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1040ex Depreciation Table of Contents Introduction Special Depreciation AllowanceQualified Property Election Not To Claim the Allowance Rules for Returns Filed Before June 1, 2002 Passenger Automobiles New York Liberty Zone BenefitsSpecial Liberty Zone Depreciation Allowance Increased Section 179 Deduction Liberty Zone Leasehold Improvement Property If you depreciate business property that you acquired and placed in service after September 10, 2001, new law contains provisions that may affect your depreciation deduction for that property. 1040ex Publication 946, How To Depreciate Property, contains information on depreciation. 1040ex However, Publication 946 does not contain the new provisions because it was printed before the law was enacted. 1040ex The new provisions are in the Supplement to Publication 946, which is reprinted below. 1040ex Supplement to Publication 946 How To Depreciate Property   Introduction After Publication 946 was printed, the Job Creation and Worker Assistance Act of 2002 was signed into law by the President. 1040ex The new law made several changes in the tax rules explained in the publication. 1040ex Some of the changes apply to property placed in service during 2001. 1040ex This supplemental publication describes those changes and explains what you should do if you are affected by them. 1040ex The situations and examples in Publication 946 do not reflect any of the changes made by the Job Creation and Worker Assistance Act of 2002. 1040ex The new law contains the following provisions. 1040ex 30% depreciation deductions (special depreciation allowance and special New York Liberty Zone (Liberty Zone) depreciation allowance) for the year qualified property is placed in service after September 10, 2001. 1040ex An increased dollar limit on the section 179 deduction for qualified Liberty Zone property purchased after September 10, 2001. 1040ex A shorter recovery period for qualified Liberty Zone leasehold improvement property placed in service after September 10, 2001. 1040ex An increase in the maximum depreciation deduction for 2001 for a qualified passenger automobile placed in service after September 10, 2001. 1040ex If you believe you qualify for an increased deduction under any of these new rules, you must file the revised 2001 Form 4562 (dated March 2002) for 2001 calendar or fiscal years and 2000 fiscal years ending after September 10, 2001. 1040ex If you have already filed a tax return, this supplemental publication explains how to claim these benefits and how to elect not to claim the special depreciation allowance or special Liberty Zone depreciation allowance. 1040ex See Table 2 at the end of the supplement for an overview of the rules that apply if you filed your return before June 1, 2002. 1040ex Special Depreciation Allowance You can take a special depreciation allowance for qualified property you place in service after September 10, 2001. 1040ex The allowance is an additional deduction of 30% of the property's depreciable basis. 1040ex To figure the depreciable basis, you must first multiply the property's cost or other basis by the percentage of business/investment use and then reduce that amount by any section 179 deduction and certain other deductions and credits for the property. 1040ex See What Is the Basis for Depreciation? on page 23 in Publication 946 for more information on figuring depreciable basis. 1040ex The allowance is deductible for both regular tax and alternative minimum tax (AMT) purposes. 1040ex There is no AMT adjustment required for any depreciation figured on the remaining basis of the property. 1040ex In the year you claim the allowance (generally the year you place the property in service), you must reduce the depreciable basis of the property by the allowance before figuring your regular depreciation deduction. 1040ex Example 1. 1040ex On November 1, 2001, you bought and placed in service in your business qualified property that cost $100,000. 1040ex You did not elect to claim a section 179 deduction. 1040ex You can deduct 30% of the cost ($30,000) as a special depreciation allowance for 2001. 1040ex You use the remaining $70,000 of cost to figure your regular depreciation deduction for 2001 and later years. 1040ex Example 2. 1040ex The facts are the same as in Example 1, except that you choose to deduct $24,000 of the property's cost as a section 179 deduction. 1040ex You use the remaining $76,000 of cost to figure your special depreciation allowance of $22,800 ($76,000 × 30%). 1040ex You use the remaining $53,200 of cost to figure your regular depreciation deduction for 2001 and later years. 1040ex Qualified Property To qualify for the special depreciation allowance, your property must meet the following requirements. 1040ex It is new property of one of the following types. 1040ex Property depreciated under the modified accelerated cost recovery system (MACRS) with a recovery period of 20 years or less. 1040ex See Can You Use MACRS To Depreciate Your Property and Which Recovery Period Applies? on pages 7 and 23, respectively, in Publication 946. 1040ex Water utility property. 1040ex See 25-year property on page 22 in Publication 946. 1040ex Computer software that is not a section 197 intangible as described in Computer software on page 5 in Publication 946. 1040ex (The cost of some computer software is treated as part of the cost of hardware and is depreciated under MACRS. 1040ex ) Qualified leasehold improvement property (defined later). 1040ex It meets the following tests (explained later under Tests To Be Met). 1040ex Acquisition date test. 1040ex Placed in service date test. 1040ex Original use test. 1040ex It is not excepted property (explained later under Excepted Property). 1040ex Qualified leasehold improvement property. 1040ex    Generally, this is any improvement to an interior part of a building that is nonresidential real property, provided all of the following requirements are met. 1040ex The improvement is made under or pursuant to a lease by the lessee (or any sublessee) or the lessor of that part of the building. 1040ex That part of the building is to be occupied exclusively by the lessee (or any sublessee) of that part. 1040ex The improvement is placed in service more than 3 years after the date the building was first placed in service. 1040ex   However, a qualified leasehold improvement does not include any improvement for which the expenditure is attributable to any of the following. 1040ex The enlargement of the building. 1040ex Any elevator or escalator. 1040ex Any structural component benefiting a common area. 1040ex The internal structural framework of the building. 1040ex   Generally, a binding commitment to enter into a lease is treated as a lease and the parties to the commitment are treated as the lessor and lessee. 1040ex However, a binding commitment between related persons is not treated as a lease. 1040ex Related persons. 1040ex   For this purpose, the following are related persons. 1040ex Members of an affiliated group. 1040ex The persons listed in items (1) through (9) under Related persons on page 8 of Publication 946 (except that “80% or more” should be substituted for “more than 10%” each place it appears). 1040ex An executor and a beneficiary of the same estate. 1040ex Tests To Be Met To qualify for the special depreciation allowance, the property must meet all of the following tests. 1040ex Acquisition date test. 1040ex    Generally, you must have acquired the property either: After September 10, 2001, and before September 11, 2004, but only if no written binding contract for the acquisition was in effect before September 11, 2001, or Pursuant to a written binding contract entered into after September 10, 2001, and before September 11, 2004. 1040ex   Property you manufacture, construct, or produce for your own use meets this test if you began the manufacture, construction, or production of the property after September 10, 2001, and before September 11, 2004. 1040ex Placed in service date test. 1040ex   Generally, the property must be placed in service for use in your trade or business or for the production of income after September 10, 2001, and before January 1, 2005. 1040ex   If you sold property you placed in service after September 10, 2001, and you leased it back within 3 months after the property was originally placed in service, the property is treated as placed in service no earlier than the date it is used under the leaseback. 1040ex Original use test. 1040ex   The original use of the property must have begun with you after September 10, 2001. 1040ex “Original use” means the first use to which the property is put, whether or not by you. 1040ex Additional capital expenditures you incurred after September 10, 2001, to recondition or rebuild your property meet the original use test. 1040ex Excepted Property The following property does not qualify for the special depreciation allowance. 1040ex Property used by any person before September 11, 2001. 1040ex Property required to be depreciated using ADS. 1040ex This includes listed property used 50% or less in a qualified business use. 1040ex Qualified New York Liberty Zone leasehold improvement property (defined next). 1040ex Qualified New York Liberty Zone leasehold improvement property. 1040ex   This is any qualified leasehold improvement property (as defined earlier) if all of the following requirements are met. 1040ex The improvement is to a building located in the New York Liberty Zone (defined later under New York Liberty Zone Benefits). 1040ex The improvement is placed in service after September 10, 2001, and before January 1, 2007. 1040ex No written binding contract for the improvement was in effect before September 11, 2001. 1040ex Election Not To Claim the Allowance You can elect not to claim the special depreciation allowance for qualified property. 1040ex If you make this election for any property, it applies to all property in the same property class placed in service during the year. 1040ex To make this election, attach a statement to your return indicating you elect not to claim the allowance and the class of property for which you are making the election. 1040ex When to make election. 1040ex   Generally, you must make the election on a timely filed tax return (including extensions) for the year in which you place the property in service. 1040ex   However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the original return (not including extensions). 1040ex Attach the election statement to the amended return. 1040ex At the top of the election statement, write “Filed pursuant to section 301. 1040ex 9100–2. 1040ex ” Revoking an election. 1040ex   Once you elect not to deduct the special depreciation allowance for a class of property, you cannot revoke the election without IRS consent. 1040ex A request to revoke the election is subject to a user fee. 1040ex Rules for Returns Filed Before June 1, 2002 The following rules apply if you placed qualified property in service after September 10, 2001, and filed your return before June 1, 2002. 1040ex The rules apply to returns for the following years. 1040ex 2000 fiscal years that end after September 10, 2001. 1040ex 2001 calendar and fiscal years. 1040ex Claiming the allowance. 1040ex   If you did not claim the allowance on your return and did not make the election not to claim the allowance, you can do either of the following to claim the allowance. 1040ex File an amended return by the due date (not including extensions) of your return for the year following the year the property was placed in service. 1040ex Write “Filed Pursuant to Rev. 1040ex Proc. 1040ex 2002–33” at the top of the amended return. 1040ex File Form 3115, Application for Change in Accounting Method, with your return for the year following the year the property was placed in service. 1040ex Your return must be filed by the due date (including extensions). 1040ex Write “Automatic Change Filed Under Rev. 1040ex Proc. 1040ex 2002–33” on the appropriate line of Form 3115. 1040ex You must also file a copy (with signature) of the completed Form 3115 with the IRS National Office no later than when you file the original with your return. 1040ex For more information about filing Form 3115, including the address to send it to, see Revenue Procedure 2002–9, Revenue Procedure 2002–19, and Revenue Procedure 2002–33. 1040ex Example 1. 1040ex You are an individual and you use the calendar year. 1040ex You placed qualified property in service for your business in December 2001. 1040ex You filed your 2001 income tax return before April 15, 2002. 1040ex You did not claim the special depreciation allowance for the property and did not make the election not to claim the allowance. 1040ex You can claim the special allowance by filing an amended 2001 return by April 15, 2003, with “Filed Pursuant to Rev. 1040ex Proc. 1040ex 2002–33” at the top of the amended return. 1040ex You must file an amended return by April 15, 2003, even if you get an extension of time to file your 2002 tax return. 1040ex Example 2. 1040ex The facts concerning your 2001 return are the same as in Example 1. 1040ex In addition, you got an automatic 4-month extension of time (to August 15, 2003) to file your 2002 return. 1040ex You can claim the special allowance by filing a Form 3115 (with “Filed Pursuant to Rev. 1040ex Proc. 1040ex 2002–33” on the appropriate line) with your 2002 return by August 15, 2003. 1040ex You must also file a copy of this Form 3115 with the IRS National Office no later than when you file your 2002 return. 1040ex Electing not to claim the allowance. 1040ex   Generally, you have elected not to claim the special depreciation allowance for a class of property if you: Filed your return timely (including extensions) for the year you placed qualified property in service and indicated on a statement with the return that you are not claiming the allowance, or Filed your return timely and filed an amended return within 6 months of the due date of the original return (not including extensions) and indicated on a statement with the amended return that you are not claiming the allowance. 1040ex The statement must indicate that you are not deducting the special depreciation allowance and the class of property to which the election applies. 1040ex The statement can be either attached to or written on the return. 1040ex You can, for example, write “not deducting 30%” on Form 4562. 1040ex Deemed election. 1040ex   If you have not followed either of the procedures described above to elect not to claim the allowance, you may still be treated as making the election. 1040ex You will be treated as making the election if you meet both of the following conditions. 1040ex You filed your return for the year you placed the property in service and claimed depreciation, but not the special allowance, for any class of property. 1040ex You do not file an amended return or a Form 3115 within the time prescribed for claiming the special allowance. 1040ex See Claiming the allowance, earlier. 1040ex Passenger Automobiles The limit on your depreciation deduction (including any section 179 deduction) for any passenger automobile that is qualified property (defined earlier) placed in service after September 10, 2001, and for which you claim the special depreciation allowance is increased. 1040ex Generally, the limit is increased from $3,060 to $7,660. 1040ex However, if the automobile is a qualified electric car, the limit is increased from $9,280 to $23,080 ($22,980 if placed in service in 2002). 1040ex Table 1 shows the maximum deduction amounts for 2001. 1040ex Table 1. 1040ex Maximum Deduction for 2001 Qualified Vehicle Placed in Service Before Sept. 1040ex 11 Placed in Service After Sept. 1040ex 10 Passenger automobile $3,060 $7,660 Electric car 9,280 23,080 1 1$22,980 if you place an electric car in service in 2002. 1040ex Election not to claim the allowance. 1040ex   The increased maximum depreciation deduction does not apply if you elected not to claim the special depreciation allowance as explained earlier under Election Not To Claim the Allowance and Rules for Returns Filed Before June 1, 2002. 1040ex New York Liberty Zone Benefits Several benefits are available for property you place in service in the New York Liberty Zone (Liberty Zone). 1040ex They include a special depreciation allowance for the year you place the property in service, an increased section 179 deduction, and the classification of certain leasehold improvement property as 5-year property. 1040ex Area defined. 1040ex   The New York Liberty Zone is the area located on or south of Canal Street, East Broadway (east of its intersection with Canal Street), or Grand Street (east of its intersection with East Broadway) in the Borough of Manhattan in the City of New York, New York. 1040ex Special Liberty Zone Depreciation Allowance You can take a special depreciation allowance for qualified Liberty Zone property you place in service after September 10, 2001. 1040ex The allowance is an additional deduction of 30% of the property's depreciable basis. 1040ex To figure the depreciable basis, you must first multiply the property's cost or other basis by the percentage of business/investment use and then reduce that amount by any section 179 deduction and certain other deductions and credits for the property. 1040ex See What Is the Basis for Depreciation? on page 23 in Publication 946 for more information on figuring depreciable basis. 1040ex The allowance is deductible for both regular tax and alternative minimum tax (AMT) purposes. 1040ex There is no AMT adjustment required for any depreciation figured on the remaining basis of the property. 1040ex In the year you claim the allowance (generally the year you place the property in service), you must reduce the depreciable basis of the property by the allowance before figuring your regular depreciation deduction. 1040ex You cannot claim the special Liberty Zone depreciation allowance for property eligible for the special depreciation allowance explained earlier in Qualified Property under Special Depreciation Allowance. 1040ex Qualified property is eligible for only one special depreciation allowance. 1040ex Example 1. 1040ex On November 1, 2001, you bought and placed in service in your business, which is in the Liberty Zone, qualified Liberty Zone property that cost $200,000. 1040ex You did not elect to claim a section 179 deduction. 1040ex You can deduct 30% of the cost ($60,000) as a special Liberty Zone depreciation allowance for 2001. 1040ex You use the remaining $140,000 of cost to figure your regular depreciation deduction for 2001 and later years. 1040ex Example 2. 1040ex The facts are the same as in Example 1, except that you choose to deduct $59,000 of the property's cost as a section 179 deduction. 1040ex (See Increased Section 179 Deduction, later, for information concerning how this section 179 deduction amount is figured). 1040ex You use the remaining $141,000 of cost to figure your special Liberty Zone depreciation allowance of $42,300 ($141,000 × 30%). 1040ex You use the remaining $98,700 of cost to figure your regular depreciation deduction for 2001 and later years. 1040ex Qualified Liberty Zone Property For a 2001 calendar or fiscal year and a 2000 fiscal year that ends after September 10, 2001, property qualifies for the special Liberty Zone depreciation allowance if it meets the following requirements. 1040ex It is one of the following types of property. 1040ex Used property depreciated under MACRS with a recovery period of 20 years or less. 1040ex See Can You Use MACRS To Depreciate Your Property and Which Recovery Period Applies? on pages 7 and 23, respectively, in Publication 946. 1040ex Used water utility property. 1040ex See 25-year property on page 22 in Publication 946. 1040ex Used computer software that is not a section 197 intangible as described in Computer software on page 5 in Publication 946. 1040ex (The cost of some computer software is treated as part of the cost of hardware and is depreciated under MACRS. 1040ex ) Certain nonresidential real property and residential rental property (defined later). 1040ex It meets the following tests (explained later under Tests to be met). 1040ex Acquisition date test. 1040ex Placed in service date test. 1040ex Substantial use test. 1040ex Original use test. 1040ex It is not excepted property (explained later under Excepted property). 1040ex Nonresidential real property and residential rental property. 1040ex   This property is qualifying property only to the extent it rehabilitates real property damaged, or replaces real property destroyed or condemned, as a result of the terrorist attack of September 11, 2001. 1040ex Property is treated as replacing destroyed or condemned property if, as part of an integrated plan, such property replaces real property included in a continuous area that includes real property destroyed or condemned. 1040ex   For these purposes, real property is considered destroyed (or condemned) only if an entire building or structure was destroyed (or condemned) as a result of the terrorist attack. 1040ex Otherwise, the property is considered damaged real property. 1040ex For example, if certain structural components of a building (such as walls, floors, or plumbing fixtures) are damaged or destroyed as a result of the terrorist attack, but the building is not destroyed (or condemned), then only costs related to replacing the damaged or destroyed structural components qualify for the special Liberty Zone depreciation allowance. 1040ex Tests to be met. 1040ex   To qualify for the special Liberty Zone depreciation allowance, your property must meet all of the following tests. 1040ex Acquisition date test. 1040ex   You must have acquired the property by purchase after September 10, 2001, and there must not have been a binding written contract for the acquisition in effect before September 11, 2001. 1040ex   For information on the acquisition of property by purchase, see Property Acquired by Purchase on page 15 of Publication 946. 1040ex   Property you manufacture, construct, or produce for your own use meets this test if you began the manufacture, construction, or production of the property after September 10, 2001. 1040ex Placed in service date test. 1040ex   Generally, the property must be placed in service for use in your trade or business or for the production of income before January 1, 2007 (January 1, 2010, in the case of qualifying nonresidential real property and residential rental property). 1040ex   If you sold property you placed in service after September 10, 2001, and you leased it back within 3 months after the property was originally placed in service, the property is treated as placed in service no earlier than the date it is used under the leaseback. 1040ex Substantial use test. 1040ex   Substantially all use of the property must be in the Liberty Zone and in the active conduct of your trade or business in the Liberty Zone. 1040ex Original use test. 1040ex   The original use of the property in the Liberty Zone must have begun with you after September 10, 2001. 1040ex   Used property can be qualified Liberty Zone property if it has not previously been used within the Liberty Zone. 1040ex Also, additional capital expenditures you incurred after September 10, 2001, to recondition or rebuild your property meet the original use test if the original use of the property in the Liberty Zone began with you. 1040ex Excepted property. 1040ex   The following property does not qualify for the special Liberty Zone depreciation allowance. 1040ex Property eligible for the special depreciation allowance explained earlier in Qualified Property under Special Depreciation Allowance. 1040ex Property required to be depreciated using ADS. 1040ex This includes listed property used 50% or less in a qualified business use. 1040ex Qualified New York Liberty Zone leasehold improvement property (defined earlier in Excepted Property under Special Depreciation Allowance). 1040ex Example. 1040ex In December 2001, you bought and placed in service in your business in the Liberty Zone the following property. 1040ex New office furniture with a MACRS recovery period of 7 years. 1040ex A used computer with a MACRS recovery period of 5 years. 1040ex The computer had not previously been used within the Liberty Zone. 1040ex Because the office furniture is new property, it qualifies for the special depreciation allowance, but not the special Liberty Zone depreciation allowance. 1040ex Because the computer is used property that had not previously been used in the Liberty Zone, it qualifies for the special Liberty Zone depreciation allowance, but not the special depreciation allowance. 1040ex Election Not To Claim the Liberty Zone Allowance You can elect not to claim the special Liberty Zone depreciation allowance for qualified property. 1040ex If you make this election for any property, it applies to all property in the same property class placed in service during the year. 1040ex To make this election, attach a statement to your return indicating you elect not to claim the allowance and the class of property for which you are making the election. 1040ex When to make the election. 1040ex   Generally, you must make the election on a timely filed tax return (including extensions) for the year in which you place the property in service. 1040ex   However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the original return (not including extensions). 1040ex Attach the election statement to the amended return. 1040ex At the top of the election statement, write “Filed pursuant to section 301. 1040ex 9100–2. 1040ex ” Revoking an election. 1040ex   Once you elect not to deduct the special Liberty Zone depreciation allowance for a class of property, you cannot revoke the election without IRS consent. 1040ex A request to revoke the election is subject to a user fee. 1040ex Returns filed before June 1, 2002. 1040ex   The rules that apply to the special depreciation allowance discussed earlier in Rules for Returns Filed Before June 1, 2002 under Special Depreciation Allowance also apply to the special Liberty Zone depreciation allowance. 1040ex Increased Section 179 Deduction Under section 179 of the Internal Revenue Code, you can choose to recover all or part of the cost of certain qualifying property, up to a limit, by deducting it in the year you place the property in service. 1040ex For tax years beginning in 2000, that limit was $20,000. 1040ex For tax years beginning in 2001 and 2002, that limit is generally $24,000. 1040ex If the cost of qualifying section 179 property placed in service in a year is over $200,000, you must reduce the dollar limit (but not below zero) by the amount of the cost over $200,000. 1040ex Increased Dollar Limit The dollar limit on the section 179 deduction is increased for certain property placed in service in the Liberty Zone. 1040ex The increase is the smaller of the following amounts. 1040ex $35,000. 1040ex The cost of section 179 property that is qualified Liberty Zone property placed in service during the year. 1040ex If you use the revised 2001 Form 4562 (dated March 2002) for a tax year beginning in 2000, you must reduce the section 179 dollar limit to $20,000 before adding the additional amount for qualified property. 1040ex Qualified property. 1040ex   To qualify for the increased section 179 deduction, your property must be section 179 property that is either: Qualified Liberty Zone property, or Property that would be qualified Liberty Zone property except that it is eligible for the special depreciation allowance. 1040ex Qualified Liberty Zone property is explained earlier in Qualified Liberty Zone Property under Special Liberty Zone Depreciation Allowance. 1040ex Property eligible for the special depreciation allowance is explained earlier in Qualified Property under Special Depreciation Allowance. 1040ex For information on the requirements that must be met for property to qualify for the section 179 deduction, see What Property Qualifies? on page 14 of Publication 946. 1040ex Example 1. 1040ex In 2002, you place in service in your business, which is in the Liberty Zone, qualified property (defined earlier) costing $25,000. 1040ex Because this cost is less than $35,000, the dollar limit on the section 179 deduction is increased by $25,000 to $49,000 ($24,000 + $25,000). 1040ex Example 2. 1040ex In 2002, you place in service in your business, which is in the Liberty Zone, qualified property (defined earlier) costing $75,000. 1040ex Because $35,000 is less than the cost of the property you place in service, the dollar limit on the section 179 deduction you can claim is increased by $35,000 to $59,000 ($24,000 + $35,000). 1040ex Reduced Dollar Limit Generally, you must reduce the dollar limit for a year by the cost of qualifying section 179 property placed in service in the year that is more than $200,000. 1040ex However, if the cost of your Liberty Zone property exceeds $200,000, you take into account only 50% (instead of 100%) of the cost of qualified property placed in service in a year. 1040ex Example. 1040ex In 2002, you place in service in your business, which is in the Liberty Zone, qualified property costing $460,000. 1040ex Your increased dollar limit is $59,000 ($35,000 + $24,000). 1040ex Because 50% of the cost of the property you place in service ($230,000) is $30,000 more than $200,000, you must reduce your $59,000 dollar limit to $29,000 ($59,000 - $30,000). 1040ex Recapture Rules Rules similar to those explained on page 20 of Publication 946 under When Must You Recapture the Deduction? apply with respect to any qualified property you stop using in the Liberty Zone. 1040ex Returns Filed Before June 1, 2002 If you filed a return before June 1, 2002, and did not deduct the increased section 179 amount for qualified property placed in service after September 10, 2001, you can deduct the increased amount by filing an amended return by the due date (not including extensions) of the return for the year after the year the property was placed in service. 1040ex This rule applies to returns for the following years. 1040ex 2000 fiscal years that end after September 10, 2001. 1040ex 2001 calendar and fiscal years. 1040ex On the amended return, write “Filed Pursuant to Rev. 1040ex Proc. 1040ex 2002–33. 1040ex ” Liberty Zone Leasehold Improvement Property Qualified Liberty Zone leasehold improvement property (described earlier in Qualified Property under Special Depreciation Allowance) is 5-year property. 1040ex This means that it is depreciated over a recovery period of 5 years. 1040ex For information about recovery periods, see Which Recovery Period Applies? on page 23 of Publication 946. 1040ex The straight-line method must be used with respect to qualified Liberty Zone leasehold improvement property. 1040ex Under ADS, the recovery period for qualified Liberty Zone leasehold improvement property is 9 years. 1040ex Returns Filed Before June 1, 2002 If you filed either of the following returns before June 1, 2002, and did not depreciate qualified Liberty Zone leasehold improvement property placed in service during the tax year as 5-year property using the straight line method, you should file an amended return before you file your return for the year after the year the property was placed in service. 1040ex Your 2000 fiscal year return (for a 2000 fiscal year that ends after September 10, 2001). 1040ex Your 2001 calendar or fiscal year return. 1040ex On the amended return, write “Filed Pursuant to Rev. 1040ex Proc. 1040ex 2002–33. 1040ex ” Table 2. 1040ex Rules for Returns Filed Before June 1, 2002 Note:This chart highlights the rules for returns affected by the Job Creation and Worker Assistance Act of 2002 that were filed before June 1, 2002, without accounting for any of the new benefits under the law. 1040ex See the text for definitions and examples. 1040ex Do not rely on this chart alone. 1040ex IF you want to. 1040ex . 1040ex . 1040ex THEN you. 1040ex . 1040ex . 1040ex BY. 1040ex . 1040ex . 1040ex claim the special depreciation allowance or special Liberty Zone depreciation allowance • must file an amended return • the due date (not including extensions) of your return for the year after the year the property was placed in service, or • must file Form 3115, Application for Change in Accounting Method, with your return for the year after the year the property was placed in service • the due date (including extensions) of your return for the year after the year the property was placed in service, and • must file a copy of your completed Form 3115 with the IRS National Office • the date you file the original Form 3115 with your return for the year after the year the property was placed in service. 1040ex elect not to claim the special depreciation allowance or the special Liberty Zone depreciation allowance 1 • must have filed your return timely for the year the property was placed in service, and   • must file an amended return stating you are not claiming the allowance • the date that is 6 months after the due date of the original return (not including extensions). 1040ex deduct the increased section 179 amount • must file an amended return • the due date (not including extensions) of your return for the year after the year the property was placed in service. 1040ex use a 5-year recovery period for depreciating qualified Liberty Zone leasehold improvement property • should file an amended return • the date you file your return for the year after the year the property was placed in service. 1040ex 1See also Deemed election under Rules for Returns Filed Before June 1, 2002, earlier. 1040ex Prev  Up  Next   Home   More Online Publications
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The 1040ex

1040ex Index A Abatement of interest (see Interest, abatement) Appeal rights, Appeal Rights, Appeals to the Courts, Tax Court, District Court and Court of Federal Claims (see also Tax Court) Assistance (see Tax help) Authorization, third party, Third party authorization. 1040ex B Burden of proof, Burden of proof. 1040ex C Civil action (see Waivers, tax suits, civil action) Claim for refund, Claims for Refund Disallowance, Explanation of Any Claim for Refund Disallowance Estates on installment method, Claim for refund by estates electing the installment method of payment. 1040ex Periods of financial disability, Periods of financial disability. 1040ex Comments on publication, Comments and suggestions. 1040ex Communications, privileged, Confidentiality privilege. 1040ex , Confidentiality privilege. 1040ex Confidentiality, Confidentiality privilege. 1040ex , Confidentiality privilege. 1040ex D Disability (see Financial disability, periods of) Disaster areas, abatement of interest, Abatement of Interest for Individuals Affected by Presidentially Declared Disasters or Military or Terrorist Actions E Employment status, Tax Court review of, Jurisdiction for determination of employment status. 1040ex Estates Claim for refund, Claim for refund by estates electing the installment method of payment. 1040ex Examination of returns, Examination of Returns F Fast track mediation, Fast track mediation. 1040ex Financial disability, periods of Claim for refund, Periods of financial disability. 1040ex Form 8379, Injured spouse exception. 1040ex 8857, Form 8857. 1040ex Free tax services, Free help with your tax return. 1040ex H Help (see Tax help) I Injured spouse, Injured spouse exception. 1040ex Innocent spouse relief, Tax Court review of request for relief from joint and several liability on a joint return. 1040ex , Relief from joint and several liability on a joint return. 1040ex Installment agreement, Installment Agreement Request Installment method Estates, claim for refund by, Claim for refund by estates electing the installment method of payment. 1040ex Interest Abatement Disaster areas, Abatement of Interest for Individuals Affected by Presidentially Declared Disasters or Military or Terrorist Actions Error or delay by IRS, Abatement of Interest Due to Error or Delay by the IRS Terrorist attacks, Abatement of Interest for Individuals Affected by Presidentially Declared Disasters or Military or Terrorist Actions Netting, overlapping underpayments and overpayments, Interest Netting Suspended, Suspension of interest and penalties. 1040ex J Joint and several liability, relief from, Tax Court review of request for relief from joint and several liability on a joint return. 1040ex , Relief from joint and several liability on a joint return. 1040ex L Losses Disaster area, Disaster area claims for refund. 1040ex Low Income Taxpayer Clinics, Low Income Taxpayer Clinics. 1040ex M Mediation, fast track, Fast track mediation. 1040ex More information, Useful Items - You may want to see: N Notice of deficiency Timely mailing, Suspension of interest and penalties. 1040ex Notices Third party contacts, Notice of IRS contact of third parties. 1040ex O Offer in compromise, Offer in Compromise Overpayments Offsets against state tax, Offset of past-due state income tax obligations against overpayments. 1040ex P Penalties, suspended, Suspension of interest and penalties. 1040ex Practitioners, federally authorized Confidential communications, Confidentiality privilege. 1040ex , Confidentiality privilege. 1040ex Presidentially declared disaster, Disaster area claims for refund. 1040ex Publications (see Tax help) R Refund, Claims for Refund, Periods of financial disability. 1040ex , Offset of past-due state income tax obligations against overpayments. 1040ex Reduced, Reduced Refund Refund deadline postponement, Postponed refund deadlines. 1040ex Refund or credit before court decision, Refund or Credit of Overpayments Before Final Determination Rights Communications, privileged, Confidentiality privilege. 1040ex , Confidentiality privilege. 1040ex Requests to waive, Prohibition on requests to taxpayers to give up rights to bring civil action. 1040ex S Suggestions for publication, Comments and suggestions. 1040ex T Tax Court, Appeals to the Courts, Tax Court Employment status, review of, Jurisdiction for determination of employment status. 1040ex Innocent spouse relief, review of request for, Tax Court review of request for relief from joint and several liability on a joint return. 1040ex Refund or credit before decision, Refund or Credit of Overpayments Before Final Determination Tax help, How To Get Tax Help Taxpayer Advocate, Taxpayer Advocate Service. 1040ex Taxpayer Advocate Service, Taxpayer Advocate Service. 1040ex Terrorist attacks, abatement of interest, Abatement of Interest for Individuals Affected by Presidentially Declared Disasters or Military or Terrorist Actions Third party authorization, Third party authorization. 1040ex TTY/TDD information, How To Get Tax Help W Waivers Tax suits, civil action, Prohibition on requests to taxpayers to give up rights to bring civil action. 1040ex Z Zero rate, overlapping periods of interest (see Interest, netting) Prev  Up     Home   More Online Publications