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2010 Tax Form 1040ez

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2010 Tax Form 1040ez

2010 tax form 1040ez 22. 2010 tax form 1040ez   Taxes Table of Contents IntroductionIndian tribal government. 2010 tax form 1040ez Useful Items - You may want to see: Tests To Deduct Any Tax Income TaxesState and Local Income Taxes Foreign Income Taxes General Sales TaxesMotor vehicles. 2010 tax form 1040ez Real Estate TaxesReal estate taxes for prior years. 2010 tax form 1040ez Examples. 2010 tax form 1040ez Form 1099-S. 2010 tax form 1040ez Real Estate-Related Items You Cannot Deduct Personal Property Taxes Taxes and Fees You Cannot Deduct Where To Deduct Introduction This chapter discusses which taxes you can deduct if you itemize deductions on Schedule A (Form 1040). 2010 tax form 1040ez It also explains which taxes you can deduct on other schedules or forms and which taxes you cannot deduct. 2010 tax form 1040ez This chapter covers the following topics. 2010 tax form 1040ez Income taxes (federal, state, local, and foreign). 2010 tax form 1040ez General sales taxes (state and local). 2010 tax form 1040ez Real estate taxes (state, local, and foreign). 2010 tax form 1040ez Personal property taxes (state and local). 2010 tax form 1040ez Taxes and fees you cannot deduct. 2010 tax form 1040ez Use Table 22-1 as a guide to determine which taxes you can deduct. 2010 tax form 1040ez The end of the chapter contains a section that explains which forms you use to deduct different types of taxes. 2010 tax form 1040ez Business taxes. 2010 tax form 1040ez   You can deduct certain taxes only if they are ordinary and necessary expenses of your trade or business or of producing income. 2010 tax form 1040ez For information on these taxes, see Publication 535, Business Expenses. 2010 tax form 1040ez State or local taxes. 2010 tax form 1040ez   These are taxes imposed by the 50 states, U. 2010 tax form 1040ez S. 2010 tax form 1040ez possessions, or any of their political subdivisions (such as a county or city), or by the District of Columbia. 2010 tax form 1040ez Indian tribal government. 2010 tax form 1040ez   An Indian tribal government recognized by the Secretary of the Treasury as performing substantial government functions will be treated as a state for purposes of claiming a deduction for taxes. 2010 tax form 1040ez Income taxes, real estate taxes, and personal property taxes imposed by that Indian tribal government (or by any of its subdivisions that are treated as political subdivisions of a state) are deductible. 2010 tax form 1040ez General sales taxes. 2010 tax form 1040ez   These are taxes imposed at one rate on retail sales of a broad range of classes of items. 2010 tax form 1040ez Foreign taxes. 2010 tax form 1040ez   These are taxes imposed by a foreign country or any of its political subdivisions. 2010 tax form 1040ez Useful Items - You may want to see: Publication 514 Foreign Tax Credit for Individuals 530 Tax Information for Homeowners Form (and Instructions) Schedule A (Form 1040) Itemized Deductions Schedule E (Form 1040) Supplemental Income and Loss 1116 Foreign Tax Credit Tests To Deduct Any Tax The following two tests must be met for you to deduct any tax. 2010 tax form 1040ez The tax must be imposed on you. 2010 tax form 1040ez You must pay the tax during your tax year. 2010 tax form 1040ez The tax must be imposed on you. 2010 tax form 1040ez   In general, you can deduct only taxes imposed on you. 2010 tax form 1040ez   Generally, you can deduct property taxes only if you are an owner of the property. 2010 tax form 1040ez If your spouse owns the property and pays the real estate taxes, the taxes are deductible on your spouse's separate return or on your joint return. 2010 tax form 1040ez You must pay the tax during your tax year. 2010 tax form 1040ez   If you are a cash basis taxpayer, you can deduct only those taxes you actually paid during your tax year. 2010 tax form 1040ez If you pay your taxes by check, the day you mail or deliver the check is the date of payment, provided the check is honored by the financial institution. 2010 tax form 1040ez If you use a pay-by-phone account (such as a credit card or electronic funds withdrawal), the date reported on the statement of the financial institution showing when payment was made is the date of payment. 2010 tax form 1040ez If you contest a tax liability and are a cash basis taxpayer, you can deduct the tax only in the year you actually pay it (or transfer money or other property to provide for satisfaction of the contested liability). 2010 tax form 1040ez See Publication 538, Accounting Periods and Methods, for details. 2010 tax form 1040ez    If you use an accrual method of accounting, see Publication 538 for more information. 2010 tax form 1040ez Income Taxes This section discusses the deductibility of state and local income taxes (including employee contributions to state benefit funds) and foreign income taxes. 2010 tax form 1040ez State and Local Income Taxes You can deduct state and local income taxes. 2010 tax form 1040ez However, you can elect to deduct state and local general sales taxes instead of state and local income taxes. 2010 tax form 1040ez See General Sales Taxes , later. 2010 tax form 1040ez Exception. 2010 tax form 1040ez    You cannot deduct state and local income taxes you pay on income that is exempt from federal income tax, unless the exempt income is interest income. 2010 tax form 1040ez For example, you cannot deduct the part of a state's income tax that is on a cost-of-living allowance exempt from federal income tax. 2010 tax form 1040ez What To Deduct Your deduction may be for withheld taxes, estimated tax payments, or other tax payments as follows. 2010 tax form 1040ez Withheld taxes. 2010 tax form 1040ez   You can deduct state and local income taxes withheld from your salary in the year they are withheld. 2010 tax form 1040ez Your Form(s) W-2 will show these amounts. 2010 tax form 1040ez Forms W-2G, 1099-G, 1099-R, and 1099-MISC may also show state and local income taxes withheld. 2010 tax form 1040ez Estimated tax payments. 2010 tax form 1040ez   You can deduct estimated tax payments you made during the year to a state or local government. 2010 tax form 1040ez However, you must have a reasonable basis for making the estimated tax payments. 2010 tax form 1040ez Any estimated state or local tax payments that are not made in good faith at the time of payment are not deductible. 2010 tax form 1040ez For example, you made an estimated state income tax payment. 2010 tax form 1040ez However, the estimate of your state tax liability shows that you will get a refund of the full amount of your estimated payment. 2010 tax form 1040ez You had no reasonable basis to believe you had any additional liability for state income taxes and you cannot deduct the estimated tax payment. 2010 tax form 1040ez Refund applied to taxes. 2010 tax form 1040ez   You can deduct any part of a refund of prior-year state or local income taxes that you chose to have credited to your 2013 estimated state or local income taxes. 2010 tax form 1040ez    Do not reduce your deduction by either of the following items. 2010 tax form 1040ez Any state or local income tax refund (or credit) you expect to receive for 2013. 2010 tax form 1040ez Any refund of (or credit for) prior-year state and local income taxes you actually received in 2013. 2010 tax form 1040ez   However, part or all of this refund (or credit) may be taxable. 2010 tax form 1040ez See Refund (or credit) of state or local income taxes , later. 2010 tax form 1040ez Separate federal returns. 2010 tax form 1040ez   If you and your spouse file separate state, local, and federal income tax returns, you each can deduct on your federal return only the amount of your own state and local income tax that you paid during the tax year. 2010 tax form 1040ez Joint state and local returns. 2010 tax form 1040ez   If you and your spouse file joint state and local returns and separate federal returns, each of you can deduct on your separate federal return a part of the total state and local income taxes paid during the tax year. 2010 tax form 1040ez You can deduct only the amount of the total taxes that is proportionate to your gross income compared to the combined gross income of you and your spouse. 2010 tax form 1040ez However, you cannot deduct more than the amount you actually paid during the year. 2010 tax form 1040ez You can avoid this calculation if you and your spouse are jointly and individually liable for the full amount of the state and local income taxes. 2010 tax form 1040ez If so, you and your spouse can deduct on your separate federal returns the amount you each actually paid. 2010 tax form 1040ez Joint federal return. 2010 tax form 1040ez   If you file a joint federal return, you can deduct the total of the state and local income taxes both of you paid. 2010 tax form 1040ez Contributions to state benefit funds. 2010 tax form 1040ez    As an employee, you can deduct mandatory contributions to state benefit funds withheld from your wages that provide protection against loss of wages. 2010 tax form 1040ez For example, certain states require employees to make contributions to state funds providing disability or unemployment insurance benefits. 2010 tax form 1040ez Mandatory payments made to the following state benefit funds are deductible as state income taxes on Schedule A (Form 1040), line 5. 2010 tax form 1040ez Alaska Unemployment Compensation Fund. 2010 tax form 1040ez California Nonoccupational Disability Benefit Fund. 2010 tax form 1040ez New Jersey Nonoccupational Disability Benefit Fund. 2010 tax form 1040ez New Jersey Unemployment Compensation Fund. 2010 tax form 1040ez New York Nonoccupational Disability Benefit Fund. 2010 tax form 1040ez Pennsylvania Unemployment Compensation Fund. 2010 tax form 1040ez Rhode Island Temporary Disability Benefit Fund. 2010 tax form 1040ez Washington State Supplemental Workmen's Compensation Fund. 2010 tax form 1040ez    Employee contributions to private or voluntary disability plans are not deductible. 2010 tax form 1040ez Refund (or credit) of state or local income taxes. 2010 tax form 1040ez   If you receive a refund of (or credit for) state or local income taxes in a year after the year in which you paid them, you may have to include the refund in income on Form 1040, line 10, in the year you receive it. 2010 tax form 1040ez This includes refunds resulting from taxes that were overwithheld, applied from a prior year return, not figured correctly, or figured again because of an amended return. 2010 tax form 1040ez If you did not itemize your deductions in the previous year, do not include the refund in income. 2010 tax form 1040ez If you deducted the taxes in the previous year, include all or part of the refund on Form 1040, line 10, in the year you receive the refund. 2010 tax form 1040ez For a discussion of how much to include, see Recoveries in chapter 12. 2010 tax form 1040ez Foreign Income Taxes Generally, you can take either a deduction or a credit for income taxes imposed on you by a foreign country or a U. 2010 tax form 1040ez S. 2010 tax form 1040ez possession. 2010 tax form 1040ez However, you cannot take a deduction or credit for foreign income taxes paid on income that is exempt from U. 2010 tax form 1040ez S. 2010 tax form 1040ez tax under the foreign earned income exclusion or the foreign housing exclusion. 2010 tax form 1040ez For information on these exclusions, see Publication 54, Tax Guide for U. 2010 tax form 1040ez S. 2010 tax form 1040ez Citizens and Resident Aliens Abroad. 2010 tax form 1040ez For information on the foreign tax credit, see Publication 514. 2010 tax form 1040ez General Sales Taxes You can elect to deduct state and local general sales taxes, instead of state and local income taxes, as an itemized deduction on Schedule A (Form 1040), line 5b. 2010 tax form 1040ez You can use either your actual expenses or the state and local sales tax tables to figure your sales tax deduction. 2010 tax form 1040ez Actual expenses. 2010 tax form 1040ez   Generally, you can deduct the actual state and local general sales taxes (including compensating use taxes) if the tax rate was the same as the general sales tax rate. 2010 tax form 1040ez However, sales taxes on food, clothing, medical supplies, and motor vehicles are deductible as a general sales tax even if the tax rate was less than the general sales tax rate. 2010 tax form 1040ez If you paid sales tax on a motor vehicle at a rate higher than the general sales tax rate, you can deduct only the amount of tax that you would have paid at the general sales tax rate on that vehicle. 2010 tax form 1040ez If you use the actual expenses method, you must have receipts to show the general sales taxes paid. 2010 tax form 1040ez Do not include sales taxes paid on items used in your trade or business. 2010 tax form 1040ez Motor vehicles. 2010 tax form 1040ez   For purposes of this section, motor vehicles include cars, motorcycles, motor homes, recreational vehicles, sport utility vehicles, trucks, vans, and off-road vehicles. 2010 tax form 1040ez This also includes sales taxes on a leased motor vehicle, but not on vehicles used in your trade or business. 2010 tax form 1040ez Optional sales tax tables. 2010 tax form 1040ez   Instead of using your actual expenses, you can figure your state and local general sales tax deduction using the state and local sales tax tables in the Instructions for Schedule A (Form 1040). 2010 tax form 1040ez You may also be able to add the state and local general sales taxes paid on certain specified items. 2010 tax form 1040ez   Your applicable table amount is based on the state where you live, your income, and the number of exemptions claimed on your tax return. 2010 tax form 1040ez Your income is your adjusted gross income plus any nontaxable items such as the following. 2010 tax form 1040ez Tax-exempt interest. 2010 tax form 1040ez Veterans' benefits. 2010 tax form 1040ez Nontaxable combat pay. 2010 tax form 1040ez Workers' compensation. 2010 tax form 1040ez Nontaxable part of social security and railroad retirement benefits. 2010 tax form 1040ez Nontaxable part of IRA, pension, or annuity distributions, excluding rollovers. 2010 tax form 1040ez Public assistance payments. 2010 tax form 1040ez If you lived in different states during the same tax year, you must prorate your applicable table amount for each state based on the days you lived in each state. 2010 tax form 1040ez See the Instructions for Schedule A (Form 1040), line 5, for details. 2010 tax form 1040ez Real Estate Taxes Deductible real estate taxes are any state, local, or foreign taxes on real property levied for the general public welfare. 2010 tax form 1040ez You can deduct these taxes only if they are based on the assessed value of the real property and charged uniformly against all property under the jurisdiction of the taxing authority. 2010 tax form 1040ez Deductible real estate taxes generally do not include taxes charged for local benefits and improvements that increase the value of the property. 2010 tax form 1040ez They also do not include itemized charges for services (such as trash collection) assessed against specific property or certain people, even if the charge is paid to the taxing authority. 2010 tax form 1040ez For more information about taxes and charges that are not deductible, see Real Estate-Related Items You Cannot Deduct , later. 2010 tax form 1040ez Tenant-shareholders in a cooperative housing corporation. 2010 tax form 1040ez   Generally, if you are a tenant-stockholder in a cooperative housing corporation, you can deduct the amount paid to the corporation that represents your share of the real estate taxes the corporation paid or incurred for your dwelling unit. 2010 tax form 1040ez The corporation should provide you with a statement showing your share of the taxes. 2010 tax form 1040ez For more information, see Special Rules for Cooperatives in Publication 530. 2010 tax form 1040ez Division of real estate taxes between buyers and sellers. 2010 tax form 1040ez   If you bought or sold real estate during the year, the real estate taxes must be divided between the buyer and the seller. 2010 tax form 1040ez   The buyer and the seller must divide the real estate taxes according to the number of days in the real property tax year (the period to which the tax is imposed relates) that each owned the property. 2010 tax form 1040ez The seller is treated as paying the taxes up to, but not including, the date of sale. 2010 tax form 1040ez The buyer is treated as paying the taxes beginning with the date of sale. 2010 tax form 1040ez This applies regardless of the lien dates under local law. 2010 tax form 1040ez Generally, this information is included on the settlement statement provided at the closing. 2010 tax form 1040ez    If you (the seller) cannot deduct taxes until they are paid because you use the cash method of accounting, and the buyer of your property is personally liable for the tax, you are considered to have paid your part of the tax at the time of the sale. 2010 tax form 1040ez This lets you deduct the part of the tax to the date of sale even though you did not actually pay it. 2010 tax form 1040ez However, you must also include the amount of that tax in the selling price of the property. 2010 tax form 1040ez The buyer must include the same amount in his or her cost of the property. 2010 tax form 1040ez   You figure your deduction for taxes on each property bought or sold during the real property tax year as follows. 2010 tax form 1040ez Worksheet 22-1. 2010 tax form 1040ez Figuring Your Real Estate Tax Deduction 1. 2010 tax form 1040ez Enter the total real estate taxes for the real property tax year   2. 2010 tax form 1040ez Enter the number of days in the real property tax year that you owned the property   3. 2010 tax form 1040ez Divide line 2 by 365 (for leap years, divide line 2 by 366) . 2010 tax form 1040ez 4. 2010 tax form 1040ez Multiply line 1 by line 3. 2010 tax form 1040ez This is your deduction. 2010 tax form 1040ez Enter it on Schedule A (Form 1040), line 6   Note. 2010 tax form 1040ez Repeat steps 1 through 4 for each property you bought or sold during the real property tax year. 2010 tax form 1040ez Your total deduction is the sum of the line 4 amounts for all of the properties. 2010 tax form 1040ez Real estate taxes for prior years. 2010 tax form 1040ez   Do not divide delinquent taxes between the buyer and seller if the taxes are for any real property tax year before the one in which the property is sold. 2010 tax form 1040ez Even if the buyer agrees to pay the delinquent taxes, the buyer cannot deduct them. 2010 tax form 1040ez The buyer must add them to the cost of the property. 2010 tax form 1040ez The seller can deduct these taxes paid by the buyer. 2010 tax form 1040ez However, the seller must include them in the selling price. 2010 tax form 1040ez Examples. 2010 tax form 1040ez   The following examples illustrate how real estate taxes are divided between buyer and seller. 2010 tax form 1040ez Example 1. 2010 tax form 1040ez Dennis and Beth White's real property tax year for both their old home and their new home is the calendar year, with payment due August 1. 2010 tax form 1040ez The tax on their old home, sold on May 7, was $620. 2010 tax form 1040ez The tax on their new home, bought on May 3, was $732. 2010 tax form 1040ez Dennis and Beth are considered to have paid a proportionate share of the real estate taxes on the old home even though they did not actually pay them to the taxing authority. 2010 tax form 1040ez On the other hand, they can claim only a proportionate share of the taxes they paid on their new property even though they paid the entire amount. 2010 tax form 1040ez Dennis and Beth owned their old home during the real property tax year for 126 days (January 1 to May 6, the day before the sale). 2010 tax form 1040ez They figure their deduction for taxes on their old home as follows. 2010 tax form 1040ez Worksheet 22-1. 2010 tax form 1040ez Figuring Your Real Estate Tax Deduction — Taxes on Old Home 1. 2010 tax form 1040ez Enter the total real estate taxes for the real property tax year $620 2. 2010 tax form 1040ez Enter the number of days in the real property tax year that you owned the property 126 3. 2010 tax form 1040ez Divide line 2 by 365 (for leap years, divide line 2 by 366) . 2010 tax form 1040ez 3452 4. 2010 tax form 1040ez Multiply line 1 by line 3. 2010 tax form 1040ez This is your deduction. 2010 tax form 1040ez Enter it on Schedule A (Form 1040), line 6 $214 Since the buyers of their old home paid all of the taxes, Dennis and Beth also include the $214 in the selling price of the old home. 2010 tax form 1040ez (The buyers add the $214 to their cost of the home. 2010 tax form 1040ez ) Dennis and Beth owned their new home during the real property tax year for 243 days (May 3 to December 31, including their date of purchase). 2010 tax form 1040ez They figure their deduction for taxes on their new home as follows. 2010 tax form 1040ez Worksheet 22-1. 2010 tax form 1040ez Figuring Your Real Estate Tax Deduction — Taxes on New Home 1. 2010 tax form 1040ez Enter the total real estate taxes for the real property tax year $732 2. 2010 tax form 1040ez Enter the number of days in the real property tax year that you owned the property 243 3. 2010 tax form 1040ez Divide line 2 by 365 (for leap years, divide line 2 by 366) . 2010 tax form 1040ez 6658 4. 2010 tax form 1040ez Multiply line 1 by line 3. 2010 tax form 1040ez This is your deduction. 2010 tax form 1040ez Enter it on Schedule A (Form 1040), line 6 $487 Since Dennis and Beth paid all of the taxes on the new home, they add $245 ($732 paid less $487 deduction) to their cost of the new home. 2010 tax form 1040ez (The sellers add this $245 to their selling price and deduct the $245 as a real estate tax. 2010 tax form 1040ez ) Dennis and Beth's real estate tax deduction for their old and new homes is the sum of $214 and $487, or $701. 2010 tax form 1040ez They will enter this amount on Schedule A (Form 1040), line 6. 2010 tax form 1040ez Example 2. 2010 tax form 1040ez George and Helen Brown bought a new home on May 3, 2013. 2010 tax form 1040ez Their real property tax year for the new home is the calendar year. 2010 tax form 1040ez Real estate taxes for 2012 were assessed in their state on January 1, 2013. 2010 tax form 1040ez The taxes became due on May 31, 2013, and October 31, 2013. 2010 tax form 1040ez The Browns agreed to pay all taxes due after the date of purchase. 2010 tax form 1040ez Real estate taxes for 2012 were $680. 2010 tax form 1040ez They paid $340 on May 31, 2013, and $340 on October 31, 2013. 2010 tax form 1040ez These taxes were for the 2012 real property tax year. 2010 tax form 1040ez The Browns cannot deduct them since they did not own the property until 2013. 2010 tax form 1040ez Instead, they must add $680 to the cost of their new home. 2010 tax form 1040ez In January 2014, the Browns receive their 2013 property tax statement for $752, which they will pay in 2014. 2010 tax form 1040ez The Browns owned their new home during the 2013 real property tax year for 243 days (May 3 to December 31). 2010 tax form 1040ez They will figure their 2014 deduction for taxes as follows. 2010 tax form 1040ez Worksheet 22-1. 2010 tax form 1040ez Figuring Your Real Estate Tax Deduction — Taxes on New Home 1. 2010 tax form 1040ez Enter the total real estate taxes for the real property tax year $752 2. 2010 tax form 1040ez Enter the number of days in the real property tax year that you owned the property 243 3. 2010 tax form 1040ez Divide line 2 by 365 (for leap years, divide line 2 by 366) . 2010 tax form 1040ez 6658 4. 2010 tax form 1040ez Multiply line 1 by line 3. 2010 tax form 1040ez This is your deduction. 2010 tax form 1040ez Claim it on Schedule A (Form 1040), line 6 $501 The remaining $251 ($752 paid less $501 deduction) of taxes paid in 2014, along with the $680 paid in 2013, is added to the cost of their new home. 2010 tax form 1040ez Because the taxes up to the date of sale are considered paid by the seller on the date of sale, the seller is entitled to a 2013 tax deduction of $931. 2010 tax form 1040ez This is the sum of the $680 for 2012 and the $251 for the 122 days the seller owned the home in 2013. 2010 tax form 1040ez The seller must also include the $931 in the selling price when he or she figures the gain or loss on the sale. 2010 tax form 1040ez The seller should contact the Browns in January 2014 to find out how much real estate tax is due for 2013. 2010 tax form 1040ez Form 1099-S. 2010 tax form 1040ez   For certain sales or exchanges of real estate, the person responsible for closing the sale (generally the settlement agent) prepares Form 1099-S, Proceeds From Real Estate Transactions, to report certain information to the IRS and to the seller of the property. 2010 tax form 1040ez Box 2 of Form 1099-S is for the gross proceeds from the sale and should include the portion of the seller's real estate tax liability that the buyer will pay after the date of sale. 2010 tax form 1040ez The buyer includes these taxes in the cost basis of the property, and the seller both deducts this amount as a tax paid and includes it in the sales price of the property. 2010 tax form 1040ez   For a real estate transaction that involves a home, any real estate tax the seller paid in advance but that is the liability of the buyer appears on Form 1099-S, box 5. 2010 tax form 1040ez The buyer deducts this amount as a real estate tax, and the seller reduces his or her real estate tax deduction (or includes it in income) by the same amount. 2010 tax form 1040ez See Refund (or rebate) , later. 2010 tax form 1040ez Taxes placed in escrow. 2010 tax form 1040ez   If your monthly mortgage payment includes an amount placed in escrow (put in the care of a third party) for real estate taxes, you may not be able to deduct the total amount placed in escrow. 2010 tax form 1040ez You can deduct only the real estate tax that the third party actually paid to the taxing authority. 2010 tax form 1040ez If the third party does not notify you of the amount of real estate tax that was paid for you, contact the third party or the taxing authority to find the proper amount to show on your return. 2010 tax form 1040ez Tenants by the entirety. 2010 tax form 1040ez   If you and your spouse held property as tenants by the entirety and you file separate federal returns, each of you can deduct only the taxes each of you paid on the property. 2010 tax form 1040ez Divorced individuals. 2010 tax form 1040ez   If your divorce or separation agreement states that you must pay the real estate taxes for a home owned by you and your spouse, part of your payments may be deductible as alimony and part as real estate taxes. 2010 tax form 1040ez See Taxes and insurance in chapter 18 for more information. 2010 tax form 1040ez Ministers' and military housing allowances. 2010 tax form 1040ez   If you are a minister or a member of the uniformed services and receive a housing allowance that you can exclude from income, you still can deduct all of the real estate taxes you pay on your home. 2010 tax form 1040ez Refund (or rebate). 2010 tax form 1040ez   If you received a refund or rebate in 2013 of real estate taxes you paid in 2013, you must reduce your deduction by the amount refunded to you. 2010 tax form 1040ez If you received a refund or rebate in 2013 of real estate taxes you deducted in an earlier year (either as an itemized deduction or an increase to your standard deduction), you generally must include the refund or rebate in income in the year you receive it. 2010 tax form 1040ez However, the amount you include in income is limited to the amount of the deduction that reduced your tax in the earlier year. 2010 tax form 1040ez For more information, see Recoveries in chapter 12. 2010 tax form 1040ez Table 22-1. 2010 tax form 1040ez Which Taxes Can You Deduct? Type of Tax You Can Deduct You Cannot Deduct Fees and Charges Fees and charges that are expenses of your trade or business or of producing income. 2010 tax form 1040ez Fees and charges that are not expenses of your trade or business or of producing income, such as fees for driver's licenses, car inspections, parking, or charges for water bills (see Taxes and Fees You Cannot Deduct ). 2010 tax form 1040ez     Fines and penalties. 2010 tax form 1040ez Income Taxes State and local income taxes. 2010 tax form 1040ez Federal income taxes. 2010 tax form 1040ez   Foreign income taxes. 2010 tax form 1040ez     Employee contributions to state funds listed under Contributions to state benefit funds . 2010 tax form 1040ez Employee contributions to private or voluntary disability plans. 2010 tax form 1040ez     State and local general sales taxes if you choose to deduct state and local income taxes. 2010 tax form 1040ez General Sales Taxes State and local general sales taxes, including compensating use taxes. 2010 tax form 1040ez State and local income taxes if you choose to deduct state and local general sales taxes. 2010 tax form 1040ez Other Taxes Taxes that are expenses of your trade or business. 2010 tax form 1040ez Federal excise taxes, such as tax on gasoline, that are not expenses of your trade or business or of producing income. 2010 tax form 1040ez   Taxes on property producing rent or royalty income. 2010 tax form 1040ez Per capita taxes. 2010 tax form 1040ez   Occupational taxes. 2010 tax form 1040ez See chapter 28. 2010 tax form 1040ez     One-half of self-employment tax paid. 2010 tax form 1040ez   Personal Property Taxes State and local personal property taxes. 2010 tax form 1040ez Customs duties that are not expenses of your trade or business or of producing income. 2010 tax form 1040ez Real Estate Taxes State and local real estate taxes. 2010 tax form 1040ez Real estate taxes that are treated as imposed on someone else (see Division of real estate taxes between buyers and sellers ). 2010 tax form 1040ez   Foreign real estate taxes. 2010 tax form 1040ez Taxes for local benefits (with exceptions). 2010 tax form 1040ez See Real Estate-Related Items You Cannot Deduct . 2010 tax form 1040ez   Tenant's share of real estate taxes paid by  cooperative housing corporation. 2010 tax form 1040ez Trash and garbage pickup fees (with exceptions). 2010 tax form 1040ez See Real Estate-Related Items You Cannot Deduct . 2010 tax form 1040ez     Rent increase due to higher real estate taxes. 2010 tax form 1040ez     Homeowners' association charges. 2010 tax form 1040ez Real Estate-Related Items You Cannot Deduct Payments for the following items generally are not deductible as real estate taxes. 2010 tax form 1040ez Taxes for local benefits. 2010 tax form 1040ez Itemized charges for services (such as trash and garbage pickup fees). 2010 tax form 1040ez Transfer taxes (or stamp taxes). 2010 tax form 1040ez Rent increases due to higher real estate taxes. 2010 tax form 1040ez Homeowners' association charges. 2010 tax form 1040ez Taxes for local benefits. 2010 tax form 1040ez   Deductible real estate taxes generally do not include taxes charged for local benefits and improvements tending to increase the value of your property. 2010 tax form 1040ez These include assessments for streets, sidewalks, water mains, sewer lines, public parking facilities, and similar improvements. 2010 tax form 1040ez You should increase the basis of your property by the amount of the assessment. 2010 tax form 1040ez   Local benefit taxes are deductible only if they are for maintenance, repair, or interest charges related to those benefits. 2010 tax form 1040ez If only a part of the taxes is for maintenance, repair, or interest, you must be able to show the amount of that part to claim the deduction. 2010 tax form 1040ez If you cannot determine what part of the tax is for maintenance, repair, or interest, none of it is deductible. 2010 tax form 1040ez    Taxes for local benefits may be included in your real estate tax bill. 2010 tax form 1040ez If your taxing authority (or mortgage lender) does not furnish you a copy of your real estate tax bill, ask for it. 2010 tax form 1040ez You should use the rules above to determine if the local benefit tax is deductible. 2010 tax form 1040ez Contact the taxing authority if you need additional information about a specific charge on your real estate tax bill. 2010 tax form 1040ez Itemized charges for services. 2010 tax form 1040ez    An itemized charge for services assessed against specific property or certain people is not a tax, even if the charge is paid to the taxing authority. 2010 tax form 1040ez For example, you cannot deduct the charge as a real estate tax if it is: A unit fee for the delivery of a service (such as a $5 fee charged for every 1,000 gallons of water you use), A periodic charge for a residential service (such as a $20 per month or $240 annual fee charged to each homeowner for trash collection), or A flat fee charged for a single service provided by your government (such as a $30 charge for mowing your lawn because it was allowed to grow higher than permitted under your local ordinance). 2010 tax form 1040ez    You must look at your real estate tax bill to determine if any nondeductible itemized charges, such as those listed above, are included in the bill. 2010 tax form 1040ez If your taxing authority (or mortgage lender) does not furnish you a copy of your real estate tax bill, ask for it. 2010 tax form 1040ez Exception. 2010 tax form 1040ez   Service charges used to maintain or improve services (such as trash collection or police and fire protection) are deductible as real estate taxes if: The fees or charges are imposed at a like rate against all property in the taxing jurisdiction, The funds collected are not earmarked; instead, they are commingled with general revenue funds, and Funds used to maintain or improve services are not limited to or determined by the amount of these fees or charges collected. 2010 tax form 1040ez Transfer taxes (or stamp taxes). 2010 tax form 1040ez   Transfer taxes and similar taxes and charges on the sale of a personal home are not deductible. 2010 tax form 1040ez If they are paid by the seller, they are expenses of the sale and reduce the amount realized on the sale. 2010 tax form 1040ez If paid by the buyer, they are included in the cost basis of the property. 2010 tax form 1040ez Rent increase due to higher real estate taxes. 2010 tax form 1040ez   If your landlord increases your rent in the form of a tax surcharge because of increased real estate taxes, you cannot deduct the increase as taxes. 2010 tax form 1040ez Homeowners' association charges. 2010 tax form 1040ez   These charges are not deductible because they are imposed by the homeowners' association, rather than the state or local government. 2010 tax form 1040ez Personal Property Taxes Personal property tax is deductible if it is a state or local tax that is: Charged on personal property, Based only on the value of the personal property, and Charged on a yearly basis, even if it is collected more or less than once a year. 2010 tax form 1040ez A tax that meets the above requirements can be considered charged on personal property even if it is for the exercise of a privilege. 2010 tax form 1040ez For example, a yearly tax based on value qualifies as a personal property tax even if it is called a registration fee and is for the privilege of registering motor vehicles or using them on the highways. 2010 tax form 1040ez If the tax is partly based on value and partly based on other criteria, it may qualify in part. 2010 tax form 1040ez Example. 2010 tax form 1040ez Your state charges a yearly motor vehicle registration tax of 1% of value plus 50 cents per hundredweight. 2010 tax form 1040ez You paid $32 based on the value ($1,500) and weight (3,400 lbs. 2010 tax form 1040ez ) of your car. 2010 tax form 1040ez You can deduct $15 (1% × $1,500) as a personal property tax because it is based on the value. 2010 tax form 1040ez The remaining $17 ($. 2010 tax form 1040ez 50 × 34), based on the weight, is not deductible. 2010 tax form 1040ez Taxes and Fees You Cannot Deduct Many federal, state, and local government taxes are not deductible because they do not fall within the categories discussed earlier. 2010 tax form 1040ez Other taxes and fees, such as federal income taxes, are not deductible because the tax law specifically prohibits a deduction for them. 2010 tax form 1040ez See Table 22-1. 2010 tax form 1040ez Taxes and fees that are generally not deductible include the following items. 2010 tax form 1040ez Employment taxes. 2010 tax form 1040ez This includes social security, Medicare, and railroad retirement taxes withheld from your pay. 2010 tax form 1040ez However, one-half of self-employment tax you pay is deductible. 2010 tax form 1040ez In addition, the social security and other employment taxes you pay on the wages of a household worker may be included in medical expenses that you can deduct or child care expenses that allow you to claim the child and dependent care credit. 2010 tax form 1040ez For more information, see chapters 21 and 32. 2010 tax form 1040ez Estate, inheritance, legacy, or succession taxes. 2010 tax form 1040ez However, you can deduct the estate tax attributable to income in respect of a decedent if you, as a beneficiary, must include that income in your gross income. 2010 tax form 1040ez In that case, deduct the estate tax as a miscellaneous deduction that is not subject to the 2%-of-adjusted-gross-income limit. 2010 tax form 1040ez For more information, see Publication 559, Survivors, Executors, and Administrators. 2010 tax form 1040ez Federal income taxes. 2010 tax form 1040ez This includes income taxes withheld from your pay. 2010 tax form 1040ez Fines and penalties. 2010 tax form 1040ez You cannot deduct fines and penalties paid to a government for violation of any law, including related amounts forfeited as collateral deposits. 2010 tax form 1040ez Gift taxes. 2010 tax form 1040ez License fees. 2010 tax form 1040ez You cannot deduct license fees for personal purposes (such as marriage, driver's, and dog license fees). 2010 tax form 1040ez Per capita taxes. 2010 tax form 1040ez You cannot deduct state or local per capita taxes. 2010 tax form 1040ez Many taxes and fees other than those listed above are also nondeductible, unless they are ordinary and necessary expenses of a business or income producing activity. 2010 tax form 1040ez For other nondeductible items, see Real Estate-Related Items You Cannot Deduct , earlier. 2010 tax form 1040ez Where To Deduct You deduct taxes on the following schedules. 2010 tax form 1040ez State and local income taxes. 2010 tax form 1040ez    These taxes are deducted on Schedule A (Form 1040), line 5, even if your only source of income is from business, rents, or royalties. 2010 tax form 1040ez Check box a on line 5. 2010 tax form 1040ez General sales taxes. 2010 tax form 1040ez   Sales taxes are deducted on Schedule A (Form 1040), line 5. 2010 tax form 1040ez You must check box b on line 5. 2010 tax form 1040ez If you elect to deduct sales taxes, you cannot deduct state and local income taxes on Schedule A (Form 1040), line 5, box a. 2010 tax form 1040ez Foreign income taxes. 2010 tax form 1040ez   Generally, income taxes you pay to a foreign country or U. 2010 tax form 1040ez S. 2010 tax form 1040ez possession can be claimed as an itemized deduction on Schedule A (Form 1040), line 8, or as a credit against your U. 2010 tax form 1040ez S. 2010 tax form 1040ez income tax on Form 1040, line 47. 2010 tax form 1040ez To claim the credit, you may have to complete and attach Form 1116. 2010 tax form 1040ez For more information, see chapter 37, the Form 1040 instructions, or Publication 514. 2010 tax form 1040ez Real estate taxes and personal property taxes. 2010 tax form 1040ez    Real estate and personal property taxes are deducted on Schedule A (Form 1040), lines 6 and 7, respectively, unless they are paid on property used in your business, in which case they are deducted on Schedule C, Schedule C-EZ, or Schedule F (Form 1040). 2010 tax form 1040ez Taxes on property that produces rent or royalty income are deducted on Schedule E (Form 1040). 2010 tax form 1040ez Self-employment tax. 2010 tax form 1040ez    Deduct one-half of your self-employment tax on Form 1040, line 27. 2010 tax form 1040ez Other taxes. 2010 tax form 1040ez    All other deductible taxes are deducted on Schedule A (Form 1040), line 8. 2010 tax form 1040ez Prev  Up  Next   Home   More Online Publications
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Understanding Your CP53B Notice

We tried to direct deposit your refund, but the financial institution couldn’t process it. We are researching your account, but it will take 8 to 10 weeks to complete our review and verify this refund.


What you need to do

  • You don’t need to do anything at this time.

You may want to

  • Call us at the toll-free number on the notice if you don’t receive your refund check or a follow-up letter within 10 weeks
  • Monitor your financial accounts

If you notice any suspicious or unusual activity, you should:

  • Notify your financial institutions
  • Contact the fraud department of one of the three major credit bureaus
  • Report any fraudulent activity to your local police or sheriff's department
  • File a complaint with the Federal Trade Commission
  • Submit a Form 14039, Identity Theft Affidavit

Answers to Common Questions

Q. What should I do if I didn’t file a return?

A. Submit a Form 14039, Identity Theft Affidavit, to the IRS address in the Form 14039 instructions.

Q. Can I direct part of my refund into my tax professional’s checking or savings account to pay my tax preparation fee?

A. No. You can direct your refund to any of your checking or savings accounts. You can’t direct your refund to someone else’s account (except for your spouse’s account when you have a joint refund).

Q. Why will it take up to 10 weeks to receive my refund?

A. We must research your account to determine if you are entitled to the refund. We try to balance customer service and tax compliance when we review tax returns.  Refund timeframes are also affected by:

  • Bankruptcy
  • An open audit
  • A balance due on a related account (such as a different tax year)

Q. Will calling the IRS give me additional information or speed my refund?

A. No, calling us won’t speed up your refund. You don’t need to call us unless we send you a letter that asks you to contact us. Our telephone assistors won’t be able to provide any additional information.


Tips for next year

If you request a direct deposit refund, be sure the account you specify is in your name (or your spouse’s if you have a joint refund).

If you changed your name as a result of a recent marriage or divorce, be sure the name on your tax return matches the name registered with the Social Security Administration.

Never direct your refund to an account that belongs to a relative, friend, or tax return preparer.

 

Page Last Reviewed or Updated: 21-Jan-2014

Printable samples of this notice (PDF)

 

 

How to get help

  • Call the 1-800 number listed on the top right corner of your notice.
  • Authorize someone (e.g., accountant) to contact the IRS on your behalf using Form 2848.
  • See if you qualify for help from a Low Income Taxpayer Clinic.
     

The 2010 Tax Form 1040ez

2010 tax form 1040ez Publication 587 - Main Content Table of Contents Qualifying for a DeductionExclusive Use Regular Use Trade or Business Use Principal Place of Business Place To Meet Patients, Clients, or Customers Separate Structure Figuring the DeductionUsing Actual Expenses Using the Simplified Method Daycare Facility Standard meal and snack rates. 2010 tax form 1040ez Sale or Exchange of Your HomeGain on Sale Depreciation Basis Adjustment Reporting the Sale More Information Business Furniture and EquipmentListed Property Property Bought for Business Use Personal Property Converted to Business Use Recordkeeping Where To DeductSelf-Employed Persons Employees Partners How To Get Tax HelpLow Income Taxpayer Clinics Worksheet To Figure the Deduction for Business Use of Your HomeInstructions for the Worksheet Worksheets To Figure the Deduction for Business Use of Your Home (Simplified Method) Instructions for the Simplified Method Worksheet Instructions for the Daycare Facility Worksheet Instructions for the Area Adjustment Worksheet Qualifying for a Deduction Generally, you cannot deduct items related to your home, such as mortgage interest, real estate taxes, utilities, maintenance, rent, depreciation, or property insurance, as business expenses. 2010 tax form 1040ez However, you may be able to deduct expenses related to the business use of part of your home if you meet specific requirements. 2010 tax form 1040ez Even then, the deductible amount of these types of expenses may be limited. 2010 tax form 1040ez Use this section and Figure A, later, to decide if you can deduct expenses for the business use of your home. 2010 tax form 1040ez To qualify to deduct expenses for business use of your home, you must use part of your home: Exclusively and regularly as your principal place of business (defined later), Exclusively and regularly as a place where you meet or deal with patients, clients, or customers in the normal course of your trade or business, In the case of a separate structure which is not attached to your home, in connection with your trade or business, On a regular basis for certain storage use (see Storage of inventory or product samples , later), For rental use (see Publication 527), or As a daycare facility (see Daycare Facility , later). 2010 tax form 1040ez Additional tests for employee use. 2010 tax form 1040ez   If you are an employee and you use a part of your home for business, you may qualify for a deduction for its business use. 2010 tax form 1040ez You must meet the tests discussed earlier plus: Your business use must be for the convenience of your employer, and You must not rent any part of your home to your employer and use the rented portion to perform services as an employee for that employer. 2010 tax form 1040ez If the use of the home office is merely appropriate and helpful, you cannot deduct expenses for the business use of your home. 2010 tax form 1040ez Exclusive Use To qualify under the exclusive use test, you must use a specific area of your home only for your trade or business. 2010 tax form 1040ez The area used for business can be a room or other separately identifiable space. 2010 tax form 1040ez The space does not need to be marked off by a permanent partition. 2010 tax form 1040ez You do not meet the requirements of the exclusive use test if you use the area in question both for business and for personal purposes. 2010 tax form 1040ez Example. 2010 tax form 1040ez You are an attorney and use a den in your home to write legal briefs and prepare clients' tax returns. 2010 tax form 1040ez Your family also uses the den for recreation. 2010 tax form 1040ez The den is not used exclusively in your trade or business, so you cannot claim a deduction for the business use of the den. 2010 tax form 1040ez Exceptions to Exclusive Use You do not have to meet the exclusive use test if either of the following applies. 2010 tax form 1040ez You use part of your home for the storage of inventory or product samples (discussed next). 2010 tax form 1040ez You use part of your home as a daycare facility, discussed later under Daycare Facility . 2010 tax form 1040ez Note. 2010 tax form 1040ez With the exception of these two uses, any portion of the home used for business purposes must meet the exclusive use test. 2010 tax form 1040ez Storage of inventory or product samples. 2010 tax form 1040ez    If you use part of your home for storage of inventory or product samples, you can deduct expenses for the business use of your home without meeting the exclusive use test. 2010 tax form 1040ez However, you must meet all the following tests. 2010 tax form 1040ez You sell products at wholesale or retail as your trade or business. 2010 tax form 1040ez You keep the inventory or product samples in your home for use in your trade or business. 2010 tax form 1040ez Your home is the only fixed location of your trade or business. 2010 tax form 1040ez You use the storage space on a regular basis. 2010 tax form 1040ez The space you use is a separately identifiable space suitable for storage. 2010 tax form 1040ez Example. 2010 tax form 1040ez Your home is the only fixed location of your business of selling mechanics' tools at retail. 2010 tax form 1040ez You regularly use half of your basement for storage of inventory and product samples. 2010 tax form 1040ez You sometimes use the area for personal purposes. 2010 tax form 1040ez The expenses for the storage space are deductible even though you do not use this part of your basement exclusively for business. 2010 tax form 1040ez Regular Use To qualify under the regular use test, you must use a specific area of your home for business on a regular basis. 2010 tax form 1040ez Incidental or occasional business use is not regular use. 2010 tax form 1040ez You must consider all facts and circumstances in determining whether your use is on a regular basis. 2010 tax form 1040ez Trade or Business Use To qualify under the trade-or-business-use test, you must use part of your home in connection with a trade or business. 2010 tax form 1040ez If you use your home for a profit-seeking activity that is not a trade or business, you cannot take a deduction for its business use. 2010 tax form 1040ez Example. 2010 tax form 1040ez You use part of your home exclusively and regularly to read financial periodicals and reports, clip bond coupons, and carry out similar activities related to your own investments. 2010 tax form 1040ez You do not make investments as a broker or dealer. 2010 tax form 1040ez So, your activities are not part of a trade or business and you cannot take a deduction for the business use of your home. 2010 tax form 1040ez Principal Place of Business You can have more than one business location, including your home, for a single trade or business. 2010 tax form 1040ez To qualify to deduct the expenses for the business use of your home under the principal place of business test, your home must be your principal place of business for that trade or business. 2010 tax form 1040ez To determine whether your home is your principal place of business, you must consider: The relative importance of the activities performed at each place where you conduct business, and The amount of time spent at each place where you conduct business. 2010 tax form 1040ez Your home office will qualify as your principal place of business if you meet the following requirements. 2010 tax form 1040ez You use it exclusively and regularly for administrative or management activities of your trade or business. 2010 tax form 1040ez You have no other fixed location where you conduct substantial administrative or management activities of your trade or business. 2010 tax form 1040ez If, after considering your business locations, your home cannot be identified as your principal place of business, you cannot deduct home office expenses. 2010 tax form 1040ez However, see the later discussions under Place To Meet Patients, Clients, or Customers and Separate Structure for other ways to qualify to deduct home office expenses. 2010 tax form 1040ez Administrative or management activities. 2010 tax form 1040ez   There are many activities that are administrative or managerial in nature. 2010 tax form 1040ez The following are a few examples. 2010 tax form 1040ez Billing customers, clients, or patients. 2010 tax form 1040ez Keeping books and records. 2010 tax form 1040ez Ordering supplies. 2010 tax form 1040ez Setting up appointments. 2010 tax form 1040ez Forwarding orders or writing reports. 2010 tax form 1040ez Administrative or management activities performed at other locations. 2010 tax form 1040ez   The following activities performed by you or others will not disqualify your home office from being your principal place of business. 2010 tax form 1040ez You have others conduct your administrative or management activities at locations other than your home. 2010 tax form 1040ez (For example, another company does your billing from its place of business. 2010 tax form 1040ez ) You conduct administrative or management activities at places that are not fixed locations of your business, such as in a car or a hotel room. 2010 tax form 1040ez You occasionally conduct minimal administrative or management activities at a fixed location outside your home. 2010 tax form 1040ez You conduct substantial nonadministrative or nonmanagement business activities at a fixed location outside your home. 2010 tax form 1040ez (For example, you meet with or provide services to customers, clients, or patients at a fixed location of the business outside your home. 2010 tax form 1040ez ) You have suitable space to conduct administrative or management activities outside your home, but choose to use your home office for those activities instead. 2010 tax form 1040ez Please click here for the text description of the image. 2010 tax form 1040ez Can you deduct business use of the home expenses? Example 1. 2010 tax form 1040ez John is a self-employed plumber. 2010 tax form 1040ez Most of John's time is spent at customers' homes and offices installing and repairing plumbing. 2010 tax form 1040ez He has a small office in his home that he uses exclusively and regularly for the administrative or management activities of his business, such as phoning customers, ordering supplies, and keeping his books. 2010 tax form 1040ez John writes up estimates and records of work completed at his customers' premises. 2010 tax form 1040ez He does not conduct any substantial administrative or management activities at any fixed location other than his home office. 2010 tax form 1040ez John does not do his own billing. 2010 tax form 1040ez He uses a local bookkeeping service to bill his customers. 2010 tax form 1040ez John's home office qualifies as his principal place of business for deducting expenses for its use. 2010 tax form 1040ez He uses the home office for the administrative or managerial activities of his plumbing business and he has no other fixed location where he conducts these administrative or managerial activities. 2010 tax form 1040ez His choice to have his billing done by another company does not disqualify his home office from being his principal place of business. 2010 tax form 1040ez He meets all the qualifications, including principal place of business, so he can deduct expenses (subject to certain limitations, explained later) for the business use of his home. 2010 tax form 1040ez Example 2. 2010 tax form 1040ez Pamela is a self-employed sales representative for several different product lines. 2010 tax form 1040ez She has an office in her home that she uses exclusively and regularly to set up appointments and write up orders and other reports for the companies whose products she sells. 2010 tax form 1040ez She occasionally writes up orders and sets up appointments from her hotel room when she is away on business overnight. 2010 tax form 1040ez Pamela's business is selling products to customers at various locations throughout her territory. 2010 tax form 1040ez To make these sales, she regularly visits customers to explain the available products and take orders. 2010 tax form 1040ez Pamela's home office qualifies as her principal place of business for deducting expenses for its use. 2010 tax form 1040ez She conducts administrative or management activities there and she has no other fixed location where she conducts substantial administrative or management activities. 2010 tax form 1040ez The fact that she conducts some administrative or management activities in her hotel room (not a fixed location) does not disqualify her home office from being her principal place of business. 2010 tax form 1040ez She meets all the qualifications, including principal place of business, so she can deduct expenses (subject to certain limitations, explained later) for the business use of her home. 2010 tax form 1040ez Example 3. 2010 tax form 1040ez Paul is a self-employed anesthesiologist. 2010 tax form 1040ez He spends the majority of his time administering anesthesia and postoperative care in three local hospitals. 2010 tax form 1040ez One of the hospitals provides him with a small shared office where he could conduct administrative or management activities. 2010 tax form 1040ez Paul very rarely uses the office the hospital provides. 2010 tax form 1040ez He uses a room in his home that he has converted to an office. 2010 tax form 1040ez He uses this room exclusively and regularly to conduct all the following activities. 2010 tax form 1040ez Contacting patients, surgeons, and hospitals regarding scheduling. 2010 tax form 1040ez Preparing for treatments and presentations. 2010 tax form 1040ez Maintaining billing records and patient logs. 2010 tax form 1040ez Satisfying continuing medical education requirements. 2010 tax form 1040ez Reading medical journals and books. 2010 tax form 1040ez Paul's home office qualifies as his principal place of business for deducting expenses for its use. 2010 tax form 1040ez He conducts administrative or management activities for his business as an anesthesiologist there and he has no other fixed location where he conducts substantial administrative or management activities for this business. 2010 tax form 1040ez His choice to use his home office instead of the one provided by the hospital does not disqualify his home office from being his principal place of business. 2010 tax form 1040ez His performance of substantial nonadministrative or nonmanagement activities at fixed locations outside his home also does not disqualify his home office from being his principal place of business. 2010 tax form 1040ez He meets all the qualifications, including principal place of business, so he can deduct expenses (subject to certain limitations, explained later) for the business use of his home. 2010 tax form 1040ez Example 4. 2010 tax form 1040ez Kathleen is employed as a teacher. 2010 tax form 1040ez She is required to teach and meet with students at the school and to grade papers and tests. 2010 tax form 1040ez The school provides her with a small office where she can work on her lesson plans, grade papers and tests, and meet with parents and students. 2010 tax form 1040ez The school does not require her to work at home. 2010 tax form 1040ez Kathleen prefers to use the office she has set up in her home and does not use the one provided by the school. 2010 tax form 1040ez She uses this home office exclusively and regularly for the administrative duties of her teaching job. 2010 tax form 1040ez Kathleen must meet the convenience-of-the-employer test, even if her home qualifies as her principal place of business for deducting expenses for its use. 2010 tax form 1040ez Her employer provides her with an office and does not require her to work at home, so she does not meet the convenience-of-the-employer test and cannot claim a deduction for the business use of her home. 2010 tax form 1040ez More Than One Trade or Business The same home office can be the principal place of business for two or more separate business activities. 2010 tax form 1040ez Whether your home office is the principal place of business for more than one business activity must be determined separately for each of your trade or business activities. 2010 tax form 1040ez You must use the home office exclusively and regularly for one or more of the following purposes. 2010 tax form 1040ez As the principal place of business for one or more of your trades or businesses. 2010 tax form 1040ez As a place to meet or deal with patients, clients, or customers in the normal course of one or more of your trades or businesses. 2010 tax form 1040ez If your home office is a separate structure, in connection with one or more of your trades or businesses. 2010 tax form 1040ez You can use your home office for more than one business activity, but you cannot use it for any nonbusiness (i. 2010 tax form 1040ez e. 2010 tax form 1040ez , personal) activities. 2010 tax form 1040ez If you are an employee, any use of the home office in connection with your employment must be for the convenience of your employer. 2010 tax form 1040ez See Rental to employer , later, if you rent part of your home to your employer. 2010 tax form 1040ez Example. 2010 tax form 1040ez Tracy White is employed as a teacher. 2010 tax form 1040ez Her principal place of work is the school, which provides her office space to do her school work. 2010 tax form 1040ez She also has a mail order jewelry business. 2010 tax form 1040ez All her work in the jewelry business is done in her home office and the office is used exclusively for that business. 2010 tax form 1040ez If she meets all the other tests, she can deduct expenses for the business use of her home for the jewelry business. 2010 tax form 1040ez If Tracy also uses the office for work related to her teaching, she must meet the exclusive use test for both businesses to qualify for the deduction. 2010 tax form 1040ez As an employee, Tracy must also meet the convenience-of-the-employer test to qualify for the deduction. 2010 tax form 1040ez She does not meet this test for her work as a teacher, so she cannot claim a deduction for the business use of her home for either activity. 2010 tax form 1040ez Place To Meet Patients, Clients, or Customers If you meet or deal with patients, clients, or customers in your home in the normal course of your business, even though you also carry on business at another location, you can deduct your expenses for the part of your home used exclusively and regularly for business if you meet both the following tests. 2010 tax form 1040ez You physically meet with patients, clients, or customers on your premises. 2010 tax form 1040ez Their use of your home is substantial and integral to the conduct of your business. 2010 tax form 1040ez Doctors, dentists, attorneys, and other professionals who maintain offices in their homes generally will meet this requirement. 2010 tax form 1040ez Using your home for occasional meetings and telephone calls will not qualify you to deduct expenses for the business use of your home. 2010 tax form 1040ez The part of your home you use exclusively and regularly to meet patients, clients, or customers does not have to be your principal place of business. 2010 tax form 1040ez Example. 2010 tax form 1040ez June Quill, a self-employed attorney, works 3 days a week in her city office. 2010 tax form 1040ez She works 2 days a week in her home office used only for business. 2010 tax form 1040ez She regularly meets clients there. 2010 tax form 1040ez Her home office qualifies for a business deduction because she meets clients there in the normal course of her business. 2010 tax form 1040ez Separate Structure You can deduct expenses for a separate free-standing structure, such as a studio, workshop, garage, or barn, if you use it exclusively and regularly for your business. 2010 tax form 1040ez The structure does not have to be your principal place of business or a place where you meet patients, clients, or customers. 2010 tax form 1040ez Example. 2010 tax form 1040ez John Berry operates a floral shop in town. 2010 tax form 1040ez He grows the plants for his shop in a greenhouse behind his home. 2010 tax form 1040ez He uses the greenhouse exclusively and regularly in his business, so he can deduct the expenses for its use, subject to certain limitations, explained later. 2010 tax form 1040ez Figuring the Deduction After you determine that you meet the tests under Qualifying for a Deduction , you can begin to figure how much you can deduct. 2010 tax form 1040ez When figuring the amount you can deduct for the business use of your home, you will use either your actual expenses or a simplified method. 2010 tax form 1040ez Electing to use the simplified method. 2010 tax form 1040ez   The simplified method is an alternative to the calculation, allocation, and substantiation of actual expenses. 2010 tax form 1040ez You choose whether or not to figure your deduction using the simplified method each taxable year. 2010 tax form 1040ez See Using the Simplified Method , later. 2010 tax form 1040ez Rental to employer. 2010 tax form 1040ez   If you rent part of your home to your employer and you use the rented part in performing services for your employer as an employee, your deduction for the business use of your home is limited. 2010 tax form 1040ez You can deduct mortgage interest, qualified mortgage insurance premiums, real estate taxes, and personal casualty losses for the rented part, subject to any limitations. 2010 tax form 1040ez However, you cannot deduct otherwise allowable trade or business expenses, business casualty losses, or depreciation related to the use of your home (or use the simplified method as an alternative to deducting these actual expenses) in performing services for your employer. 2010 tax form 1040ez Using Actual Expenses If you do not or cannot elect to use the simplified method for a home, you will figure your deduction for that home using your actual expenses. 2010 tax form 1040ez You will also need to figure the percentage of your home used for business and the limit on the deduction. 2010 tax form 1040ez If you are an employee or a partner, or you use your home in your farming business and you file Schedule F (Form 1040), you can use the Worksheet To Figure the Deduction for Business Use of Your Home, near the end of this publication, to help you figure your deduction. 2010 tax form 1040ez If you use your home in a trade or business and you file Schedule C (Form 1040), you will use Form 8829 to figure your deduction. 2010 tax form 1040ez Part-year use. 2010 tax form 1040ez   You cannot deduct expenses for the business use of your home incurred during any part of the year you did not use your home for business purposes. 2010 tax form 1040ez For example, if you begin using part of your home for business on July 1, and you meet all the tests from that date until the end of the year, consider only your expenses for the last half of the year in figuring your allowable deduction. 2010 tax form 1040ez Expenses related to tax-exempt income. 2010 tax form 1040ez   Generally, you cannot deduct expenses that are related to tax-exempt allowances. 2010 tax form 1040ez However, if you receive a tax-exempt parsonage allowance or a tax-exempt military allowance, your expenses for mortgage interest and real estate taxes are deductible under the normal rules. 2010 tax form 1040ez No deduction is allowed for other expenses related to the tax-exempt allowance. 2010 tax form 1040ez   If your housing is provided free of charge and the value of the housing is tax exempt, you cannot deduct the rental value of any portion of the housing. 2010 tax form 1040ez Actual Expenses You must divide the expenses of operating your home between personal and business use. 2010 tax form 1040ez The part of a home operating expense you can use to figure your deduction depends on both of the following. 2010 tax form 1040ez Whether the expense is direct, indirect, or unrelated. 2010 tax form 1040ez The percentage of your home used for business. 2010 tax form 1040ez Table 1, next, describes the types of expenses you may have and the extent to which they are deductible. 2010 tax form 1040ez Table 1. 2010 tax form 1040ez Types of Expenses  Expense  Description  Deductibility Direct Expenses only for  the business part  of your home. 2010 tax form 1040ez Deductible in full. 2010 tax form 1040ez *   Examples:  Painting or repairs  only in the area  used for business. 2010 tax form 1040ez Exception: May be only partially  deductible in a daycare facility. 2010 tax form 1040ez See Daycare Facility , later. 2010 tax form 1040ez Indirect Expenses for  keeping up and running your  entire home. 2010 tax form 1040ez Deductible based on the percentage of your home used for business. 2010 tax form 1040ez *   Examples:  Insurance, utilities, and  general repairs. 2010 tax form 1040ez   Unrelated Expenses only for  the parts of your  home not used  for business. 2010 tax form 1040ez Not deductible. 2010 tax form 1040ez   Examples:  Lawn care or painting  a room not used  for business. 2010 tax form 1040ez   *Subject to the deduction limit, discussed later. 2010 tax form 1040ez Form 8829 and the Worksheet To Figure the Deduction for Business Use of Your Home have separate columns for direct and indirect expenses. 2010 tax form 1040ez Certain expenses are deductible whether or not you use your home for business. 2010 tax form 1040ez If you qualify to deduct business use of the home expenses, use the business percentage of these expenses to figure your total business use of the home deduction. 2010 tax form 1040ez These expenses include the following. 2010 tax form 1040ez Real estate taxes. 2010 tax form 1040ez Qualified mortgage insurance premiums. 2010 tax form 1040ez Deductible mortgage interest. 2010 tax form 1040ez Casualty losses. 2010 tax form 1040ez Other expenses are deductible only if you use your home for business. 2010 tax form 1040ez You can use the business percentage of these expenses to figure your total business use of the home deduction. 2010 tax form 1040ez These expenses generally include (but are not limited to) the following. 2010 tax form 1040ez Depreciation (covered under Depreciating Your Home , later). 2010 tax form 1040ez Insurance. 2010 tax form 1040ez Rent paid for the use of property you do not own but use in your trade or business. 2010 tax form 1040ez Repairs. 2010 tax form 1040ez Security system. 2010 tax form 1040ez Utilities and services. 2010 tax form 1040ez Real estate taxes. 2010 tax form 1040ez   To figure the business part of your real estate taxes, multiply the real estate taxes paid by the percentage of your home used for business. 2010 tax form 1040ez   For more information on the deduction for real estate taxes, see Publication 530, Tax Information for Homeowners. 2010 tax form 1040ez Deductible mortgage interest. 2010 tax form 1040ez   To figure the business part of your deductible mortgage interest, multiply this interest by the percentage of your home used for business. 2010 tax form 1040ez You can include interest on a second mortgage in this computation. 2010 tax form 1040ez If your total mortgage debt is more than $1,000,000 or your home equity debt is more than $100,000, your deduction may be limited. 2010 tax form 1040ez For more information on what interest is deductible, see Publication 936, Home Mortgage Interest Deduction. 2010 tax form 1040ez Qualified mortgage insurance premiums. 2010 tax form 1040ez   To figure the business part of your qualified mortgage insurance premiums, multiply the premiums by the percentage of your home used for business. 2010 tax form 1040ez You can include premiums for insurance on a second mortgage in this computation. 2010 tax form 1040ez If your adjusted gross income is more than $100,000 ($50,000 if your filing status is married filing separately), your deduction may be limited. 2010 tax form 1040ez For more information, see Publication 936, and Line 13 in the Instructions for Schedule A (Form 1040). 2010 tax form 1040ez Casualty losses. 2010 tax form 1040ez    If you have a casualty loss on your home that you use for business, treat the casualty loss as a direct expense, an indirect expense, or an unrelated expense, depending on the property affected. 2010 tax form 1040ez A direct expense is the loss on the portion of the property you use only in your business. 2010 tax form 1040ez Use the entire loss to figure the business use of the home deduction. 2010 tax form 1040ez An indirect expense is the loss on property you use for both business and personal purposes. 2010 tax form 1040ez Use only the business portion to figure the deduction. 2010 tax form 1040ez An unrelated expense is the loss on property you do not use in your business. 2010 tax form 1040ez Do not use any of the loss to figure the deduction. 2010 tax form 1040ez Example. 2010 tax form 1040ez You meet the rules to take a deduction for an office in your home that is 10% of the total area of your house. 2010 tax form 1040ez A storm damages your roof. 2010 tax form 1040ez This is an indirect expense as the roof is part of the whole house and is considered to be used both for business and personal purposes. 2010 tax form 1040ez You would complete Form 4684, Casualties and Thefts, to report your loss. 2010 tax form 1040ez You complete both section A (Personal Use Property) and section B (Business and Income-Producing Property) as your home is used both for business and personal purposes. 2010 tax form 1040ez Since you use 90% of your home for personal purposes, use 90% of the cost or adjusted basis of your home, insurance or other reimbursement, and fair market value, both before and after the storm, to figure the amounts to enter on lines 2, 3, 5, and 6 of Form 4684. 2010 tax form 1040ez Since you use 10% of your home for business purposes, use 10% of the cost or adjusted basis of your home, insurance or other reimbursement, and fair market value, both before and after the storm, to figure the amounts to enter on lines 20, 21, 23, and 24 of Form 4684. 2010 tax form 1040ez Forms and worksheets to use. 2010 tax form 1040ez   If you are filing Schedule C (Form 1040), get Form 8829 and follow the instructions for casualty losses. 2010 tax form 1040ez If you are an employee or a partner, or you file Schedule F (Form 1040), use the Worksheet To Figure the Deduction for Business Use of Your Home, near the end of this publication. 2010 tax form 1040ez You will also need to get Form 4684. 2010 tax form 1040ez More information. 2010 tax form 1040ez   For more information on casualty losses, see Publication 547, Casualties, Disasters, and Thefts. 2010 tax form 1040ez Insurance. 2010 tax form 1040ez   You can deduct the cost of insurance that covers the business part of your home. 2010 tax form 1040ez However, if your insurance premium gives you coverage for a period that extends past the end of your tax year, you can deduct only the business percentage of the part of the premium that gives you coverage for your tax year. 2010 tax form 1040ez You can deduct the business percentage of the part that applies to the following year in that year. 2010 tax form 1040ez Rent. 2010 tax form 1040ez   If you rent the home you occupy and meet the requirements for business use of the home, you can deduct part of the rent you pay. 2010 tax form 1040ez To figure your deduction, multiply your rent payments by the percentage of your home used for business. 2010 tax form 1040ez   If you own your home, you cannot deduct the fair rental value of your home. 2010 tax form 1040ez However, see Depreciating Your Home , later. 2010 tax form 1040ez Repairs. 2010 tax form 1040ez   The cost of repairs that relate to your business, including labor (other than your own labor), is a deductible expense. 2010 tax form 1040ez For example, a furnace repair benefits the entire home. 2010 tax form 1040ez If you use 10% of your home for business, you can deduct 10% of the cost of the furnace repair. 2010 tax form 1040ez   Repairs keep your home in good working order over its useful life. 2010 tax form 1040ez Examples of common repairs are patching walls and floors, painting, wallpapering, repairing roofs and gutters, and mending leaks. 2010 tax form 1040ez However, repairs are sometimes treated as a permanent improvement and are not deductible. 2010 tax form 1040ez See Permanent improvements , later, under Depreciating Your Home. 2010 tax form 1040ez Security system. 2010 tax form 1040ez   If you install a security system that protects all the doors and windows in your home, you can deduct the business part of the expenses you incur to maintain and monitor the system. 2010 tax form 1040ez You also can take a depreciation deduction for the part of the cost of the security system relating to the business use of your home. 2010 tax form 1040ez Utilities and services. 2010 tax form 1040ez   Expenses for utilities and services, such as electricity, gas, trash removal, and cleaning services, are primarily personal expenses. 2010 tax form 1040ez However, if you use part of your home for business, you can deduct the business part of these expenses. 2010 tax form 1040ez Generally, the business percentage for utilities is the same as the percentage of your home used for business. 2010 tax form 1040ez Telephone. 2010 tax form 1040ez   The basic local telephone service charge, including taxes, for the first telephone line into your home (i. 2010 tax form 1040ez e. 2010 tax form 1040ez , landline) is a nondeductible personal expense. 2010 tax form 1040ez However, charges for business long-distance phone calls on that line, as well as the cost of a second line into your home used exclusively for business, are deductible business expenses. 2010 tax form 1040ez Do not include these expenses as a cost of using your home for business. 2010 tax form 1040ez Deduct these charges separately on the appropriate form or schedule. 2010 tax form 1040ez For example, if you file Schedule C (Form 1040), deduct these expenses on line 25, Utilities (instead of line 30, Expenses for business use of your home). 2010 tax form 1040ez Depreciating Your Home If you own your home and qualify to deduct expenses for its business use, you can claim a deduction for depreciation. 2010 tax form 1040ez Depreciation is an allowance for the wear and tear on the part of your home used for business. 2010 tax form 1040ez You cannot depreciate the cost or value of the land. 2010 tax form 1040ez You recover its cost when you sell or otherwise dispose of the property. 2010 tax form 1040ez Before you figure your depreciation deduction, you need to know the following information. 2010 tax form 1040ez The month and year you started using your home for business. 2010 tax form 1040ez The adjusted basis and fair market value of your home (excluding land) at the time you began using it for business. 2010 tax form 1040ez The cost of any improvements before and after you began using the property for business. 2010 tax form 1040ez The percentage of your home used for business. 2010 tax form 1040ez See Business Percentage , later. 2010 tax form 1040ez Adjusted basis defined. 2010 tax form 1040ez   The adjusted basis of your home is generally its cost, plus the cost of any permanent improvements you made to it, minus any casualty losses or depreciation deducted in earlier tax years. 2010 tax form 1040ez For a discussion of adjusted basis, see Publication 551. 2010 tax form 1040ez Permanent improvements. 2010 tax form 1040ez   A permanent improvement increases the value of property, adds to its life, or gives it a new or different use. 2010 tax form 1040ez Examples of improvements are replacing electric wiring or plumbing, adding a new roof or addition, paneling, or remodeling. 2010 tax form 1040ez    You must carefully distinguish between repairs and improvements. 2010 tax form 1040ez See Repairs , earlier, under Actual Expenses. 2010 tax form 1040ez You also must keep accurate records of these expenses. 2010 tax form 1040ez These records will help you decide whether an expense is a deductible or a capital (added to the basis) expense. 2010 tax form 1040ez However, if you make repairs as part of an extensive remodeling or restoration of your home, the entire job is an improvement. 2010 tax form 1040ez Example. 2010 tax form 1040ez You buy an older home and fix up two rooms as a beauty salon. 2010 tax form 1040ez You patch the plaster on the ceilings and walls, paint, repair the floor, install an outside door, and install new wiring, plumbing, and other equipment. 2010 tax form 1040ez Normally, the patching, painting, and floor work are repairs and the other expenses are permanent improvements. 2010 tax form 1040ez However, because the work gives your property a new use, the entire remodeling job is a permanent improvement and its cost is added to the basis of the property. 2010 tax form 1040ez You cannot deduct any portion of it as a repair expense. 2010 tax form 1040ez Adjusting for depreciation deducted in earlier years. 2010 tax form 1040ez   Decrease the basis of your property by the depreciation you deducted, or could have deducted, on your tax returns under the method of depreciation you properly selected. 2010 tax form 1040ez If you deducted less depreciation than you could have under the method you selected, decrease the basis by the amount you could have deducted under that method. 2010 tax form 1040ez If you did not deduct any depreciation, decrease the basis by the amount you could have deducted. 2010 tax form 1040ez   If you deducted more depreciation than you should have, decrease your basis by the amount you should have deducted, plus the part of the excess depreciation you deducted that actually decreased your tax liability for any year. 2010 tax form 1040ez   If you deducted the incorrect amount of depreciation, see Publication 946. 2010 tax form 1040ez Fair market value defined. 2010 tax form 1040ez   The fair market value of your home is the price at which the property would change hands between a buyer and a seller, neither having to buy or sell, and both having reasonable knowledge of all necessary facts. 2010 tax form 1040ez Sales of similar property, on or about the date you begin using your home for business, may be helpful in determining the property's fair market value. 2010 tax form 1040ez Figuring the depreciation deduction for the current year. 2010 tax form 1040ez   If you began using your home for business before 2013, continue to use the same depreciation method you used in past tax years. 2010 tax form 1040ez   If you began using your home for business for the first time in 2013, depreciate the business part as nonresidential real property under the modified accelerated cost recovery system (MACRS). 2010 tax form 1040ez Under MACRS, nonresidential real property is depreciated using the straight line method over 39 years. 2010 tax form 1040ez For more information on MACRS and other methods of depreciation, see Publication 946. 2010 tax form 1040ez   To figure the depreciation deduction, you must first figure the part of the cost of your home that can be depreciated (depreciable basis). 2010 tax form 1040ez The depreciable basis is figured by multiplying the percentage of your home used for business by the smaller of the following. 2010 tax form 1040ez The adjusted basis of your home (excluding land) on the date you began using your home for business. 2010 tax form 1040ez The fair market value of your home (excluding land) on the date you began using your home for business. 2010 tax form 1040ez Depreciation table. 2010 tax form 1040ez   If 2013 was the first year you used your home for business, you can figure your 2013 depreciation for the business part of your home by using the appropriate percentage from the following table. 2010 tax form 1040ez Table 2. 2010 tax form 1040ez MACRS Percentage Table for 39-Year Nonresidential Real Property Month First Used for Business Percentage To Use 1 2. 2010 tax form 1040ez 461% 2 2. 2010 tax form 1040ez 247% 3 2. 2010 tax form 1040ez 033% 4 1. 2010 tax form 1040ez 819% 5 1. 2010 tax form 1040ez 605% 6 1. 2010 tax form 1040ez 391% 7 1. 2010 tax form 1040ez 177% 8 0. 2010 tax form 1040ez 963% 9 0. 2010 tax form 1040ez 749% 10 0. 2010 tax form 1040ez 535% 11 0. 2010 tax form 1040ez 321% 12 0. 2010 tax form 1040ez 107%   Multiply the depreciable basis of the business part of your home by the percentage from the table for the first month you use your home for business. 2010 tax form 1040ez See Publication 946 for the percentages for the remaining tax years of the recovery period. 2010 tax form 1040ez Example. 2010 tax form 1040ez In May, George Miller began to use one room in his home exclusively and regularly to meet clients. 2010 tax form 1040ez This room is 8% of the square footage of his home. 2010 tax form 1040ez He bought the home in 2003 for $125,000. 2010 tax form 1040ez He determined from his property tax records that his adjusted basis in the house (exclusive of land) is $115,000. 2010 tax form 1040ez In May, the house had a fair market value of $165,000. 2010 tax form 1040ez He multiplies his adjusted basis of $115,000 (which is less than the fair market value) by 8%. 2010 tax form 1040ez The result is $9,200, his depreciable basis for the business part of the house. 2010 tax form 1040ez George files his return based on the calendar year. 2010 tax form 1040ez May is the 5th month of his tax year. 2010 tax form 1040ez He multiplies his depreciable basis of $9,200 by 1. 2010 tax form 1040ez 605% (. 2010 tax form 1040ez 01605), the percentage from the table for the 5th month. 2010 tax form 1040ez His depreciation deduction is $147. 2010 tax form 1040ez 66. 2010 tax form 1040ez Depreciating permanent improvements. 2010 tax form 1040ez   Add the costs of permanent improvements made before you began using your home for business to the basis of your property. 2010 tax form 1040ez Depreciate these costs as part of the cost of your home as explained earlier. 2010 tax form 1040ez The costs of improvements made after you begin using your home for business (that affect the business part of your home, such as a new roof) are depreciated separately. 2010 tax form 1040ez Multiply the cost of the improvement by the business-use percentage and depreciate the result over the recovery period that would apply to your home if you began using it for business at the same time as the improvement. 2010 tax form 1040ez For improvements made this year, the recovery period is 39 years. 2010 tax form 1040ez For the percentage to use for the first year, see Table 2, earlier. 2010 tax form 1040ez For more information on recovery periods, see Publication 946. 2010 tax form 1040ez Business Percentage To find the business percentage, compare the size of the part of your home that you use for business to your whole house. 2010 tax form 1040ez Use the resulting percentage to figure the business part of the expenses for operating your entire home. 2010 tax form 1040ez You can use any reasonable method to determine the business percentage. 2010 tax form 1040ez The following are two commonly used methods for figuring the percentage. 2010 tax form 1040ez Divide the area (length multiplied by the width) used for business by the total area of your home. 2010 tax form 1040ez If the rooms in your home are all about the same size, you can divide the number of rooms used for business by the total number of rooms in your home. 2010 tax form 1040ez Example 1. 2010 tax form 1040ez Your office is 240 square feet (12 feet × 20 feet). 2010 tax form 1040ez Your home is 1,200 square feet. 2010 tax form 1040ez Your office is 20% (240 ÷ 1,200) of the total area of your home. 2010 tax form 1040ez Your business percentage is 20%. 2010 tax form 1040ez Example 2. 2010 tax form 1040ez You use one room in your home for business. 2010 tax form 1040ez Your home has 10 rooms, all about equal size. 2010 tax form 1040ez Your office is 10% (1 ÷ 10) of the total area of your home. 2010 tax form 1040ez Your business percentage is 10%. 2010 tax form 1040ez Use lines 1-7 of Form 8829, or lines 1-3 on the Worksheet To Figure the Deduction for Business Use of Your Home (near the end of this publication) to figure your business percentage. 2010 tax form 1040ez Deduction Limit If your gross income from the business use of your home equals or exceeds your total business expenses (including depreciation), you can deduct all your business expenses related to the use of your home. 2010 tax form 1040ez If your gross income from the business use of your home is less than your total business expenses, your deduction for certain expenses for the business use of your home is limited. 2010 tax form 1040ez Your deduction of otherwise nondeductible expenses, such as insurance, utilities, and depreciation of your home (with depreciation of your home taken last), that are allocable to the business, is limited to the gross income from the business use of your home minus the sum of the following. 2010 tax form 1040ez The business part of expenses you could deduct even if you did not use your home for business (such as mortgage interest, real estate taxes, and casualty and theft losses that are allowable as itemized deductions on Schedule A (Form 1040)). 2010 tax form 1040ez These expenses are discussed in detail under Actual Expenses , earlier. 2010 tax form 1040ez The business expenses that relate to the business activity in the home (for example, business phone, supplies, and depreciation on equipment), but not to the use of the home itself. 2010 tax form 1040ez If you are self-employed, do not include in (2) above your deduction for one-half of your self-employment tax. 2010 tax form 1040ez Carryover of unallowed expenses. 2010 tax form 1040ez   If your deductions are greater than the current year's limit, you can carry over the excess to the next year in which you use actual expenses. 2010 tax form 1040ez They are subject to the deduction limit for that year, whether or not you live in the same home during that year. 2010 tax form 1040ez Figuring the deduction limit and carryover. 2010 tax form 1040ez   If you are an employee or a partner, or you file Schedule F (Form 1040), use the Worksheet To Figure the Deduction for Business Use of Your Home, near the end of this publication. 2010 tax form 1040ez If you file Schedule C (Form 1040), figure your deduction limit and carryover on Form 8829. 2010 tax form 1040ez Example. 2010 tax form 1040ez You meet the requirements for deducting expenses for the business use of your home. 2010 tax form 1040ez You use 20% of your home for business. 2010 tax form 1040ez In 2013, your business expenses and the expenses for the business use of your home are deducted from your gross income in the following order. 2010 tax form 1040ez    Gross income from business $6,000 Minus:   Deductible mortgage interest and real estate taxes (20%) 3,000 Business expenses not related to the use of your home (100%) (business phone, supplies, and depreciation on equipment) 2,000 Deduction limit $1,000 Minus other expenses allocable to business use of home:   Maintenance, insurance, and utilities (20%) 800 Depreciation allowed (20% = $1,600 allowable, but subject to balance of deduction limit) 200 Other expenses up to the deduction limit $1,000 Depreciation carryover to 2014 ($1,600 − $200) (subject to deduction limit in 2014) $1,400   You can deduct all of the business part of your deductible mortgage interest and real estate taxes ($3,000). 2010 tax form 1040ez You also can deduct all of your business expenses not related to the use of your home ($2,000). 2010 tax form 1040ez Additionally, you can deduct all of the business part of your expenses for maintenance, insurance, and utilities, because the total ($800) is less than the $1,000 deduction limit. 2010 tax form 1040ez Your deduction for depreciation for the business use of your home is limited to $200 ($1,000 minus $800) because of the deduction limit. 2010 tax form 1040ez You can carry over the $1,400 balance and add it to your depreciation for 2014, subject to your deduction limit in 2014. 2010 tax form 1040ez More than one place of business. 2010 tax form 1040ez   If part of the gross income from your trade or business is from the business use of part of your home and part is from a place other than your home, you must determine the part of your gross income from the business use of your home before you figure the deduction limit. 2010 tax form 1040ez In making this determination, consider the time you spend at each location, the business investment in each location, and any other relevant facts and circumstances. 2010 tax form 1040ez If your home office qualifies as your principal place of business, you can deduct your daily transportation costs between your home and another work location in the same trade or business. 2010 tax form 1040ez For more information on transportation costs, see Publication 463, Travel, Entertainment, Gift, and Car Expenses. 2010 tax form 1040ez Using the Simplified Method The simplified method is an alternative to the calculation, allocation, and substantiation of actual expenses. 2010 tax form 1040ez In most cases, you will figure your deduction by multiplying $5, the prescribed rate, by the area of your home used for a qualified business use. 2010 tax form 1040ez The area you use to figure your deduction is limited to 300 square feet. 2010 tax form 1040ez See Simplified Amount , later, for information about figuring the amount of the deduction. 2010 tax form 1040ez For more information about the simplified method, see Revenue Procedure 2013-13, 2013-06 I. 2010 tax form 1040ez R. 2010 tax form 1040ez B. 2010 tax form 1040ez 478, available at www. 2010 tax form 1040ez irs. 2010 tax form 1040ez gov/irb/2013-06_IRB/ar09. 2010 tax form 1040ez html. 2010 tax form 1040ez Actual expenses and depreciation of your home. 2010 tax form 1040ez   If you elect to use the simplified method, you cannot deduct any actual expenses for the business except for business expenses that are not related to the use of the home. 2010 tax form 1040ez You also cannot deduct any depreciation (including any additional first-year depreciation) or section 179 expense for the portion of the home that is used for a qualified business use. 2010 tax form 1040ez The depreciation deduction allowable for that portion of the home is deemed to be zero for a year you use the simplified method. 2010 tax form 1040ez If you figure your deduction for business use of the home using actual expenses in a subsequent year, you will have to use the appropriate optional depreciation table for MACRS to figure your depreciation. 2010 tax form 1040ez More information. 2010 tax form 1040ez   For more information about claiming depreciation in a subsequent year, see Revenue Procedure 2013-13, 2013-06 I. 2010 tax form 1040ez R. 2010 tax form 1040ez B. 2010 tax form 1040ez 478, available at www. 2010 tax form 1040ez irs. 2010 tax form 1040ez gov/irb/2013-06_IRB/ar09. 2010 tax form 1040ez html. 2010 tax form 1040ez See Publication 946 for the optional depreciation tables Although you cannot deduct any depreciation or section 179 expense for the portion of your home used for a qualified business use, you may still claim depreciation or the section 179 expense deduction on other assets used in the business (for example, furniture and equipment). 2010 tax form 1040ez Expenses deductible without regard to business use. 2010 tax form 1040ez   When using the simplified method, treat as personal expenses those business expenses related to the use of the home that are deductible without regard to whether there is a qualified business use of the home. 2010 tax form 1040ez These expenses include mortgage interest, real estate taxes, and casualty losses, subject to any limitations. 2010 tax form 1040ez See Where To Deduct , later. 2010 tax form 1040ez If you also rent part of your home, you must still allocate these expenses between rental use and personal use (for this purpose, personal use includes business use reported using the simplified method). 2010 tax form 1040ez No deduction of carryover of actual expenses. 2010 tax form 1040ez   If you used actual expenses to figure your deduction for business use of the home in a prior year and your deduction was limited, you cannot deduct the disallowed amount carried over from the prior year during a year you figure your deduction using the simplified method. 2010 tax form 1040ez Instead, you will continue to carry over the disallowed amount to the next year that you use actual expenses to figure your deduction. 2010 tax form 1040ez Electing the Simplified Method You choose whether or not to figure your deduction using the simplified method each taxable year. 2010 tax form 1040ez Make the election for a home by using the simplified method to figure the deduction for the qualified business use of that home on a timely filed, original federal income tax return. 2010 tax form 1040ez An election for a taxable year, once made, is irrevocable. 2010 tax form 1040ez A change from using the simplified method in one year to actual expenses in a succeeding taxable year, or vice-versa, is not a change in method of accounting and does not require the consent of the Commissioner. 2010 tax form 1040ez Shared use. 2010 tax form 1040ez   If you share your home with someone else who also uses the home in a business that qualifies for this deduction, each of you make your own election. 2010 tax form 1040ez More than one qualified business use. 2010 tax form 1040ez   If you conduct more than one business that qualifies for this deduction in your home, your election to use the simplified method applies to all your qualified business uses of that home. 2010 tax form 1040ez More than one home. 2010 tax form 1040ez   If you used more than one home during the year (for example, you moved during the year), you can elect to use the simplified method for only one of the homes. 2010 tax form 1040ez You must figure the deduction for any other home using actual expenses. 2010 tax form 1040ez Simplified Amount Your deduction for the qualified business use of a home is the sum of each amount you figure for a separate qualified business use of your home. 2010 tax form 1040ez To figure your deduction for the business use of a home using the simplified method, you will need to know the following information for each qualified business use of the home. 2010 tax form 1040ez The allowable area of your home used in conducting the business. 2010 tax form 1040ez If you did not conduct the business for the entire year in the home or the area changed during the year, you will need to know the allowable area you used and the number of days you conducted the business for each month. 2010 tax form 1040ez The gross income from the business use of your home. 2010 tax form 1040ez The amount of the business expenses that are not related to the use of your home. 2010 tax form 1040ez If the qualified business use is for a daycare facility that uses space in your home on a regular (but not exclusive) basis, you will also need to know the percentage of time that part of your home is used for daycare. 2010 tax form 1040ez To figure the amount you can deduct for qualified business use of your home using the simplified method, follow these 3 steps. 2010 tax form 1040ez Multiply the allowable area by $5 (or less than $5 if the qualified business use is for a daycare that uses space in your home on a regular, but not exclusive, basis). 2010 tax form 1040ez See Allowable area and Space used regularly for daycare , later. 2010 tax form 1040ez Subtract the expenses from the business that are not related to the use of the home from the gross income related to the business use of the home. 2010 tax form 1040ez If these expenses are greater than the gross income from the business use of the home, then you cannot take a deduction for this business use of the home. 2010 tax form 1040ez See Gross income limitation , later. 2010 tax form 1040ez Take the smaller of the amounts from (1) and (2). 2010 tax form 1040ez This is the amount you can deduct for this qualified business use of your home using the simplified method. 2010 tax form 1040ez If you are an employee or a partner, or you use your home in your farming business and file Schedule F (Form 1040), you can use the Simplified Method Worksheet, near the end of this publication, to help you figure your deduction. 2010 tax form 1040ez If you use your home in a trade or business and you file Schedule C (Form 1040), you will use the Simplified Method Worksheet in your Instructions for Schedule C to figure your deduction. 2010 tax form 1040ez Allowable area. 2010 tax form 1040ez   In most cases, the allowable area is the smaller of the actual area (in square feet) of your home used in conducting the business and 300 square feet. 2010 tax form 1040ez Your allowable area may be smaller if you conducted the business as a qualified joint venture with your spouse, the area used by the business was shared with another qualified business use, you used the home for the business for only part of the year, or the area used by the business changed during the year. 2010 tax form 1040ez You can use the Area Adjustment Worksheet (for simplified method), near the end of this publication, to help you figure your allowable area for a qualified business use. 2010 tax form 1040ez Area used by a qualified joint venture. 2010 tax form 1040ez   If the qualified business use of the home is also a qualified joint venture, you and your spouse will figure the deduction for the business use separately. 2010 tax form 1040ez Split the actual area used in conducting business between you and your spouse in the same manner you split your other tax attributes. 2010 tax form 1040ez Then, each spouse will figure the allowable area separately. 2010 tax form 1040ez For more information about qualified joint ventures, see Qualified Joint Venture in the Instructions for Schedule C. 2010 tax form 1040ez Shared use. 2010 tax form 1040ez   If you share your home with someone else who uses the home to conduct business that also qualifies for this deduction, you may not include the same square feet to figure your deduction as the other person. 2010 tax form 1040ez You must allocate the shared space between you and the other person in a reasonable manner. 2010 tax form 1040ez Example. 2010 tax form 1040ez Kristin and Lindsey are roommates. 2010 tax form 1040ez Kristin uses 300 square feet of their home for a qualified business use. 2010 tax form 1040ez Lindsey uses 200 square feet of their home for a separate qualified business use. 2010 tax form 1040ez The qualified business uses share 100 square feet. 2010 tax form 1040ez In addition to the portion that they do not share, Kristin and Lindsey can both claim 50 of the 100 square feet or divide the 100 square feet between them in any reasonable manner. 2010 tax form 1040ez If divided evenly, Kristin could claim 250 square feet using the simplified method and Lindsey could claim 150 square feet. 2010 tax form 1040ez More than one qualified business use. 2010 tax form 1040ez   If you conduct more than one business qualifying for the deduction, you are limited to a maximum of 300 square feet for all of the businesses. 2010 tax form 1040ez Allocate the actual square footage used (up to the maximum of 300 square feet) among your qualified business uses in a reasonable manner. 2010 tax form 1040ez However, do not allocate more square feet to a qualified business use than you actually use for that business. 2010 tax form 1040ez Rental use. 2010 tax form 1040ez   The simplified method does not apply to rental use. 2010 tax form 1040ez A rental use that qualifies for the deduction must be figured using actual expenses. 2010 tax form 1040ez If the rental use and a qualified business use share the same area, you will have to allocate the actual area used between the two uses. 2010 tax form 1040ez You cannot use the same area to figure a deduction for the qualified business use as you are using to figure the deduction for the rental use. 2010 tax form 1040ez Part-year use or area changes. 2010 tax form 1040ez   If your qualified business use was for a portion of the taxable year (for example, a seasonal business or a business that begins during the taxable year) or you changed the square footage of your qualified business use, your deduction is limited to the average monthly allowable square footage. 2010 tax form 1040ez You calculate the average monthly allowable square footage by adding the amount of allowable square feet you used in each month and dividing the sum by 12. 2010 tax form 1040ez When determining the average monthly allowable square footage, you cannot take more than 300 square feet into account for any one month. 2010 tax form 1040ez Additionally, if your qualified business use was less than 15 days in a month, you must use -0- for that month. 2010 tax form 1040ez Example 1. 2010 tax form 1040ez Andy files his federal income tax return on a calendar year basis. 2010 tax form 1040ez On July 20, he began using 420 square feet of his home for a qualified business use. 2010 tax form 1040ez He continued to use the 420 square feet until the end of the year. 2010 tax form 1040ez His average monthly allowable square footage is 125 square feet, which is figured using 300 square feet for each month August through December divided by the number of months in the taxable year ((0 + 0 + 0 + 0 + 0 + 0 + 0 + 300 + 300 + 300 + 300 + 300)/12). 2010 tax form 1040ez Example 2. 2010 tax form 1040ez Amy files her federal income tax return on a calendar year basis. 2010 tax form 1040ez On April 20, she began using 100 square feet of her home for a qualified business use. 2010 tax form 1040ez On August 5, she expanded the area of her qualified use to 330 square feet. 2010 tax form 1040ez Amy continued to use the 330 square feet until the end of the year. 2010 tax form 1040ez Her average monthly allowable square footage is 150 square feet, which is figured using 100 square feet for May through July and 300 square feet for August through December divided by the number of months in the taxable year ((0 + 0 + 0 + 0 + 100 + 100 +100 + 300 + 300 + 300 + 300 + 300)/12). 2010 tax form 1040ez Gross income limitation. 2010 tax form 1040ez   Your deduction for business use of the home is limited to an amount equal to the gross income derived from the qualified business use of the home reduced by the business deductions that are unrelated to the use of your home. 2010 tax form 1040ez If the business deductions that are unrelated to the use of your home are greater than the gross income derived from the qualified business use of your home, then you cannot take a deduction for this qualified business use of your home. 2010 tax form 1040ez Business expenses not related to use of the home. 2010 tax form 1040ez   These expenses relate to the business activity in the home, but not to the use of the home itself. 2010 tax form 1040ez You can still deduct business expenses that are unrelated to the use of the home. 2010 tax form 1040ez See Where To Deduct , later. 2010 tax form 1040ez Examples of business expenses that are unrelated to the use of the home are advertising, wages, supplies, dues, and depreciation for equipment. 2010 tax form 1040ez Space used regularly for daycare. 2010 tax form 1040ez   If you do not use the area of your home exclusively for daycare, you must reduce the prescribed rate (maximum $5 per square foot) before figuring your deduction. 2010 tax form 1040ez The reduced rate will equal the prescribed rate times a fraction. 2010 tax form 1040ez The numerator of the fraction is the number of hours that the space was used during the year for daycare and the denominator is the total number of hours during the year that the space was available for all uses. 2010 tax form 1040ez You can use the Daycare Facility Worksheet (for simplified method), near the end of this publication, to help you figure the reduced rate. 2010 tax form 1040ez    If you used at least 300 square feet for daycare regularly and exclusively during the year, then you do not need to reduce the prescribed rate or complete the Daycare Facility Worksheet. 2010 tax form 1040ez Daycare Facility If you use space in your home on a regular basis for providing daycare, you may be able to claim a deduction for that part of your home even if you use the same space for nonbusiness purposes. 2010 tax form 1040ez To qualify for this exception to the exclusive use rule, you must meet both of the following requirements. 2010 tax form 1040ez You must be in the trade or business of providing daycare for children, persons age 65 or older, or persons who are physically or mentally unable to care for themselves. 2010 tax form 1040ez You must have applied for, been granted, or be exempt from having, a license, certification, registration, or approval as a daycare center or as a family or group daycare home under state law. 2010 tax form 1040ez You do not meet this requirement if your application was rejected or your license or other authorization was revoked. 2010 tax form 1040ez Figuring the deduction. 2010 tax form 1040ez   If you elect to use the simplified method for your home, figure your deduction as described earlier in Using the Simplified Method under Figuring the Deduction. 2010 tax form 1040ez    If you are figuring your deduction using actual expenses and you regularly use part of your home for daycare, figure what part is used for daycare, as explained in Business Percentage , earlier, under Figuring the Deduction. 2010 tax form 1040ez If you also use that part exclusively for daycare, deduct all the allocable expenses, subject to the deduction limit, as explained earlier. 2010 tax form 1040ez   If the use of part of your home as a daycare facility is regular, but not exclusive, you must figure the percentage of time that part of your home is used for daycare. 2010 tax form 1040ez A room that is available for use throughout each business day and that you regularly use in your business is considered to be used for daycare throughout each business day. 2010 tax form 1040ez You do not have to keep records to show the specific hours the area was used for business. 2010 tax form 1040ez You can use the area occasionally for personal reasons. 2010 tax form 1040ez However, a room you use only occasionally for business does not qualify for the deduction. 2010 tax form 1040ez To find the percentage of time you actually use your home for business, compare the total time used for business to the total time that part of your home can be used for all purposes. 2010 tax form 1040ez You can compare the hours of business use in a week with the number of hours in a week (168). 2010 tax form 1040ez Or you can compare the hours of business use for the year with the number of hours in the year (8,760 in 2013). 2010 tax form 1040ez If you started or stopped using your home for daycare in 2013, you must prorate the number of hours based on the number of days the home was available for daycare. 2010 tax form 1040ez Example 1. 2010 tax form 1040ez Mary Lake used her basement to operate a daycare business for children. 2010 tax form 1040ez She figures the business percentage of the basement as follows. 2010 tax form 1040ez Square footage of the basement Square footage of her home = 1,600 3,200 = 50%           She used the basement for daycare an average of 12 hours a day, 5 days a week, for 50 weeks a year. 2010 tax form 1040ez During the other 12 hours a day, the family could use the basement. 2010 tax form 1040ez She figures the percentage of time the basement was used for daycare as follows. 2010 tax form 1040ez Number of hours used for daycare (12 x 5 x 50) Total number of hours in the year (24 x 365) = 3,000 8,760 = 34. 2010 tax form 1040ez 25%           Mary can deduct 34. 2010 tax form 1040ez 25% of any direct expenses for the basement. 2010 tax form 1040ez However, because her indirect expenses are for the entire house, she can deduct only 17. 2010 tax form 1040ez 13% of the indirect expenses. 2010 tax form 1040ez She figures the percentage for her indirect expenses as follows. 2010 tax form 1040ez Business percentage of the basement 50% Multiplied by: Percentage of time used for daycare × 34. 2010 tax form 1040ez 25% Percentage for indirect expenses 17. 2010 tax form 1040ez 13% Mary completes Form 8829, Part I, figuring the percentage of her home used for business, including the percentage of time the basement was used. 2010 tax form 1040ez In Part II, Mary figures her deductible expenses. 2010 tax form 1040ez She uses the following information to complete Part II. 2010 tax form 1040ez Gross income from her daycare business $50,000 Expenses not related to the business use of the home $25,000 Tentative profit $25,000 Rent $8,400 Utilities $850 Painting the basement $500 Mary enters her tentative profit, $25,000, on line 8. 2010 tax form 1040ez (This figure is the same as the amount on line 29 of her Schedule C (Form 1040). 2010 tax form 1040ez ) The expenses she paid for rent and utilities relate to her entire home. 2010 tax form 1040ez Therefore, she enters the amount paid for rent on line 18, column (b), and the amount paid for utilities on line 20, column (b). 2010 tax form 1040ez She shows the total of these expenses on line 22, column (b). 2010 tax form 1040ez For line 23, she multiplies the amount on line 22, column (b) by the percentage on line 7 and enters the result, $1,585. 2010 tax form 1040ez Mary paid $500 to have the basement painted. 2010 tax form 1040ez The painting is a direct expense. 2010 tax form 1040ez However, because she did not use the basement exclusively for daycare, she must multiply $500 by the percentage of time the basement was used for daycare (34. 2010 tax form 1040ez 25% – line 6). 2010 tax form 1040ez She enters $171 (34. 2010 tax form 1040ez 25% × $500) on line 19, column (a). 2010 tax form 1040ez She adds line 22, column (a), and line 23 and enters $1,756 ($171 + $1,585) on line 25. 2010 tax form 1040ez This is less than her deduction limit (line 15), so she can deduct the entire amount. 2010 tax form 1040ez She follows the instructions to complete the rest of Part II and enters $1,756 on lines 33 and 35. 2010 tax form 1040ez She then carries the $1,756 to line 30 of her Schedule C (Form 1040). 2010 tax form 1040ez Example 2. 2010 tax form 1040ez Assume the same facts as in Example 1 except that Mary also has another room that was available each business day for children to take naps in. 2010 tax form 1040ez Although she did not keep a record of the number of hours the room was actually used for naps, it was used for part of each business day. 2010 tax form 1040ez Since the room was available for business use during regular operating hours each business day and was used regularly in the business, it is considered used for daycare throughout each business day. 2010 tax form 1040ez The basement and room are 60% of the total area of her home. 2010 tax form 1040ez In figuring her expenses, 34. 2010 tax form 1040ez 25% of any direct expenses for the basement and room are deductible. 2010 tax form 1040ez In addition, 20. 2010 tax form 1040ez 55% (34. 2010 tax form 1040ez 25% × 60%) of her indirect expenses are deductible. 2010 tax form 1040ez Example 3. 2010 tax form 1040ez Assume the same facts as in Example 1 except that Mary stopped using her home for a daycare facility on June 24, 2013. 2010 tax form 1040ez She used the basement for daycare an average of 12 hours a day, 5 days a week, but for only 25 weeks of the year. 2010 tax form 1040ez During the other 12 hours a day, the family could still use the basement. 2010 tax form 1040ez She figures the percentage of time the basement was used for business as follows. 2010 tax form 1040ez Number of hours used for daycare (12 x 5 x 25) Total number of hours during period used (24 x 175) = 1,500 4,200 = 35. 2010 tax form 1040ez 71%           Mary can deduct 35. 2010 tax form 1040ez 71% of any direct expenses for the basement. 2010 tax form 1040ez However, because her indirect expenses are for the entire house, she can deduct only 17. 2010 tax form 1040ez 86% of the indirect expenses. 2010 tax form 1040ez She figures the percentage for her indirect expenses as follows. 2010 tax form 1040ez Business percentage of the basement 50% Multiplied by: Percentage of time used for daycare × 35. 2010 tax form 1040ez 71% Percentage for indirect expenses 17. 2010 tax form 1040ez 86% Meals. 2010 tax form 1040ez   If you provide food for your daycare recipients, do not include the expense as a cost of using your home for business. 2010 tax form 1040ez Claim it as a separate deduction on your Schedule C (Form 1040). 2010 tax form 1040ez You can never deduct the cost of food consumed by you or your family. 2010 tax form 1040ez You can deduct as a business expense 100% of the actual cost of food consumed by your daycare recipients (see Standard meal and snack rates , later, for an optional method for eligible children) and generally only 50% of the cost of food consumed by your employees. 2010 tax form 1040ez However, you can deduct 100% of the cost of food consumed by your employees if its value can be excluded from their wages as a de minimis fringe benefit. 2010 tax form 1040ez For more information on meals that meet these requirements, see Meals in chapter 2 of Publication 15-B, Employer's Tax Guide to Fringe Benefits. 2010 tax form 1040ez   If you deduct the actual cost of food for your daycare business, keep a separate record (with receipts) of your family's food costs. 2010 tax form 1040ez   Reimbursements you receive from a sponsor under the Child and Adult Care Food Program of the Department of Agriculture are taxable only to the extent they exceed your expenses for food for eligible children. 2010 tax form 1040ez If your reimbursements are more than your expenses for food, show the difference as income in Part I of Schedule C (Form 1040). 2010 tax form 1040ez If your food expenses are greater than the reimbursements, show the difference as an expense in Part V of Schedule C (Form 1040). 2010 tax form 1040ez Do not include payments or expenses for your own children if they are eligible for the program. 2010 tax form 1040ez Follow this procedure even if you receive a Form 1099-MISC, Miscellaneous Income, reporting a payment from the sponsor. 2010 tax form 1040ez Standard meal and snack rates. 2010 tax form 1040ez   If you qualify as a family daycare provider, you can use the standard meal and snack rates, instead of actual costs, to compute the deductible cost of meals and snacks provided to eligible children. 2010 tax form 1040ez For these purposes: A family daycare provider is a person engaged in the business of providing family daycare. 2010 tax form 1040ez Family daycare is childcare provided to eligible children in the home of the family daycare provider. 2010 tax form 1040ez The care must be non-medical, not involve a transfer of legal custody, and generally last less than 24 hours each day. 2010 tax form 1040ez Eligible children are minor children receiving family daycare in the home of the family daycare provider. 2010 tax form 1040ez Eligible children do not include children who are full-time or part-time residents in the home where the childcare is provided or children whose parents or guardians are residents of the same home. 2010 tax form 1040ez Eligible children do not include children who receive daycare services for personal reasons of the provider. 2010 tax form 1040ez For example, if a provider provides daycare services for a relative as a favor to that relative, that child is not an eligible child. 2010 tax form 1040ez   You can compute the deductible cost of each meal and snack you actually purchased and served to an eligible child during the time period you provided family daycare using the standard meal and snack rates shown in Table 3, later. 2010 tax form 1040ez You can use the standard meal and snack rates for a maximum of one breakfast, one lunch, one dinner, and three snacks per eligible child per day. 2010 tax form 1040ez If you receive reimbursement for a particular meal or snack, you can deduct only the portion of the applicable standard meal or snack rate that is more than the amount of the reimbursement. 2010 tax form 1040ez   You can use either the standard meal and snack rates or actual costs to calculate the deductible cost of food provided to eligible children in the family daycare for any particular tax year. 2010 tax form 1040ez If you choose to use the standard meal and snack rates for a particular tax year, you must use the rates for all your deductible food costs for eligible children during that tax year. 2010 tax form 1040ez However, if you use the standard meal and snack rates in any tax year, you can use actual costs to compute the deductible cost of food in any other tax year. 2010 tax form 1040ez   If you use the standard meal and snack rates, you must maintain records to substantiate the computation of the total amount deducted for the cost of food provided to eligible children. 2010 tax form 1040ez The records kept should include the name of each child, dates and hours of attendance in the daycare, and the type and quantity of meals and snacks served. 2010 tax form 1040ez This information can be recorded in a log similar to the one shown in Exhibit A, near the end of this publication. 2010 tax form 1040ez   The standard meal and snack rates include beverages, but do not include non-food supplies used for food preparation, service, or storage, such as containers, paper products, or utensils. 2010 tax form 1040ez These expenses can be claimed as a separate deduction on your Schedule C (Form 1040). 2010 tax form 1040ez     Table 3. 2010 tax form 1040ez Standard Meal and Snack Rates1 Location of Family Daycare Provider Breakfast Lunch Dinner Snack States other than Alaska an