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How To File A Amended Tax Return

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How To File A Amended Tax Return

How to file a amended tax return 27. How to file a amended tax return   Tax Benefits for Work-Related Education Table of Contents What's New Introduction Useful Items - You may want to see: Qualifying Work-Related EducationEducation Required by Employer or by Law Education To Maintain or Improve Skills Education To Meet Minimum Requirements Education That Qualifies You for a New Trade or Business What Expenses Can Be DeductedUnclaimed reimbursement. How to file a amended tax return Transportation Expenses Travel Expenses No Double Benefit Allowed Reimbursements Deducting Business ExpensesSelf-Employed Persons Employees Performing Artists and Fee-Basis Officials Impairment-Related Work Expenses Recordkeeping What's New Standard mileage rate. How to file a amended tax return  Generally, if you claim a business deduction for work-related education and you drive your car to and from school, the amount you can deduct for miles driven from January 1, 2013, through December 31, 2013, is 56½ cents per mile. How to file a amended tax return For more information, see Transportation Expenses under What Expenses Can Be Deducted. How to file a amended tax return Introduction This chapter discusses work-related education expenses that you may be able to deduct as business expenses. How to file a amended tax return To claim such a deduction, you must: Itemize your deductions on Schedule A (Form 1040) if you are an employee, File Schedule C (Form 1040), Schedule C-EZ (Form 1040), or Schedule F (Form 1040) if you are self-employed, and Have expenses for education that meet the requirements discussed under Qualifying Work-Related Education . How to file a amended tax return If you are an employee and can itemize your deductions, you may be able to claim a deduction for the expenses you pay for your work-related education. How to file a amended tax return Your deduction will be the amount by which your qualifying work-related education expenses plus other job and certain miscellaneous expenses (except for impairment-related work expenses of disabled individuals) is greater than 2% of your adjusted gross income. How to file a amended tax return See chapter 28. How to file a amended tax return If you are self-employed, you deduct your expenses for qualifying work-related education directly from your self-employment income. How to file a amended tax return Your work-related education expenses may also qualify you for other tax benefits, such as the American opportunity and lifetime learning credits (see chapter 35). How to file a amended tax return You may qualify for these other benefits even if you do not meet the requirements listed earlier. How to file a amended tax return Also, keep in mind that your work-related education expenses may qualify you to claim more than one tax benefit. How to file a amended tax return Generally, you may claim any number of benefits as long as you use different expenses to figure each one. How to file a amended tax return When you figure your taxes, you may want to compare these tax benefits so you can choose the method(s) that give you the lowest tax liability. How to file a amended tax return Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 970 Tax Benefits for Education Form (and Instructions) 2106 Employee Business Expenses 2106-EZ Unreimbursed Employee Business Expenses Schedule A (Form 1040) Itemized Deductions Qualifying Work-Related Education You can deduct the costs of qualifying work-related education as business expenses. How to file a amended tax return This is education that meets at least one of the following two tests. How to file a amended tax return The education is required by your employer or the law to keep your present salary, status, or job. How to file a amended tax return The required education must serve a bona fide business purpose of your employer. How to file a amended tax return The education maintains or improves skills needed in your present work. How to file a amended tax return However, even if the education meets one or both of the above tests, it is not qualifying work-related education if it: Is needed to meet the minimum educational requirements of your present trade or business, or Is part of a program of study that will qualify you for a new trade or business. How to file a amended tax return You can deduct the costs of qualifying work-related education as a business expense even if the education could lead to a degree. How to file a amended tax return Use Figure 27-A, later, as a quick check to see if your education qualifies. How to file a amended tax return Education Required by Employer or by Law Once you have met the minimum educational requirements for your job, your employer or the law may require you to get more education. How to file a amended tax return This additional education is qualifying work-related education if all three of the following requirements are met. How to file a amended tax return It is required for you to keep your present salary, status, or job, The requirement serves a bona fide business purpose of your employer, and The education is not part of a program that will qualify you for a new trade or business. How to file a amended tax return When you get more education than your employer or the law requires, the additional education can be qualifying work-related education only if it maintains or improves skills required in your present work. How to file a amended tax return See Education To Maintain or Improve Skills , later. How to file a amended tax return Example. How to file a amended tax return You are a teacher who has satisfied the minimum requirements for teaching. How to file a amended tax return Your employer requires you to take an additional college course each year to keep your teaching job. How to file a amended tax return If the courses will not qualify you for a new trade or business, they are qualifying work-related education even if you eventually receive a master's degree and an increase in salary because of this extra education. How to file a amended tax return Education To Maintain or Improve Skills If your education is not required by your employer or the law, it can be qualifying work-related education only if it maintains or improves skills needed in your present work. How to file a amended tax return This could include refresher courses, courses on current developments, and academic or vocational courses. How to file a amended tax return Example. How to file a amended tax return You repair televisions, radios, and stereo systems for XYZ Store. How to file a amended tax return To keep up with the latest changes, you take special courses in radio and stereo service. How to file a amended tax return These courses maintain and improve skills required in your work. How to file a amended tax return Maintaining skills vs. How to file a amended tax return qualifying for new job. How to file a amended tax return   Education to maintain or improve skills needed in your present work is not qualifying education if it will also qualify you for a new trade or business. How to file a amended tax return Education during temporary absence. How to file a amended tax return   If you stop working for a year or less in order to get education to maintain or improve skills needed in your present work and then return to the same general type of work, your absence is considered temporary. How to file a amended tax return Education that you get during a temporary absence is qualifying work-related education if it maintains or improves skills needed in your present work. How to file a amended tax return Example. How to file a amended tax return You quit your biology research job to become a full-time biology graduate student for one year. How to file a amended tax return If you return to work in biology research after completing the courses, the education is related to your present work even if you do not go back to work with the same employer. How to file a amended tax return Education during indefinite absence. How to file a amended tax return   If you stop work for more than a year, your absence from your job is considered indefinite. How to file a amended tax return Education during an indefinite absence, even if it maintains or improves skills needed in the work from which you are absent, is considered to qualify you for a new trade or business. How to file a amended tax return Therefore, it is not qualifying work-related education. How to file a amended tax return Education To Meet Minimum Requirements Education you need to meet the minimum educational requirements for your present trade or business is not qualifying work-related education. How to file a amended tax return The minimum educational requirements are determined by: Laws and regulations, Standards of your profession, trade, or business, and Your employer. How to file a amended tax return Once you have met the minimum educational requirements that were in effect when you were hired, you do not have to meet any new minimum educational requirements. How to file a amended tax return This means that if the minimum requirements change after you were hired, any education you need to meet the new requirements can be qualifying education. How to file a amended tax return You have not necessarily met the minimum educational requirements of your trade or business simply because you are already doing the work. How to file a amended tax return Example 1. How to file a amended tax return You are a full-time engineering student. How to file a amended tax return Although you have not received your degree or certification, you work part-time as an engineer for a firm that will employ you as a full-time engineer after you finish college. How to file a amended tax return Although your college engineering courses improve your skills in your present job, they are also needed to meet the minimum job requirements for a full-time engineer. How to file a amended tax return The education is not qualifying work-related education. How to file a amended tax return Example 2. How to file a amended tax return You are an accountant and you have met the minimum educational requirements of your employer. How to file a amended tax return Your employer later changes the minimum educational requirements and requires you to take college courses to keep your job. How to file a amended tax return These additional courses can be qualifying work-related education because you have already satisfied the minimum requirements that were in effect when you were hired. How to file a amended tax return Requirements for Teachers States or school districts usually set the minimum educational requirements for teachers. How to file a amended tax return The requirement is the college degree or the minimum number of college hours usually required of a person hired for that position. How to file a amended tax return If there are no requirements, you will have met the minimum educational requirements when you become a faculty member. How to file a amended tax return The determination of whether you are a faculty member of an educational institution must be made on the basis of the particular practices of the institution. How to file a amended tax return You generally will be considered a faculty member when one or more of the following occurs. How to file a amended tax return You have tenure. How to file a amended tax return Your years of service count toward obtaining tenure. How to file a amended tax return You have a vote in faculty decisions. How to file a amended tax return Your school makes contributions for you to a retirement plan other than social security or a similar program. How to file a amended tax return Example 1. How to file a amended tax return The law in your state requires beginning secondary school teachers to have a bachelor's degree, including 10 professional education courses. How to file a amended tax return In addition, to keep the job a teacher must complete a fifth year of training within 10 years from the date of hire. How to file a amended tax return If the employing school certifies to the state Department of Education that qualified teachers cannot be found, the school can hire persons with only 3 years of college. How to file a amended tax return However, to keep their jobs, these teachers must get a bachelor's degree and the required professional education courses within 3 years. How to file a amended tax return Under these facts, the bachelor's degree, whether or not it includes the 10 professional education courses, is considered the minimum educational requirement for qualification as a teacher in your state. How to file a amended tax return If you have all the required education except the fifth year, you have met the minimum educational requirements. How to file a amended tax return The fifth year of training is qualifying work-related education unless it is part of a program of study that will qualify you for a new trade or business. How to file a amended tax return Figure 27-A Does Your Work-Related Education Qualify? Please click here for the text description of the image. How to file a amended tax return Figure 27-A. How to file a amended tax return Does Your Work-Related Education Qualify?" Example 2. How to file a amended tax return Assume the same facts as in Example 1 except that you have a bachelor's degree and only six professional education courses. How to file a amended tax return The additional four education courses can be qualifying work-related education. How to file a amended tax return Although you do not have all the required courses, you have already met the minimum educational requirements. How to file a amended tax return Example 3. How to file a amended tax return Assume the same facts as in Example 1 except that you are hired with only 3 years of college. How to file a amended tax return The courses you take that lead to a bachelor's degree (including those in education) are not qualifying work-related education. How to file a amended tax return They are needed to meet the minimum educational requirements for employment as a teacher. How to file a amended tax return Example 4. How to file a amended tax return You have a bachelor's degree and you work as a temporary instructor at a university. How to file a amended tax return At the same time, you take graduate courses toward an advanced degree. How to file a amended tax return The rules of the university state that you can become a faculty member only if you get a graduate degree. How to file a amended tax return Also, you can keep your job as an instructor only as long as you show satisfactory progress toward getting this degree. How to file a amended tax return You have not met the minimum educational requirements to qualify you as a faculty member. How to file a amended tax return The graduate courses are not qualifying work-related education. How to file a amended tax return Certification in a new state. How to file a amended tax return   Once you have met the minimum educational requirements for teachers for your state, you are considered to have met the minimum educational requirements in all states. How to file a amended tax return This is true even if you must get additional education to be certified in another state. How to file a amended tax return Any additional education you need is qualifying work-related education. How to file a amended tax return You have already met the minimum requirements for teaching. How to file a amended tax return Teaching in another state is not a new trade or business. How to file a amended tax return Example. How to file a amended tax return You hold a permanent teaching certificate in State A and are employed as a teacher in that state for several years. How to file a amended tax return You move to State B and are promptly hired as a teacher. How to file a amended tax return You are required, however, to complete certain prescribed courses to get a permanent teaching certificate in State B. How to file a amended tax return These additional courses are qualifying work-related education because the teaching position in State B involves the same general kind of work for which you were qualified in State A. How to file a amended tax return Education That Qualifies You for a New Trade or Business Education that is part of a program of study that will qualify you for a new trade or business is not qualifying work-related education. How to file a amended tax return This is true even if you do not plan to enter that trade or business. How to file a amended tax return If you are an employee, a change of duties that involves the same general kind of work is not a new trade or business. How to file a amended tax return Example 1. How to file a amended tax return You are an accountant. How to file a amended tax return Your employer requires you to get a law degree at your own expense. How to file a amended tax return You register at a law school for the regular curriculum that leads to a law degree. How to file a amended tax return Even if you do not intend to become a lawyer, the education is not qualifying because the law degree will qualify you for a new trade or business. How to file a amended tax return Example 2. How to file a amended tax return You are a general practitioner of medicine. How to file a amended tax return You take a 2-week course to review developments in several specialized fields of medicine. How to file a amended tax return The course does not qualify you for a new profession. How to file a amended tax return It is qualifying work-related education because it maintains or improves skills required in your present profession. How to file a amended tax return Example 3. How to file a amended tax return While working in the private practice of psychiatry, you enter a program to study and train at an accredited psychoanalytic institute. How to file a amended tax return The program will lead to qualifying you to practice psychoanalysis. How to file a amended tax return The psychoanalytic training does not qualify you for a new profession. How to file a amended tax return It is qualifying work-related education because it maintains or improves skills required in your present profession. How to file a amended tax return Bar or CPA Review Course Review courses to prepare for the bar examination or the certified public accountant (CPA) examination are not qualifying work-related education. How to file a amended tax return They are part of a program of study that can qualify you for a new profession. How to file a amended tax return Teaching and Related Duties All teaching and related duties are considered the same general kind of work. How to file a amended tax return A change in duties in any of the following ways is not considered a change to a new business. How to file a amended tax return Elementary school teacher to secondary school teacher. How to file a amended tax return Teacher of one subject, such as biology, to teacher of another subject, such as art. How to file a amended tax return Classroom teacher to guidance counselor. How to file a amended tax return Classroom teacher to school administrator. How to file a amended tax return What Expenses Can Be Deducted If your education meets the requirements described earlier under Qualifying Work-Related Education , you can generally deduct your education expenses as business expenses. How to file a amended tax return If you are not self-employed, you can deduct business expenses only if you itemize your deductions. How to file a amended tax return You cannot deduct expenses related to tax-exempt and excluded income. How to file a amended tax return Deductible expenses. How to file a amended tax return   The following education expenses can be deducted. How to file a amended tax return Tuition, books, supplies, lab fees, and similar items. How to file a amended tax return Certain transportation and travel costs. How to file a amended tax return Other education expenses, such as costs of research and typing when writing a paper as part of an educational program. How to file a amended tax return Nondeductible expenses. How to file a amended tax return   You cannot deduct personal or capital expenses. How to file a amended tax return For example, you cannot deduct the dollar value of vacation time or annual leave you take to attend classes. How to file a amended tax return This amount is a personal expense. How to file a amended tax return Unclaimed reimbursement. How to file a amended tax return   If you do not claim reimbursement that you are entitled to receive from your employer, you cannot deduct the expenses that apply to that unclaimed reimbursement. How to file a amended tax return Example. How to file a amended tax return Your employer agrees to pay your education expenses if you file a voucher showing your expenses. How to file a amended tax return You do not file a voucher, and you do not get reimbursed. How to file a amended tax return Because you did not file a voucher, you cannot deduct the expenses on your tax return. How to file a amended tax return Transportation Expenses If your education qualifies, you can deduct local transportation costs of going directly from work to school. How to file a amended tax return If you are regularly employed and go to school on a temporary basis, you can also deduct the costs of returning from school to home. How to file a amended tax return Temporary basis. How to file a amended tax return   You go to school on a temporary basis if either of the following situations applies to you. How to file a amended tax return Your attendance at school is realistically expected to last 1 year or less and does indeed last for 1 year or less. How to file a amended tax return Initially, your attendance at school is realistically expected to last 1 year or less, but at a later date your attendance is reasonably expected to last more than 1 year. How to file a amended tax return Your attendance is temporary up to the date you determine it will last more than 1 year. How to file a amended tax return Note. How to file a amended tax return If you are in either situation (1) or (2), your attendance is not temporary if facts and circumstances indicate otherwise. How to file a amended tax return Attendance not on a temporary basis. How to file a amended tax return   You do not go to school on a temporary basis if either of the following situations apply to you. How to file a amended tax return Your attendance at school is realistically expected to last more than 1 year. How to file a amended tax return It does not matter how long you actually attend. How to file a amended tax return Initially, your attendance at school is realistically expected to last 1 year or less, but at a later date your attendance is reasonably expected to last more than 1 year. How to file a amended tax return Your attendance is not temporary after the date you determine it will last more than 1 year. How to file a amended tax return Deductible Transportation Expenses If you are regularly employed and go directly from home to school on a temporary basis, you can deduct the round-trip costs of transportation between your home and school. How to file a amended tax return This is true regardless of the location of the school, the distance traveled, or whether you attend school on nonwork days. How to file a amended tax return Transportation expenses include the actual costs of bus, subway, cab, or other fares, as well as the costs of using your car. How to file a amended tax return Transportation expenses do not include amounts spent for travel, meals, or lodging while you are away from home overnight. How to file a amended tax return Example 1. How to file a amended tax return You regularly work in a nearby town, and go directly from work to home. How to file a amended tax return You also attend school every work night for 3 months to take a course that improves your job skills. How to file a amended tax return Since you are attending school on a temporary basis, you can deduct your daily round-trip transportation expenses in going between home and school. How to file a amended tax return This is true regardless of the distance traveled. How to file a amended tax return Example 2. How to file a amended tax return Assume the same facts as in Example 1 except that on certain nights you go directly from work to school and then home. How to file a amended tax return You can deduct your transportation expenses from your regular work site to school and then home. How to file a amended tax return Example 3. How to file a amended tax return Assume the same facts as in Example 1 except that you attend the school for 9 months on Saturdays, nonwork days. How to file a amended tax return Since you are attending school on a temporary basis, you can deduct your round-trip transportation expenses in going between home and school. How to file a amended tax return Example 4. How to file a amended tax return Assume the same facts as in Example 1 except that you attend classes twice a week for 15 months. How to file a amended tax return Since your attendance in school is not considered temporary, you cannot deduct your transportation expenses in going between home and school. How to file a amended tax return If you go directly from work to school, you can deduct the one-way transportation expenses of going from work to school. How to file a amended tax return If you go from work to home to school and return home, your transportation expenses cannot be more than if you had gone directly from work to school. How to file a amended tax return Using your car. How to file a amended tax return   If you use your car (whether you own or lease it) for transportation to school, you can deduct your actual expenses or use the standard mileage rate to figure the amount you can deduct. How to file a amended tax return The standard mileage rate for miles driven from January 1, 2013, through December 31, 2013 is 56½ cents per mile. How to file a amended tax return Whichever method you use, you can also deduct parking fees and tolls. How to file a amended tax return See chapter 26 for information on deducting your actual expenses of using a car. How to file a amended tax return Travel Expenses You can deduct expenses for travel, meals (see 50% limit on meals , later), and lodging if you travel overnight mainly to obtain qualifying work-related education. How to file a amended tax return Travel expenses for qualifying work-related education are treated the same as travel expenses for other employee business purposes. How to file a amended tax return For more information, see chapter 26. How to file a amended tax return You cannot deduct expenses for personal activities, such as sightseeing, visiting, or entertaining. How to file a amended tax return Mainly personal travel. How to file a amended tax return   If your travel away from home is mainly personal, you cannot deduct all of your expenses for travel, meals, and lodging. How to file a amended tax return You can deduct only your expenses for lodging and 50% of your expenses for meals during the time you attend the qualified educational activities. How to file a amended tax return   Whether a trip's purpose is mainly personal or educational depends upon the facts and circumstances. How to file a amended tax return An important factor is the comparison of time spent on personal activities with time spent on educational activities. How to file a amended tax return If you spend more time on personal activities, the trip is considered mainly educational only if you can show a substantial nonpersonal reason for traveling to a particular location. How to file a amended tax return Example 1. How to file a amended tax return John works in Newark, New Jersey. How to file a amended tax return He traveled to Chicago to take a deductible 1-week course at the request of his employer. How to file a amended tax return His main reason for going to Chicago was to take the course. How to file a amended tax return While there, he took a sight-seeing trip, entertained some friends, and took a side trip to Pleasantville for a day. How to file a amended tax return Since the trip was mainly for business, John can deduct his round-trip airfare to Chicago. How to file a amended tax return He cannot deduct his transportation expenses of going to Pleasantville. How to file a amended tax return He can deduct only the meals (subject to the 50% limit) and lodging connected with his educational activities. How to file a amended tax return Example 2. How to file a amended tax return Sue works in Boston. How to file a amended tax return She went to a university in Michigan to take a course for work. How to file a amended tax return The course is qualifying work-related education. How to file a amended tax return She took one course, which is one-fourth of a full course load of study. How to file a amended tax return She spent the rest of the time on personal activities. How to file a amended tax return Her reasons for taking the course in Michigan were all personal. How to file a amended tax return Sue's trip is mainly personal because three-fourths of her time is considered personal time. How to file a amended tax return She cannot deduct the cost of her round-trip train ticket to Michigan. How to file a amended tax return She can deduct one-fourth of the meals (subject to the 50% limit) and lodging costs for the time she attended the university. How to file a amended tax return Example 3. How to file a amended tax return Dave works in Nashville and recently traveled to California to take a 2-week seminar. How to file a amended tax return The seminar is qualifying work-related education. How to file a amended tax return While there, he spent an extra 8 weeks on personal activities. How to file a amended tax return The facts, including the extra 8-week stay, show that his main purpose was to take a vacation. How to file a amended tax return Dave cannot deduct his round-trip airfare or his meals and lodging for the 8 weeks. How to file a amended tax return He can deduct only his expenses for meals (subject to the 50% limit) and lodging for the 2 weeks he attended the seminar. How to file a amended tax return Cruises and conventions. How to file a amended tax return   Certain cruises and conventions offer seminars or courses as part of their itinerary. How to file a amended tax return Even if the seminars or courses are work-related, your deduction for travel may be limited. How to file a amended tax return This applies to: Travel by ocean liner, cruise ship, or other form of luxury water transportation, and Conventions outside the North American area. How to file a amended tax return   For a discussion of the limits on travel expense deductions that apply to cruises and conventions, see Luxury Water Travel and Conventions in chapter 1 of Publication 463. How to file a amended tax return 50% limit on meals. How to file a amended tax return   You can deduct only 50% of the cost of your meals while traveling away from home to obtain qualifying work-related education. How to file a amended tax return You cannot have been reimbursed for the meals. How to file a amended tax return   Employees must use Form 2106 or Form 2106-EZ to apply the 50% limit. How to file a amended tax return Travel as Education You cannot deduct the cost of travel as a form of education even if it is directly related to your duties in your work or business. How to file a amended tax return Example. How to file a amended tax return You are a French language teacher. How to file a amended tax return While on sabbatical leave granted for travel, you traveled through France to improve your knowledge of the French language. How to file a amended tax return You chose your itinerary and most of your activities to improve your French language skills. How to file a amended tax return You cannot deduct your travel expenses as education expenses. How to file a amended tax return This is true even if you spent most of your time learning French by visiting French schools and families, attending movies or plays, and engaging in similar activities. How to file a amended tax return No Double Benefit Allowed You cannot do either of the following. How to file a amended tax return Deduct work-related education expenses as business expenses if you benefit from these expenses under any other provision of the law, for example, the tuition and fees deduction (see chapter 35). How to file a amended tax return Deduct work-related education expenses paid with tax-free scholarship, grant, or employer-provided educational assistance. How to file a amended tax return See Adjustments to Qualifying Work-Related Education Expenses , next. How to file a amended tax return Adjustments to Qualifying Work-Related Education Expenses If you pay qualifying work-related education expenses with certain tax-free funds, you cannot claim a deduction for those amounts. How to file a amended tax return You must reduce the qualifying expenses by the amount of such expenses allocable to the tax-free educational assistance. How to file a amended tax return For more information, see chapter 12 of Publication 970. How to file a amended tax return Tax-free educational assistance includes: The tax-free part of scholarships and fellowships (see chapter 1 of Publication 970), The tax-free part of Pell grants (see chapter 1 of Publication 970), The tax-free part of employer-provided educational assistance (see chapter 11 of Publication 970), Veterans' educational assistance (see chapter 1 of Publication 970), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received for education assistance. How to file a amended tax return Amounts that do not reduce qualifying work-related education expenses. How to file a amended tax return   Do not reduce the qualifying work-related education expenses by amounts paid with funds the student receives as: Payment for services, such as wages, A loan, A gift, An inheritance, or A withdrawal from the student's personal savings. How to file a amended tax return   Also, do not reduce the qualifying work-related education expenses by any scholarship or fellowship reported as income on the student's return or any scholarship which, by its terms, cannot be applied to qualifying work-related education expenses. How to file a amended tax return Reimbursements How you treat reimbursements depends on the arrangement you have with your employer. How to file a amended tax return There are two basic types of reimbursement arrangements—accountable plans and nonaccountable plans. How to file a amended tax return You can tell the type of plan you are reimbursed under by the way the reimbursement is reported on your Form W-2. How to file a amended tax return For information on how to treat reimbursements under both accountable and nonaccountable plans, see Reimbursements in chapter 26. How to file a amended tax return Deducting Business Expenses Self-employed persons and employees report business expenses differently. How to file a amended tax return The following information explains what forms you must use to deduct the cost of your qualifying work-related education as a business expense. How to file a amended tax return Self-Employed Persons If you are self-employed, report the cost of your qualifying work-related education on the appropriate form used to report your business income and expenses (generally Schedule C, C-EZ, or F). How to file a amended tax return If your educational expenses include expenses for a car or truck, travel, or meals, report those expenses the same way you report other business expenses for those items. How to file a amended tax return See the instructions for the form you file for information on how to complete it. How to file a amended tax return Employees If you are an employee, you can deduct the cost of qualifying work-related education only if you: Did not receive (and were not entitled to receive) any reimbursement from your employer, Were reimbursed under a nonaccountable plan (amount is included in box 1 of Form W-2), or Received reimbursement under an accountable plan, but the amount received was less than your expenses for which you claimed reimbursement. How to file a amended tax return If either (1) or (2) applies, you can deduct the total qualifying cost. How to file a amended tax return If (3) applies, you can deduct only the qualifying costs that were more than your reimbursement. How to file a amended tax return In order to deduct the cost of your qualifying work-related education as a business expense, include the amount with your deduction for any other employee business expenses on Schedule A (Form 1040), line 21. How to file a amended tax return (Special rules for expenses of certain performing artists and fee-basis officials and for impairment-related work expenses are explained later. How to file a amended tax return ) This deduction (except for impairment-related work expenses of disabled individuals) is subject to the 2%-of-adjusted-gross-income limit that applies to most miscellaneous itemized deductions. How to file a amended tax return See chapter 28. How to file a amended tax return Form 2106 or 2106-EZ. How to file a amended tax return   To figure your deduction for employee business expenses, including qualifying work-related education, you generally must complete Form 2106 or Form 2106-EZ. How to file a amended tax return Form not required. How to file a amended tax return   Do not complete either Form 2106 or Form 2106-EZ if: If amounts included in box 1 of your Form W-2, are not considered reimbursements, and You are not claiming travel, transportation, meal, or entertainment expenses. How to file a amended tax return   If you meet both of these requirements, enter the expenses directly on Schedule A (Form 1040), line 21. How to file a amended tax return (Special rules for expenses of certain performing artists and fee-basis officials and for impairment-related work expenses are explained later. How to file a amended tax return ) Using Form 2106-EZ. How to file a amended tax return   This form is shorter and easier to use than Form 2106. How to file a amended tax return Generally, you can use this form if: All reimbursements, if any, are included in box 1 of your Form W-2, and You are using the standard mileage rate if you are claiming vehicle expenses. How to file a amended tax return   If you do not meet both of these requirements, use Form 2106. How to file a amended tax return Performing Artists and Fee-Basis Officials If you are a qualified performing artist, or a state (or local) government official who is paid in whole or in part on a fee basis, you can deduct the cost of your qualifying work-related education as an adjustment to gross income rather than as an itemized deduction. How to file a amended tax return Include the cost of your qualifying work-related education with any other employee business expenses on Form 1040, line 24. How to file a amended tax return You do not have to itemize your deductions on Schedule A (Form 1040), and, therefore, the deduction is not subject to the 2%-of-adjusted-gross-income limit. How to file a amended tax return You must complete Form 2106 or 2106-EZ to figure your deduction, even if you meet the requirements described earlier under Form not required . How to file a amended tax return For more information on qualified performing artists, see chapter 6 of Publication 463. How to file a amended tax return Impairment-Related Work Expenses If you are disabled and have impairment-related work expenses that are necessary for you to be able to get qualifying work-related education, you can deduct these expenses on Schedule A (Form 1040), line 28. How to file a amended tax return They are not subject to the 2%-of-adjusted-gross-income limit. How to file a amended tax return To deduct these expenses, you must complete Form 2106 or 2106-EZ even if you meet the requirements described earlier under Form not required . How to file a amended tax return For more information on impairment-related work expenses, see chapter 6 of Publication 463. How to file a amended tax return Recordkeeping You must keep records as proof of any deduction claimed on your tax return. How to file a amended tax return Generally, you should keep your records for 3 years from the date of filing the tax return and claiming the deduction. How to file a amended tax return For specific information about keeping records of business expenses, see Recordkeeping in chapter 26. How to file a amended tax return Prev  Up  Next   Home   More Online Publications
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The How To File A Amended Tax Return

How to file a amended tax return 4. How to file a amended tax return   Figuring Depreciation Under MACRS Table of Contents Introduction Useful Items - You may want to see: Which Depreciation System (GDS or ADS) Applies? Which Property Class Applies Under GDS?Rent-to-own dealer. How to file a amended tax return Rent-to-own contract. How to file a amended tax return What Is the Placed in Service Date? What Is the Basis for Depreciation? Which Recovery Period Applies?Recovery Periods Under GDS Recovery Periods Under ADS Additions and Improvements Which Convention Applies? Which Depreciation Method Applies?Depreciation Methods for Farm Property Electing a Different Method How Is the Depreciation Deduction Figured?Using the MACRS Percentage Tables Figuring the Deduction Without Using the Tables Figuring the Deduction for Property Acquired in a Nontaxable Exchange Figuring the Deduction for a Short Tax Year How Do You Use General Asset Accounts?Grouping Property Figuring Depreciation for a GAA Disposing of GAA Property Terminating GAA Treatment Electing To Use a GAA When Do You Recapture MACRS Depreciation? Introduction The Modified Accelerated Cost Recovery System (MACRS) is used to recover the basis of most business and investment property placed in service after 1986. How to file a amended tax return MACRS consists of two depreciation systems, the General Depreciation System (GDS) and the Alternative Depreciation System (ADS). How to file a amended tax return Generally, these systems provide different methods and recovery periods to use in figuring depreciation deductions. How to file a amended tax return To be sure you can use MACRS to figure depreciation for your property, see What Method Can You Use To Depreciate Your Property in chapter 1. How to file a amended tax return This chapter explains how to determine which MACRS depreciation system applies to your property. How to file a amended tax return It also discusses other information you need to know before you can figure depreciation under MACRS. How to file a amended tax return This information includes the property's recovery class, placed in service date, and basis, as well as the applicable recovery period, convention, and depreciation method. How to file a amended tax return It explains how to use this information to figure your depreciation deduction and how to use a general asset account to depreciate a group of properties. How to file a amended tax return Finally, it explains when and how to recapture MACRS depreciation. How to file a amended tax return Useful Items - You may want to see: Publication 225 Farmer's Tax Guide 463 Travel, Entertainment, Gift, and Car  Expenses 544 Sales and Other Dispositions of Assets 551 Basis of Assets 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 See chapter 6 for information about getting publications and forms. How to file a amended tax return Which Depreciation System (GDS or ADS) Applies? Your use of either the General Depreciation System (GDS) or the Alternative Depreciation System (ADS) to depreciate property under MACRS determines what depreciation method and recovery period you use. How to file a amended tax return You generally must use GDS unless you are specifically required by law to use ADS or you elect to use ADS. How to file a amended tax return If you placed your property in service in 2013, complete Part III of Form 4562 to report depreciation using MACRS. How to file a amended tax return Complete section B of Part III to report depreciation using GDS, and complete section C of Part III to report depreciation using ADS. How to file a amended tax return If you placed your property in service before 2013 and are required to file Form 4562, report depreciation using either GDS or ADS on line 17 in Part III. How to file a amended tax return Required use of ADS. How to file a amended tax return   You must use ADS for the following property. How to file a amended tax return Listed property used 50% or less in a qualified business use. How to file a amended tax return See chapter 5 for information on listed property. How to file a amended tax return Any tangible property used predominantly outside the United States during the year. How to file a amended tax return Any tax-exempt use property. How to file a amended tax return Any tax-exempt bond-financed property. How to file a amended tax return All property used predominantly in a farming business and placed in service in any tax year during which an election not to apply the uniform capitalization rules to certain farming costs is in effect. How to file a amended tax return Any property imported from a foreign country for which an Executive Order is in effect because the country maintains trade restrictions or engages in other discriminatory acts. How to file a amended tax return If you are required to use ADS to depreciate your property, you cannot claim any special depreciation allowance (discussed in chapter 3) for the property. How to file a amended tax return Electing ADS. How to file a amended tax return   Although your property may qualify for GDS, you can elect to use ADS. How to file a amended tax return The election generally must cover all property in the same property class that you placed in service during the year. How to file a amended tax return However, the election for residential rental property and nonresidential real property can be made on a property-by-property basis. How to file a amended tax return Once you make this election, you can never revoke it. How to file a amended tax return   You make the election by completing line 20 in Part III of Form 4562. How to file a amended tax return Which Property Class Applies Under GDS? The following is a list of the nine property classifications under GDS and examples of the types of property included in each class. How to file a amended tax return These property classes are also listed under column (a) in section B, Part III, of Form 4562. How to file a amended tax return For detailed information on property classes, see Appendix B, Table of Class Lives and Recovery Periods, in this publication. How to file a amended tax return 3-year property. How to file a amended tax return Tractor units for over-the-road use. How to file a amended tax return Any race horse over 2 years old when placed in service. How to file a amended tax return (All race horses placed in service after December 31, 2008, and before January 1, 2014, are deemed to be 3-year property, regardless of age. How to file a amended tax return ) Any other horse (other than a race horse) over 12 years old when placed in service. How to file a amended tax return Qualified rent-to-own property (defined later). How to file a amended tax return 5-year property. How to file a amended tax return Automobiles, taxis, buses, and trucks. How to file a amended tax return Computers and peripheral equipment. How to file a amended tax return Office machinery (such as typewriters, calculators, and copiers). How to file a amended tax return Any property used in research and experimentation. How to file a amended tax return Breeding cattle and dairy cattle. How to file a amended tax return Appliances, carpets, furniture, etc. How to file a amended tax return , used in a residential rental real estate activity. How to file a amended tax return Certain geothermal, solar, and wind energy property. How to file a amended tax return 7-year property. How to file a amended tax return Office furniture and fixtures (such as desks, files, and safes). How to file a amended tax return Agricultural machinery and equipment. How to file a amended tax return Any property that does not have a class life and has not been designated by law as being in any other class. How to file a amended tax return Certain motorsports entertainment complex property (defined later) placed in service before January 1, 2014. How to file a amended tax return Any natural gas gathering line placed in service after April 11, 2005. How to file a amended tax return See Natural gas gathering line and electric transmission property , later. How to file a amended tax return 10-year property. How to file a amended tax return Vessels, barges, tugs, and similar water transportation equipment. How to file a amended tax return Any single purpose agricultural or horticultural structure. How to file a amended tax return Any tree or vine bearing fruits or nuts. How to file a amended tax return Qualified small electric meter and qualified smart electric grid system (defined later) placed in service on or after October 3, 2008. How to file a amended tax return 15-year property. How to file a amended tax return Certain improvements made directly to land or added to it (such as shrubbery, fences, roads, sidewalks, and bridges). How to file a amended tax return Any retail motor fuels outlet (defined later), such as a convenience store. How to file a amended tax return Any municipal wastewater treatment plant. How to file a amended tax return Any qualified leasehold improvement property (defined later) placed in service before January 1, 2014. How to file a amended tax return Any qualified restaurant property (defined later) placed in service before January 1, 2014. How to file a amended tax return Initial clearing and grading land improvements for gas utility property. How to file a amended tax return Electric transmission property (that is section 1245 property) used in the transmission at 69 or more kilovolts of electricity placed in service after April 11, 2005. How to file a amended tax return See Natural gas gathering line and electric transmission property , later. How to file a amended tax return Any natural gas distribution line placed in service after April 11, 2005 and before January 1, 2011. How to file a amended tax return Any qualified retail improvement property placed in service before January 1, 2014. How to file a amended tax return 20-year property. How to file a amended tax return Farm buildings (other than single purpose agricultural or horticultural structures). How to file a amended tax return Municipal sewers not classified as 25-year property. How to file a amended tax return Initial clearing and grading land improvements for electric utility transmission and distribution plants. How to file a amended tax return 25-year property. How to file a amended tax return This class is water utility property, which is either of the following. How to file a amended tax return Property that is an integral part of the gathering, treatment, or commercial distribution of water, and that, without regard to this provision, would be 20-year property. How to file a amended tax return Municipal sewers other than property placed in service under a binding contract in effect at all times since June 9, 1996. How to file a amended tax return Residential rental property. How to file a amended tax return This is any building or structure, such as a rental home (including a mobile home), if 80% or more of its gross rental income for the tax year is from dwelling units. How to file a amended tax return A dwelling unit is a house or apartment used to provide living accommodations in a building or structure. How to file a amended tax return It does not include a unit in a hotel, motel, or other establishment where more than half the units are used on a transient basis. How to file a amended tax return If you occupy any part of the building or structure for personal use, its gross rental income includes the fair rental value of the part you occupy. How to file a amended tax return Nonresidential real property. How to file a amended tax return This is section 1250 property, such as an office building, store, or warehouse, that is neither residential rental property nor property with a class life of less than 27. How to file a amended tax return 5 years. How to file a amended tax return Qualified rent-to-own property. How to file a amended tax return   Qualified rent-to-own property is property held by a rent-to-own dealer for purposes of being subject to a rent-to-own contract. How to file a amended tax return It is tangible personal property generally used in the home for personal use. How to file a amended tax return It includes computers and peripheral equipment, televisions, videocassette recorders, stereos, camcorders, appliances, furniture, washing machines and dryers, refrigerators, and other similar consumer durable property. How to file a amended tax return Consumer durable property does not include real property, aircraft, boats, motor vehicles, or trailers. How to file a amended tax return   If some of the property you rent to others under a rent-to-own agreement is of a type that may be used by the renters for either personal or business purposes, you still can treat this property as qualified property as long as it does not represent a significant portion of your leasing property. How to file a amended tax return However, if this dual-use property does represent a significant portion of your leasing property, you must prove that this property is qualified rent-to-own property. How to file a amended tax return Rent-to-own dealer. How to file a amended tax return   You are a rent-to-own dealer if you meet all the following requirements. How to file a amended tax return You regularly enter into rent-to-own contracts (defined below) in the ordinary course of your business for the use of consumer property. How to file a amended tax return A substantial portion of these contracts end with the customer returning the property before making all the payments required to transfer ownership. How to file a amended tax return The property is tangible personal property of a type generally used within the home for personal use. How to file a amended tax return Rent-to-own contract. How to file a amended tax return   This is any lease for the use of consumer property between a rent-to-own dealer and a customer who is an individual which— Is titled “Rent-to-Own Agreement,” “Lease Agreement with Ownership Option,” or other similar language. How to file a amended tax return Provides a beginning date and a maximum period of time, not to exceed 156 weeks or 36 months from the beginning date, for which the contract can be in effect (including renewals or options to extend). How to file a amended tax return Provides for regular periodic (weekly or monthly) payments that can be either level or decreasing. How to file a amended tax return If the payments are decreasing, no payment can be less than 40% of the largest payment. How to file a amended tax return Provides for total payments that generally exceed the normal retail price of the property plus interest. How to file a amended tax return Provides for total payments that do not exceed $10,000 for each item of property. How to file a amended tax return Provides that the customer has no legal obligation to make all payments outlined in the contract and that, at the end of each weekly or monthly payment period, the customer can either continue to use the property by making the next payment or return the property in good working order with no further obligations and no entitlement to a return of any prior payments. How to file a amended tax return Provides that legal title to the property remains with the rent-to-own dealer until the customer makes either all the required payments or the early purchase payments required under the contract to acquire legal title. How to file a amended tax return Provides that the customer has no right to sell, sublease, mortgage, pawn, pledge, or otherwise dispose of the property until all contract payments have been made. How to file a amended tax return Motorsports entertainment complex. How to file a amended tax return   This is a racing track facility permanently situated on land that hosts one or more racing events for automobiles, trucks, or motorcycles during the 36-month period after the first day of the month in which the facility is placed in service. How to file a amended tax return The events must be open to the public for the price of admission. How to file a amended tax return Qualified smart electric grid system. How to file a amended tax return   A qualified smart electric grid system means any smart grid property used as part of a system for electric distribution grid communications, monitoring, and management placed in service after October 3, 2008, by a taxpayer who is a supplier of electrical energy or a provider of electrical energy services. How to file a amended tax return Smart grid property includes electronics and related equipment that is capable of: Sensing, collecting, and monitoring data of or from all portions of a utility's electric distribution grid, Providing real-time, two-way communications to monitor or to manage the grid, and Providing real-time analysis of an event prediction based on collected data that can be used to provide electric distribution system reliability, quality, and performance. How to file a amended tax return Retail motor fuels outlet. How to file a amended tax return   Real property is a retail motor fuels outlet if it is used to a substantial extent in the retail marketing of petroleum or petroleum products (whether or not it is also used to sell food or other convenience items) and meets any one of the following three tests. How to file a amended tax return It is not larger than 1,400 square feet. How to file a amended tax return 50% or more of the gross revenues generated from the property are derived from petroleum sales. How to file a amended tax return 50% or more of the floor space in the property is devoted to petroleum marketing sales. How to file a amended tax return A retail motor fuels outlet does not include any facility related to petroleum and natural gas trunk pipelines. How to file a amended tax return Qualified leasehold improvement property. How to file a amended tax return    Generally, this is any improvement to an interior part of a building (placed in service before January 1, 2014) that is nonresidential real property, provided all of the requirements discussed in chapter 3 under Qualified leasehold improvement property are met. How to file a amended tax return   In addition, an improvement made by the lessor does not qualify as qualified leasehold improvement property to any subsequent owner unless it is acquired from the original lessor by reason of the lessor's death or in any of the following types of transactions. How to file a amended tax return A transaction to which section 381(a) applies, A mere change in the form of conducting the trade or business so long as the property is retained in the trade or business as qualified leasehold improvement property and the taxpayer retains a substantial interest in the trade or business, A like-kind exchange, involuntary conversion, or reacquisition of real property to the extent that the basis in the property represents the carryover basis, or Certain nonrecognition transactions to the extent that your basis in the property is determined by reference to the transferor's or distributor's basis in the property. How to file a amended tax return Examples include the following. How to file a amended tax return A complete liquidation of a subsidiary. How to file a amended tax return A transfer to a corporation controlled by the transferor. How to file a amended tax return An exchange of property by a corporation solely for stock or securities in another corporation in a reorganization. How to file a amended tax return Qualified restaurant property. How to file a amended tax return   Qualified restaurant property is any section 1250 property that is a building placed in service after December 31, 2008, and before January 1, 2014. How to file a amended tax return Also, more than 50% of the building's square footage must be devoted to preparation of meals and seating for on-premises consumption of prepared meals. How to file a amended tax return Qualified smart electric meter. How to file a amended tax return   A qualified smart electric meter is any time-based meter and related communication equipment which is placed in service by a supplier of electric energy or a provider of electric energy services and which is capable of being used by you as part of a system that: Measures and records electricity usage data on a time-differentiated basis in at least 24 separate time segments per day; Provides for the exchange of information between the supplier or provider and the customer's smart electric meter in support of time-based rates or other forms of demand response; Provides data to the supplier or provider so that the supplier or provider can provide energy usage information to customers electronically, and Provides all commercial and residential customers of such supplier or provider with net metering. How to file a amended tax return Net metering means allowing a customer a credit, if any, as complies with applicable federal and state laws and regulations for providing electricity to the supplier or provider. How to file a amended tax return Natural gas gathering line and electric transmission property. How to file a amended tax return   Any natural gas gathering line placed in service after April 11, 2005, is treated as 7-year property, and electric transmission property (that is section 1245 property) used in the transmission at 69 or more kilovolts of electricity and any natural gas distribution line placed in service after April 11, 2005, are treated as 15-year property, if the following requirements are met. How to file a amended tax return The original use of the property must have begun with you after April 11, 2005. How to file a amended tax return Original use means the first use to which the property is put, whether or not by you. How to file a amended tax return Therefore, property used by any person before April 12, 2005, is not original use. How to file a amended tax return Original use includes additional capital expenditures you incurred to recondition or rebuild your property. How to file a amended tax return However, original use does not include the cost of reconditioned or rebuilt property you acquired. How to file a amended tax return Property containing used parts will not be treated as reconditioned or rebuilt if the cost of the used parts is not more than 20% of the total cost of the property. How to file a amended tax return The property must not be placed in service under a binding contract in effect before April 12, 2005. How to file a amended tax return The property must not be self-constructed property (property you manufacture, construct, or produce for your own use), if you began the manufacture, construction, or production of the property before April 12, 2005. How to file a amended tax return Property that is manufactured, constructed, or produced for your use by another person under a written binding contract entered into by you or a related party before the manufacture, construction, or production of the property is considered to be manufactured, constructed, or produced by you. How to file a amended tax return What Is the Placed in Service Date? You begin to claim depreciation when your property is placed in service for either use in a trade or business or the production of income. How to file a amended tax return The placed in service date for your property is the date the property is ready and available for a specific use. How to file a amended tax return It is therefore not necessarily the date it is first used. How to file a amended tax return If you converted property held for personal use to use in a trade or business or for the production of income, treat the property as being placed in service on the conversion date. How to file a amended tax return See Placed in Service under When Does Depreciation Begin and End in chapter 1 for examples illustrating when property is placed in service. How to file a amended tax return What Is the Basis for Depreciation? The basis for depreciation of MACRS property is the property's cost or other basis multiplied by the percentage of business/investment use. How to file a amended tax return For a discussion of business/investment use, see Partial business or investment use under Property Used in Your Business or Income-Producing Activity in chapter 1 . How to file a amended tax return Reduce that amount by any credits and deductions allocable to the property. How to file a amended tax return The following are examples of some credits and deductions that reduce basis. How to file a amended tax return Any deduction for section 179 property. How to file a amended tax return Any deduction under section 179B of the Internal Revenue Code for capital costs to comply with Environmental Protection Agency sulfur regulations. How to file a amended tax return Any deduction under section 179C of the Internal Revenue Code for certain qualified refinery property placed in service after August 8, 2005, and before January 1, 2014. How to file a amended tax return Any deduction under section 179D of the Internal Revenue Code for certain energy efficient commercial building property placed in service after December 31, 2005, and before January 1, 2014. How to file a amended tax return Any deduction under section 179E of the Internal Revenue Code for qualified advanced mine safety equipment property placed in service after December 20, 2006, and before January 1, 2014 . How to file a amended tax return Any deduction for removal of barriers to the disabled and the elderly. How to file a amended tax return Any disabled access credit, enhanced oil recovery credit, and credit for employer-provided childcare facilities and services. How to file a amended tax return Any special depreciation allowance. How to file a amended tax return Basis adjustment for investment credit property under section 50(c) of the Internal Revenue Code. How to file a amended tax return For additional credits and deductions that affect basis, see section 1016 of the Internal Revenue Code. How to file a amended tax return Enter the basis for depreciation under column (c) in Part III of Form 4562. How to file a amended tax return For information about how to determine the cost or other basis of property, see What Is the Basis of Your Depreciable Property in chapter 1 . How to file a amended tax return Which Recovery Period Applies? The recovery period of property is the number of years over which you recover its cost or other basis. How to file a amended tax return It is determined based on the depreciation system (GDS or ADS) used. How to file a amended tax return Recovery Periods Under GDS Under GDS, property that is not qualified Indian reservation property is depreciated over one of the following recovery periods. How to file a amended tax return Property Class Recovery Period 3-year property   3 years 1   5-year property   5 years     7-year property   7 years     10-year property   10 years     15-year property   15 years 2   20-year property   20 years     25-year property   25 years 3   Residential rental property   27. How to file a amended tax return 5 years     Nonresidential real property   39 years 4   15 years for qualified rent-to-own property placed in service before August 6, 1997. How to file a amended tax return 239 years for property that is a retail motor fuels outlet placed in service before August 20, 1996 (31. How to file a amended tax return 5 years if placed in service before May 13, 1993), unless you elected to depreciate it over 15 years. How to file a amended tax return 320 years for property placed in service before June 13, 1996, or under a binding contract in effect before June 10, 1996. How to file a amended tax return 431. How to file a amended tax return 5 years for property placed in service before May 13, 1993 (or before January 1, 1994, if the purchase or construction of the property is under a binding contract in effect before May 13, 1993, or if construction began before May 13, 1993). How to file a amended tax return The GDS recovery periods for property not listed above can be found in Appendix B, Table of Class Lives and Recovery Periods. How to file a amended tax return Residential rental property and nonresidential real property are defined earlier under Which Depreciation System (GDS or ADS) Applies. How to file a amended tax return Enter the appropriate recovery period on Form 4562 under column (d) in section B of Part III, unless already shown (for 25-year property, residential rental property, and nonresidential real property). How to file a amended tax return Office in the home. How to file a amended tax return   If your home is a personal-use single family residence and you begin to use part of your home as an office, depreciate that part of your home as nonresidential real property over 39 years (31. How to file a amended tax return 5 years if you began using it for business before May 13, 1993). How to file a amended tax return However, if your home is an apartment in an apartment building that you own and the building is residential rental property as defined earlier under Which Depreciation System (GDS or ADS) Applies , depreciate the part used as an office as residential rental property over 27. How to file a amended tax return 5 years. How to file a amended tax return See Publication 587 for a discussion of the tests you must meet to claim expenses, including depreciation, for the business use of your home. How to file a amended tax return Home changed to rental use. How to file a amended tax return   If you begin to rent a home that was your personal home before 1987, you depreciate it as residential rental property over 27. How to file a amended tax return 5 years. How to file a amended tax return Indian Reservation Property The recovery periods for qualified property you placed in service on an Indian reservation after 1993 and before 2014 are shorter than those listed earlier. How to file a amended tax return The following table shows these shorter recovery periods. How to file a amended tax return Property Class Recovery  Period 3-year property 2 years 5-year property 3 years 7-year property 4 years 10-year property 6 years 15-year property 9 years 20-year property 12 years Nonresidential real property 22 years Nonresidential real property is defined earlier under Which Property Class Applies Under GDS . How to file a amended tax return Use this chart to find the correct percentage table to use for qualified Indian reservation property. How to file a amended tax return IF your recovery period is: THEN use the following table in Appendix A: 2 years A-21 3 years A-1, A-2, A-3, A-4, or A-5 4 years A-22 6 years A-23 9 years A-14, A-15, A-16, A-17, or A-18 12 years A-14, A-15, A-16, A-17, or A-18 22 years A-24 Qualified property. How to file a amended tax return   Property eligible for the shorter recovery periods are 3-, 5-, 7-, 10-, 15-, and 20-year property and nonresidential real property. How to file a amended tax return You must use this property predominantly in the active conduct of a trade or business within an Indian reservation. How to file a amended tax return The rental of real property that is located on an Indian reservation is treated as the active conduct of a trade or business within an Indian reservation. How to file a amended tax return   The following property is not qualified property. How to file a amended tax return Property used or located outside an Indian reservation on a regular basis, other than qualified infrastructure property. How to file a amended tax return Property acquired directly or indirectly from a related person. How to file a amended tax return Property placed in service for purposes of conducting or housing class I, II, or III gaming activities. How to file a amended tax return These activities are defined in section 4 of the Indian Regulatory Act (25 U. How to file a amended tax return S. How to file a amended tax return C. How to file a amended tax return 2703). How to file a amended tax return Any property you must depreciate under ADS. How to file a amended tax return Determine whether property is qualified without regard to the election to use ADS and after applying the special rules for listed property not used predominantly for qualified business use (discussed in chapter 5). How to file a amended tax return Qualified infrastructure property. How to file a amended tax return   Item (1) above does not apply to qualified infrastructure property located outside the reservation that is used to connect with qualified infrastructure property within the reservation. How to file a amended tax return Qualified infrastructure property is property that meets all the following rules. How to file a amended tax return It is qualified property, as defined earlier, except that it is outside the reservation. How to file a amended tax return It benefits the tribal infrastructure. How to file a amended tax return It is available to the general public. How to file a amended tax return It is placed in service in connection with the active conduct of a trade or business within a reservation. How to file a amended tax return Infrastructure property includes, but is not limited to, roads, power lines, water systems, railroad spurs, and communications facilities. How to file a amended tax return Related person. How to file a amended tax return   For purposes of item (2) above, 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 for a description of related persons. How to file a amended tax return Indian reservation. How to file a amended tax return   The term Indian reservation means a reservation as defined in section 3(d) of the Indian Financing Act of 1974 (25 U. How to file a amended tax return S. How to file a amended tax return C. How to file a amended tax return 1452(d)) or section 4(10) of the Indian Child Welfare Act of 1978 (25 U. How to file a amended tax return S. How to file a amended tax return C. How to file a amended tax return 1903(10)). How to file a amended tax return Section 3(d) of the Indian Financing Act of 1974 defines reservation to include former Indian reservations in Oklahoma. How to file a amended tax return For a definition of the term “former Indian reservations in Oklahoma,” see Notice 98-45 in Internal Revenue Bulletin 1998-35. How to file a amended tax return Recovery Periods Under ADS The recovery periods for most property generally are longer under ADS than they are under GDS. How to file a amended tax return The following table shows some of the ADS recovery periods. How to file a amended tax return Property Recovery  Period Rent-to-own property 4 years Automobiles and light duty trucks 5 years Computers and peripheral equipment 5 years High technology telephone station equipment installed on customer premises 5 years High technology medical equipment 5 years Personal property with no class life 12 years Natural gas gathering lines 14 years Single purpose agricultural and horticultural structures 15 years Any tree or vine bearing fruit or nuts 20 years Initial clearing and grading land  improvements for gas utility property 20 years Initial clearing and grading land  improvements for electric utility  transmission and distribution plants 25 years Electric transmission property used in the transmission at 69 or more kilovolts of electricity 30 years Natural gas distribution lines 35 years Any qualified leasehold improvement property 39 years Any qualified restaurant property 39 years Nonresidential real property 40 years Residential rental property 40 years Section 1245 real property not listed in Appendix B 40 years Railroad grading and tunnel bore 50 years The ADS recovery periods for property not listed above can be found in the tables in Appendix B. How to file a amended tax return Rent-to-own property, qualified leasehold improvement property, qualified restaurant property, residential rental property, and nonresidential real property are defined earlier under Which Property Class Applies Under GDS . How to file a amended tax return Tax-exempt use property subject to a lease. How to file a amended tax return   The ADS recovery period for any property leased under a lease agreement to a tax-exempt organization, governmental unit, or foreign person or entity (other than a partnership) cannot be less than 125% of the lease term. How to file a amended tax return Additions and Improvements An addition or improvement you make to depreciable property is treated as separate depreciable property. How to file a amended tax return See How Do You Treat Repairs and Improvements in chapter 1 for a definition of improvements. How to file a amended tax return Its property class and recovery period are the same as those that would apply to the original property if you had placed it in service at the same time you placed the addition or improvement in service. How to file a amended tax return The recovery period begins on the later of the following dates. How to file a amended tax return The date you place the addition or improvement in service. How to file a amended tax return The date you place in service the property to which you made the addition or improvement. How to file a amended tax return If the improvement you make is qualified leasehold improvement property, qualified restaurant property, or qualified retail improvement property, the GDS recovery period is 15 years (39 years under ADS). How to file a amended tax return Example. How to file a amended tax return You own a rental home that you have been renting out since 1981. How to file a amended tax return If you put an addition on the home and place the addition in service this year, you would use MACRS to figure your depreciation deduction for the addition. How to file a amended tax return Under GDS, the property class for the addition is residential rental property and its recovery period is 27. How to file a amended tax return 5 years because the home to which the addition is made would be residential rental property if you had placed it in service this year. How to file a amended tax return Which Convention Applies? Under MACRS, averaging conventions establish when the recovery period begins and ends. How to file a amended tax return The convention you use determines the number of months for which you can claim depreciation in the year you place property in service and in the year you dispose of the property. How to file a amended tax return The mid-month convention. How to file a amended tax return   Use this convention for nonresidential real property, residential rental property, and any railroad grading or tunnel bore. How to file a amended tax return   Under this convention, you treat all property placed in service or disposed of during a month as placed in service or disposed of at the midpoint of the month. How to file a amended tax return This means that a one-half month of depreciation is allowed for the month the property is placed in service or disposed of. How to file a amended tax return   Your use of the mid-month convention is indicated by the “MM” already shown under column (e) in Part III of Form 4562. How to file a amended tax return The mid-quarter convention. How to file a amended tax return   Use this convention if the mid-month convention does not apply and the total depreciable bases of MACRS property you placed in service during the last 3 months of the tax year (excluding nonresidential real property, residential rental property, any railroad grading or tunnel bore, property placed in service and disposed of in the same year, and property that is being depreciated under a method other than MACRS) are more than 40% of the total depreciable bases of all MACRS property you placed in service during the entire year. How to file a amended tax return   Under this convention, you treat all property placed in service or disposed of during any quarter of the tax year as placed in service or disposed of at the midpoint of that quarter. How to file a amended tax return This means that 1½ months of depreciation is allowed for the quarter the property is placed in service or disposed of. How to file a amended tax return   If you use this convention, enter “MQ” under column (e) in Part III of Form 4562. How to file a amended tax return    For purposes of determining whether the mid-quarter convention applies, the depreciable basis of property you placed in service during the tax year reflects the reduction in basis for amounts expensed under section 179 and the part of the basis of property attributable to personal use. How to file a amended tax return However, it does not reflect any reduction in basis for any special depreciation allowance. How to file a amended tax return The half-year convention. How to file a amended tax return   Use this convention if neither the mid-quarter convention nor the mid-month convention applies. How to file a amended tax return   Under this convention, you treat all property placed in service or disposed of during a tax year as placed in service or disposed of at the midpoint of the year. How to file a amended tax return This means that a one-half year of depreciation is allowed for the year the property is placed in service or disposed of. How to file a amended tax return   If you use this convention, enter “HY” under column (e) in Part III of Form 4562. How to file a amended tax return Which Depreciation Method Applies? MACRS provides three depreciation methods under GDS and one depreciation method under ADS. How to file a amended tax return The 200% declining balance method over a GDS recovery period. How to file a amended tax return The 150% declining balance method over a GDS recovery period. How to file a amended tax return The straight line method over a GDS recovery period. How to file a amended tax return The straight line method over an ADS recovery period. How to file a amended tax return For property placed in service before 1999, you could have elected the 150% declining balance method using the ADS recovery periods for certain property classes. How to file a amended tax return If you made this election, continue to use the same method and recovery period for that property. How to file a amended tax return Table 4–1 lists the types of property you can depreciate under each method. How to file a amended tax return It also gives a brief explanation of the method, including any benefits that may apply. How to file a amended tax return Depreciation Methods for Farm Property If you place personal property in service in a farming business after 1988, you generally must depreciate it under GDS using the 150% declining balance method unless you are a farmer who must depreciate the property under ADS using the straight line method or you elect to depreciate the property under GDS or ADS using the straight line method. How to file a amended tax return You can depreciate real property using the straight line method under either GDS or ADS. How to file a amended tax return Fruit or nut trees and vines. How to file a amended tax return   Depreciate trees and vines bearing fruit or nuts under GDS using the straight line method over a recovery period of 10 years. How to file a amended tax return ADS required for some farmers. How to file a amended tax return   If you elect not to apply the uniform capitalization rules to any plant produced in your farming business, you must use ADS. How to file a amended tax return You must use ADS for all property you place in service in any year the election is in effect. How to file a amended tax return See the regulations under section 263A of the Internal Revenue Code for information on the uniform capitalization rules that apply to farm property. How to file a amended tax return Electing a Different Method As shown in Table 4–1 , you can elect a different method for depreciation for certain types of property. How to file a amended tax return You must make the election by the due date of the return (including extensions) for the year you placed the property in service. How to file a amended tax return However, if you timely filed your return for the year without making the election, you still can make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). How to file a amended tax return Attach the election to the amended return and write “Filed pursuant to section 301. How to file a amended tax return 9100-2” on the election statement. How to file a amended tax return File the amended return at the same address you filed the original return. How to file a amended tax return Once you make the election, you cannot change it. How to file a amended tax return If you elect to use a different method for one item in a property class, you must apply the same method to all property in that class placed in service during the year of the election. How to file a amended tax return However, you can make the election on a property-by-property basis for nonresidential real and residential rental property. How to file a amended tax return 150% election. How to file a amended tax return   Instead of using the 200% declining balance method over the GDS recovery period for nonfarm property in the 3-, 5-, 7-, and 10-year property classes, you can elect to use the 150% declining balance method. How to file a amended tax return Make the election by entering “150 DB” under column (f) in Part III of Form 4562. How to file a amended tax return Straight line election. How to file a amended tax return   Instead of using either the 200% or 150% declining balance methods over the GDS recovery period, you can elect to use the straight line method over the GDS recovery period. How to file a amended tax return Make the election by entering  “S/L” under column (f) in Part III of Form 4562. How to file a amended tax return Election of ADS. How to file a amended tax return   As explained earlier under Which Depreciation System (GDS or ADS) Applies , you can elect to use ADS even though your property may come under GDS. How to file a amended tax return ADS uses the straight line method of depreciation over fixed ADS recovery periods. How to file a amended tax return Most ADS recovery periods are listed in Appendix B, or see the table under Recovery Periods Under ADS , earlier. How to file a amended tax return   Make the election by completing line 20 in Part III of Form 4562. How to file a amended tax return Farm property. How to file a amended tax return   Instead of using the 150% declining balance method over a GDS recovery period for property you use in a farming business (other than real property), you can elect to depreciate it using either of the following methods. How to file a amended tax return The straight line method over a GDS recovery period. How to file a amended tax return The straight line method over an ADS recovery period. How to file a amended tax return Table 4-1. How to file a amended tax return Depreciation Methods Note. How to file a amended tax return The declining balance method is abbreviated as DB and the straight line method is abbreviated as SL. How to file a amended tax return Method Type of Property Benefit GDS using 200% DB • Nonfarm 3-, 5-, 7-, and 10-year property • Provides a greater deduction during the earlier recovery years • Changes to SL when that method provides an equal or greater deduction GDS using 150% DB • All farm property (except real property) • All 15- and 20-year property (except qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property placed in service before January 1, 2014) • Nonfarm 3-, 5-, 7-, and 10-year property • Provides a greater deduction during the earlier recovery years • Changes to SL when that method provides an equal or greater deduction1 GDS using SL • Nonresidential real property • Qualified leasehold improvement property placed in service before January 1, 2014 • Qualified restaurant property placed in service before January 1, 2014 • Qualified retail improvement property placed in service before January 1, 2014 • Residential rental property • Trees or vines bearing fruit or nuts • Water utility property • All 3-, 5-, 7-, 10-, 15-, and 20-year property2 • Property for which you elected section 168(k)(4) • Provides for equal yearly deductions (except for the first and last years) ADS using SL • Listed property used 50% or less for business • Property used predominantly outside the U. How to file a amended tax return S. How to file a amended tax return  • Tax-exempt property • Tax-exempt bond-financed property • Farm property used when an election not to apply the uniform capitalization rules is in effect • Imported property3 • Any property for which you elect to use this method4 • Provides for equal yearly deductions (except for the first and last years) 1The MACRS percentage tables in Appendix A have the switch to the straight line method built into their rates 2See section 168(b)(5) of the Internal Revenue Code. How to file a amended tax return 3See section 168(g)(6) of the Internal Revenue Code 4See section 168(g)(7) of the Internal Revenue Code How Is the Depreciation Deduction Figured? To figure your depreciation deduction under MACRS, you first determine the depreciation system, property class, placed in service date, basis amount, recovery period, convention, and depreciation method that applies to your property. How to file a amended tax return Then, you are ready to figure your depreciation deduction. How to file a amended tax return You can figure it using a percentage table provided by the IRS, or you can figure it yourself without using the table. How to file a amended tax return Using the MACRS Percentage Tables To help you figure your deduction under MACRS, the IRS has established percentage tables that incorporate the applicable convention and depreciation method. How to file a amended tax return These percentage tables are in Appendix A near the end of this publication. How to file a amended tax return Which table to use. How to file a amended tax return    Appendix A contains the MACRS Percentage Table Guide, which is designed to help you locate the correct percentage table to use for depreciating your property. How to file a amended tax return The percentage tables immediately follow the guide. How to file a amended tax return Rules Covering the Use of the Tables The following rules cover the use of the percentage tables. How to file a amended tax return You must apply the rates in the percentage tables to your property's unadjusted basis. How to file a amended tax return You cannot use the percentage tables for a short tax year. How to file a amended tax return See Figuring the Deduction for a Short Tax Year, later, for information on the short tax year rules. How to file a amended tax return Once you start using the percentage tables for any item of property, you generally must continue to use them for the entire recovery period of the property. How to file a amended tax return You must stop using the tables if you adjust the basis of the property for any reason other than— Depreciation allowed or allowable, or An addition or improvement to that property that is depreciated as a separate item of property. How to file a amended tax return Basis adjustments other than those made due to the items listed in (4) include an increase in basis for the recapture of a clean-fuel deduction or credit and a reduction in basis for a casualty loss. How to file a amended tax return Basis adjustment due to recapture of clean-fuel vehicle deduction or credit. How to file a amended tax return   If you increase the basis of your property because of the recapture of part or all of a deduction for clean-fuel vehicles or the credit for clean-fuel vehicle refueling property placed in service before January 1, 2006, you cannot continue to use the percentage tables. How to file a amended tax return For the year of the adjustment and the remaining recovery period, you must figure the depreciation deduction yourself using the property's adjusted basis at the end of the year. How to file a amended tax return See Figuring the Deduction Without Using the Tables, later. How to file a amended tax return Basis adjustment due to casualty loss. How to file a amended tax return   If you reduce the basis of your property because of a casualty, you cannot continue to use the percentage tables. How to file a amended tax return For the year of the adjustment and the remaining recovery period, you must figure the depreciation yourself using the property's adjusted basis at the end of the year. How to file a amended tax return See Figuring the Deduction Without Using the Tables, later. How to file a amended tax return Example. How to file a amended tax return On October 26, 2012, Sandra Elm, a calendar year taxpayer, bought and placed in service in her business a new item of 7-year property. How to file a amended tax return It cost $39,000 and she elected a section 179 deduction of $24,000. How to file a amended tax return She also took a special depreciation allowance of $7,500 [50% of $15,000 ($39,000 − $24,000)]. How to file a amended tax return Her unadjusted basis after the section 179 deduction and special depreciation allowance was $7,500 ($15,000 − $7,500). How to file a amended tax return She figured her MACRS depreciation deduction using the percentage tables. How to file a amended tax return For 2012, her MACRS depreciation deduction was $268. How to file a amended tax return In July 2013, the property was vandalized and Sandra had a deductible casualty loss of $3,000. How to file a amended tax return She must adjust the property's basis for the casualty loss, so she can no longer use the percentage tables. How to file a amended tax return Her adjusted basis at the end of 2013, before figuring her 2013 depreciation, is $4,232. How to file a amended tax return She figures that amount by subtracting the 2012 MACRS depreciation of $268 and the casualty loss of $3,000 from the unadjusted basis of $7,500. How to file a amended tax return She must now figure her depreciation for 2013 without using the percentage tables. How to file a amended tax return Figuring the Unadjusted Basis of Your Property You must apply the table rates to your property's unadjusted basis each year of the recovery period. How to file a amended tax return Unadjusted basis is the same basis amount you would use to figure gain on a sale, but you figure it without reducing your original basis by any MACRS depreciation taken in earlier years. How to file a amended tax return However, you do reduce your original basis by other amounts, including the following. How to file a amended tax return Any amortization taken on the property. How to file a amended tax return Any section 179 deduction claimed. How to file a amended tax return Any special depreciation allowance taken on the property. How to file a amended tax return For business property you purchase during the year, the unadjusted basis is its cost minus these and other applicable adjustments. How to file a amended tax return If you trade property, your unadjusted basis in the property received is the cash paid plus the adjusted basis of the property traded minus these adjustments. How to file a amended tax return MACRS Worksheet You can use this worksheet to help you figure your depreciation deduction using the percentage tables. How to file a amended tax return Use a separate worksheet for each item of property. How to file a amended tax return Then, use the information from this worksheet to prepare Form 4562. How to file a amended tax return Do not use this worksheet for automobiles. How to file a amended tax return Use the Depreciation Worksheet for Passenger Automobiles in chapter 5. How to file a amended tax return MACRS Worksheet Part I   1. How to file a amended tax return MACRS system (GDS or ADS)   2. How to file a amended tax return Property class   3. How to file a amended tax return Date placed in service   4. How to file a amended tax return Recovery period   5. How to file a amended tax return Method and convention   6. How to file a amended tax return Depreciation rate (from tables)   Part II   7. How to file a amended tax return Cost or other basis* $     8. How to file a amended tax return Business/investment use   %   9. How to file a amended tax return Multiply line 7 by line 8   $ 10. How to file a amended tax return Total claimed for section 179 deduction and other items   $ 11. How to file a amended tax return Subtract line 10 from line 9. How to file a amended tax return This is your tentative basis for depreciation   $ 12. How to file a amended tax return Multiply line 11 by . How to file a amended tax return 50 if the 50% special depreciation allowance applies. How to file a amended tax return This is your special depreciation allowance. How to file a amended tax return Enter -0- if this is not the year you placed the property in service, the property is not qualified property, or you elected not to claim a special allowance   $ 13. How to file a amended tax return Subtract line 12 from line 11. How to file a amended tax return This is your basis for depreciation     14. How to file a amended tax return Depreciation rate (from line 6)     15. How to file a amended tax return Multiply line 13 by line 14. How to file a amended tax return This is your MACRS depreciation deduction   $ *If real estate, do not include cost (basis) of land. How to file a amended tax return The following example shows how to figure your MACRS depreciation deduction using the percentage tables and the MACRS worksheet. How to file a amended tax return Example. How to file a amended tax return You bought office furniture (7-year property) for $10,000 and placed it in service on August 11, 2013. How to file a amended tax return You use the furniture only for business. How to file a amended tax return This is the only property you placed in service this year. How to file a amended tax return You did not elect a section 179 deduction and the property is not qualified property for purposes of claiming a special depreciation allowance so your property's unadjusted basis is its cost, $10,000. How to file a amended tax return You use GDS and the half-year convention to figure your depreciation. How to file a amended tax return You refer to the MACRS Percentage Table Guide in Appendix A and find that you should use Table A-1. How to file a amended tax return Multiply your property's unadjusted basis each year by the percentage for 7-year property given in Table A-1. How to file a amended tax return You figure your depreciation deduction using the MACRS worksheet as follows. How to file a amended tax return MACRS Worksheet Part I 1. How to file a amended tax return MACRS system (GDS or ADS) GDS 2. How to file a amended tax return Property class 7-year 3. How to file a amended tax return Date placed in service 8/11/13 4. How to file a amended tax return Recovery period 7-Year 5. How to file a amended tax return Method and convention 200%DB/Half-Year 6. How to file a amended tax return Depreciation rate (from tables) . How to file a amended tax return 1429 Part II 7. How to file a amended tax return Cost or other basis* $10,000     8. How to file a amended tax return Business/investment use 100 %   9. How to file a amended tax return Multiply line 7 by line 8   $10,000 10. How to file a amended tax return Total claimed for section 179 deduction and other items   -0- 11. How to file a amended tax return Subtract line 10 from line 9. How to file a amended tax return This is your tentative basis for depreciation   $10,000 12. How to file a amended tax return Multiply line 11 by . How to file a amended tax return 50 if the 50% special depreciation allowance applies. How to file a amended tax return This is your special depreciation allowance. How to file a amended tax return Enter -0- if this is not the year you placed the property in service, the property is not qualified property, or you elected not to claim a special allowance   -0- 13. How to file a amended tax return Subtract line 12 from line 11. How to file a amended tax return This is your basis for depreciation   $10,000 14. How to file a amended tax return Depreciation rate (from line 6)   . How to file a amended tax return 1429 15. How to file a amended tax return Multiply line 13 by line 14. How to file a amended tax return This is your MACRS depreciation deduction   $1,429 *If real estate, do not include cost (basis) of land. How to file a amended tax return If there are no adjustments to the basis of the property other than depreciation, your depreciation deduction for each subsequent year of the recovery period will be as follows. How to file a amended tax return Year   Basis Percentage Deduction 2014 $ 10,000 24. How to file a amended tax return 49%   $2,449   2015   10,000 17. How to file a amended tax return 49   1,749   2016   10,000 12. How to file a amended tax return 49   1,249   2017   10,000 8. How to file a amended tax return 93   893   2018   10,000 8. How to file a amended tax return 92   892   2019   10,000 8. How to file a amended tax return 93   893   2020   10,000 4. How to file a amended tax return 46   446   Examples The following examples are provided to show you how to use the percentage tables. How to file a amended tax return In both examples, assume the following. How to file a amended tax return You use the property only for business. How to file a amended tax return You use the calendar year as your tax year. How to file a amended tax return You use GDS for all the properties. How to file a amended tax return Example 1. How to file a amended tax return You bought a building and land for $120,000 and placed it in service on March 8. How to file a amended tax return The sales contract showed that the building cost $100,000 and the land cost $20,000. How to file a amended tax return It is nonresidential real property. How to file a amended tax return The building's unadjusted basis is its original cost, $100,000. How to file a amended tax return You refer to the MACRS Percentage Table Guide in Appendix A and find that you should use Table A-7a. How to file a amended tax return March is the third month of your tax year, so multiply the building's unadjusted basis, $100,000, by the percentages for the third month in Table A-7a. How to file a amended tax return Your depreciation deduction for each of the first 3 years is as follows: Year   Basis Percentage Deduction 1st $ 100,000 2. How to file a amended tax return 033%   $2,033   2nd   100,000 2. How to file a amended tax return 564   2,564   3rd   100,000 2. How to file a amended tax return 564   2,564   Example 2. How to file a amended tax return During the year, you bought a machine (7-year property) for $4,000, office furniture (7-year property) for $1,000, and a computer (5-year property) for $5,000. How to file a amended tax return You placed the machine in service in January, the furniture in September, and the computer in October. How to file a amended tax return You do not elect a section 179 deduction and none of these items is qualified property for purposes of claiming a special depreciation allowance. How to file a amended tax return You placed property in service during the last 3 months of the year, so you must first determine if you have to use the mid-quarter convention. How to file a amended tax return The total bases of all property you placed in service during the year is $10,000. How to file a amended tax return The $5,000 basis of the computer, which you placed in service during the last 3 months (the fourth quarter) of your tax year, is more than 40% of the total bases of all property ($10,000) you placed in service during the year. How to file a amended tax return Therefore, you must use the mid-quarter convention for all three items. How to file a amended tax return You refer to the MACRS Percentage Table Guide in Appendix A to determine which table you should use under the mid-quarter convention. How to file a amended tax return The machine is 7-year property placed in service in the first quarter, so you use Table A-2. How to file a amended tax return The furniture is 7-year property placed in service in the third quarter, so you use Table A-4. How to file a amended tax return Finally, because the computer is 5-year property placed in service in the fourth quarter, you use Table A-6. How to file a amended tax return Knowing what table to use for each property, you figure the depreciation for the first 2 years as follows. How to file a amended tax return Year Property Basis Percentage Deduction 1st Machine $4,000 25. How to file a amended tax return 00 $1,000   2nd Machine 4,000 21. How to file a amended tax return 43 857   1st Furniture 1,000 10. How to file a amended tax return 71 107   2nd Furniture 1,000 25. How to file a amended tax return 51 255   1st Computer 5,000 5. How to file a amended tax return 00 250   2nd Computer 5,000 38. How to file a amended tax return 00 1,900   Sale or Other Disposition Before the Recovery Period Ends If you sell or otherwise dispose of your property before the end of its recovery period, your depreciation deduction for the year of the disposition will be only part of the depreciation amount for the full year. How to file a amended tax return You have disposed of your property if you have permanently withdrawn it from use in your business or income-producing activity because of its sale, exchange, retirement, abandonment, involuntary conversion, or destruction. How to file a amended tax return After you figure the full-year depreciation amount, figure the deductible part using the convention that applies to the property. How to file a amended tax return Half-year convention used. How to file a amended tax return   For property for which you used a half-year convention, the depreciation deduction for the year of the disposition is half the depreciation determined for the full year. How to file a amended tax return Mid-quarter convention used. How to file a amended tax return   For property for which you used the mid-quarter convention, figure your depreciation deduction for the year of the disposition by multiplying a full year of depreciation by the percentage listed below for the quarter in which you disposed of the property. How to file a amended tax return Quarter Percentage First 12. How to file a amended tax return 5% Second 37. How to file a amended tax return 5 Third 62. How to file a amended tax return 5 Fourth 87. How to file a amended tax return 5 Example. How to file a amended tax return On December 2, 2010, you placed in service an item of 5-year property costing $10,000. How to file a amended tax return You did not claim a section 179 deduction and the property does not qualify for a special depreciation allowance. How to file a amended tax return Your unadjusted basis for the property was $10,000. How to file a amended tax return You used the mid-quarter convention because this was the only item of business property you placed in service in 2010 and it was placed in service during the last 3 months of your tax year. How to file a amended tax return Your property is in the 5-year property class, so you used Table A-5 to figure your depreciation deduction. How to file a amended tax return Your deductions for 2010, 2011, and 2012 were $500 (5% of $10,000), $3,800 (38% of $10,000), and $2,280 (22. How to file a amended tax return 80% of $10,000). How to file a amended tax return You disposed of the property on April 6, 2013. How to file a amended tax return To determine your depreciation deduction for 2013, first figure the deduction for the full year. How to file a amended tax return This is $1,368 (13. How to file a amended tax return 68% of $10,000). How to file a amended tax return April is in the second quarter of the year, so you multiply $1,368 by 37. How to file a amended tax return 5% to get your depreciation deduction of $513 for 2013. How to file a amended tax return Mid-month convention used. How to file a amended tax return   If you dispose of residential rental or nonresidential real property, figure your depreciation deduction for the year of the disposition by multiplying a full year of depreciation by a fraction. How to file a amended tax return The numerator of the fraction is the number of months (including partial months) in the year that the property is considered in service. How to file a amended tax return The denominator is 12. How to file a amended tax return Example. How to file a amended tax return On July 2, 2011, you purchased and placed in service residential rental property. How to file a amended tax return The property cost $100,000, not including the cost of land. How to file a amended tax return You used Table A-6 to figure your MACRS depreciation for this property. How to file a amended tax return You sold the property on March 2, 2013. How to file a amended tax return You file your tax return based on the calendar year. How to file a amended tax return A full year of depreciation for 2013 is $3,636. How to file a amended tax return This is $100,000 multiplied by . How to file a amended tax return 03636 (the percentage for the seventh month of the third recovery year) from Table A-6 . How to file a amended tax return You then apply the mid-month convention for the 2½ months of use in 2013. How to file a amended tax return Treat the month of disposition as one-half month of use. How to file a amended tax return Multiply $3,636 by the fraction, 2. How to file a amended tax return 5 over 12, to get your 2013 depreciation deduction of $757. How to file a amended tax return 50. How to file a amended tax return Figuring the Deduction Without Using the Tables Instead of using the rates in the percentage tables to figure your depreciation deduction, you can figure it yourself. How to file a amended tax return Before making the computation each year, you must reduce your adjusted basis in the property by the depreciation claimed the previous year. How to file a amended tax return Figuring MACRS deductions without using the tables generally will result in a slightly different amount than using the tables. How to file a amended tax return Declining Balance Method When using a declining balance method, you apply the same depreciation rate each year to the adjusted basis of your property. How to file a amended tax return You must use the applicable convention for the first tax year and you must switch to the straight line method beginning in the first year for which it will give an equal or greater deduction. How to file a amended tax return The straight line method is explained later. How to file a amended tax return You figure depreciation for the year you place property in service as follows. How to file a amended tax return Multiply your adjusted basis in the property by the declining balance rate. How to file a amended tax return Apply the applicable convention. How to file a amended tax return You figure depreciation for all other years (before the year you switch to the straight line method) as follows. How to file a amended tax return Reduce your adjusted basis in the property by the depreciation allowed or allowable in earlier years. How to file a amended tax return Multiply this new adjusted basis by the same declining balance rate used in earlier years. How to file a amended tax return If you dispose of property before the end of its recovery period, see Using the Applicable Convention, later, for information on how to figure depreciation for the year you dispose of it. How to file a amended tax return Figuring depreciation under the declining balance method and switching to the straight line method is illustrated in Example 1 , later, under Examples. How to file a amended tax return Declining balance rate. How to file a amended tax return   You figure your declining balance rate by dividing the specified declining balance percentage (150% or 200% changed to a decimal) by the number of years in the property's recovery period. How to file a amended tax return For example, for 3-year property depreciated using the 200% declining balance method, divide 2. How to file a amended tax return 00 (200%) by 3 to get 0. How to file a amended tax return 6667, or a 66. How to file a amended tax return 67% declining balance rate. How to file a amended tax return For 15-year property depreciated using the 150% declining balance method, divide 1. How to file a amended tax return 50 (150%) by 15 to get 0. How to file a amended tax return 10, or a 10% declining balance rate. How to file a amended tax return   The following table shows the declining balance rate for each property class and the first year for which the straight line method gives an equal or greater deduction. How to file a amended tax return Property Class Method Declining Balance Rate Year 3-year 200% DB 66. How to file a amended tax return 667% 3rd 5-year 200% DB 40. How to file a amended tax return 0 4th 7-year 200% DB 28. How to file a amended tax return 571 5th 10-year 200% DB 20. How to file a amended tax return 0 7th 15-year 150% DB 10. How to file a amended tax return 0 7th 20-year 150% DB 7. How to file a amended tax return 5 9th Straight Line Method When using the straight line method, you apply a different depreciation rate each year to the adjusted basis of your property. How to file a amended tax return You must use the applicable convention in the year you place the property in service and the year you dispose of the property. How to file a amended tax return You figure depreciation for the year you place property in service as follows. How to file a amended tax return Multiply your adjusted basis in the property by the straight line rate. How to file a amended tax return Apply the applicable convention. How to file a amended tax return You figure depreciation for all other years (including the year you switch from the declining balance method to the straight line method) as follows. How to file a amended tax return Reduce your adjusted basis in the property by the depreciation allowed or allowable in earlier years (under any method). How to file a amended tax return Determine the depreciation rate for the year. How to file a amended tax return Multiply the adjusted basis figured in (1) by the depreciation rate figured in (2). How to file a amended tax return If you dispose of property before the end of its recovery period, see Using the Applicable Convention , later, for information on how to figure depreciation for the year you dispose of it. How to file a amended tax return Straight line rate. How to file a amended tax return   You determine the straight line depreciation rate for any tax year by dividing the number 1 by the years remaining in the recovery period at the beginning of that year. How to file a amended tax return When figuring the number of years remaining, you must take into account the convention used in the year you placed the property in service. How to file a amended tax return If the number of years remaining is less than 1, the depreciation rate for that tax year is 1. How to file a amended tax return 0 (100%). How to file a amended tax return Using the Applicable Convention The applicable convention (discussed earlier under Which Convention Applies ) affects how you figure your depreciation deduction for the year you place your property in service and for the year you dispose of it. How to file a amended tax return It determines how much of the recovery period remains at the beginning of each year, so it also affects the depreciation rate for property you depreciate under the straight line method. How to file a amended tax return See Straight line rate in the previous discussion. How to file a amended tax return Use the applicable convention as explained in the following discussions. How to file a amended tax return Half-year convention. How to file a amended tax return   If this convention applies, you deduct a half-year of depreciation for the first year and the last year that you depreciate the property. How to file a amended tax return You deduct a full year of depreciation for any other year during the recovery period. How to file a amended tax return   Figure your depreciation deduction for the year you place the property in service by dividing the depreciation for a full year by 2. How to file a amended tax return If you dispose of the property before the end of the recovery period, figure your depreciation deduction for the year of the disposition the same way. How to file a amended tax return If you hold the property for the entire recovery period, your depreciation deduction for the year that includes the final 6 months of the recovery period is the amount of your unrecovered basis in the property. How to file a amended tax return Mid-quarter convention. How to file a amended tax return   If this convention applies, the depreciation you can deduct for the first year you depreciate the property depends on the quarter in which you place the property in service. How to file a amended tax return   A quarter of a full 12-month tax year is a period of 3 months. How to file a amended tax return The first quarter in a year begins on the first day of the tax year. How to file a amended tax return The second quarter begins on the first day of the fourth month of the tax year. How to file a amended tax return The third quarter begins on the first day of the seventh month of the tax year. How to file a amended tax return The fourth quarter begins on the first day of the tenth month of the tax year. How to file a amended tax return A calendar year is divided into the following quarters. How to file a amended tax return Quarter Months First January, February, March Second April, May, June Third July, August, September Fourth October, November, December   Figure your depreciation deduction for the year you place the property in service by multiplying the depreciation for a full year by the percentage listed below for the quarter you place the property in service. How to file a amended tax return Quarter Percentage First 87. How to file a amended tax return 5% Second 62. How to file a amended tax return 5 Third 37. How to file a amended tax return 5 Fourth 12. How to file a amended tax return 5   If you dispose of the property before the end of the recovery period, figure your depreciation deduction for the year of the disposition by multiplying a full year of depreciation by the percentage listed below for the quarter you dispose of the property. How to file a amended tax return Quarter Percentage First 12. How to file a amended tax return 5% Second 37. How to file a amended tax return 5 Third 62. How to file a amended tax return 5 Fourth 87. How to file a amended tax return 5   If you hold the property for the entire recovery period, your depreciation deduction for the year that includes the final quarter of the recovery period is the amount of your unrecovered basis in the property. How to file a amended tax return Mid-month convention. How to file a amended tax return   If this convention applies, the depreciation you can deduct for the first year that you depreciate the property depends on the month in which you place the property in service. How to file a amended tax return Figure your depreciation deduction for the year you place the property in service by multiplying the depreciation for a full year by a fraction. How to file a amended tax return The numerator of the fraction is the number of full months in the year that the property is in service plus ½ (or 0. How to file a amended tax return 5). How to file a amended tax return The denominator is 12. How to file a amended tax return   If you dispose of the property before the end of the recovery period, figure your depreciation deduction for the year of the disposition the same way. How to file a amended tax return If you hold the property for the entire recovery period, your depreciation deduction for the year that includes the final month of the recovery period is the amount of your unrecovered basis in the property. How to file a amended tax return Example. How to file a amended tax return You use the calendar year and place nonresidential real property in service in August. How to file a amended tax return The property is in service 4 full months (September, October, November, and December). How to file a amended tax return Your numerator is 4. How to file a amended tax return 5 (4 full months plus 0. How to file a amended tax return 5). How to file a amended tax return You multiply the depreciation for a full year by 4. How to file a amended tax return 5/12, or 0. How to file a amended tax return 375. How to file a amended tax return Examples The following examples show how to figure depreciation under MACRS without using the percentage tables. How to file a amended tax return Figures are rounded for purposes of the examples. How to file a amended tax return Assume for all the examples that you use a calendar year as your tax year. How to file a amended tax return Example 1—200% DB method and half-year convention. How to file a amended tax return In February, you placed in service depreciable property with a 5-year recovery period and a basis of $1,000. How to file a amended tax return You do not elect to take the section 179 deduction and the property does not qualify for a special depreciation allowance. How to file a amended tax return You use GDS and the 200% declining balance (DB) method to figure your depreciation. How to file a amended tax return When the straight line (SL) method results in an equal or larger deduction, you switch to the SL method. How to file a amended tax return You did not place any property in service in the last 3 months of the year, so you must use the half-year convention. How to file a amended tax return First year. How to file a amended tax return You figure the depreciation rate under the 200% DB method by dividing 2 (200%) by 5 (the number of years in the recovery period). How to file a amended tax return The result is 40%. How to file a amended tax return You multiply the adjusted basis of the property ($1,000) by the 40% DB rate. How to file a amended tax return You apply the half-year convention by dividing the result ($400) by 2. How to file a amended tax return Depreciation for the first year under the 200% DB method is $200. How to file a amended tax return You figure the depreciation rate under the straight line (SL) method by dividing 1 by 5, the number of years in the recovery period. How to file a amended tax return The result is 20%. How to file a amended tax return You multiply the adjusted basis of the property ($1,000) by the 20% SL rate. How to file a amended tax return You apply the half-year convention by dividing the result ($200) by 2. How to file a amended tax return Depreciation for the first year under the SL method is $100. How to file a amended tax return The DB method provides a larger deduction, so you deduct the $200 figured under the 200% DB method. How to file a amended tax return Second year. How to file a amended tax return You reduce the adjusted basis ($1,000) by the depreciation claimed in the first year ($200). How to file a amended tax return You multiply the result ($800) by the DB rate (40%). How to file a amended tax return Depreciation for the second year under the 200% DB method is $320. How to file a amended tax return You figure the SL depreciation rate by dividing 1 by 4. How to file a amended tax return 5, the number of years remaining in the recovery period. How to file a amended tax return (Based on the half-year convention, you used only half a year of the recovery period in the first year. How to file a amended tax return ) You multiply the reduced adjusted basis ($800) by the result (22. How to file a amended tax return 22%). How to file a amended tax return Depreciation under the SL method for the second year is $178. How to file a amended tax return The DB method provides a larger deduction, so you deduct the $320 figured under the 200% DB method. How to file a amended tax return Third year. How to file a amended tax return You reduce the adjusted basis ($800) by the depreciation claimed in the second year ($320). How to file a amended tax return You multiply the result ($480) by the DB rate (40%). How to file a amended tax return Depreciation for the third year under the 200% DB method is $192. How to file a amended tax return You figure the SL depreciation rate by dividing 1 by 3. How to file a amended tax return 5. How to file a amended tax return You multiply the reduced adjusted basis ($480) by the result (28. How to file a amended tax return 57%). How to file a amended tax return Depreciation under the SL method for the third year is $137. How to file a amended tax return The DB method provides a larger deduction, so you deduct the $192 figured under the 200% DB method. How to file a amended tax return Fourth year. How to file a amended tax return You reduce the adjusted basis ($480) by the de