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File State Income Tax Free

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File State Income Tax Free

File state income tax free Publication 17 - Introductory Material Table of Contents What's New Reminders IntroductionIcons. File state income tax free Ordering forms and publications. File state income tax free Tax questions. File state income tax free All material in this publication may be reprinted freely. File state income tax free A citation to Your Federal Income Tax (2013) would be appropriate. File state income tax free The explanations and examples in this publication reflect the interpretation by the Internal Revenue Service (IRS) of: Tax laws enacted by Congress, Treasury regulations, and Court decisions. File state income tax free However, the information given does not cover every situation and is not intended to replace the law or change its meaning. File state income tax free This publication covers some subjects on which a court may have made a decision more favorable to taxpayers than the interpretation by the IRS. File state income tax free Until these differing interpretations are resolved by higher court decisions or in some other way, this publication will continue to present the interpretations by the IRS. File state income tax free All taxpayers have important rights when working with the IRS. File state income tax free These rights are described in Your Rights as a Taxpayer in the back of this publication. File state income tax free What's New This section summarizes important tax changes that took effect in 2013. File state income tax free Most of these changes are discussed in more detail throughout this publication. File state income tax free Future developments. File state income tax free  For the latest information about the tax law topics covered in this publication, including information about any tax legislation, go to www. File state income tax free irs. File state income tax free gov/pub17. File state income tax free Additional Medicare Tax. File state income tax free  Beginning in 2013, a 0. File state income tax free 9% Additional Medicare Tax applies to Medicare wages, railroad retirement (RRTA) compensation, and self-employment income that are more than: $125,000 if married filing separately, $250,000 if married filing jointly, or $200,000 for any other filing status. File state income tax free See Form 8959 and its instructions. File state income tax free Net Investment Income Tax. File state income tax free  Beginning in 2013, you may be subject to Net Investment Income Tax (NIIT). File state income tax free The NIIT is 3. File state income tax free 8% of the smaller of (a) your net investment income or (b) the excess of your modified adjusted gross income over: $125,000 if married filing separately, $250,000 if married filing jointly or qualifying widow(er), or $200,000 if any other filing status. File state income tax free See Form 8960 and its instructions. File state income tax free Change in tax rates. File state income tax free  The highest tax rate is 39. File state income tax free 6%. File state income tax free For more information, see the 2013 Tax Computation Worksheet or the 2013 Tax Rate Schedules near the end of this publication. File state income tax free Tax rate on net capital gain and qualified dividends. File state income tax free  The maximum tax rate of 15% on net capital gain and qualified dividends has increased to 20% for some taxpayers. File state income tax free See chapter 16. File state income tax free Medical and dental expenses. File state income tax free  You can deduct only the part of your medical and dental expenses that is more than 10% of your adjusted gross income (7. File state income tax free 5% if either you or your spouse is age 65 or older). File state income tax free See chapter 21. File state income tax free Personal exemption amount increased for certain taxpayers. File state income tax free  Your personal exemption is increased to $3,900. File state income tax free But the amount is reduced if your adjusted gross income is more than: $150,000 if married filing separately, $250,000 if single, $275,000 if head of household, or $300,000 if any other filing status. File state income tax free See chapter 3. File state income tax free Limit on itemized deductions. File state income tax free  You may not be able to deduct all of your itemized deductions if your adjusted gross income is more than: $150,000 if married filing separately, $250,000 if single, $275,000 if head of household, or $300,000 if any other filing status. File state income tax free See chapter 29. File state income tax free Same-sex marriages. File state income tax free  If you have a same-sex spouse whom you legally married in a state (or foreign country) that recognizes same-sex marriage, you and your spouse generally must use the married filing jointly or married filing separately filing status on your 2013 return, even if you and your spouse now live in a state (or foreign country) that does not recognize same-sex marriage. File state income tax free See chapter 2. File state income tax free If you meet certain requirements, you may be able to file amended returns to change your filing status for some earlier years. File state income tax free For details on filing amended returns, see chapter 1. File state income tax free Health flexible spending arrangements (FSAs). File state income tax free  You cannot have more than $2,500 in salary reduction contributions made to a health FSA for plan years beginning after 2012. File state income tax free See chapter 5. File state income tax free Expiring credits. File state income tax free  The plug-in electric vehicle credit and the refundable part of the credit for prior year minimum tax have expired. File state income tax free You cannot claim either one on your 2013 return. File state income tax free See chapter 37. File state income tax free Ponzi-type investment schemes. File state income tax free  There are new rules for how to claim a theft loss deduction on Form 4684 due to a Ponzi-type investment scheme. File state income tax free See chapter 25. File state income tax free Home office deduction simplified method. File state income tax free  If you can take a home office deduction, you may be able to use a simplified method to figure it. File state income tax free See Publication 587. File state income tax free Standard mileage rates. File state income tax free  The 2013 rate for business use of your car is increased to 56½ cents a mile. File state income tax free See chapter 26. File state income tax free The 2013 rate for use of your car to get medical care is increased to 24 cents a mile. File state income tax free See chapter 21. File state income tax free The 2013 rate for use of your car to move is increased to 24 cents a mile. File state income tax free See Publication 521, Moving Expenses. File state income tax free Reminders Listed below are important reminders and other items that may help you file your 2013 tax return. File state income tax free Many of these items are explained in more detail later in this publication. File state income tax free Enter your social security number (SSN). File state income tax free  Enter your SSN in the space provided on your tax form. File state income tax free If you filed a joint return for 2012 and are filing a joint return for 2013 with the same spouse, enter your names and SSNs in the same order as on your 2012 return. File state income tax free See chapter 1. File state income tax free Secure your tax records from identity theft. File state income tax free  Identity theft occurs when someone uses your personal information, such as your name, SSN, or other identifying information, without your permission, to commit fraud or other crimes. File state income tax free An identity thief may use your SSN to get a job or may file a tax return using your SSN to receive a refund. File state income tax free For more information about identity theft and how to reduce your risk from it, see chapter 1. File state income tax free Taxpayer identification numbers. File state income tax free  You must provide the taxpayer identification number for each person for whom you claim certain tax benefits. File state income tax free This applies even if the person was born in 2013. File state income tax free Generally, this number is the person's social security number (SSN). File state income tax free See chapter 1. File state income tax free Foreign source income. File state income tax free  If you are a U. File state income tax free S. File state income tax free citizen with income from sources outside the United States (foreign income), you must report all such income on your tax return unless it is exempt by U. File state income tax free S. File state income tax free law. File state income tax free This is true whether you live inside or outside the United States and whether or not you receive a Form W-2 or Form 1099 from the foreign payer. File state income tax free This applies to earned income (such as wages and tips) as well as unearned income (such as interest, dividends, capital gains, pensions, rents and royalties). File state income tax free If you live outside the United States, you may be able to exclude part or all of your foreign source earned income. File state income tax free For details, see Publication 54, Tax Guide for U. File state income tax free S. File state income tax free Citizens and Resident Aliens Abroad. File state income tax free Foreign financial assets. File state income tax free  If you had foreign financial assets in 2013, you may have to file Form 8938 with your return. File state income tax free Check www. File state income tax free IRS. File state income tax free gov/form8938 for details. File state income tax free Automatic 6-month extension to file tax return. File state income tax free  You can use Form 4868, Application for Automatic Extension of Time To File U. File state income tax free S. File state income tax free Individual Income Tax Return, to obtain an automatic 6-month extension of time to file your tax return. File state income tax free See chapter 1. File state income tax free Include your phone number on your return. File state income tax free  To promptly resolve any questions we have in processing your tax return, we would like to be able to call you. File state income tax free Please enter your daytime telephone number on your tax form next to your signature and occupation. File state income tax free If you are filing a joint return, you can enter either your or your spouse's daytime phone number. File state income tax free Payment of taxes. File state income tax free   You can pay your taxes online, by phone, or by check or money order. File state income tax free You can make a direct transfer from your bank account or use a credit or debit card. File state income tax free If you e-file, you can schedule an electronic payment. File state income tax free See chapter 1. File state income tax free Faster ways to file your return. File state income tax free  The IRS offers fast, accurate ways to file your tax return information without filing a paper tax return. File state income tax free You can use IRS e-file (electronic filing). File state income tax free See chapter 1. File state income tax free Free electronic filing. File state income tax free  You may be able to file your 2013 taxes online for free. File state income tax free See chapter 1. File state income tax free Change of address. File state income tax free  If you change your address, you should notify the IRS. File state income tax free See Change of Address in chapter 1. File state income tax free Refund on a late filed return. File state income tax free  If you were due a refund but you did not file a return, you generally must file your return within 3 years from the date the return was due (including extensions) to get that refund. File state income tax free See chapter 1. File state income tax free Frivolous tax returns. File state income tax free  The IRS has published a list of positions that are identified as frivolous. File state income tax free The penalty for filing a frivolous tax return is $5,000. File state income tax free See chapter 1. File state income tax free Filing erroneous claim for refund or credit. File state income tax free  You may have to pay a penalty if you file an erroneous claim for refund or credit. File state income tax free See chapter 1. File state income tax free Privacy Act and paperwork reduction information. File state income tax free   The IRS Restructuring and Reform Act of 1998, the Privacy Act of 1974, and the Paperwork Reduction Act of 1980 require that when we ask you for information we must first tell you what our legal right is to ask for the information, why we are asking for it, how it will be used, what could happen if we do not receive it, and whether your response is voluntary, required to obtain a benefit, or mandatory under the law. File state income tax free A complete statement on this subject can be found in your tax form instructions. File state income tax free Customer service for taxpayers. File state income tax free  You can set up a personal appointment at the most convenient Taxpayer Assistance Center, on the most convenient business day. File state income tax free See How To Get Tax Help in the back of this publication. File state income tax free Preparer e-file mandate. File state income tax free  Most paid preparers must e-file returns they prepare and file. File state income tax free Your preparer may make you aware of this requirement and the options available to you. File state income tax free Treasury Inspector General for Tax Administration. File state income tax free   If you want to confidentially report misconduct, waste, fraud, or abuse by an IRS employee, you can call 1-800-366-4484 (call 1-800-877-8339 if you are deaf, hard of hearing, or have a speech disability, and are using TTY/TDD equipment). File state income tax free You can remain anonymous. File state income tax free Photographs of missing children. File state income tax free  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. File state income tax free Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. File state income tax free 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. File state income tax free Introduction This publication covers the general rules for filing a federal income tax return. File state income tax free It supplements the information contained in your tax form instructions. File state income tax free It explains the tax law to make sure you pay only the tax you owe and no more. File state income tax free How this publication is arranged. File state income tax free   This publication closely follows Form 1040, U. File state income tax free S. File state income tax free Individual Income Tax Return. File state income tax free It is divided into six parts which cover different sections of Form 1040. File state income tax free Each part is further divided into chapters which generally discuss one line of the form. File state income tax free Do not worry if you file Form 1040A or Form 1040EZ. File state income tax free Anything included on a line of either of these forms is also included on Form 1040. File state income tax free   The table of contents inside the front cover and the index in the back of the publication are useful tools to help you find the information you need. File state income tax free What is in this publication. File state income tax free   The publication begins with the rules for filing a tax return. File state income tax free It explains: Who must file a return, Which tax form to use, When the return is due, How to e-file your return, and Other general information. File state income tax free It will help you identify which filing status you qualify for, whether you can claim any dependents, and whether the income you receive is taxable. File state income tax free The publication goes on to explain the standard deduction, the kinds of expenses you may be able to deduct, and the various kinds of credits you may be able to take to reduce your tax. File state income tax free   Throughout the publication are examples showing how the tax law applies in typical situations. File state income tax free Also throughout the publication are flowcharts and tables that present tax information in an easy-to-understand manner. File state income tax free   Many of the subjects discussed in this publication are discussed in greater detail in other IRS publications. File state income tax free References to those other publications are provided for your information. File state income tax free Icons. File state income tax free   Small graphic symbols, or icons, are used to draw your attention to special information. File state income tax free See Table 1 later for an explanation of each icon used in this publication. File state income tax free What is not covered in this publication. File state income tax free   Some material that you may find helpful is not included in this publication but can be found in your tax form instruction booklet. File state income tax free This includes lists of: Where to report certain items shown on information documents, and Recorded tax information topics (TeleTax). File state income tax free   If you operate your own business or have other self-employment income, such as from babysitting or selling crafts, see the following publications for more information. File state income tax free Publication 334, Tax Guide for Small Business (For Individuals Who Use Schedule C or C-EZ). File state income tax free Publication 535, Business Expenses. File state income tax free Publication 587, Business Use of Your Home (Including Use by Daycare Providers). File state income tax free Help from the IRS. File state income tax free   There are many ways you can get help from the IRS. File state income tax free These are explained under How To Get Tax Help in the back of this publication. File state income tax free Comments and suggestions. File state income tax free   We welcome your comments about this publication and your suggestions for future editions. File state income tax free   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. File state income tax free NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. File state income tax free Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. File state income tax free   You can send your comments from www. File state income tax free irs. File state income tax free gov/formspubs/. File state income tax free Click on “More Information” and then on “Comment on Tax Forms and Publications”. File state income tax free   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. File state income tax free Ordering forms and publications. File state income tax free   Visit www. File state income tax free irs. File state income tax free gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. File state income tax free Internal Revenue Service 1201 N. File state income tax free Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. File state income tax free   If you have a tax question, check the information available on IRS. File state income tax free gov or call 1-800-829-1040. File state income tax free We cannot answer tax questions sent to either of the above addresses. File state income tax free IRS mission. File state income tax free   Provide America's taxpayers top quality service by helping them understand and meet their tax responsibilities and by applying the tax law with integrity and fairness to all. File state income tax free Table 1. File state income tax free Legend of Icons Icon Explanation Items that may cause you particular problems, or an alert about pending legislation that may be enacted after this publication goes to print. File state income tax free An Internet site or an email address. File state income tax free An address you may need. File state income tax free Items you should keep in your personal records. File state income tax free Items you may need to figure or a worksheet you may need to complete and keep for your records. File state income tax free An important phone number. File state income tax free Helpful information you may need. File state income tax free Prev  Up  Next   Home   More Online Publications
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Affordable Care Act Tax Provisions for Individuals and Families

The Affordable Care Act, or health care law, contains health insurance coverage and financial assistance options for individuals and families. The IRS administers the tax provisions included in the law. Visit HealthCare.gov for more information on coverage options and financial assistance.
 

What do I need to know for my 2013 tax return?

Considerations for 2014

  • Open Enrollment for the Health Insurance Marketplace: The open enrollment period to purchase health care coverage through the Health Insurance Marketplace for 2014 began Oct. 1, 2013 and runs through March 31, 2014. When you get health insurance through the marketplace, you may be able to get advance payments of the premium tax credit that will immediately help lower your monthly premium. Learn more at HealthCare.gov.
  • Premium Tax Credit: If you get insurance through the Marketplace, you may be eligible to claim the premium tax credit. You can elect to have advance payments of the tax credit sent directly to your insurer during 2014, or wait to claim the credit when you file your tax return in 2015. If you choose to have advance payments sent to your insurer, you will have to reconcile the payments on your 2014 tax return, which will be filed in 2015. If you’re already receiving advance payments of the credit, you need do nothing at this time unless you have a change in circumstance. Learn More.
  • Change in Circumstances: If you're receiving advance payments of the premium tax credit to help pay for your insurance coverage, you should report life changes, such as income, marital status or family size changes, to your marketplace. Reporting changes will help to make sure you are getting the proper amount of advance payments.
  • Individual Shared Responsibility Payment: Starting January 2014, you and your family must have health care coverage, have an exemption from coverage, or make a payment when you file your 2014 tax return in 2015. Most people already have qualifying health care coverage and will not need to do anything more than maintain that coverage throughout 2014. Learn More.

 

Page Last Reviewed or Updated: 24-Mar-2014

The File State Income Tax Free

File state income tax free 5. File state income tax free   Additional Rules for Listed Property Table of Contents Introduction Useful Items - You may want to see: What Is Listed Property?Passenger Automobiles Other Property Used for Transportation Computers and Related Peripheral Equipment Can Employees Claim a Deduction? What Is the Business-Use Requirement?How To Allocate Use Qualified Business Use Recapture of Excess Depreciation Lessee's Inclusion Amount Do the Passenger Automobile Limits Apply?Maximum Depreciation Deduction Deductions After the Recovery Period Deductions For Passenger Automobiles Acquired in a Trade-in What Records Must Be Kept?Adequate Records How Is Listed Property Information Reported? Introduction This chapter discusses the deduction limits and other special rules that apply to certain listed property. File state income tax free Listed property includes cars and other property used for transportation, property used for entertainment, and certain computers. File state income tax free Deductions for listed property (other than certain leased property) are subject to the following special rules and limits. File state income tax free Deduction for employees. File state income tax free If your use of the property is not for your employer's convenience or is not required as a condition of your employment, you cannot deduct depreciation or rent expenses for your use of the property as an employee. File state income tax free Business-use requirement. File state income tax free If the property is not used predominantly (more than 50%) for qualified business use, you cannot claim the section 179 deduction or a special depreciation allowance. File state income tax free In addition, you must figure any depreciation deduction under the Modified Accelerated Cost Recovery System (MACRS) using the straight line method over the ADS recovery period. File state income tax free You may also have to recapture (include in income) any excess depreciation claimed in previous years. File state income tax free A similar inclusion amount applies to certain leased property. File state income tax free Passenger automobile limits and rules. File state income tax free Annual limits apply to depreciation deductions (including section 179 deductions and any special depreciation allowance) for certain passenger automobiles. File state income tax free You can continue to deduct depreciation for the unrecovered basis resulting from these limits after the end of the recovery period. File state income tax free This chapter defines listed property and explains the special rules and depreciation deduction limits that apply, including the special inclusion amount rule for leased property. File state income tax free It also discusses the recordkeeping rules for listed property and explains how to report information about the property on your tax return. File state income tax free Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 535 Business Expenses 587 Business Use of Your Home (Including Use by Daycare Providers) Form (and Instructions) 2106 Employee Business Expenses 2106-EZ Unreimbursed Employee Business Expenses 4562 Depreciation and Amortization 4797 Sales of Business Property See chapter 6 for information about getting publications and forms. File state income tax free What Is Listed Property? Listed property is any of the following. File state income tax free Passenger automobiles (as defined later). File state income tax free Any other property used for transportation, unless it is an excepted vehicle. File state income tax free Property generally used for entertainment, recreation, or amusement (including photographic, phonographic, communication, and video-recording equipment). File state income tax free Computers and related peripheral equipment, unless used only at a regular business establishment and owned or leased by the person operating the establishment. File state income tax free A regular business establishment includes a portion of a dwelling unit that is used both regularly and exclusively for business as discussed in Publication 587. File state income tax free Improvements to listed property. File state income tax free   An improvement made to listed property that must be capitalized is treated as a new item of depreciable property. File state income tax free The recovery period and method of depreciation that apply to the listed property as a whole also apply to the improvement. File state income tax free For example, if you must depreciate the listed property using the straight line method, you also must depreciate the improvement using the straight line method. File state income tax free Passenger Automobiles A passenger automobile is any four-wheeled vehicle made primarily for use on public streets, roads, and highways and rated at 6,000 pounds or less of unloaded gross vehicle weight (6,000 pounds or less of gross vehicle weight for trucks and vans). File state income tax free It includes any part, component, or other item physically attached to the automobile at the time of purchase or usually included in the purchase price of an automobile. File state income tax free The following vehicles are not considered passenger automobiles for these purposes. File state income tax free An ambulance, hearse, or combination ambulance-hearse used directly in a trade or business. File state income tax free A vehicle used directly in the trade or business of transporting persons or property for pay or hire. File state income tax free A truck or van that is a qualified nonpersonal use vehicle. File state income tax free Qualified nonpersonal use vehicles. File state income tax free   Qualified nonpersonal use vehicles are vehicles that by their nature are not likely to be used more than a minimal amount for personal purposes. File state income tax free They include the trucks and vans listed as excepted vehicles under Other Property Used for Transportation , next. File state income tax free They also include trucks and vans that have been specially modified so that they are not likely to be used more than a minimal amount for personal purposes, such as by installation of permanent shelving and painting the vehicle to display advertising or the company's name. File state income tax free For a detailed discussion of passenger automobiles, including leased passenger automobiles, see  Publication 463. File state income tax free Other Property Used for Transportation Although vehicles used to transport persons or property for pay or hire and vehicles rated at more than the 6,000-pound threshold are not passenger automobiles, they are still “other property used for transportation” and are subject to the special rules for listed property. File state income tax free Other property used for transportation includes trucks, buses, boats, airplanes, motorcycles, and any other vehicles used to transport persons or goods. File state income tax free Excepted vehicles. File state income tax free   Other property used for transportation does not include the following qualified nonpersonal use vehicles (defined earlier under Passenger Automobiles ). File state income tax free Clearly marked police and fire vehicles. File state income tax free Unmarked vehicles used by law enforcement officers if the use is officially authorized. File state income tax free Ambulances used as such and hearses used as such. File state income tax free Any vehicle with a loaded gross vehicle weight of over 14,000 pounds that is designed to carry cargo. File state income tax free Bucket trucks (cherry pickers), cement mixers, dump trucks (including garbage trucks), flatbed trucks, and refrigerated trucks. File state income tax free Combines, cranes and derricks, and forklifts. File state income tax free Delivery trucks with seating only for the driver, or only for the driver plus a folding jump seat. File state income tax free Qualified moving vans. File state income tax free Qualified specialized utility repair trucks. File state income tax free School buses used in transporting students and employees of schools. File state income tax free Other buses with a capacity of at least 20 passengers that are used as passenger buses. File state income tax free Tractors and other special purpose farm vehicles. File state income tax free Clearly marked police and fire vehicle. File state income tax free   A clearly marked police or fire vehicle is a vehicle that meets all the following requirements. File state income tax free It is owned or leased by a governmental unit or an agency or instrumentality of a governmental unit. File state income tax free It is required to be used for commuting by a police officer or fire fighter who, when not on a regular shift, is on call at all times. File state income tax free It is prohibited from being used for personal use (other than commuting) outside the limit of the police officer's arrest powers or the fire fighter's obligation to respond to an emergency. File state income tax free It is clearly marked with painted insignia or words that make it readily apparent that it is a police or fire vehicle. File state income tax free A marking on a license plate is not a clear marking for these purposes. File state income tax free Qualified moving van. File state income tax free   A qualified moving van is any truck or van used by a professional moving company for moving household or business goods if the following requirements are met. File state income tax free No personal use of the van is allowed other than for travel to and from a move site or for minor personal use, such as a stop for lunch on the way from one move site to another. File state income tax free Personal use for travel to and from a move site happens no more than five times a month on average. File state income tax free Personal use is limited to situations in which it is more convenient to the employer, because of the location of the employee's residence in relation to the location of the move site, for the van not to be returned to the employer's business location. File state income tax free Qualified specialized utility repair truck. File state income tax free   A truck is a qualified specialized utility repair truck if it is not a van or pickup truck and all the following apply. File state income tax free The truck was specifically designed for and is used to carry heavy tools, testing equipment, or parts. File state income tax free Shelves, racks, or other permanent interior construction has been installed to carry and store the tools, equipment, or parts and would make it unlikely that the truck would be used, other than minimally, for personal purposes. File state income tax free The employer requires the employee to drive the truck home in order to be able to respond in emergency situations for purposes of restoring or maintaining electricity, gas, telephone, water, sewer, or steam utility services. File state income tax free Computers and Related Peripheral Equipment A computer is a programmable, electronically activated device capable of accepting information, applying prescribed processes to the information, and supplying the results of those processes with or without human intervention. File state income tax free It consists of a central processing unit with extensive storage, logic, arithmetic, and control capabilities. File state income tax free Related peripheral equipment is any auxiliary machine which is designed to be controlled by the central processing unit of a computer. File state income tax free The following are neither computers nor related peripheral equipment. File state income tax free Any equipment that is an integral part of other property that is not a computer. File state income tax free Typewriters, calculators, adding and accounting machines, copiers, duplicating equipment, and similar equipment. File state income tax free Equipment of a kind used primarily for the user's amusement or entertainment, such as video games. File state income tax free Can Employees Claim a Deduction? If you are an employee, you can claim a depreciation deduction for the use of your listed property (whether owned or rented) in performing services as an employee only if your use is a business use. File state income tax free The use of your property in performing services as an employee is a business use only if both the following requirements are met. File state income tax free The use is for your employer's convenience. File state income tax free The use is required as a condition of your employment. File state income tax free If these requirements are not met, you cannot deduct depreciation (including the section 179 deduction) or rent expenses for your use of the property as an employee. File state income tax free Employer's convenience. File state income tax free   Whether the use of listed property is for your employer's convenience must be determined from all the facts. File state income tax free The use is for your employer's convenience if it is for a substantial business reason of the employer. File state income tax free The use of listed property during your regular working hours to carry on your employer's business generally is for the employer's convenience. File state income tax free Condition of employment. File state income tax free   Whether the use of listed property is a condition of your employment depends on all the facts and circumstances. File state income tax free The use of property must be required for you to perform your duties properly. File state income tax free Your employer does not have to require explicitly that you use the property. File state income tax free However, a mere statement by the employer that the use of the property is a condition of your employment is not sufficient. File state income tax free Example 1. File state income tax free Virginia Sycamore is employed as a courier with We Deliver, which provides local courier services. File state income tax free She owns and uses a motorcycle to deliver packages to downtown offices. File state income tax free We Deliver explicitly requires all delivery persons to own a car or motorcycle for use in their employment. File state income tax free Virginia's use of the motorcycle is for the convenience of We Deliver and is required as a condition of employment. File state income tax free Example 2. File state income tax free Bill Nelson is an inspector for Uplift, a construction company with many sites in the local area. File state income tax free He must travel to these sites on a regular basis. File state income tax free Uplift does not furnish an automobile or explicitly require him to use his own automobile. File state income tax free However, it pays him for any costs he incurs in traveling to the various sites. File state income tax free The use of his own automobile or a rental automobile is for the convenience of Uplift and is required as a condition of employment. File state income tax free Example 3. File state income tax free Assume the same facts as in Example 2 except that Uplift furnishes a car to Bill, who chooses to use his own car and receive payment for using it. File state income tax free The use of his own car is neither for the convenience of Uplift nor required as a condition of employment. File state income tax free Example 4. File state income tax free Marilyn Lee is a pilot for Y Company, a small charter airline. File state income tax free Y requires pilots to obtain 80 hours of flight time annually in addition to flight time spent with the airline. File state income tax free Pilots usually can obtain these hours by flying with the Air Force Reserve or by flying part-time with another airline. File state income tax free Marilyn owns her own airplane. File state income tax free The use of her airplane to obtain the required flight hours is neither for the convenience of the employer nor required as a condition of employment. File state income tax free Example 5. File state income tax free David Rule is employed as an engineer with Zip, an engineering contracting firm. File state income tax free He occasionally takes work home at night rather than work late in the office. File state income tax free He owns and uses a home computer which is virtually identical to the office model. File state income tax free His use of the computer is neither for the convenience of his employer nor required as a condition of employment. File state income tax free What Is the Business-Use Requirement? You can claim the section 179 deduction and a special depreciation allowance for listed property and depreciate listed property using GDS and a declining balance method if the property meets the business-use requirement. File state income tax free To meet this requirement, listed property must be used predominantly (more than 50% of its total use) for qualified business use. File state income tax free If this requirement is not met, the following rules apply. File state income tax free Property not used predominantly for qualified business use during the year it is placed in service does not qualify for the section 179 deduction. File state income tax free Property not used predominantly for qualified business use during the year it is placed in service does not qualify for a special depreciation allowance. File state income tax free Any depreciation deduction under MACRS for property not used predominantly for qualified business use during any year must be figured using the straight line method over the ADS recovery period. File state income tax free This rule applies each year of the recovery period. File state income tax free Excess depreciation on property previously used predominantly for qualified business use must be recaptured (included in income) in the first year in which it is no longer used predominantly for qualified business use. File state income tax free A lessee must add an inclusion amount to income in the first year in which the leased property is not used predominantly for qualified business use. File state income tax free Being required to use the straight line method for an item of listed property not used predominantly for qualified business use is not the same as electing the straight line method. File state income tax free It does not mean that you have to use the straight line method for other property in the same class as the item of listed property. File state income tax free Exception for leased property. File state income tax free   The business-use requirement generally does not apply to any listed property leased or held for leasing by anyone regularly engaged in the business of leasing listed property. File state income tax free   You are considered regularly engaged in the business of leasing listed property only if you enter into contracts for the leasing of listed property with some frequency over a continuous period of time. File state income tax free This determination is made on the basis of the facts and circumstances in each case and takes into account the nature of your business in its entirety. File state income tax free Occasional or incidental leasing activity is insufficient. File state income tax free For example, if you lease only one passenger automobile during a tax year, you are not regularly engaged in the business of leasing automobiles. File state income tax free An employer who allows an employee to use the employer's property for personal purposes and charges the employee for the use is not regularly engaged in the business of leasing the property used by the employee. File state income tax free How To Allocate Use To determine whether the business-use requirement is met, you must allocate the use of any item of listed property used for more than one purpose during the year among its various uses. File state income tax free For passenger automobiles and other means of transportation, allocate the property's use on the basis of mileage. File state income tax free You determine the percentage of qualified business use by dividing the number of miles you drove the vehicle for business purposes during the year by the total number of miles you drove the vehicle for all purposes (including business miles) during the year. File state income tax free For other listed property, allocate the property's use on the basis of the most appropriate unit of time the property is actually used (rather than merely being available for use). File state income tax free For example, you can determine the percentage of business use of a computer by dividing the number of hours you used the computer for business purposes during the year by the total number of hours you used the computer for all purposes (including business use) during the year. File state income tax free Entertainment use. File state income tax free   Treat the use of listed property for entertainment, recreation, or amusement purposes as a business use only to the extent you can deduct expenses (other than interest and property tax expenses) due to its use as an ordinary and necessary business expense. File state income tax free Commuting use. File state income tax free   The use of an automobile for commuting is not business use, regardless of whether work is performed during the trip. File state income tax free For example, a business telephone call made on a car telephone while commuting to work does not change the character of the trip from commuting to business. File state income tax free This is also true for a business meeting held in a car while commuting to work. File state income tax free Similarly, a business call made on an otherwise personal trip does not change the character of a trip from personal to business. File state income tax free The fact that an automobile is used to display material that advertises the owner's or user's trade or business does not convert an otherwise personal use into business use. File state income tax free Use of your automobile by another person. File state income tax free   If someone else uses your automobile, do not treat that use as business use unless one of the following conditions applies. File state income tax free That use is directly connected with your business. File state income tax free You properly report the value of the use as income to the other person and withhold tax on the income where required. File state income tax free You are paid a fair market rent. File state income tax free Treat any payment to you for the use of the automobile as a rent payment for purposes of item (3). File state income tax free Employee deductions. File state income tax free   If you are an employee, do not treat your use of listed property as business use unless it is for your employer's convenience and is required as a condition of your employment. File state income tax free See Can Employees Claim a Deduction , earlier. File state income tax free Qualified Business Use Qualified business use of listed property is any use of the property in your trade or business. File state income tax free However, it does not include the following uses. File state income tax free The leasing of property to any 5% owner or related person (to the extent the property is used by a 5% owner or person related to the owner or lessee of the property). File state income tax free The use of property as pay for the services of a 5% owner or related person. File state income tax free The use of property as pay for services of any person (other than a 5% owner or related person), unless the value of the use is included in that person's gross income and income tax is withheld on that amount where required. File state income tax free Property does not stop being used predominantly for qualified business use because of a transfer at death. File state income tax free Exception for leasing or compensatory use of aircraft. File state income tax free   Treat the leasing of any aircraft by a 5% owner or related person, or the compensatory use of any aircraft, as a qualified business use if at least 25% of the total use of the aircraft during the year is for a qualified business use. File state income tax free 5% owner. File state income tax free   For a business entity that is not a corporation, a 5% owner is any person who owns more than 5% of the capital or profits interest in the business. File state income tax free   For a corporation, a 5% owner is any person who owns, or is considered to own, either of the following. File state income tax free More than 5% of the outstanding stock of the corporation. File state income tax free Stock possessing more than 5% of the total combined voting power of all stock in the corporation. File state income tax free Related persons. File state income tax free   For a description of related persons, see Related persons in the discussion on property owned or used in 1986 under What Method Can You Use To Depreciate Your Property in chapter 1 . File state income tax free For this purpose, however, treat as related persons only the relationships listed in items (1) through (10) of that discussion and substitute “50%” for “10%” each place it appears. File state income tax free Examples. File state income tax free   The following examples illustrate whether the use of business property is qualified business use. File state income tax free Example 1. File state income tax free John Maple is the sole proprietor of a plumbing contracting business. File state income tax free John employs his brother, Richard, in the business. File state income tax free As part of Richard's pay, he is allowed to use one of the company automobiles for personal use. File state income tax free The company includes the value of the personal use of the automobile in Richard's gross income and properly withholds tax on it. File state income tax free The use of the automobile is pay for the performance of services by a related person, so it is not a qualified business use. File state income tax free Example 2. File state income tax free John, in Example 1, allows unrelated employees to use company automobiles for personal purposes. File state income tax free He does not include the value of the personal use of the company automobiles as part of their compensation and he does not withhold tax on the value of the use of the automobiles. File state income tax free This use of company automobiles by employees is not a qualified business use. File state income tax free Example 3. File state income tax free James Company Inc. File state income tax free owns several automobiles that its employees use for business purposes. File state income tax free The employees also are allowed to take the automobiles home at night. File state income tax free The fair market value of each employee's use of an automobile for any personal purpose, such as commuting to and from work, is reported as income to the employee and James Company withholds tax on it. File state income tax free This use of company automobiles by employees, even for personal purposes, is a qualified business use for the company. File state income tax free Investment Use The use of property to produce income in a nonbusiness activity (investment use) is not a qualified business use. File state income tax free However, you can treat the investment use as business use to figure the depreciation deduction for the property in a given year. File state income tax free Example 1. File state income tax free Sarah Bradley uses a home computer 50% of the time to manage her investments. File state income tax free She also uses the computer 40% of the time in her part-time consumer research business. File state income tax free Sarah's home computer is listed property because it is not used at a regular business establishment. File state income tax free She does not use the computer predominantly for qualified business use. File state income tax free Therefore, she cannot elect a section 179 deduction or claim a special depreciation allowance for the computer. File state income tax free She must depreciate it using the straight line method over the ADS recovery period. File state income tax free Her combined business/investment use for determining her depreciation deduction is 90%. File state income tax free Example 2. File state income tax free If Sarah uses her computer 30% of the time to manage her investments and 60% of the time in her consumer research business, it is used predominantly for qualified business use. File state income tax free She can elect a section 179 deduction and, if she does not deduct all the computer's cost, she can claim a special depreciation allowance and depreciate the computer using the 200% declining balance method over the GDS recovery period. File state income tax free Her combined business/investment use for determining her depreciation deduction is 90%. File state income tax free Recapture of Excess Depreciation If you used listed property more than 50% in a qualified business use in the year you placed it in service, you must recapture (include in income) excess depreciation in the first year you use it 50% or less. File state income tax free You also increase the adjusted basis of your property by the same amount. File state income tax free Excess depreciation is: The depreciation allowable for the property (including any section 179 deduction and special depreciation allowance claimed) for years before the first year you do not use the property predominantly for qualified business use, minus The depreciation that would have been allowable for those years if you had not used the property predominantly for qualified business use in the year you placed it in service. File state income tax free To determine the amount in (2) above, you must refigure the depreciation using the straight line method and the ADS recovery period. File state income tax free Example. File state income tax free In June 2009, Ellen Rye purchased and placed in service a pickup truck that cost $18,000. File state income tax free She used it only for qualified business use for 2009 through 2012. File state income tax free Ellen claimed a section 179 deduction of $10,000 based on the purchase of the truck. File state income tax free She began depreciating it using the 200% DB method over a 5-year GDS recovery period. File state income tax free The pickup truck's gross vehicle weight was over 6,000 pounds, so it was not subject to the passenger automobile limits discussed later under Do the Passenger Automobile Limits Apply. File state income tax free During 2013, she used the truck 50% for business and 50% for personal purposes. File state income tax free She includes $4,018 excess depreciation in her gross income for 2013. File state income tax free The excess depreciation is determined as follows. File state income tax free Total section 179 deduction ($10,000) and depreciation claimed ($6,618) for 2009 through 2012. File state income tax free (Depreciation is from Table A-1. File state income tax free ) $16,618 Minus: Depreciation allowable (Table A-8):     2009 – 10% of $18,000 $1,800   2010 – 20% of $18,000 3,600   2011 – 20% of $18,000 3,600   2012 – 20% of $18,000 3,600 12,600 Excess depreciation $4,018 If Ellen's use of the truck does not change to 50% for business and 50% for personal purposes until 2015, there will be no excess depreciation. File state income tax free The total depreciation allowable using Table A-8 through 2015 will be $18,000, which equals the total of the section 179 deduction and depreciation she will have claimed. File state income tax free Where to figure and report recapture. File state income tax free   Use Form 4797, Part IV, to figure the recapture amount. File state income tax free Report the recapture amount as other income on the same form or schedule on which you took the depreciation deduction. File state income tax free For example, report the recapture amount as other income on Schedule C (Form 1040) if you took the depreciation deduction on Schedule C. File state income tax free If you took the depreciation deduction on Form 2106, report the recapture amount as other income on Form 1040, line 21. File state income tax free Lessee's Inclusion Amount If you use leased listed property other than a passenger automobile for business/investment use, you must include an amount in your income in the first year your qualified business-use percentage is 50% or less. File state income tax free Your qualified business-use percentage is the part of the property's total use that is qualified business use (defined earlier). File state income tax free For the inclusion amount rules for a leased passenger automobile, see Leasing a Car in chapter 4 of Publication 463. File state income tax free The inclusion amount is the sum of Amount A and Amount B, described next. File state income tax free However, see the special rules for the inclusion amount, later, if your lease begins in the last 9 months of your tax year or is for less than one year. File state income tax free Amount A. File state income tax free   Amount A is: The fair market value of the property, multiplied by The business/investment use for the first tax year the qualified business-use percentage is 50% or less, multiplied by The applicable percentage from Table A-19 in Appendix A . File state income tax free   The fair market value of the property is the value on the first day of the lease term. File state income tax free If the capitalized cost of an item of listed property is specified in the lease agreement, you must treat that amount as the fair market value. File state income tax free Amount B. File state income tax free   Amount B is: The fair market value of the property, multiplied by The average of the business/investment use for all tax years the property was leased that precede the first tax year the qualified business-use percentage is 50% or less, multiplied by The applicable percentage from Table A–20 in Appendix A . File state income tax free Maximum inclusion amount. File state income tax free   The inclusion amount cannot be more than the sum of the deductible amounts of rent for the tax year in which the lessee must include the amount in gross income. File state income tax free Inclusion amount worksheet. File state income tax free   The following worksheet is provided to help you figure the inclusion amount for leased listed property. File state income tax free Inclusion Amount Worksheet for Leased Listed Property 1. File state income tax free Fair market value   2. File state income tax free Business/investment use for first year business use is 50% or less   3. File state income tax free Multiply line 1 by line 2. File state income tax free   4. File state income tax free Rate (%) from Table A-19   5. File state income tax free Multiply line 3 by line 4. File state income tax free This is Amount A. File state income tax free   6. File state income tax free Fair market value   7. File state income tax free Average business/investment use for years property leased before the first year business use is 50% or less . File state income tax free . File state income tax free . File state income tax free . File state income tax free . File state income tax free . File state income tax free . File state income tax free . File state income tax free . File state income tax free . File state income tax free . File state income tax free . File state income tax free . File state income tax free   8. File state income tax free Multiply line 6 by line 7   9. File state income tax free Rate (%) from Table A-20   10. File state income tax free Multiply line 8 by line 9. File state income tax free This is Amount B. File state income tax free   11. File state income tax free Add line 5 and line 10. File state income tax free This is your inclusion amount. File state income tax free Enter here and as other income on the form or schedule on which you originally took the deduction (for example, Schedule C or F (Form 1040), Form 1040, Form 1120, etc. File state income tax free )         Example. File state income tax free On February 1, 2011, Larry House, a calendar year taxpayer, leased and placed in service a computer with a fair market value of $3,000. File state income tax free The lease is for a period of 5 years. File state income tax free Larry does not use the computer at a regular business establishment, so it is listed property. File state income tax free His business use of the property (all of which is qualified business use) is 80% in 2011, 60% in 2012, and 40% in 2013. File state income tax free He must add an inclusion amount to gross income for 2013, the first tax year his qualified business-use percentage is 50% or less. File state income tax free The computer has a 5-year recovery period under both GDS and ADS. File state income tax free 2013 is the third tax year of the lease, so the applicable percentage from Table A-19 is −19. File state income tax free 8%. File state income tax free The applicable percentage from Table A-20 is 22. File state income tax free 0%. File state income tax free Larry's deductible rent for the computer for 2013 is $800. File state income tax free Larry uses the Inclusion amount worksheet. File state income tax free to figure the amount he must include in income for 2013. File state income tax free His inclusion amount is $224, which is the sum of −$238 (Amount A) and $462 (Amount B). File state income tax free Inclusion Amount Worksheet for Leased Listed Property 1. File state income tax free Fair market value $3,000   2. File state income tax free Business/investment use for first year business use is 50% or less 40 % 3. File state income tax free Multiply line 1 by line 2. File state income tax free 1,200   4. File state income tax free Rate (%) from Table A-19 −19. File state income tax free 8 % 5. File state income tax free Multiply line 3 by line 4. File state income tax free This is Amount A. File state income tax free −238   6. File state income tax free Fair market value 3,000   7. File state income tax free Average business/investment use for years property leased before the first year business use is 50% or less 70 % 8. File state income tax free Multiply line 6 by line 7 2,100   9. File state income tax free Rate (%) from Table A-20 22. File state income tax free 0 % 10. File state income tax free Multiply line 8 by line 9. File state income tax free This is Amount B. File state income tax free 462   11. File state income tax free Add line 5 and line 10. File state income tax free This is your inclusion amount. File state income tax free Enter here and as other income on the form or schedule on which you originally took the deduction (for example, Schedule C or F (Form 1040), Form 1040, Form 1120, etc. File state income tax free ) $224           Lease beginning in the last 9 months of your tax year. File state income tax free    The inclusion amount is subject to a special rule if all the following apply. File state income tax free The lease term begins within 9 months before the close of your tax year. File state income tax free You do not use the property predominantly (more than 50%) for qualified business use during that part of the tax year. File state income tax free The lease term continues into your next tax year. File state income tax free Under this special rule, add the inclusion amount to income in the next tax year. File state income tax free Figure the inclusion amount by taking into account the average of the business/investment use for both tax years (line 2 of the Inclusion Amount Worksheet for Leased Listed Property) and the applicable percentage for the tax year the lease term begins. File state income tax free Skip lines 6 through 9 of the worksheet and enter zero on line 10. File state income tax free Example 1. File state income tax free On August 1, 2012, Julie Rule, a calendar year taxpayer, leased and placed in service an item of listed property. File state income tax free The property is 5-year property with a fair market value of $10,000. File state income tax free Her property has a recovery period of 5 years under ADS. File state income tax free The lease is for 5 years. File state income tax free Her business use of the property was 50% in 2012 and 90% in 2013. File state income tax free She paid rent of $3,600 for 2012, of which $3,240 is deductible. File state income tax free She must include $147 in income in 2013. File state income tax free The $147 is the sum of Amount A and Amount B. File state income tax free Amount A is $147 ($10,000 × 70% × 2. File state income tax free 1%), the product of the fair market value, the average business use for 2012 and 2013, and the applicable percentage for year one from Table A-19 . File state income tax free Amount B is zero. File state income tax free Lease for less than one year. File state income tax free   A special rule for the inclusion amount applies if the lease term is less than one year and you do not use the property predominantly (more than 50%) for qualified business use. File state income tax free The amount included in income is the inclusion amount (figured as described in the preceding discussions) multiplied by a fraction. File state income tax free The numerator of the fraction is the number of days in the lease term and the denominator is 365 (or 366 for leap years). File state income tax free   The lease term for listed property other than residential rental or nonresidential real property includes options to renew. File state income tax free If you have two or more successive leases that are part of the same transaction (or a series of related transactions) for the same or substantially similar property, treat them as one lease. File state income tax free Example 2. File state income tax free On October 1, 2012, John Joyce, a calendar year taxpayer, leased and placed in service an item of listed property that is 3-year property. File state income tax free This property had a fair market value of $15,000 and a recovery period of 5 years under ADS. File state income tax free The lease term was 6 months (ending on March 31, 2013), during which he used the property 45% in business. File state income tax free He must include $71 in income in 2013. File state income tax free The $71 is the sum of Amount A and Amount B. File state income tax free Amount A is $71 ($15,000 × 45% × 2. File state income tax free 1% × 183/365), the product of the fair market value, the average business use for both years, and the applicable percentage for year one from Table A-19 , prorated for the length of the lease. File state income tax free Amount B is zero. File state income tax free Where to report inclusion amount. File state income tax free   Report the inclusion amount figured as described in the preceding discussions as other income on the same form or schedule on which you took the deduction for your rental costs. File state income tax free For example, report the inclusion amount as other income on Schedule C (Form 1040) if you took the deduction on Schedule C. File state income tax free If you took the deduction for rental costs on Form 2106, report the inclusion amount as other income on Form 1040, line 21. File state income tax free Do the Passenger Automobile Limits Apply? The depreciation deduction, including the section 179 deduction and special depreciation allowance, you can claim for a passenger automobile (defined earlier) each year is limited. File state income tax free This section describes the maximum depreciation deduction amounts for 2013 and explains how to deduct, after the recovery period, the unrecovered basis of your property that results from applying the passenger automobile limit. File state income tax free Exception for leased cars. File state income tax free   The passenger automobile limits generally do not apply to passenger automobiles leased or held for leasing by anyone regularly engaged in the business of leasing passenger automobiles. File state income tax free For information on when you are considered regularly engaged in the business of leasing listed property, including passenger automobiles, see Exception for leased property , earlier, under What Is the Business-Use Requirement . File state income tax free Maximum Depreciation Deduction The passenger automobile limits are the maximum depreciation amounts you can deduct for a passenger automobile. File state income tax free They are based on the date you placed the automobile in service. File state income tax free Passenger Automobiles The maximum deduction amounts for most passenger automobiles are shown in the following table. File state income tax free Maximum Depreciation Deduction for Passenger Automobiles Date       4th & Placed 1st 2nd 3rd Later In Service Year Year Year Years 2013 $11,1601 $5,100 $3,050 $1,875 2012 11,1601 5,100 3,050 1,875 2011 11,0602 4,900 2,950 1,775 2010 11,0602  4,900 2,950 1,775 2009 10,9603 4,800 2,850 1,775 2008 10,9603  4,800 2,850 1,775 2007 3,060 4,900 2,850 1,775 2006 2,960 4,800 2,850 1,775 2005 2,960 4,700 2,850 1,675 2004 10,6104 4,800 2,850 1,675 5/06/2003– 12/31/2003 10,7105 4,900 2,950 1,775 1/01/2003– 5/05/2003 7,6606 4,900 2,950 1,775 1If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,160. File state income tax free 2If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,060. File state income tax free 3If you elected not to claim any special depreciation allowance for the vehicle or the vehicle is not qualified property, the maximum deduction is $2,960. File state income tax free 4If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $2,960. File state income tax free 5If you acquired the vehicle before 5/06/03, the maximum deduction is $7,660. File state income tax free If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $3,060. File state income tax free 6If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $3,060. File state income tax free If your business/investment use of the automobile is less than 100%, you must reduce the maximum deduction amount by multiplying the maximum amount by the percentage of business/investment use determined on an annual basis during the tax year. File state income tax free If you have a short tax year, you must reduce the maximum deduction amount by multiplying the maximum amount by a fraction. File state income tax free The numerator of the fraction is the number of months and partial months in the short tax year and the denominator is 12. File state income tax free Example. File state income tax free On April 15, 2013, Virginia Hart bought and placed in service a new car for $14,500. File state income tax free She used the car only in her business. File state income tax free She files her tax return based on the calendar year. File state income tax free She does not elect a section 179 deduction and elected not to claim any special depreciation allowance for the car. File state income tax free Under MACRS, a car is 5-year property. File state income tax free Since she placed her car in service on April 15 and used it only for business, she uses the percentages in Table A-1 to figure her MACRS depreciation on the car. File state income tax free Virginia multiplies the $14,500 unadjusted basis of her car by 0. File state income tax free 20 to get her MACRS depreciation of $2,900 for 2013. File state income tax free This $2,900 is below the maximum depreciation deduction of $3,160 for passenger automobiles placed in service in 2013. File state income tax free She can deduct the full $2,900. File state income tax free Electric Vehicles The maximum depreciation deductions for passenger automobiles that are produced to run primarily on electricity are higher than those for other automobiles. File state income tax free The maximum deduction amounts for electric vehicles placed in service after August 5, 1997, and before January 1, 2007, are shown in the following table. File state income tax free Owners of electric vehicles placed in service after December 31, 2006, should use the table of maximum deduction amounts later for electric vehicles classified as passenger automobiles or use the table of maximum deduction amounts for trucks and vans later, for electric vehicles classified as trucks and vans. File state income tax free Maximum Depreciation Deduction For Electric Vehicles Date       4th & Placed 1st 2nd 3rd Later In Service Year Year Year Years 2006 $8,980 $14,400 $8,650 $5,225 2005 8,880 14,200 8,450 5,125 2004 31,8301 14,300 8,550 5,125 5/06/2003– 12/31/2003 32,0302 14,600 8,750 5,225 1/01/2003– 5/05/2003 22,8803 14,600 8,750 5,225 1If you elected not to claim any special depreciation allowance for the vehicle or the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $8,880. File state income tax free 2If you acquired the vehicle before 5/06/03, the maximum deduction is $22,880. File state income tax free If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $9,080. File state income tax free 3 If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $9,080. File state income tax free Trucks and Vans The maximum depreciation deductions for trucks and vans placed in service after 2002 are higher than those for other passenger automobiles. File state income tax free The maximum deduction amounts for trucks and vans are shown in the following table. File state income tax free Maximum Depreciation Deduction For Trucks and Vans Date       4th & Placed 1st 2nd 3rd Later In Service Year Year Year Years 2013 $11,3601 $5,400 $3,250 $1,975 2012 11,3601 5,300 3,150 1,875 2011 11,2602 5,200 3,150 1,875 2010 11,1603 5,100 3,050 1,875 2009 11,0604 4,900 2,950 1,775 2008 11,1605 5,100 3,050 1,875 2007 3,260 5,200 3,050 1,875 2006 3,260 5,200 3,150 1,875 2005 3,260 5,200 3,150 1,875 2004 10,9106 5,300 3,150 1,875 5/06/2003– 12/31/2003 11,0107 5,400 3,250 1,975 1/01/2003– 5/05/2003 7,9608 5,400 3,250 1,975 1 If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,360. File state income tax free 2 If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,260. File state income tax free 3 If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,160. File state income tax free 4 If you elect not to claim any special depreciation allowance for the vehicle or the vehicle is not qualified property, the maximum deduction is $3,060. File state income tax free 5If you elected not to claim any special depreciation allowance for the vehicle or the vehicle is not qualified property, the maximum deduction is $3,160. File state income tax free 6If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, or the maximum deduction is $3,260. File state income tax free 7 If you acquired the vehicle before 5/06/03, the maximum deduction is $7,960. File state income tax free If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $3,360. File state income tax free 8 If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $3,360. File state income tax free Depreciation Worksheet for Passenger Automobiles You can use the following worksheet to figure your depreciation deduction using the percentage tables. File state income tax free Then use the information from this worksheet to prepare Form 4562. File state income tax free Depreciation Worksheet for Passenger Automobiles   Part I   1. File state income tax free MACRS system (GDS or ADS)     2. File state income tax free Property class     3. File state income tax free Date placed in service     4. File state income tax free Recovery period     5. File state income tax free Method and convention     6. File state income tax free Depreciation rate (from tables)     7. File state income tax free Maximum depreciation deduction for this year from the appropriate table       8. File state income tax free Business/investment-use percentage       9. File state income tax free Multiply line 7 by line 8. File state income tax free This is your adjusted maximum depreciation deduction       10. File state income tax free Section 179 deduction claimed this year (not more than line 9). File state income tax free Enter -0- if this is not the year you placed the car in service. File state income tax free         Note. File state income tax free  1) If line 10 is equal to line 9, stop here. File state income tax free Your combined section 179 and depreciation deduction (including your special depreciation allowance) is limited to the amount on line 9. File state income tax free  2) If line 10 is less than line 9, complete Part II. File state income tax free   Part II   11. File state income tax free Subtract line 10 from line 9. File state income tax free This is the limit on the amount you can deduct for depreciation (including any special depreciation allowance )       12. File state income tax free Cost or other basis (reduced by any alternative motor vehicle credit 1or credit for electric vehicles 2)       13. File state income tax free Multiply line 12 by line 8. File state income tax free This is your business/investment cost       14. File state income tax free Section 179 deduction claimed in the year you placed the car in service       15. File state income tax free Subtract line 14 from line 13. File state income tax free This is your tentative basis for depreciation       16. File state income tax free Multiply line 15 by . File state income tax free 50 if the 50% special depreciation allowance applies. File state income tax free This is your special depreciation allowance. File state income tax free Enter -0- if this is not the year you placed the car in service, the car is not qualified property, or you elected not to claim a special depreciation allowance       Note 1) If line 16 is equal to line 11, stop here. File state income tax free Your depreciation deduction (including your special depreciation allowance) is limited to the amount on line 11. File state income tax free  2) If line 16 is less than line 11, complete Part III. File state income tax free   Part III   17. File state income tax free Subtract line 16 from 11. File state income tax free This is the limit on the amount you can deduct for MACRS depreciation       18. File state income tax free Subtract line 16 from line 15. File state income tax free This is your basis for depreciation. File state income tax free       19. File state income tax free Multiply line 18 by line 6. File state income tax free This is your tentative MACRS depreciation deduction. File state income tax free       20. File state income tax free Enter the lesser of line 17 or line 19. File state income tax free This is your MACRS depreciation deduction. File state income tax free     1 When figuring the amount to enter on line 12, do not reduce your cost or other basis by any section 179 deduction you claimed for your car. File state income tax free 2 Reduce the basis by the lesser of $4,000 or 10% of the cost of the vehicle even if the credit is less than that amount. File state income tax free             Deductions After the Recovery Period If the depreciation deductions for your automobile are reduced under the passenger automobile limits, you will have unrecovered basis in your automobile at the end of the recovery period. File state income tax free If you continue to use the automobile for business, you can deduct that unrecovered basis after the recovery period ends. File state income tax free You can claim a depreciation deduction in each succeeding tax year until you recover your full basis in the car. File state income tax free The maximum amount you can deduct each year is determined by the date you placed the car in service and your business/investment-use percentage. File state income tax free See Maximum Depreciation Deduction , earlier. File state income tax free Unrecovered basis is the cost or other basis of the passenger automobile reduced by any clean-fuel vehicle deduction, electric vehicle credit, depreciation, and section 179 deductions that would have been allowable if you had used the car 100% for business and investment use and the passenger automobile limits had not applied. File state income tax free You cannot claim a depreciation deduction for listed property other than passenger automobiles after the recovery period ends. File state income tax free There is no unrecovered basis at the end of the recovery period because you are considered to have used this property 100% for business and investment purposes during all of the recovery period. File state income tax free Example. File state income tax free In May 2007, you bought and placed in service a car costing $31,500. File state income tax free The car was 5-year property under GDS (MACRS). File state income tax free You did not elect a section 179 deduction and elected not to claim any special depreciation allowance for the car. File state income tax free You used the car exclusively for business during the recovery period (2007 through 2012). File state income tax free You figured your depreciation as shown below. File state income tax free Year Percentage Amount Limit   Allowed 2007 20. File state income tax free 0% $6,300 $2,960   $2,960 2008 32. File state income tax free 0 10,080 4,800   4,800 2009 19. File state income tax free 2 6,048 2,850   2,850 2010 11. File state income tax free 52 3,629 1,675   1,675 2011 11. File state income tax free 52 3,629 1,675   1,675 2012 5. File state income tax free 76 1,814 1,675   1,675 Total   $15,635 At the end of 2012, you had an unrecovered basis of $15,865 ($31,500 − $15,635). File state income tax free If in 2013 and later years you continue to use the car 100% for business, you can deduct each year the lesser of $1,675 or your remaining unrecovered basis. File state income tax free If your business use of the car had been less than 100% during any year, your depreciation deduction would have been less than the maximum amount allowable for that year. File state income tax free However, in figuring your unrecovered basis in the car, you would still reduce your basis by the maximum amount allowable as if the business use had been 100%. File state income tax free For example, if you had used your car 60% for business instead of 100%, your allowable depreciation deductions would have been $9,519 ($15,865 × 60%), but you still would have to reduce your basis by $15,865 to determine your unrecovered basis. File state income tax free Deductions For Passenger Automobiles Acquired in a Trade-in If you acquire a passenger automobile in a trade-in, depreciate the carryover basis separately as if the trade-in did not occur. File state income tax free Depreciate the part of the new automobile's basis that exceeds its carryover basis (excess basis) as if it were newly placed in service property. File state income tax free This excess basis is the additional cash paid for the new automobile in the trade-in. File state income tax free The depreciation figured for the two components of the basis (carryover basis and excess basis) is subject to a single passenger automobile limit. File state income tax free Special rules apply in determining the passenger automobile limits. File state income tax free These rules and examples are discussed in section 1. File state income tax free 168(i)-6(d)(3) of the regulations. File state income tax free Instead of figuring depreciation for the carryover basis and the excess basis separately, you can elect to treat the old automobile as disposed of and both of the basis components for the new automobile as if placed in service at the time of the trade-in. File state income tax free For more information, including how to make this election, see Election out under Property Acquired in a Like-kind Exchange or Involuntary Conversion in chapter 4 and sections 1. File state income tax free 168(i)-6(i) and 1. File state income tax free 168(i)-6(j) of the regulations. File state income tax free What Records Must Be Kept? You cannot take any depreciation or section 179 deduction for the use of listed property unless you can prove your business/investment use with adequate records or with sufficient evidence to support your own statements. File state income tax free For listed property, you must keep records for as long as any recapture can still occur. File state income tax free Recapture can occur in any tax year of the recovery period. File state income tax free Adequate Records To meet the adequate records requirement, you must maintain an account book, diary, log, statement of expense, trip sheet, or similar record or other documentary evidence that, together with the receipt, is sufficient to establish each element of an expenditure or use. File state income tax free You do not have to record information in an account book, diary, or similar record if the information is already shown on the receipt. File state income tax free However, your records should back up your receipts in an orderly manner. File state income tax free Elements of expenditure or use. File state income tax free   Your records or other documentary evidence must support all the following. File state income tax free The amount of each separate expenditure, such as the cost of acquiring the item, maintenance and repair costs, capital improvement costs, lease payments, and any other expenses. File state income tax free The amount of each business and investment use (based on an appropriate measure, such as mileage for vehicles and time for other listed property), and the total use of the property for the tax year. File state income tax free The date of the expenditure or use. File state income tax free The business or investment purpose for the expenditure or use. File state income tax free   Written documents of your expenditure or use are generally better evidence than oral statements alone. File state income tax free You do not have to keep a daily log. File state income tax free However, some type of record containing the elements of an expenditure or the business or investment use of listed property made at or near the time of the expenditure or use and backed up by other documents is preferable to a statement you prepare later. File state income tax free Timeliness. File state income tax free   You must record the elements of an expenditure or use at the time you have full knowledge of the elements. File state income tax free An expense account statement made from an account book, diary, or similar record prepared or maintained at or near the time of the expenditure or use generally is considered a timely record if, in the regular course of business: The statement is given by an employee to the employer, or The statement is given by an independent contractor to the client or customer. File state income tax free   For example, a log maintained on a weekly basis, that accounts for use during the week, will be considered a record made at or near the time of use. File state income tax free Business purpose supported. File state income tax free   Generally, an adequate record of business purpose must be in the form of a written statement. File state income tax free However, the amount of detail necessary to establish a business purpose depends on the facts and circumstances of each case. File state income tax free A written explanation of the business purpose will not be required if the purpose can be determined from the surrounding facts and circumstances. File state income tax free For example, a salesperson visiting customers on an established sales route will not normally need a written explanation of the business purpose of his or her travel. File state income tax free Business use supported. File state income tax free   An adequate record contains enough information on each element of every business or investment use. File state income tax free The amount of detail required to support the use depends on the facts and circumstances. File state income tax free For example, a taxpayer who uses a truck for both business and personal purposes and whose only business use of the truck is to make customer deliveries on an established route can satisfy the requirement by recording the length of the route, including the total number of miles driven during the tax year and the date of each trip at or near the time of the trips. File state income tax free   Although you generally must prepare an adequate written record, you can prepare a record of the business use of listed property in a computer memory device that uses a logging program. File state income tax free Separate or combined expenditures or uses. File state income tax free   Each use by you normally is considered a separate use. File state income tax free However, you can combine repeated uses as a single item. File state income tax free   Record each expenditure as a separate item. File state income tax free Do not combine it with other expenditures. File state income tax free If you choose, however, you can combine amounts you spent for the use of listed property during a tax year, such as for gasoline or automobile repairs. File state income tax free If you combine these expenses, you do not need to support the business purpose of each expense. File state income tax free Instead, you can divide the expenses based on the total business use of the listed property. File state income tax free   You can account for uses that can be considered part of a single use, such as a round trip or uninterrupted business use, by a single record. File state income tax free For example, you can account for the use of a truck to make deliveries at several locations that begin and end at the business premises and can include a stop at the business in between deliveries by a single record of miles driven. File state income tax free You can account for the use of a passenger automobile by a salesperson for a business trip away from home over a period of time by a single record of miles traveled. File state income tax free Minimal personal use (such as a stop for lunch between two business stops) is not an interruption of business use. File state income tax free Confidential information. File state income tax free   If any of the information on the elements of an expenditure or use is confidential, you do not need to include it in the account book or similar record if you record it at or near the time of the expenditure or use. File state income tax free You must keep it elsewhere and make it available as support to the IRS director for your area on request. File state income tax free Substantial compliance. File state income tax free   If you have not fully supported a particular element of an expenditure or use, but have complied with the adequate records requirement for the expenditure or use to the satisfaction of the IRS director for your area, you can establish this element by any evidence the IRS director for your area deems adequate. File state income tax free   If you fail to establish to the satisfaction of the IRS director for your area that you have substantially complied with the adequate records requirement for an element of an expenditure or use, you must establish the element as follows. File state income tax free By your own oral or written statement containing detailed information as to the element. File state income tax free By other evidence sufficient to establish the element. File state income tax free   If the element is the cost or amount, time, place, or date of an expenditure or use, its supporting evidence must be direct evidence, such as oral testimony by witnesses or a written statement setting forth detailed information about the element or the documentary evidence. File state income tax free If the element is the business purpose of an expenditure, its supporting evidence can be circumstantial evidence. File state income tax free Sampling. File state income tax free   You can maintain an adequate record for part of a tax year and use that record to support your business and investment use of listed property for the entire tax year if it can be shown by other evidence that the periods for which you maintain an adequate record are representative of the use throughout the year. File state income tax free Example 1. File state income tax free Denise Williams, a sole proprietor and calendar year taxpayer, operates an interior decorating business out of her home. File state income tax free She uses her automobile for local business visits to the homes or offices of clients, for meetings with suppliers and subcontractors, and to pick up and deliver items to clients. File state income tax free There is no other business use of the automobile, but she and family members also use it for personal purposes. File state income tax free She maintains adequate records for the first 3 months of the year showing that 75% of the automobile use was for business. File state income tax free Subcontractor invoices and paid bills show that her business continued at approximately the same rate for the rest of the year. File state income tax free If there is no change in circumstances, such as the purchase of a second car for exclusive use in her business, the determination that her combined business/investment use of the automobile for the tax year is 75% rests on sufficient supporting evidence. File state income tax free Example 2. File state income tax free Assume the same facts as in Example 1, except that Denise maintains adequate records during the first week of every month showing that 75% of her use of the automobile is for business. File state income tax free Her business invoices show that her business continued at the same rate during the later weeks of each month so that her weekly records are representative of the automobile's business use throughout the month. File state income tax free The determination that her business/investment use of the automobile for the tax year is 75% rests on sufficient supporting evidence. File state income tax free Example 3. File state income tax free Bill Baker, a sole proprietor and calendar year taxpayer, is a salesman in a large metropolitan area for a company that manufactures household products. File state income tax free For the first 3 weeks of each month, he occasionally uses his own automobile for business travel within the metropolitan area. File state income tax free During these weeks, his business use of the automobile does not follow a consistent pattern. File state income tax free During the fourth week of each month, he delivers all business orders taken during the previous month. File state income tax free The business use of his automobile, as supported by adequate records, is 70% of its total use during that fourth week. File state income tax free The determination based on the record maintained during the fourth week of the month that his business/investment use of the automobile for the tax year is 70% does not rest on sufficient supporting evidence because his use during that week is not representative of use during other periods. File state income tax free Loss of records. File state income tax free   When you establish that failure to produce adequate records is due to loss of the records through circumstances beyond your control, such as through fire, flood, earthquake, or other casualty, you have the right to support a deduction by reasonable reconstruction of your expenditures and use. File state income tax free How Is Listed Property Information Reported? You must provide the information about your listed property requested in Part V of Form 4562, Section A, if you claim either of the following deductions. File state income tax free Any deduction for a vehicle. File state income tax free A depreciation deduction for any other listed property. File state income tax free If you claim any deduction for a vehicle, you also must provide the information requested in Section B. File state income tax free If you provide the vehicle for your employee's use, the employee must give you this information. File state income tax free If you provide any vehicle for use by an employee, you must first answer the questions in Section C to see if you meet an exception to completing Section B for that vehicle. File state income tax free Vehicles used by your employees. File state income tax free   You do not have to complete Section B, Part V, for vehicles used by your employees who are not more-than-5% owners or related persons if you meet at least one of the following requirements. File state income tax free You maintain a written policy statement that prohibits one of the following uses of the vehicles. File state income tax free All personal use including commuting. File state income tax free Personal use, other than commuting, by employees who are not officers, directors, or 1%-or-more owners. File state income tax free You treat all use of the vehicles by your employees as personal use. File state income tax free You provide more than five vehicles for use by your employees, and you keep in your records the information on their use given to you by the employees. File state income tax free For demonstrator automobiles provided to full-time salespersons, you maintain a written policy statement that limits the total mileage outside the salesperson's normal working hours and prohibits use of the automobile by anyone else, for vacation trips, or to store personal possessions. File state income tax free Exceptions. File state income tax free   If you file Form 2106, 2106-EZ, or Schedule C-EZ (Form 1040), and you are not required to file Form 4562, report information about listed property on that form and not on Form 4562. File state income tax free Also, if you file Schedule C (Form 1040) and are claiming the standard mileage rate or actual vehicle expenses (except depreciation) and you are not required to file Form 4562 for any other reason, report vehicle information in Part IV of Schedule C and not on Form 4562. File state income tax free Prev  Up  Next   Home   More Online Publications