something that wears out, decays, gets used up, becomes obsolete, or loses its value from natural causes. Unemployment tax forms Irrigation systems and water wells. Unemployment tax forms   Irrigation systems and wells used in a trade or business can be depreciated if their useful life can be determined. Unemployment tax forms You can depreciate irrigation systems and wells composed of masonry, concrete, tile, metal, or wood. Unemployment tax forms In addition, you can depreciate costs for moving dirt to construct irrigation systems and water wells composed of these materials. Unemployment tax forms However, land preparation costs for center pivot irrigation systems are not depreciable. Unemployment tax forms Dams, ponds, and terraces. Unemployment tax forms   In general, you cannot depreciate earthen dams, ponds, and terraces unless the structures have a determinable useful life. Unemployment tax forms What Property Cannot Be Depreciated? Certain property cannot be depreciated, even if the requirements explained earlier are met. Unemployment tax forms This includes the following. Unemployment tax forms Land. Unemployment tax forms You can never depreciate the cost of land because land does not wear out, become obsolete, or get used up. Unemployment tax forms The cost of land generally includes the cost of clearing, grading, planting, and landscaping. Unemployment tax forms Although you cannot depreciate land, you can depreciate certain costs incurred in preparing land for business use. Unemployment tax forms See chapter 1 of Publication 946. Unemployment tax forms Property placed in service and disposed of in the same year. Unemployment tax forms Determining when property is placed in service is explained later. Unemployment tax forms Equipment used to build capital improvements. Unemployment tax forms You must add otherwise allowable depreciation on the equipment during the period of construction to the basis of your improvements. Unemployment tax forms Intangible property such as section 197 intangibles. Unemployment tax forms This property does not have a determinable useful life and generally cannot be depreciated. Unemployment tax forms However, see Amortization , later. Unemployment tax forms Special rules apply to computer software (discussed below). Unemployment tax forms Certain term interests (discussed below). Unemployment tax forms Computer software. Unemployment tax forms   Computer software is generally not a section 197 intangible even if acquired in connection with the acquisition of a business, if it meets all of the following tests. Unemployment tax forms It is readily available for purchase by the general public. Unemployment tax forms It is subject to a nonexclusive license. Unemployment tax forms It has not been substantially modified. Unemployment tax forms   If the software meets the tests above, it can be depreciated and may qualify for the section 179 expense deduction and the special depreciation allowance (if applicable), discussed later. Unemployment tax forms Certain term interests in property. Unemployment tax forms   You cannot depreciate a term interest in property created or acquired after July 27, 1989, for any period during which the remainder interest is held, directly or indirectly, by a person related to you. Unemployment tax forms This rule does not apply to the holder of a term interest in property acquired by gift, bequest, or inheritance. Unemployment tax forms For more information, see chapter 1 of Publication 946. Unemployment tax forms When Does Depreciation Begin and End? You begin to depreciate your property when you place it in service for use in your trade or business or for the production of income. Unemployment tax forms You stop depreciating property either when you have fully recovered your cost or other basis or when you retire it from service, whichever happens first. Unemployment tax forms Placed in Service Property is placed in service when it is ready and available for a specific use, whether in a business activity, an income-producing activity, a tax-exempt activity, or a personal activity. Unemployment tax forms Even if you are not using the property, it is in service when it is ready and available for its specific use. Unemployment tax forms Example. Unemployment tax forms You bought a planter for use in your farm business. Unemployment tax forms The planter was delivered in December 2012 after harvest was over. Unemployment tax forms You begin to depreciate the planter for 2012 because it was ready and available for its specific use in 2012, even though it will not be used until the spring of 2013. Unemployment tax forms If your planter comes unassembled in December 2012 and is put together in February 2013, it is not placed in service until 2013. Unemployment tax forms You begin to depreciate it in 2013. Unemployment tax forms If your planter was delivered and assembled in February 2013 but not used until April 2013, it is placed in service in February 2013, because this is when the planter was ready for its specified use. Unemployment tax forms You begin to depreciate it in 2013. Unemployment tax forms Fruit or nut trees and vines. Unemployment tax forms   If you acquire an orchard, grove, or vineyard before the trees or vines have reached the income-producing stage, and they have a preproductive period of more than 2 years, you must capitalize the preproductive-period costs under the uniform capitalization rules (unless you elect not to use these rules). Unemployment tax forms See chapter 6 for information about the uniform capitalization rules. Unemployment tax forms Your depreciation begins when the trees and vines reach the income-producing stage (that is, when they bear fruit, nuts, or grapes in quantities sufficient to commercially warrant harvesting). Unemployment tax forms Immature livestock. Unemployment tax forms   Depreciation for livestock begins when the livestock reaches the age of maturity. Unemployment tax forms If you bought immature livestock for drafting purposes, depreciation begins when they can be worked. Unemployment tax forms If you bought immature livestock for dairy purposes, depreciation begins when they can be milked. Unemployment tax forms If you bought immature livestock for breeding purposes, depreciation begins when they can be bred. Unemployment tax forms Your basis for depreciation is your initial cost for the immature livestock. Unemployment tax forms Idle Property Continue to claim a deduction for depreciation on property used in your business or for the production of income even if it is temporarily idle. Unemployment tax forms For example, if you stop using a machine because there is a temporary lack of a market for a product made with that machine, continue to deduct depreciation on the machine. Unemployment tax forms Cost or Other Basis Fully Recovered You stop depreciating property when you have fully recovered your cost or other basis. Unemployment tax forms This happens when your section 179 and allowed or allowable depreciation deductions equal your cost or investment in the property. Unemployment tax forms Retired From Service You stop depreciating property when you retire it from service, even if you have not fully recovered its cost or other basis. Unemployment tax forms You retire property from service when you permanently withdraw it from use in a trade or business or from use in the production of income because of any of the following events. Unemployment tax forms You sell or exchange the property. Unemployment tax forms You convert the property to personal use. Unemployment tax forms You abandon the property. Unemployment tax forms You transfer the property to a supplies or scrap account. Unemployment tax forms The property is destroyed. Unemployment tax forms For information on abandonment of property, see chapter 8. Unemployment tax forms For information on destroyed property, see chapter 11 and Publication 547, Casualties, Disasters, and Thefts. Unemployment tax forms Can You Use MACRS To Depreciate Your Property? You must use the Modified Accelerated Cost Recovery System (MACRS) to depreciate most business and investment property placed in service after 1986. Unemployment tax forms MACRS is explained later under Figuring Depreciation Under MACRS . Unemployment tax forms You cannot use MACRS to depreciate the following property. Unemployment tax forms Property you placed in service before 1987. Unemployment tax forms Use the methods discussed in Publication 534. Unemployment tax forms Certain property owned or used in 1986. Unemployment tax forms See chapter 1 of Publication 946. Unemployment tax forms Intangible property. Unemployment tax forms Films, video tapes, and recordings. Unemployment tax forms Certain corporate or partnership property acquired in a nontaxable transfer. Unemployment tax forms Property you elected to exclude from MACRS. Unemployment tax forms For more information, see chapter 1 of Publication 946. Unemployment tax forms What Is the Basis of Your Depreciable Property? To figure your depreciation deduction, you must determine the basis of your property. Unemployment tax forms To determine basis, you need to know the cost or other basis of your property. Unemployment tax forms Cost or other basis. Unemployment tax forms   The basis of property you buy is usually its cost plus amounts you paid for items such as sales tax, freight charges, and installation and testing fees. Unemployment tax forms The cost includes the amount you pay in cash, debt obligations, other property, or services. Unemployment tax forms   There are times when you cannot use cost as basis. Unemployment tax forms In these situations, the fair market value (FMV) or the adjusted basis of the property may be used. Unemployment tax forms Adjusted basis. Unemployment tax forms   To find your property's basis for depreciation, you may have to make certain adjustments (increases and decreases) to the basis of the property for events occurring between the time you acquired the property and the time you placed it in service. Unemployment tax forms Basis adjustment for depreciation allowed or allowable. Unemployment tax forms   After you place your property in service, you must reduce the basis of the property by the depreciation allowed or allowable, whichever is greater. Unemployment tax forms Depreciation allowed is depreciation you actually deducted (from which you received a tax benefit). Unemployment tax forms Depreciation allowable is depreciation you are entitled to deduct. Unemployment tax forms   If you do not claim depreciation you are entitled to deduct, you must still reduce the basis of the property by the full amount of depreciation allowable. Unemployment tax forms   If you deduct more depreciation than you should, you must reduce your basis by any amount deducted from which you received a tax benefit (the depreciation allowed). Unemployment tax forms   For more information, see chapter 6. Unemployment tax forms How Do You Treat Repairs and Improvements? You generally deduct the cost of repairing business property in the same way as any other business expense. Unemployment tax forms However, if a repair or replacement increases the value of your property, makes it more useful, or lengthens its life, you must treat it as an improvement and depreciate it. Unemployment tax forms Treat improvements as separate depreciable property. Unemployment tax forms See chapter 1 of Publication 946 for more information. Unemployment tax forms Example. Unemployment tax forms You repair a small section on a corner of the roof of a barn that you rent to others. Unemployment tax forms You deduct the cost of the repair as a business expense. Unemployment tax forms However, if you replace the entire roof, the new roof is considered to be an improvement because it increases the value and lengthens the life for the property. Unemployment tax forms You depreciate the cost of the new roof. Unemployment tax forms Improvements to rented property. Unemployment tax forms   You can depreciate permanent improvements you make to business property you rent from someone else. Unemployment tax forms Do You Have To File Form 4562? Use Form 4562 to claim your deduction for depreciation and amortization. Unemployment tax forms You must complete and attach Form 4562 to your tax return if you are claiming any of the following. Unemployment tax forms A section 179 expense deduction for the current year or a section 179 carryover from a prior year. Unemployment tax forms Depreciation for property placed in service during the current year. Unemployment tax forms Depreciation on any vehicle or other listed property, regardless of when it was placed in service. Unemployment tax forms Amortization of costs that began in the current year. Unemployment tax forms For more information, see the Instructions for Form 4562. Unemployment tax forms How Do You Correct Depreciation Deductions? If you deducted an incorrect amount of depreciation in any year, you may be able to make a correction by filing an amended return for that year. Unemployment tax forms You can file an amended return to correct the amount of depreciation claimed for any property in any of the following situations. Unemployment tax forms You claimed the incorrect amount because of a mathematical error made in any year. Unemployment tax forms You claimed the incorrect amount because of a posting error made in any year, for example, omitting an asset from the depreciation schedule. Unemployment tax forms You have not adopted a method of accounting for the property placed in service by you in tax years ending after December 29, 2003. Unemployment tax forms You claimed the incorrect amount on property placed in service by you in tax years ending before December 30, 2003. Unemployment tax forms Note. Unemployment tax forms You have adopted a method of accounting if you used the same incorrect method of depreciation for two or more consecutively filed returns. Unemployment tax forms If you are not allowed to make the correction on an amended return, you may be able to change your accounting method to claim the correct amount of depreciation. Unemployment tax forms See the Instructions for Form 3115. Unemployment tax forms Section 179 Expense Deduction You can elect 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. Unemployment tax forms This is the section 179 expense deduction. Unemployment tax forms You can elect the section 179 expense deduction instead of recovering the cost by taking depreciation deductions. Unemployment tax forms This part of the chapter explains the rules for the section 179 expense deduction. Unemployment tax forms It explains what property qualifies for the deduction, what property does not qualify for the deduction, the limits that may apply, how to elect the deduction, and when you may have to recapture the deduction. Unemployment tax forms For more information, see chapter 2 of Publication 946. Unemployment tax forms What Property Qualifies? To qualify for the section 179 expense deduction, your property must meet all the following requirements. Unemployment tax forms It must be eligible property. Unemployment tax forms It must be acquired for business use. Unemployment tax forms It must have been acquired by purchase. Unemployment tax forms Eligible Property To qualify for the section 179 expense deduction, your property must be one of the following types of depreciable property. Unemployment tax forms Tangible personal property. Unemployment tax forms Qualified real property. Unemployment tax forms (Special rules apply to qualified real property that you elect to treat as qualified section 179 real property. Unemployment tax forms For more information, see chapter 2 of Publication 946 and section 179(f) of the Internal Revenue Code. Unemployment tax forms ) Other tangible property (except buildings and their structural components) used as: An integral part of manufacturing, production, or extraction or of furnishing transportation, communications, electricity, gas, water, or sewage disposal services; A research facility used in connection with any of the activities in (a) above; or A facility used in connection with any of the activities in (a) for the bulk storage of fungible commodities. Unemployment tax forms Single purpose agricultural (livestock) or horticultural structures. Unemployment tax forms Storage facilities (except buildings and their structural components) used in connection with distributing petroleum or any primary product of petroleum. Unemployment tax forms Off-the-shelf computer software that is readily available for purchase by the general public, is subject to a nonexclusive lease, and has not been substantially modified. Unemployment tax forms Tangible personal property. Unemployment tax forms   Tangible personal property is any tangible property that is not real property. Unemployment tax forms It includes the following property. Unemployment tax forms Machinery and equipment. Unemployment tax forms Property contained in or attached to a building (other than structural components), such as milk tanks, automatic feeders, barn cleaners, and office equipment. Unemployment tax forms Gasoline storage tanks and pumps at retail service stations. Unemployment tax forms Livestock, including horses, cattle, hogs, sheep, goats, and mink and other fur-bearing animals. Unemployment tax forms Facility used for the bulk storage of fungible commodities. Unemployment tax forms   A facility used for the bulk storage of fungible commodities is qualifying property for purposes of the section 179 expense deduction if it is used in connection with any of the activities listed earlier in item (3)(a). Unemployment tax forms Bulk storage means the storage of a commodity in a large mass before it is used. Unemployment tax forms Grain bins. Unemployment tax forms   A grain bin is an example of a storage facility that is qualifying section 179 property. Unemployment tax forms It is a facility used in connection with the production of grain or livestock for the bulk storage of fungible commodities. Unemployment tax forms Single purpose agricultural or horticultural structures. Unemployment tax forms   A single purpose agricultural (livestock) or horticultural structure is qualifying property for purposes of the section 179 expense deduction. Unemployment tax forms Agricultural structure. Unemployment tax forms   A single purpose agricultural (livestock) structure is any building or enclosure specifically designed, constructed, and used for both the following reasons. Unemployment tax forms To house, raise, and feed a particular type of livestock and its produce. Unemployment tax forms To house the equipment, including any replacements, needed to house, raise, or feed the livestock. Unemployment tax forms For this purpose, livestock includes poultry. Unemployment tax forms   Single purpose structures are qualifying property if used, for example, to breed chickens or hogs, produce milk from dairy cattle, or produce feeder cattle or pigs, broiler chickens, or eggs. Unemployment tax forms The facility must include, as an integral part of the structure or enclosure, equipment necessary to house, raise, and feed the livestock. Unemployment tax forms Horticultural structure. Unemployment tax forms   A single purpose horticultural structure is either of the following. Unemployment tax forms A greenhouse specifically designed, constructed, and used for the commercial production of plants. Unemployment tax forms A structure specifically designed, constructed, and used for the commercial production of mushrooms. Unemployment tax forms Use of structure. Unemployment tax forms   A structure must be used only for the purpose that qualified it. Unemployment tax forms For example, a hog barn will not be qualifying property if you use it to house poultry. Unemployment tax forms Similarly, using part of your greenhouse to sell plants will make the greenhouse nonqualifying property. Unemployment tax forms   If a structure includes work space, the work space can be used only for the following activities. Unemployment tax forms Stocking, caring for, or collecting livestock or plants or their produce. Unemployment tax forms Maintaining the enclosure or structure. Unemployment tax forms Maintaining or replacing the equipment or stock enclosed or housed in the structure. Unemployment tax forms Property Acquired by Purchase To qualify for the section 179 expense deduction, your property must have been acquired by purchase. Unemployment tax forms For example, property acquired by gift or inheritance does not qualify. Unemployment tax forms Property acquired from a related person (that is, your spouse, ancestors, or lineal descendants) is not considered acquired by purchase. Unemployment tax forms Example. Unemployment tax forms Ken is a farmer. Unemployment tax forms He purchased two tractors, one from his brother and one from his father. Unemployment tax forms He placed both tractors in service in the same year he bought them. Unemployment tax forms The tractor purchased from his father does not qualify for the section 179 expense deduction because he is a related person (as defined above). Unemployment tax forms The tractor purchased from his brother does qualify for the deduction because Ken is not a related person (as defined above). Unemployment tax forms What Property Does Not Qualify? Land and improvements. Unemployment tax forms   Land and land improvements, do not qualify as section 179 property. Unemployment tax forms Land improvements include nonagricultural fences, swimming pools, paved parking areas, wharves, docks, bridges, and fences. Unemployment tax forms However, agricultural fences do qualify as section 179 property. Unemployment tax forms Similarly, field drainage tile also qualifies as section 179 property. Unemployment tax forms Excepted property. Unemployment tax forms   Even if the requirements explained in the preceding discussions are met, farmers cannot elect the section 179 expense deduction for the following property. Unemployment tax forms Certain property you lease to others (if you are a noncorporate lessor). Unemployment tax forms Certain property used predominantly to furnish lodging or in connection with the furnishing of lodging. Unemployment tax forms Property used by a tax-exempt organization (other than a tax-exempt farmers' cooperative) unless the property is used mainly in a taxable unrelated trade or business. Unemployment tax forms Property used by governmental units or foreign persons or entities (except property used under a lease with a term of less than 6 months). Unemployment tax forms How Much Can You Deduct? Your section 179 expense deduction is generally the cost of the qualifying property. Unemployment tax forms However, the total amount you can elect to deduct under section 179 is subject to a dollar limit and a business income limit. Unemployment tax forms These limits apply to each taxpayer, not to each business. Unemployment tax forms However, see Married individuals under Dollar Limits , later. Unemployment tax forms See also the special rules for applying the limits for partnerships and S corporations under Partnerships and S Corporations , later. Unemployment tax forms If you deduct only part of the cost of qualifying property as a section 179 expense deduction, you can generally depreciate the cost you do not deduct. Unemployment tax forms Use Part I of Form 4562 to figure your section 179 expense deduction. Unemployment tax forms Partial business use. Unemployment tax forms   When you use property for business and nonbusiness purposes, you can elect the section 179 expense deduction only if you use it more than 50% for business in the year you place it in service. Unemployment tax forms If you used the property more than 50% for business, multiply the cost of the property by the percentage of business use. Unemployment tax forms Use the resulting business cost to figure your section 179 expense deduction. Unemployment tax forms Trade-in of other property. Unemployment tax forms   If you buy qualifying property with cash and a trade-in, its cost for purposes of the section 179 expense deduction includes only the cash you paid. Unemployment tax forms For example, if you buy (for cash and a trade-in) a new tractor for use in your business, your cost for the section 179 expense deduction is the cash you paid. Unemployment tax forms It does not include the adjusted basis of the old tractor you trade for the new tractor. Unemployment tax forms Example. Unemployment tax forms J-Bar Farms traded two cultivators having a total adjusted basis of $6,800 for a new cultivator costing $13,200. Unemployment tax forms They received an $8,000 trade-in allowance for the old cultivators and paid $5,200 cash for the new cultivator. Unemployment tax forms J-Bar also traded a used pickup truck with an adjusted basis of $8,000 for a new pickup truck costing $35,000. Unemployment tax forms They received a $5,000 trade-in allowance and paid $30,000 cash for the new pickup truck. Unemployment tax forms Only the cash paid by J-Bar qualifies for the section 179 expense deduction. Unemployment tax forms J-Bar's business costs that qualify for a section 179 expense deduction are $35,200 ($5,200 + $30,000). Unemployment tax forms Dollar Limits The total amount you can elect to deduct under section 179 for most property placed in service in 2013 is $500,000. Unemployment tax forms If you acquire and place in service more than one item of qualifying property during the year, you can allocate the section 179 expense deduction among the items in any way, as long as the total deduction is not more than $500,000. Unemployment tax forms Qualified real property that you elect to treat as section 179 property is limited to $250,000 of the maximum section 179 deduction of $500,000 for 2013. Unemployment tax forms You do not have to claim the full $500,000. Unemployment tax forms For specific information on the section 179 dollar limits, see chapter 2 of Publication 946. Unemployment tax forms Reduced dollar limit for cost exceeding $2 million. Unemployment tax forms   If the cost of your qualifying section 179 property placed in service in 2013 is over $2 million, you must reduce the dollar limit (but not below zero) by the amount of cost over $2 million. Unemployment tax forms 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 expense deduction and you cannot carry over the cost that is more than $2,500,000. Unemployment tax forms Example. Unemployment tax forms This year, James Smith placed in service machinery costing $2,050,000. Unemployment tax forms Because this cost is $50,000 more than $2 million, he must reduce his dollar limit to $450,000 ($500,000 − $50,000). Unemployment tax forms Limits for sport utility vehicles. Unemployment tax forms   The total amount you can elect to deduct for certain sport utility vehicles and certain other vehicles placed in service in 2013 is $25,000. Unemployment tax forms This rule applies to any 4-wheeled vehicle primarily designed or used to carry passengers over public streets, roads, and highways that is rated at more than 6,000 pounds gross vehicle weight and not more than 14,000 pounds gross vehicle weight. Unemployment tax forms   For more information, see chapter 2 of Publication 946. Unemployment tax forms Limits for passenger automobiles. Unemployment tax forms   For a passenger automobile that is placed in service in 2013, the total section 179 and depreciation deduction is limited. Unemployment tax forms See Do the Passenger Automobile Limits Apply , later. Unemployment tax forms Married individuals. Unemployment tax forms   If you are married, how you figure your section 179 expense deduction depends on whether you file jointly or separately. Unemployment tax forms If you 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. Unemployment tax forms If you and your spouse file separate returns, you are treated as one taxpayer for the dollar limit, including the reduction for costs over $2 million. Unemployment tax forms You must allocate the dollar limit (after any reduction) equally between you, unless you both elect a different allocation. Unemployment tax forms If the percentages elected by each of you do not total 100%, 50% will be allocated to each of you. Unemployment tax forms Joint return after separate returns. Unemployment tax forms   If you and your spouse elect to amend your separate returns by filing a joint return after the due date for filing your return, the dollar limit on the joint return is the lesser of the following amounts. Unemployment tax forms The dollar limit (after reduction for any cost of section 179 property over $2 million). Unemployment tax forms The total cost of section 179 property you and your spouse elected to expense on your separate returns. Unemployment tax forms Business Income Limit The total cost you can deduct each year after you apply the dollar limit is limited to the taxable income from the active conduct of any trade or business during the year. Unemployment tax forms Generally, you are considered to actively conduct a trade or business if you meaningfully participate in the management or operations of the trade or business. Unemployment tax forms Any cost not deductible in one year under section 179 because of this limit can be carried to the next year. Unemployment tax forms See Carryover of disallowed deduction , later. Unemployment tax forms Taxable income. Unemployment tax forms   In general, figure taxable income for this purpose by totaling the net income and losses from all trades and businesses you actively conducted during the year. Unemployment tax forms In addition to net income or loss from a sole proprietorship, partnership, or S corporation, net income or loss derived from a trade or business also includes the following items. Unemployment tax forms Section 1231 gains (or losses) as discussed in chapter 9. Unemployment tax forms Interest from working capital of your trade or business. Unemployment tax forms Wages, salaries, tips, or other pay earned by you (or your spouse if you file a joint return) as an employee of any employer. Unemployment tax forms   In addition, figure taxable income without regard to any of the following. Unemployment tax forms The section 179 expense deduction. Unemployment tax forms The self-employment tax deduction. Unemployment tax forms Any net operating loss carryback or carryforward. Unemployment tax forms Any unreimbursed employee business expenses. Unemployment tax forms Two different taxable income limits. Unemployment tax forms   In addition to the business income limit for your section 179 expense deduction, you may have a taxable income limit for some other deduction (for example, charitable contributions). Unemployment tax forms You may have to figure the limit for this other deduction taking into account the section 179 expense deduction. Unemployment tax forms If so, complete the following steps. Unemployment tax forms Step Action 1 Figure taxable income without the section 179 expense deduction or the other deduction. Unemployment tax forms 2 Figure a hypothetical section 179 expense deduction using the taxable income figured in Step 1. Unemployment tax forms 3 Subtract the hypothetical section 179 expense deduction figured in Step 2 from the taxable income figured in Step 1. Unemployment tax forms 4 Figure a hypothetical amount for the other deduction using the amount figured in Step 3 as taxable income. Unemployment tax forms 5 Subtract the hypothetical other deduction figured in Step 4 from the taxable income figured in  Step 1. Unemployment tax forms 6 Figure your actual section 179 expense deduction using the taxable income figured in Step 5. Unemployment tax forms 7 Subtract your actual section 179 expense deduction figured in Step 6 from the taxable income figured in Step 1. Unemployment tax forms 8 Figure your actual other deduction using the taxable income figured in Step 7. Unemployment tax forms Example. Unemployment tax forms On February 1, 2013, the XYZ farm corporation purchased and placed in service qualifying section 179 property that cost $500,000. Unemployment tax forms It elects to expense the entire $500,000 cost under section 179. Unemployment tax forms In June, the corporation gave a charitable contribution of $10,000. Unemployment tax forms A corporation's limit on charitable contributions is figured after subtracting any section 179 expense deduction. Unemployment tax forms The business income limit for the section 179 expense deduction is figured after subtracting any allowable charitable contributions. Unemployment tax forms XYZ's taxable income figured without the section 179 expense deduction or the deduction for charitable contributions is $520,000. Unemployment tax forms XYZ figures its section 179 expense deduction and its deduction for charitable contributions as follows. Unemployment tax forms Step 1. Unemployment tax forms Taxable income figured without either deduction is $520,000. Unemployment tax forms Step 2. Unemployment tax forms Using $520,000 as taxable income, XYZ's hypothetical section 179 expense deduction is $500,000. Unemployment tax forms Step 3. Unemployment tax forms $20,000 ($520,000 − $500,000). Unemployment tax forms Step 4. Unemployment tax forms Using $20,000 (from Step 3) as taxable income, XYZ's hypothetical charitable contribution (limited to 10% of taxable income) is $2,000. Unemployment tax forms Step 5. Unemployment tax forms $518,000 ($520,000 − $2,000). Unemployment tax forms Step 6. Unemployment tax forms Using $518,000 (from Step 5) as taxable income, XYZ figures the actual section 179 expense deduction. Unemployment tax forms Because the taxable income is at least $500,000, XYZ can take a $500,000 section 179 expense deduction. Unemployment tax forms Step 7. Unemployment tax forms $20,000 ($520,000 − $500,000). Unemployment tax forms Step 8. Unemployment tax forms Using $20,000 (from Step 7) as taxable income, XYZ's actual charitable contribution (limited to 10% of taxable income) is $2,000. Unemployment tax forms Carryover of disallowed deduction. Unemployment tax forms   You can carry over for an unlimited number of years the cost of any section 179 property you elected to expense but were unable to because of the business income limit. Unemployment tax forms   The amount you carry over is used in determining your section 179 expense deduction in the next year. Unemployment tax forms However, it is subject to the limits in that year. Unemployment tax forms If you place more than one property in service in a year, you can select the properties for which all or a part of the cost will be carried forward. Unemployment tax forms Your selections must be shown in your books and records. Unemployment tax forms Example. Unemployment tax forms Last year, Joyce Jones placed in service a machine that cost $8,000 and elected to deduct all $8,000 under section 179. Unemployment tax forms The taxable income from her business (determined without regard to both a section 179 expense deduction for the cost of the machine and the self-employment tax deduction) was $6,000. Unemployment tax forms Her section 179 expense deduction was limited to $6,000. Unemployment tax forms The $2,000 cost that was not allowed as a section 179 expense deduction (because of the business income limit) is carried to this year. Unemployment tax forms This year, Joyce placed another machine in service that cost $9,000. Unemployment tax forms Her taxable income from business (determined without regard to both a section 179 expense deduction for the cost of the machine and the self-employment tax deduction) is $10,000. Unemployment tax forms Joyce can deduct the full cost of the machine ($9,000) but only $1,000 of the carryover from last year because of the business income limit. Unemployment tax forms She can carry over the balance of $1,000 to next year. Unemployment tax forms Partnerships and S Corporations The section 179 expense deduction limits apply both to the partnership or S corporation and to each partner or shareholder. Unemployment tax forms The partnership or S corporation determines its section 179 expense deduction subject to the limits. Unemployment tax forms It then allocates the deduction among its partners or shareholders. Unemployment tax forms If you are a partner in a partnership or shareholder of an S corporation, you add the amount allocated from the partnership or S corporation to any section 179 costs not related to the partnership or S corporation and then apply the dollar limit to this total. Unemployment tax forms To determine any reduction in the dollar limit for costs over $560,000, you do not include any of the cost of section 179 property placed in service by the partnership or S corporation. Unemployment tax forms After you apply the dollar limit, you apply the business income limit to any remaining section 179 costs. Unemployment tax forms For more information, see chapter 2 of Publication 946. Unemployment tax forms Example. Unemployment tax forms In 2013, Partnership P placed in service section 179 property with a total cost of $2,160,000. Unemployment tax forms P must reduce its dollar limit by $160,000 ($2,160,000 − $2,000,000). Unemployment tax forms Its maximum section 179 expense deduction is $340,000 ($500,000 − $160,000), and it elects to expense that amount. Unemployment tax forms Because P's taxable income from the active conduct of all its trades or businesses for the year was $400,000, it can deduct the full $340,000. Unemployment tax forms P allocates $100,000 of its section 179 expense deduction and $110,000 of its taxable income to John, one of its partners. Unemployment tax forms John also conducts a business as a sole proprietor and in 2013, placed in service in that business, section 179 property costing $28,000. Unemployment tax forms John's taxable income from that business was $10,000. Unemployment tax forms In addition to the $100,000 allocated from P, he elects to expense the $28,000 of his sole proprietorship's section 179 costs. Unemployment tax forms However, John's deduction is limited to his business taxable income of $120,000 ($110,000 from P plus $10,000 from his sole proprietorship). Unemployment tax forms He carries over $8,000 ($128,000 − $120,000) of the elected section 179 costs to 2014. Unemployment tax forms How Do You Elect the Deduction? You elect to take the section 179 expense deduction by completing Part I of Form 4562. Unemployment tax forms If you elect the deduction for listed property, complete Part V of  Form 4562 before completing Part I. Unemployment tax forms   File Form 4562 with either of the following: Your original tax return (whether or not you filed it timely), or An amended return filed within the time prescribed by law. Unemployment tax forms 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. Unemployment tax forms The amended return must also include any resulting adjustments to taxable income. Unemployment tax forms Revoking an election. Unemployment tax forms   An election (or any specification made in the election) to take a section 179 expense deduction for 2013 can be revoked without IRS approval by filing an amended return. Unemployment tax forms The amended return must be filed within the time prescribed by law. Unemployment tax forms The amended return must also include any resulting adjustments to taxable income (for example, allowable depreciation in that tax year for the item of section 179 property for which the election pertains. Unemployment tax forms ) Once made, the revocation is irrevocable. Unemployment tax forms When Must You Recapture the Deduction? You may have to recapture the section 179 expense deduction if, in any year during the property's recovery period, the percentage of business use drops to 50% or less. Unemployment tax forms In the year the business use drops to 50% or less, you include the recapture amount as ordinary income. Unemployment tax forms You also increase the basis of the property by the recapture amount. Unemployment tax forms Recovery periods for property are discussed later. Unemployment tax forms If you sell, exchange, or otherwise dispose of the property, do not figure the recapture amount under the rules explained in this discussion. Unemployment tax forms Instead, use the rules for recapturing depreciation explained in  chapter 9 under Section 1245 Property. Unemployment tax forms   If the property is listed property, do not figure the recapture amount under the rules explained in this discussion when the percentage of business use drops to 50% or less. Unemployment tax forms Instead, use the rules for recapturing depreciation explained in chapter 5 of Publication 946 under Recapture of Excess Depreciation. Unemployment tax forms Figuring the recapture amount. Unemployment tax forms   To figure the amount to recapture, take the following steps. Unemployment tax forms Figure the allowable depreciation for the section 179 expense deduction you claimed. Unemployment tax forms Begin with the year you placed the property in service and include the year of recapture. Unemployment tax forms Subtract the depreciation figured in (1) from the section 179 expense deduction you actually claimed. Unemployment tax forms The result is the amount you must recapture. Unemployment tax forms Example. Unemployment tax forms In January 2011, Paul Lamb, a calendar year taxpayer, bought and placed in service section 179 property costing $10,000. Unemployment tax forms The property is not listed property. Unemployment tax forms He elected a $5,000 section 179 expense deduction for the property and also elected not to claim a special depreciation allowance. Unemployment tax forms He used the property only for business in 2011 and 2012. Unemployment tax forms During 2013, he used the property 40% for business and 60% for personal use. Unemployment tax forms He figures his recapture amount as follows. Unemployment tax forms Section 179 expense deduction claimed (2011) $5,000 Minus: Allowable depreciation (instead of section 179 expense deduction):   2011 $1,250   2012 1,875   2013 ($1,250 × 40% (business)) 500 3,625 2013 — Recapture amount $1,375     Paul must include $1,375 in income for 2013. Unemployment tax forms Where to report recapture. Unemployment tax forms   Report any recapture of the section 179 expense deduction as ordinary income in Part IV of Form 4797 and include it in income on Schedule F (Form 1040). Unemployment tax forms Recapture for qualified section 179 GO Zone property. Unemployment tax forms   If any qualified section 179 GO Zone property ceases to be used in the GO Zone in a later year, you must recapture the benefit of the increased section 179 expense deduction as “other income. Unemployment tax forms ” Claiming the Special Depreciation Allowance For qualified property (defined below) placed in service in 2013, you can take an additional 50% special depreciation allowance. Unemployment tax forms The allowance is an additional deduction you can take after any section 179 expense deduction and before you figure regular depreciation under MACRS. Unemployment tax forms Figure the special depreciation allowance by multiplying the depreciable basis of the qualified property by 50%. Unemployment tax forms What is Qualified Property? For farmers, qualified property generally is certain qualified property acquired after December 31, 2007, and placed in service before January 1, 2014. Unemployment tax forms Certain qualified property acquired after December 31, 2007, and placed in service before January 1, 2014. Unemployment tax forms   Certain qualified property (defined below) acquired after December 31, 2007, and before January 1, 2014, is eligible for a 50% special depreciation allowance. Unemployment tax forms   Qualified property includes the following: Tangible property depreciated under the Modified Accelerated Cost Recovery System (MACRS) with a recovery period of 20 years or less. Unemployment tax forms Water utility property. Unemployment tax forms Off-the-shelf computer software. Unemployment tax forms Qualified leasehold improvement property. Unemployment tax forms   Qualified property must also meet all of the following tests: You must have acquired qualified property by purchase after December 31, 2007. Unemployment tax forms If a binding contract to acquire the property existed before January 1, 2008, the property does not qualify. Unemployment tax forms Qualified property must be placed in service after December 31, 2007 and placed in service before January 1, 2014 (before January 1, 2015 for certain property with a long production period and for certain aircraft). Unemployment tax forms The original use of the property must begin with you after December 31, 2007. Unemployment tax forms For more information, see chapter 3 of Publication 946. Unemployment tax forms How Can You Elect Not To Claim the Allowance? You can elect, for any class of property, not to deduct the special depreciation allowance for all property in such class placed in service during the tax year. Unemployment tax forms To make the election, attach a statement to your return indicating the class of property for which you are making the election. Unemployment tax forms 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. Unemployment tax forms However, if you timely filed your return for the year without making the election, you still can make the election by filing an amended return within 6 months of the due date of the original return (not including extensions). Unemployment tax forms Attach the election statement to the amended return. Unemployment tax forms On the amended return, write “Filed pursuant to section 301. Unemployment tax forms 9100-2. Unemployment tax forms ” Once made, the election may not be revoked without IRS consent. Unemployment tax forms If you elect not to have the special depreciation allowance apply, the property may be subject to an alternative minimum tax adjustment for depreciation. Unemployment tax forms When Must You Recapture an Allowance When you dispose of property for which you claimed a special depreciation allowance, any gain on the disposition is generally recaptured (included in income) as ordinary income up to the amount of the special depreciation allowance previously allowed or allowable. Unemployment tax forms For more information, see chapter 3 of Publication 946. Unemployment tax forms Figuring Depreciation Under MACRS The Modified Accelerated Cost Recovery System (MACRS) is used to recover the basis of most business and investment property placed in service after 1986. Unemployment tax forms MACRS consists of two depreciation systems, the General Depreciation System (GDS) and the Alternative Depreciation System (ADS). Unemployment tax forms Generally, these systems provide different methods and recovery periods to use in figuring depreciation deductions. Unemployment tax forms To be sure you can use MACRS to figure depreciation for your property, see Can You Use MACRS To Depreciate Your Property, earlier. Unemployment tax forms This part explains how to determine which MACRS depreciation system applies to your property. Unemployment tax forms It also discusses the following information that you need to know before you can figure depreciation under MACRS. Unemployment tax forms Property's recovery class. Unemployment tax forms Placed-in-service date. Unemployment tax forms Basis for depreciation. Unemployment tax forms Recovery period. Unemployment tax forms Convention. Unemployment tax forms Depreciation method. Unemployment tax forms Finally, this part explains how to use this information to figure your depreciation deduction. Unemployment tax forms Which Depreciation System (GDS or ADS) Applies? Your use of either the General Depreciation System (GDS) or the Alternative Depreciation System (ADS) to depreciate property under MACRS determines what depreciation method and recovery period you use. Unemployment tax forms You generally must use GDS unless you are specifically required by law to use ADS or you elect to use ADS. Unemployment tax forms Required use of ADS. Unemployment tax forms   You must use ADS for the following property. Unemployment tax forms All property used predominantly in a farming business and placed in service in any tax year during which an election not to apply the uniform capitalization rules to certain farming costs is in effect. Unemployment tax forms Listed property used 50% or less in a qualified business use. Unemployment tax forms See Additional Rules for Listed Property , later. Unemployment tax forms Any tax-exempt use property. Unemployment tax forms Any tax-exempt bond-financed property. Unemployment tax forms Any property imported from a foreign country for which an Executive Order is in effect because the country maintains trade restrictions or engages in other discriminatory acts. Unemployment tax forms Any tangible property used predominantly outside the United States during the year. Unemployment tax forms If you are required to use ADS to depreciate your property, you cannot claim the special depreciation allowance. Unemployment tax forms Electing ADS. Unemployment tax forms   Although your property may qualify for GDS, you can elect to use ADS. Unemployment tax forms The election generally must cover all property in the same property class you placed in service during the year. Unemployment tax forms However, the election for residential rental property and nonresidential real property can be made on a property-by-property basis. Unemployment tax forms Once you make this election, you can never revoke it. Unemployment tax forms   You make the election by completing line 20 in Part III of Form 4562. Unemployment tax forms Which Property Class Applies Under GDS? The following is a list of the nine property classes under GDS. Unemployment tax forms 3-year property. Unemployment tax forms 5-year property. Unemployment tax forms 7-year property. Unemployment tax forms 10-year property. Unemployment tax forms 15-year property. Unemployment tax forms 20-year property. Unemployment tax forms 25-year property. Unemployment tax forms Residential rental property. Unemployment tax forms Nonresidential real property. Unemployment tax forms See Which Property Class Applies Under GDS in chapter 4 of Publication 946 for examples of the types of property included in each class. Unemployment tax forms What Is the Placed-in-Service Date? You begin to claim depreciation when your property is placed in service for use either in a trade or business or for the production of income. Unemployment tax forms The placed-in-service date for your property is the date the property is ready and available for a specific use. Unemployment tax forms It is therefore not necessarily the date it is first used. Unemployment tax forms If you converted property held for personal use to use in a trade or business or for the production of income, treat the property as being placed in service on the conversion date. Unemployment tax forms See Placed in Service under When Does Depreciation Begin and End , earlier, for examples illustrating when property is placed in service. Unemployment tax forms What Is the Basis for Depreciation? The basis for depreciation of MACRS property is the property's cost or other basis multiplied by the percentage of business/investment use. Unemployment tax forms Reduce that amount by any credits and deductions allocable to the property. Unemployment tax forms The following are examples of some of the credits and deductions that reduce basis. Unemployment tax forms Any deduction for section 179 property. Unemployment tax forms Any deduction for removal of barriers to the disabled and the elderly. Unemployment tax forms Any disabled access credit, enhanced oil recovery credit, and credit for employer-provided childcare facilities and services. Unemployment tax forms Any special depreciation allowance. Unemployment tax forms Basis adjustment for investment credit property under section 50(c) of the Internal Revenue Code. Unemployment tax forms For information about how to determine the cost or other basis of property, see What Is the Basis of Your Depreciable Property , earlier. Unemployment tax forms Also, see chapter 6. Unemployment tax forms For additional credits and deductions that affect basis, see section 1016 of the Internal Revenue Code. Unemployment tax forms Which Recovery Period Applies? The recovery period of property is the number of years over which you recover its cost or other basis. Unemployment tax forms It is determined based on the depreciation system (GDS or ADS) used. Unemployment tax forms See Table 7-1 for recovery periods under both GDS and ADS for some commonly used assets. Unemployment tax forms For a complete list of recovery periods, see the Table of Class Lives and Recovery Periods in Appendix B of Publication 946. Unemployment tax forms House trailers for farm laborers. Unemployment tax forms   To depreciate a house trailer you supply as housing for those who work on your farm, use one of the following recovery periods if the house trailer is mobile (it has wheels and a history of movement). Unemployment tax forms A 7-year recovery period under GDS. Unemployment tax forms A 10-year recovery period under ADS. Unemployment tax forms   However, if the house trailer is not mobile (its wheels have been removed and permanent utilities and pipes attached to it), use one of the following recovery periods. Unemployment tax forms A 20-year recovery period under GDS. Unemployment tax forms A 25-year recovery period under ADS. Unemployment tax forms Water wells. Unemployment tax forms   Water wells used to provide water for raising poultry and livestock are land improvements. Unemployment tax forms If they are depreciable, use one of the following recovery periods. Unemployment tax forms A 15-year recovery period under GDS. Unemployment tax forms A 20-year recovery period under ADS. Unemployment tax forms   The types of water wells that can be depreciated were discussed earlier in Irrigation systems and water wells under Property Having a Determinable Useful Life . Unemployment tax forms Table 7-1. Unemployment tax forms Farm Property Recovery Periods   Recovery Period in Years Assets GDS ADS Agricultural structures (single purpose) 10 15 Automobiles 5 5 Calculators and copiers 5 6 Cattle (dairy or breeding) 5 7 Communication equipment1 7 10 Computer and peripheral equipment 5 5 Drainage facilities 15 20 Farm buildings2 20 25 Farm machinery and equipment 7 10 Fences (agricultural) 7 10 Goats and sheep (breeding) 5 5 Grain bin 7 10 Hogs (breeding) 3 3 Horses (age when placed in service)     Breeding and working (12 years or less) 7 10 Breeding and working (more than 12 years) 3 10 Racing horses 3 12 Horticultural structures (single purpose) 10 15 Logging machinery and equipment3 5 6 Nonresidential real property 394 40 Office furniture, fixtures, and equipment (not calculators, copiers, or typewriters) 7 10 Paved lots 15 20 Residential rental property 27. Unemployment tax forms 5 40 Tractor units (over-the-road) 3 4 Trees or vines bearing fruit or nuts 10 20 Truck (heavy duty, unloaded weight 13,000 lbs. Unemployment tax forms or more) 5 6 Truck (actual weight less than 13,000 lbs) 5 5 Water wells 15 20 1 Not including communication equipment listed in other classes. Unemployment tax forms 2 Not including single purpose agricultural or horticultural structures. Unemployment tax forms 3 Used by logging and sawmill operators for cutting of timber. Unemployment tax forms 4 For property placed in service after May 12, 1993; for property placed in service before May 13, 1993,  the recovery period is 31. Unemployment tax forms 5 years. Unemployment tax forms Which Convention Applies? Under MACRS, averaging conventions establish when the recovery period begins and ends. Unemployment tax forms The convention you use determines the number of months for which you can claim depreciation in the year you place property in service and in the year you dispose of the property. Unemployment tax forms Use one of the following conventions. Unemployment tax forms The half-year convention. Unemployment tax forms The mid-month convention. Unemployment tax forms The mid-quarter convention. Unemployment tax forms For a detailed explanation of each convention, see Which Convention Applies in chapter 4 of Publication 946. Unemployment tax forms Also, see the Instructions for Form 4562. Unemployment tax forms Which Depreciation Method Applies? MACRS provides three depreciation methods under GDS and one depreciation method under ADS. Unemployment tax forms The 200% declining balance method over a GDS recovery period. Unemployment tax forms The 150% declining balance method over a GDS recovery period. Unemployment tax forms The straight line method over a GDS recovery period. Unemployment tax forms The straight line method over an ADS recovery period. Unemployment tax forms Depreciation Table. Unemployment tax forms   The following table lists the types of property you can depreciate under each method. Unemployment tax forms The declining balance method is abbreviated as DB and the straight line method is abbreviated as SL. Unemployment tax forms Depreciation Table System/Method   Type of Property GDS using  150% DB • All property used in a farming business (except real property)   • All 15- and 20-year property   • Nonfarm 3-, 5-, 7-, and 10-year property1 GDS using SL • Nonresidential real property   • Residential rental property   • Trees or vines bearing fruit or nuts   • All 3-, 5-, 7-, 10-, 15-, and 20-year property1 ADS using SL • Property used predomi- nantly outside the United States   • Farm property used when an election not to apply the uniform capitalization rules is in effect   • Tax-exempt property   • Tax-exempt bond-financed property   • Imported property2   • Any property for which you elect to use this method1 GDS using  200% DB • Nonfarm 3-, 5-, 7-, and 10-year property 1Elective method 2See section 168(g)(6) of the Internal Revenue  Code Property used in farming business. Unemployment tax forms   For personal property placed in service after 1988 in a farming business, you must use the 150% declining balance method over a GDS recovery period or you can elect one of the following methods. Unemployment tax forms The straight line method over a GDS recovery period. Unemployment tax forms The straight line method over an ADS recovery period. Unemployment tax forms For property placed in service before 1999, you could have elected to use the 150% declining balance method using the ADS recovery periods for certain property classes. Unemployment tax forms If you made this election, continue to use the same method and recovery period for that property. Unemployment tax forms Real property. Unemployment tax forms   You can depreciate real property using the straight line method under either GDS or ADS. Unemployment tax forms Switching to straight line. Unemployment tax forms   If you use a declining balance method, you switch to the straight line method in the year it provides an equal or greater deduction. Unemployment tax forms If you use the MACRS percentage tables, discussed later under How Is the Depreciation Deduction Figured , you do not need to determine in which year your deduction is greater using the straight line method. Unemployment tax forms The tables have the switch to the straight line method built into their rates. Unemployment tax forms Fruit or nut trees and vines. Unemployment tax forms   Depreciate trees and vines bearing fruit or nuts under GDS using the straight line method over a 10-year recovery period. Unemployment tax forms ADS required for some farmers. Unemployment tax forms   If you elect not to apply the uniform capitalization rules to any plant shown in Table 6-1 of chapter 6 and produced in your farming business, you must use ADS for all property you place in service in any year the election is in effect. Unemployment tax forms See chapter 6 for a discussion of the application of the uniform capitalization rules to farm property. Unemployment tax forms Electing a different method. Unemployment tax forms   As shown in the Depreciation Table , you can elect a different method for depreciation for certain types of property. Unemployment tax forms You must make the election by the due date of the return (including extensions) for the year you placed the property in service. Unemployment tax forms 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 your return (excluding extensions). Unemployment tax forms Attach the election to the amended return and write “Filed pursuant to section 301. Unemployment tax forms 9100-2” on the election statement. Unemployment tax forms File the amended return at the same address you filed the original return. Unemployment tax forms Once you make the election, you cannot change it. Unemployment tax forms    If you elect to use a different method for one item in a property class, you must apply the same method to all property in that class placed in service during the year of the election. Unemployment tax forms However, you can make the election on a property-by-property basis for residential rental and nonresidential real property. Unemployment tax forms Straight line election. Unemployment tax forms   Instead of using the declining balance method, you can elect to use the straight line method over the GDS recovery period. Unemployment tax forms Make the election by entering “S/L” under column (f) in Part III of Form 4562. Unemployment tax forms ADS election. Unemployment tax forms   As explained earlier under Which Depreciation System (GDS or ADS) Applies , you can elect to use ADS even though your property may come under GDS. Unemployment tax forms ADS uses the straight line method of depreciation over the ADS recovery periods, which are generally longer than the GDS recovery periods. Unemployment tax forms The ADS recovery periods for many assets used in the business of farming are listed in Table 7–1. Unemployment tax forms Additional ADS recovery periods for other classes of property may be found in the Table of Class Lives and Recovery Periods in Appendix B of Publication 946. Unemployment tax forms How Is the Depreciation Deduction Figured? To figure your depreciation deduction under MACRS, you first determine the depreciation system, property class, placed-in-service date, basis amount, recovery period, convention, and depreciation method that applies to your property. Unemployment tax forms Then you are ready to figure your depreciation deduction. Unemployment tax forms You can figure it in one of two ways. Unemployment tax forms You can use the percentage tables provided by the IRS. Unemployment tax forms You can figure your own deduction without using the tables. Unemployment tax forms Figuring your own MACRS deduction will generally result in a slightly different amount than using the tables. Unemployment tax forms Using the MACRS Percentage Tables To help you figure your deduction under MACRS, the IRS has established percentage tables that incorporate the applicable convention and depreciation method. Unemployment tax forms These percentage tables are in Appendix A of Publication 946. Unemployment tax forms Rules for using the tables. Unemployment tax forms   The following rules cover the use of the percentage tables. Unemployment tax forms You must apply the rates in the percentage tables to your property's unadjusted basis. Unemployment tax forms Unadjusted basis is the same basis amount you would use to figure gain on a sale but figured without reducing your original basis by any MACRS depreciation taken in earlier years. Unemployment tax forms You cannot use the percentage tables for a short tax year. Unemployment tax forms See chapter 4 of Publication 946 for information on how to figure the deduction for a short tax year. Unemployment tax forms You generally must continue to use them for the entire recovery period of the property. Unemployment tax forms You must stop using the tables if you adjust the basis of the property for any reason other than— Depreciation allowed or allowable, or An addition or improvement to the property, which is depreciated as a separate property. Unemployment tax forms Basis adjustment due to casualty loss. Unemployment tax forms   If you reduce the basis of your property because of a casualty, you cannot continue to use the percentage tables. Unemployment tax forms For the year of the adjustment and the remaining recovery period, you must figure the depreciation yourself using the property's adjusted basis at the end of the year. Unemployment tax forms See Figuring the Deduction Without Using the Tables in chapter 4 of Publication 946. Unemployment tax forms Figuring depreciation using the 150% DB method and half-year convention. Unemployment tax forms    Table 7-2 has the percentages for 3-, 5-, 7-, and 20-year property. Unemployment tax forms The percentages are based on the 150% declining balance method with a change to the straight line method. Unemployment tax forms This table covers only the half-year convention and the first 8 years for 20-year property. Unemployment tax forms See Appendix A in Publication 946 for complete MACRS tables, including tables for the mid-quarter and mid-month convention. Unemployment tax forms   The following examples show how to figure depreciation under MACRS using the percentages in Table 7-2 . Unemployment tax forms Example 1. Unemployment tax forms During the year, you bought an item of 7-year property for $10,000 and placed it in service. Unemployment tax forms You do not elect a section 179 expense deduction for this property. Unemployment tax forms In addition, the property is not qualified property for purposes of the special depreciation allowance. Unemployment tax forms The unadjusted basis of the property is $10,000. Unemployment tax forms You use the percentages in Table 7-2 to figure your deduction. Unemployment tax forms Since this is 7-year property, you multiply $10,000 by 10. Unemployment tax forms 71% to get this year's depreciation of $1,071. Unemployment tax forms For next year, your depreciation will be $1,913 ($10,000 × 19. Unemployment tax forms 13%). Unemployment tax forms Example 2. Unemployment tax forms You had a barn constructed on your farm at a cost of $20,000. Unemployment tax forms You placed the barn in service this year. Unemployment tax forms You elect not to claim the special depreciation allowance. Unemployment tax forms The barn is 20-year property and you use the table percentages to figure your deduction. Unemployment tax forms You figure this year's depreciation by multiplying $20,000 (unadjusted basis) by 3. Unemployment tax forms 75% to get $750. Unemployment tax forms For next year, your depreciation will be $1,443. Unemployment tax forms 80 ($20,000 × 7. Unemployment tax forms 219%). Unemployment tax forms Table 7-2. Unemployment tax forms 150% Declining Balance Method (Half-Year Convention) Year 3-Year 5-Year 7-Year 20-Year 1 25. Unemployment tax forms 0 % 15. Unemployment tax forms 00 % 10. Unemployment tax forms 71 % 3. Unemployment tax forms 750 % 2 37. Unemployment tax forms 5   25. Unemployment tax forms 50   19. Unemployment tax forms 13   7. Unemployment tax forms 219   3 25. Unemployment tax forms 0   17. Unemployment tax forms 85   15. Unemployment tax forms 03   6. Unemployment tax forms 677   4 12. Unemployment tax forms 5   16. Unemployment tax forms 66   12. Unemployment tax forms 25   6. Unemployment tax forms 177   5     16. Unemployment tax forms 66   12. Unemployment tax forms 25   5. Unemployment tax forms 713   6     8. Unemployment tax forms 33   12. Unemployment tax forms 25   5. Unemployment tax forms 285   7         12. Unemployment tax forms 25   4. Unemployment tax forms 888   8         6. Unemployment tax forms 13   4. Unemployment tax forms 522   Figuring depreciation using the straight line method and half-year convention. Unemployment tax forms   The following table has the straight line percentages for 3-, 5-, 7-, and 20-year property using the half-year convention. Unemployment tax forms The table covers only the first 8 years for 20-year property. Unemployment tax forms See Appendix A in Publication 946 for complete MACRS tables, including tables for the mid-quarter and mid-month convention. Unemployment tax forms Table 7-3. Unemployment tax forms Straight Line Method (Half-Year Convention) Year 3-Year 5-Year 7-Year 20-Year 1 16. Unemployment tax forms 67 % 10 % 7. Unemployment tax forms 14 % 2. Unemployment tax forms 5 % 2 33. Unemployment tax forms 33   20   14. Unemployment tax forms 29   5. Unemployment tax forms 0   3 33. Unemployment tax forms 33   20   14. Unemployment tax forms 29   5. Unemployment tax forms 0   4 16. Unemployment tax forms 67   20   14. Unemployment tax forms 28   5. Unemployment tax forms 0   5     20   14. Unemployment tax forms 29   5. Unemployment tax forms 0   6     10   14. Unemployment tax forms 28   5. Unemployment tax forms 0   7         14. Unemployment tax forms 29   5. Unemployment tax forms 0   8         7. Unemployment tax forms 14   5. Unemployment tax forms 0