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

1. Get Answers

Your online questions are customized to your unique tax situation.

2. Maximize your Refund

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

3. E-File for FREE

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

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

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

H&r Block Tax Filing

1040 Easy Form1040ez 2010 Tax Form1040ez Tax Form InstructionsFiling And Amended Tax Return2011 Taxes Online1040 Ez Form 2012Free Tax Software 2011 DownloadFree Tax Returns2011 Ez Tax Form2011 Ri 1040nrFree Irs EfileHow To File Amended Tax Return 2013H&r Block 2011 Tax ReturnFree 2006 Tax SoftwareAmend 2011 Tax Return FormFiling 1040ezWww Irs Gov Efile1040ez 2012 E File1040ez Fillable Form 2012How To File State Taxes Online Free2012 1040 Ez FormFed Tax Forms 2012Free 1040ez Form1040ez Tax FormFederal Tax Tables 2011Free Fillable State Tax FormsWww 1040 Com2012 1040 FormsFree Tax Forms 2011Wwwhrblock ComTurbotax Free For MilitaryFile Free Federal And State Taxes1040ez Instruction Book2009 Tax Forms DownloadState Tax Return FormsCan You Still File 2012 Taxes1040ez Form 2013File 2012 TaxesI Need To File My State Taxes OnlyIrs 2009

H&r Block Tax Filing

H&r block tax filing 4. H&r block tax filing   General Business Credits Table of Contents Introduction Useful Items - You may want to see: Business Credits How To Claim the Credit Introduction Your general business credit for the year consists of your carryforward of business credits from prior years plus the total of your current year business credits. H&r block tax filing In addition, your general business credit for the current year may be increased later by the carryback of business credits from later years. H&r block tax filing You subtract this credit directly from your tax. H&r block tax filing Useful Items - You may want to see: Form (and Instructions) 3800 General Business Credit 6251 Alternative Minimum Tax—Individuals See chapter 12 for information about getting publications and forms. H&r block tax filing Business Credits All of the following credits are part of the general business credit. H&r block tax filing The form you use to figure each credit is shown in parentheses. H&r block tax filing You will also have to complete Form 3800. H&r block tax filing Alternative fuel vehicle refueling property credit (Form 8911). H&r block tax filing   This credit applies to the cost of any qualified fuel vehicle refueling property you placed in service. H&r block tax filing For more information, see Form 8911. H&r block tax filing Alternative motor vehicle credit (Form 8910). H&r block tax filing   For more information, see Form 8910. H&r block tax filing Biodiesel and renewable diesel fuels credit (Form 8864). H&r block tax filing   For more information, see Form 8864. H&r block tax filing Biofuel producer credit (Form 6478). H&r block tax filing    For more information, see Form 6478. H&r block tax filing Carbon dioxide sequestration credit (Form 8933). H&r block tax filing   This credit is for carbon dioxide which is captured at a qualified facility and disposed of in a secure geological storage or used in a qualified enhanced oil or natural gas recovery project. H&r block tax filing For more information, see Form 8933. H&r block tax filing Credit for employer social security and Medicare taxes paid on certain employee tips (Form 8846). H&r block tax filing   This credit is generally equal to your (employer's) portion of social security and Medicare taxes paid on tips received by employees of your food and beverage establishment where tipping is customary. H&r block tax filing The credit applies regardless of whether the food is consumed on or off your business premises. H&r block tax filing For more information, see Form 8846. H&r block tax filing Credit for employer differential wage payments (Form 8932). H&r block tax filing   This credit provides certain small businesses with an incentive to continue to pay wages to an employee performing services on active duty in the uniformed services of the United States for a period of more than 30 days. H&r block tax filing For more information, see Form 8932. H&r block tax filing Credit for employer-provided childcare facilities and services (Form 8882). H&r block tax filing   This credit applies to the qualified expenses you paid for employee childcare and qualified expenses you paid for childcare resource and referral services. H&r block tax filing For more information, see Form 8882. H&r block tax filing Credit for increasing research activities (Form 6765). H&r block tax filing   This credit is designed to encourage businesses to increase the amounts they spend on research and experimental activities, including energy research. H&r block tax filing For more information, see Form 6765. H&r block tax filing Credit for small employer health insurance premiums (Form 8941). H&r block tax filing   This credit applies to the cost of certain health insurance coverage you provide to certain employees. H&r block tax filing For more information, see Form 8941. H&r block tax filing Credit for small employer pension plan startup costs (Form 8881). H&r block tax filing   This credit applies to pension plan startup costs of a new qualified defined benefit or defined contribution plan (including a 401(k) plan), SIMPLE plan, or simplified employee pension. H&r block tax filing For more information, see Publication 560, Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans). H&r block tax filing Disabled access credit (Form 8826). H&r block tax filing   This credit is a nonrefundable tax credit for an eligible small business that pays or incurs expenses to provide access to persons who have disabilities. H&r block tax filing You must pay or incur the expenses to enable your business to comply with the Americans with Disabilities Act of 1990. H&r block tax filing For more information, see Form 8826. H&r block tax filing Distilled spirits credit (Form 8906). H&r block tax filing   This credit is available to distillers and importers of distilled spirits and eligible wholesalers of distilled spirits. H&r block tax filing For more information, see Form 8906. H&r block tax filing Empowerment zone employment credit (Form 8844). H&r block tax filing   You may qualify for this credit if you have employees and are engaged in a business in an empowerment zone for which the credit is available. H&r block tax filing For more information, see Form 8844. H&r block tax filing Energy efficient appliance credit (Form 8909). H&r block tax filing   This credit is available for manufacturers of eligible appliances. H&r block tax filing For more information, see Form 8909. H&r block tax filing Energy efficient home credit (Form 8908). H&r block tax filing   This credit is available for eligible contractors of certain homes sold for use as a residence. H&r block tax filing For more information, see Form 8908. H&r block tax filing Indian employment credit (Form 8845). H&r block tax filing   This credit applies to qualified wages and health insurance costs you paid or incurred for qualified employees. H&r block tax filing For more information, see Form 8845. H&r block tax filing Investment credit (Form 3468). H&r block tax filing   The investment credit is the total of the following credits. H&r block tax filing Rehabilitation credit. H&r block tax filing Energy credit. H&r block tax filing Qualifying advanced coal project credit. H&r block tax filing Qualifying gasification project credit. H&r block tax filing Qualifying advanced energy project credit. H&r block tax filing   For more information, see Form 3468. H&r block tax filing Low sulfur diesel fuel production credit (Form 8896). H&r block tax filing    For more information, see Form 8896. H&r block tax filing Low-income housing credit (Form 8586). H&r block tax filing   This credit generally applies to each new qualified low-income building placed in service after 1986. H&r block tax filing For more information, see Form 8586. H&r block tax filing Mine rescue team training credit (Form 8923). H&r block tax filing   This credit applies to training program costs you pay or incur for certain mine rescue team employees. H&r block tax filing For more information, see Form 8923. H&r block tax filing New markets credit (Form 8874). H&r block tax filing   This credit is for qualified equity investments made in qualified community development entities. H&r block tax filing For more information, see Form 8874. H&r block tax filing Nonconventional source fuel credit (Form 8907). H&r block tax filing   This credit is for qualified coke and coke gas you produced and sold to an unrelated person during the tax year. H&r block tax filing For more information, see Form 8907. H&r block tax filing Orphan drug credit (Form 8820). H&r block tax filing   This credit applies to qualified expenses incurred in testing certain drugs for rare diseases and conditions. H&r block tax filing For more information, see Form 8820. H&r block tax filing Qualified plug-in electric drive motor vehicle credit (Form 8936). H&r block tax filing   This credit is for certain new qualified plug-in electric vehicles placed in service during the tax year. H&r block tax filing For more information, see Form 8936. H&r block tax filing Qualified railroad track maintenance credit (Form 8900). H&r block tax filing   This credit applies with respect to qualified railroad track maintenance expenditures paid or incurred during the tax year. H&r block tax filing For more information, see Form 8900. H&r block tax filing Renewable electricity, refined coal, and Indian coal production credit (Form 8835). H&r block tax filing   This credit is for the sale of electricity, refined coal, or Indian coal produced in the United States or U. H&r block tax filing S. H&r block tax filing possessions from qualified energy resources at a qualified facility. H&r block tax filing For more information, see Form 8835. H&r block tax filing Work opportunity credit (Form 5884). H&r block tax filing   This credit provides businesses with an incentive to hire individuals from targeted groups that have a particularly high unemployment rate or other special employment needs. H&r block tax filing For more information, see Form 5884. H&r block tax filing How To Claim the Credit To claim a general business credit, you will first have to get the forms you need to claim your current year business credits. H&r block tax filing In addition to the credit form, you also need to file Form 3800. H&r block tax filing Prev  Up  Next   Home   More Online Publications
Print - Click this link to Print this page

Commissioner's Comments, Statements and Remarks

Written Testimony of IRS Commissioner John A. Koskinen before the House Oversight and Government Reform Committee on IRS Operations
March 26, 2014 — Commissioner Koskinen's written testimony before the House Oversight and Government Reform Committee on IRS operations.

Remarks of Acting Commissioner Werfel to the American Institute of Certified Public Accountants in Washington, DC
Nov. 5, 2013 — Prepared remarks of Acting Commissioner Danny Werfel to the American Institute of Certified Public Accountants in Washington, DC.

Oral Statement of Danny Werfel, Principal Deputy Commissioner, on the Affordable Care Act Before the House Ways and Means Committee
Aug. 1, 2013 — Principal Deputy Commissioner Danny Werfel gives an opening statement on the Affordable Care Act to the House Ways and Means Committee.

Prepared Remarks of Danny Werfel, Principal Deputy Commissioner, Before the 2013 IRS Nationwide Tax Forum
July 30, 2013 — IRS Principal Deputy Commissioner Danny Werfel speaks at a 2013 Nationwide Tax Forum taking place in Dallas, Tex.

Page Last Reviewed or Updated: 27-Mar-2014

The H&r Block Tax Filing

H&r block tax filing 3. H&r block tax filing   Rent Expense Table of Contents Introduction Topics - This chapter discusses: RentConditional sales contract. H&r block tax filing Leveraged leases. H&r block tax filing Leveraged leases of limited-use property. H&r block tax filing Taxes on Leased Property Cost of Getting a Lease Improvements by Lessee Capitalizing Rent Expenses Introduction This chapter discusses the tax treatment of rent or lease payments you make for property you use in your business but do not own. H&r block tax filing It also discusses how to treat other kinds of payments you make that are related to your use of this property. H&r block tax filing These include payments you make for taxes on the property. H&r block tax filing Topics - This chapter discusses: The definition of rent Taxes on leased property The cost of getting a lease Improvements by the lessee Capitalizing rent expenses Rent Rent is any amount you pay for the use of property you do not own. H&r block tax filing In general, you can deduct rent as an expense only if the rent is for property you use in your trade or business. H&r block tax filing If you have or will receive equity in or title to the property, the rent is not deductible. H&r block tax filing Unreasonable rent. H&r block tax filing   You cannot take a rental deduction for unreasonable rent. H&r block tax filing Ordinarily, the issue of reasonableness arises only if you and the lessor are related. H&r block tax filing Rent paid to a related person is reasonable if it is the same amount you would pay to a stranger for use of the same property. H&r block tax filing Rent is not unreasonable just because it is figured as a percentage of gross sales. H&r block tax filing For examples of related persons, see Related persons in chapter 2, Publication 544. H&r block tax filing Rent on your home. H&r block tax filing   If you rent your home and use part of it as your place of business, you may be able to deduct the rent you pay for that part. H&r block tax filing You must meet the requirements for business use of your home. H&r block tax filing For more information, see Business use of your home in chapter 1. H&r block tax filing Rent paid in advance. H&r block tax filing   Generally, rent paid in your trade or business is deductible in the year paid or accrued. H&r block tax filing If you pay rent in advance, you can deduct only the amount that applies to your use of the rented property during the tax year. H&r block tax filing You can deduct the rest of your payment only over the period to which it applies. H&r block tax filing Example 1. H&r block tax filing You are a calendar year taxpayer and you leased a building for 5 years beginning July 1. H&r block tax filing Your rent is $12,000 per year. H&r block tax filing You paid the first year's rent ($12,000) on June 30. H&r block tax filing You can deduct only $6,000 (6/12 × $12,000) for the rent that applies to the first year. H&r block tax filing Example 2. H&r block tax filing You are a calendar year taxpayer. H&r block tax filing Last January you leased property for 3 years for $6,000 a year. H&r block tax filing You paid the full $18,000 (3 × $6,000) during the first year of the lease. H&r block tax filing Each year you can deduct only $6,000, the part of the lease that applies to that year. H&r block tax filing Canceling a lease. H&r block tax filing   You generally can deduct as rent an amount you pay to cancel a business lease. H&r block tax filing Lease or purchase. H&r block tax filing   There may be instances in which you must determine whether your payments are for rent or for the purchase of the property. H&r block tax filing You must first determine whether your agreement is a lease or a conditional sales contract. H&r block tax filing Payments made under a conditional sales contract are not deductible as rent expense. H&r block tax filing Conditional sales contract. H&r block tax filing   Whether an agreement is a conditional sales contract depends on the intent of the parties. H&r block tax filing Determine intent based on the provisions of the agreement and the facts and circumstances that exist when you make the agreement. H&r block tax filing No single test, or special combination of tests, always applies. H&r block tax filing However, in general, an agreement may be considered a conditional sales contract rather than a lease if any of the following is true. H&r block tax filing The agreement applies part of each payment toward an equity interest you will receive. H&r block tax filing You get title to the property after you make a stated amount of required payments. H&r block tax filing The amount you must pay to use the property for a short time is a large part of the amount you would pay to get title to the property. H&r block tax filing You pay much more than the current fair rental value of the property. H&r block tax filing You have an option to buy the property at a nominal price compared to the value of the property when you may exercise the option. H&r block tax filing Determine this value when you make the agreement. H&r block tax filing You have an option to buy the property at a nominal price compared to the total amount you have to pay under the agreement. H&r block tax filing The agreement designates part of the payments as interest, or that part is easy to recognize as interest. H&r block tax filing Leveraged leases. H&r block tax filing   Leveraged lease transactions may not be considered leases. H&r block tax filing Leveraged leases generally involve three parties: a lessor, a lessee, and a lender to the lessor. H&r block tax filing Usually the lease term covers a large part of the useful life of the leased property, and the lessee's payments to the lessor are enough to cover the lessor's payments to the lender. H&r block tax filing   If you plan to take part in what appears to be a leveraged lease, you may want to get an advance ruling. H&r block tax filing Revenue Procedure 2001-28 on page 1156 of Internal Revenue Bulletin 2001-19 contains the guidelines the IRS will use to determine if a leveraged lease is a lease for federal income tax purposes. H&r block tax filing Revenue Procedure 2001-29 on page 1160 of the same Internal Revenue Bulletin provides the information required to be furnished in a request for an advance ruling on a leveraged lease transaction. H&r block tax filing Internal Revenue Bulletin 2001-19 is available at www. H&r block tax filing irs. H&r block tax filing gov/pub/irs-irbs/irb01-19. H&r block tax filing pdf. H&r block tax filing   In general, Revenue Procedure 2001-28 provides that, for advance ruling purposes only, the IRS will consider the lessor in a leveraged lease transaction to be the owner of the property and the transaction to be a valid lease if all the factors in the revenue procedure are met, including the following. H&r block tax filing The lessor must maintain a minimum unconditional “at risk” equity investment in the property (at least 20% of the cost of the property) during the entire lease term. H&r block tax filing The lessee may not have a contractual right to buy the property from the lessor at less than fair market value when the right is exercised. H&r block tax filing The lessee may not invest in the property, except as provided by Revenue Procedure 2001-28. H&r block tax filing The lessee may not lend any money to the lessor to buy the property or guarantee the loan used by the lessor to buy the property. H&r block tax filing The lessor must show that it expects to receive a profit apart from the tax deductions, allowances, credits, and other tax attributes. H&r block tax filing   The IRS may charge you a user fee for issuing a tax ruling. H&r block tax filing For more information, see Revenue Procedure 2014-1 available at  www. H&r block tax filing irs. H&r block tax filing gov/irb/2014-1_IRB/ar05. H&r block tax filing html. H&r block tax filing Leveraged leases of limited-use property. H&r block tax filing   The IRS will not issue advance rulings on leveraged leases of so-called limited-use property. H&r block tax filing Limited-use property is property not expected to be either useful to or usable by a lessor at the end of the lease term except for continued leasing or transfer to a lessee. H&r block tax filing See Revenue Procedure 2001-28 for examples of limited-use property and property that is not limited-use property. H&r block tax filing Leases over $250,000. H&r block tax filing   Special rules are provided for certain leases of tangible property. H&r block tax filing The rules apply if the lease calls for total payments of more than $250,000 and any of the following apply. H&r block tax filing Rents increase during the lease. H&r block tax filing Rents decrease during the lease. H&r block tax filing Rents are deferred (rent is payable after the end of the calendar year following the calendar year in which the use occurs and the rent is allocated). H&r block tax filing Rents are prepaid (rent is payable before the end of the calendar year preceding the calendar year in which the use occurs and the rent is allocated). H&r block tax filing These rules do not apply if your lease specifies equal amounts of rent for each month in the lease term and all rent payments are due in the calendar year to which the rent relates (or in the preceding or following calendar year). H&r block tax filing   Generally, if the special rules apply, you must use an accrual method of accounting (and time value of money principles) for your rental expenses, regardless of your overall method of accounting. H&r block tax filing In addition, in certain cases in which the IRS has determined that a lease was designed to achieve tax avoidance, you must take rent and stated or imputed interest into account under a constant rental accrual method in which the rent is treated as accruing ratably over the entire lease term. H&r block tax filing For details, see section 467 of the Internal Revenue Code. H&r block tax filing Taxes on Leased Property If you lease business property, you can deduct as additional rent any taxes you have to pay to or for the lessor. H&r block tax filing When you can deduct these taxes as additional rent depends on your accounting method. H&r block tax filing Cash method. H&r block tax filing   If you use the cash method of accounting, you can deduct the taxes as additional rent only for the tax year in which you pay them. H&r block tax filing Accrual method. H&r block tax filing   If you use an accrual method of accounting, you can deduct taxes as additional rent for the tax year in which you can determine all the following. H&r block tax filing That you have a liability for taxes on the leased property. H&r block tax filing How much the liability is. H&r block tax filing That economic performance occurred. H&r block tax filing   The liability and amount of taxes are determined by state or local law and the lease agreement. H&r block tax filing Economic performance occurs as you use the property. H&r block tax filing Example 1. H&r block tax filing Oak Corporation is a calendar year taxpayer that uses an accrual method of accounting. H&r block tax filing Oak leases land for use in its business. H&r block tax filing Under state law, owners of real property become liable (incur a lien on the property) for real estate taxes for the year on January 1 of that year. H&r block tax filing However, they do not have to pay these taxes until July 1 of the next year (18 months later) when tax bills are issued. H&r block tax filing Under the terms of the lease, Oak becomes liable for the real estate taxes in the later year when the tax bills are issued. H&r block tax filing If the lease ends before the tax bill for a year is issued, Oak is not liable for the taxes for that year. H&r block tax filing Oak cannot deduct the real estate taxes as rent until the tax bill is issued. H&r block tax filing This is when Oak's liability under the lease becomes fixed. H&r block tax filing Example 2. H&r block tax filing The facts are the same as in Example 1 except that, according to the terms of the lease, Oak becomes liable for the real estate taxes when the owner of the property becomes liable for them. H&r block tax filing As a result, Oak will deduct the real estate taxes as rent on its tax return for the earlier year. H&r block tax filing This is the year in which Oak's liability under the lease becomes fixed. H&r block tax filing Cost of Getting a Lease You may either enter into a new lease with the lessor of the property or get an existing lease from another lessee. H&r block tax filing Very often when you get an existing lease from another lessee, you must pay the previous lessee money to get the lease, besides having to pay the rent on the lease. H&r block tax filing If you get an existing lease on property or equipment for your business, you generally must amortize any amount you pay to get that lease over the remaining term of the lease. H&r block tax filing For example, if you pay $10,000 to get a lease and there are 10 years remaining on the lease with no option to renew, you can deduct $1,000 each year. H&r block tax filing The cost of getting an existing lease of tangible property is not subject to the amortization rules for section 197 intangibles discussed in chapter 8. H&r block tax filing Option to renew. H&r block tax filing   The term of the lease for amortization includes all renewal options plus any other period for which you and the lessor reasonably expect the lease to be renewed. H&r block tax filing However, this applies only if less than 75% of the cost of getting the lease is for the term remaining on the purchase date (not including any period for which you may choose to renew, extend, or continue the lease). H&r block tax filing Allocate the lease cost to the original term and any option term based on the facts and circumstances. H&r block tax filing In some cases, it may be appropriate to make the allocation using a present value computation. H&r block tax filing For more information, see Regulations section 1. H&r block tax filing 178-1(b)(5). H&r block tax filing Example 1. H&r block tax filing You paid $10,000 to get a lease with 20 years remaining on it and two options to renew for 5 years each. H&r block tax filing Of this cost, you paid $7,000 for the original lease and $3,000 for the renewal options. H&r block tax filing Because $7,000 is less than 75% of the total $10,000 cost of the lease (or $7,500), you must amortize the $10,000 over 30 years. H&r block tax filing That is the remaining life of your present lease plus the periods for renewal. H&r block tax filing Example 2. H&r block tax filing The facts are the same as in Example 1, except that you paid $8,000 for the original lease and $2,000 for the renewal options. H&r block tax filing You can amortize the entire $10,000 over the 20-year remaining life of the original lease. H&r block tax filing The $8,000 cost of getting the original lease was not less than 75% of the total cost of the lease (or $7,500). H&r block tax filing Cost of a modification agreement. H&r block tax filing   You may have to pay an additional “rent” amount over part of the lease period to change certain provisions in your lease. H&r block tax filing You must capitalize these payments and amortize them over the remaining period of the lease. H&r block tax filing You cannot deduct the payments as additional rent, even if they are described as rent in the agreement. H&r block tax filing Example. H&r block tax filing You are a calendar year taxpayer and sign a 20-year lease to rent part of a building starting on January 1. H&r block tax filing However, before you occupy it, you decide that you really need less space. H&r block tax filing The lessor agrees to reduce your rent from $7,000 to $6,000 per year and to release the excess space from the original lease. H&r block tax filing In exchange, you agree to pay an additional rent amount of $3,000, payable in 60 monthly installments of $50 each. H&r block tax filing   You must capitalize the $3,000 and amortize it over the 20-year term of the lease. H&r block tax filing Your amortization deduction each year will be $150 ($3,000 ÷ 20). H&r block tax filing You cannot deduct the $600 (12 × $50) that you will pay during each of the first 5 years as rent. H&r block tax filing Commissions, bonuses, and fees. H&r block tax filing   Commissions, bonuses, fees, and other amounts you pay to get a lease on property you use in your business are capital costs. H&r block tax filing You must amortize these costs over the term of the lease. H&r block tax filing Loss on merchandise and fixtures. H&r block tax filing   If you sell at a loss merchandise and fixtures that you bought solely to get a lease, the loss is a cost of getting the lease. H&r block tax filing You must capitalize the loss and amortize it over the remaining term of the lease. H&r block tax filing Improvements by Lessee If you add buildings or make other permanent improvements to leased property, depreciate the cost of the improvements using the modified accelerated cost recovery system (MACRS). H&r block tax filing Depreciate the property over its appropriate recovery period. H&r block tax filing You cannot amortize the cost over the remaining term of the lease. H&r block tax filing If you do not keep the improvements when you end the lease, figure your gain or loss based on your adjusted basis in the improvements at that time. H&r block tax filing For more information, see the discussion of MACRS in Publication 946, How To Depreciate Property. H&r block tax filing Assignment of a lease. H&r block tax filing   If a long-term lessee who makes permanent improvements to land later assigns all lease rights to you for money and you pay the rent required by the lease, the amount you pay for the assignment is a capital investment. H&r block tax filing If the rental value of the leased land increased since the lease began, part of your capital investment is for that increase in the rental value. H&r block tax filing The rest is for your investment in the permanent improvements. H&r block tax filing   The part that is for the increased rental value of the land is a cost of getting a lease, and you amortize it over the remaining term of the lease. H&r block tax filing You can depreciate the part that is for your investment in the improvements over the recovery period of the property as discussed earlier, without regard to the lease term. H&r block tax filing Capitalizing Rent Expenses Under the uniform capitalization rules, you must capitalize the direct costs and part of the indirect costs for certain production or resale activities. H&r block tax filing Include these costs in the basis of property you produce or acquire for resale, rather than claiming them as a current deduction. H&r block tax filing You recover the costs through depreciation, amortization, or cost of goods sold when you use, sell, or otherwise dispose of the property. H&r block tax filing Indirect costs include amounts incurred for renting or leasing equipment, facilities, or land. H&r block tax filing Uniform capitalization rules. H&r block tax filing   You may be subject to the uniform capitalization rules if you do any of the following, unless the property is produced for your use other than in a business or an activity carried on for profit. H&r block tax filing Produce real property or tangible personal property. H&r block tax filing For this purpose, tangible personal property includes a film, sound recording, video tape, book, or similar property. H&r block tax filing Acquire property for resale. H&r block tax filing However, these rules do not apply to the following property. H&r block tax filing Personal property you acquire for resale if your average annual gross receipts are $10 million or less for the 3 prior tax years. H&r block tax filing Property you produce if you meet either of the following conditions. H&r block tax filing Your indirect costs of producing the property are $200,000 or less. H&r block tax filing You use the cash method of accounting and do not account for inventories. H&r block tax filing Example 1. H&r block tax filing You rent construction equipment to build a storage facility. H&r block tax filing If you are subject to the uniform capitalization rules, you must capitalize as part of the cost of the building the rent you paid for the equipment. H&r block tax filing You recover your cost by claiming a deduction for depreciation on the building. H&r block tax filing Example 2. H&r block tax filing You rent space in a facility to conduct your business of manufacturing tools. H&r block tax filing If you are subject to the uniform capitalization rules, you must include the rent you paid to occupy the facility in the cost of the tools you produce. H&r block tax filing More information. H&r block tax filing   For more information on these rules, see Uniform Capitalization Rules in Publication 538 and the regulations under Internal Revenue Code section 263A. H&r block tax filing Prev  Up  Next   Home   More Online Publications