File your Taxes for Free!
  • Get your maximum refund*
  • 100% accurate calculations guaranteed*

TurboTax Federal Free Edition - File Taxes Online

Don't let filing your taxes get you down! We'll help make it as easy as possible. With e-file and direct deposit, there's no faster way to get your refund!

Approved TurboTax Affiliate Site. TurboTax and TurboTax Online, among others, are registered trademarks and/or service marks of Intuit Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.


© 2012 - 2018 All rights reserved.

This is an Approved TurboTax Affiliate site. TurboTax and TurboTax Online, among other are registered trademarks and/or service marks of Intuit, Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.
When discussing "Free e-file", note that state e-file is an additional fee. E-file fees do not apply to New York state returns. Prices are subject to change without notice. E-file and get your refund faster
*If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
*Maximum Refund Guarantee - or Your Money Back: If you get a larger refund or smaller tax due from another tax preparation method, we'll refund the applicable TurboTax federal and/or state purchase price paid. TurboTax Federal Free Edition customers are entitled to payment of $14.99 and a refund of your state purchase price paid. Claims must be submitted within sixty (60) days of your TurboTax filing date and no later than 6/15/14. E-file, Audit Defense, Professional Review, Refund Transfer and technical support fees are excluded. This guarantee cannot be combined with the TurboTax Satisfaction (Easy) Guarantee. *We're so confident your return will be done right, we guarantee it. Accurate calculations guaranteed. If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
https://turbotax.intuit.com/corp/guarantees.jsp

Amend A Tax Return 2010

2008 Turbotax DownloadIrs Gov Free FileFederal Tax Forms 2010Efile IrsIrs Forms 2012 TaxesBack Tax ReliefFree Tax Preparation Services1090 Ez FormFree State Tax OnlineIrs 1040x Instructions2010 Taxes Cheap 1099 G Form W 21040ez OnlineTurbotax Amended Return 20121040ez RefundForm 10401040 Ez FileH & R Block Online FilingWhere Can I Get 2012 Tax FormsIrs 1040x1040x Electronic FilingAmend Tax Return Already FiledAmended State Tax FormTax ReturnAmending A Tax ReturnFile Taxes OnlineTurbo Tax Filing For 2010Blank Printable 1040ez FormIrs E File 2012Www Dfas MilIrs Extension Form 2011Tax Returns 2012File State Return OnlyTurbotax For MilitaryCan I File My State Taxes For Free1040x Tax Return For Prior Year InstructionsPrior Year Tax ReturnFree Prior Year Tax SoftwareMilitary Tax Help1040ez Instructions 2013Easy Tax Forms

Amend A Tax Return 2010

Amend a tax return 2010 Publication 517 - Introductory Material Table of Contents What's New Reminders IntroductionOrdering forms and publications. Amend a tax return 2010 Tax questions. Amend a tax return 2010 Useful Items - You may want to see: What's New SE tax rate. Amend a tax return 2010  For 2013 and 2014, the Old Age, Survivors, and Disability Insurance (OASDI) portion of the SE tax is 12. Amend a tax return 2010 4%. Amend a tax return 2010 The Medicare (HI) portion of the SE tax remains 2. Amend a tax return 2010 9%. Amend a tax return 2010 As a result, the SE tax rate returns to 15. Amend a tax return 2010 3%. Amend a tax return 2010 For more information, see the Instructions for Schedule SE (Form 1040). Amend a tax return 2010 Earnings subject to social security. Amend a tax return 2010  For 2013, the maximum wages and self-employment income subject to social security tax increases from $110,100 to $113,700. Amend a tax return 2010 For 2014, the maximum wages and self-employment income subject to social security tax is $117,000. Amend a tax return 2010 Additional Medicare Tax. Amend a tax return 2010  Beginning in 2013, a 0. Amend a tax return 2010 9% Additional Medicare Tax applies to Medicare wages, railroad retirement (RRTA) compensation, and self-employment income that are more than: $125,000 if married filing separately, $250,000 if married filing jointly, or $200,000 for any other filing status. Amend a tax return 2010 For more information, see Form 8959, Additional Medicare Tax, and its separate instructions. Amend a tax return 2010 Modified AGI limit for traditional IRA contributions increased. Amend a tax return 2010  For 2013, you may be able to take an IRA deduction if you were covered by a retirement plan at work and your modified AGI is: Less than $115,000 if married filing jointly or qualifying widow(er), Less than $69,000 if single or head of household, or Less than $10,000 if married filing separately. Amend a tax return 2010 If you file a joint return and either you or your spouse was not covered by a retirement plan at work, you may be able to take an IRA deduction if your modified AGI is less than $188,000. Amend a tax return 2010 Modified AGI limit for Roth IRA contributions increased. Amend a tax return 2010  For 2013, you may be able to contribute to your Roth IRA if your modified AGI is: Less than $188,000 if married filing jointly or qualifying widow(er), Less than $127,000 if single, head of household, or married filing separately and you did not live with your spouse at any time during the year, or Less than $10,000 if married filing separately and you lived with your spouse at any time during the year. Amend a tax return 2010 Earned income credit (EIC). Amend a tax return 2010  For 2013, the maximum amount of income you can earn and still claim the EIC has increased. Amend a tax return 2010 You may be able to take the EIC if you earned less than $46,227 ($51,567 for married filing jointly) and you have three or more qualifying children; $43,038 ($48,378 for married filing jointly) and you have two qualifying children; $37,870 ($43,210 for married filing jointly) and you have one qualifying child; and $14,340 ($19,680 for married filing jointly) and you do not have any qualifying children. Amend a tax return 2010 Reminders Future developments. Amend a tax return 2010 . Amend a tax return 2010   For the latest information about developments related to Publication 517, such as legislation enacted after it was published, go to www. Amend a tax return 2010 irs. Amend a tax return 2010 gov/pub517. Amend a tax return 2010 Photographs of missing children. Amend a tax return 2010  The Internal Revenue Service is a proud partner with the National Center for Missing & Exploited Children. Amend a tax return 2010 Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Amend a tax return 2010 You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Amend a tax return 2010 Introduction Three federal taxes are paid on wages and self-employment income—income tax, social security tax, and Medicare tax. Amend a tax return 2010 Social security and Medicare taxes are collected under one of two systems. Amend a tax return 2010 Under the Self-Employment Contributions Act (SECA), the self-employed person pays all the taxes. Amend a tax return 2010 Under the Federal Insurance Contributions Act (FICA), the employee and the employer each pay half of the social security and Medicare taxes. Amend a tax return 2010 No earnings are subject to both systems. Amend a tax return 2010 Table 1. Amend a tax return 2010 Are Your Ministerial Earnings* Covered Under FICA or SECA? Find the class to which you belong in the left column and read across the table to find if you are covered under FICA or SECA. Amend a tax return 2010 Do not rely on this table alone. Amend a tax return 2010 Also read the discussion for the class in the following pages. Amend a tax return 2010 Class Covered under FICA? Covered under SECA? Minister NO. Amend a tax return 2010 Your ministerial earnings are exempt. Amend a tax return 2010 YES, if you do not have an approved exemption from the IRS. Amend a tax return 2010   NO, if you have an approved exemption. Amend a tax return 2010 Member of a religious order who has not taken a vow of poverty NO. Amend a tax return 2010 Your ministerial earnings are exempt. Amend a tax return 2010 YES, if you do not have an approved exemption from the IRS. Amend a tax return 2010   NO, if you have an approved exemption. Amend a tax return 2010 Member of a religious order who has taken a vow of poverty YES, if: Your order elected FICA coverage for its members, or You worked outside the order and the work was not required by, or done on behalf of, the order. Amend a tax return 2010   NO, if neither of the above applies. Amend a tax return 2010 NO. Amend a tax return 2010 Your ministerial earnings are exempt. Amend a tax return 2010 Christian Science practitioner or reader NO. Amend a tax return 2010 Your ministerial earnings are exempt. Amend a tax return 2010 YES, if you do not have an approved exemption from the IRS. Amend a tax return 2010   NO, if you have an approved exemption. Amend a tax return 2010 Religious worker (church employee) YES, if your employer did not elect to exclude you. Amend a tax return 2010    NO, if your employer elected to exclude you. Amend a tax return 2010 YES, if your employer elected to exclude you from FICA. Amend a tax return 2010   NO, if you are covered under FICA. Amend a tax return 2010 Member of a recognized religious sect YES, if you are an employee and do not have an approved exemption from the IRS. Amend a tax return 2010    NO, if you have an approved exemption. Amend a tax return 2010 YES, if you are self-employed and do not have an approved exemption from the IRS. Amend a tax return 2010   NO, if you have an approved exemption. Amend a tax return 2010 * Ministerial earnings are the self-employment earnings that result from ministerial services, defined and discussed later. Amend a tax return 2010 In addition, all wages and self-employment income that are subject to Medicare tax are subject to a 0. Amend a tax return 2010 9% Additional Medicare Tax if they are paid in excess of the applicable threshold for an individual's filing status. Amend a tax return 2010 Additional Medicare Tax applies to Medicare wages, railroad retirement (RRTA) compensation, and self-employment income that are more than: $125,000 if married filing separately, $250,000 if married filing jointly, or $200,000 for any other filing status. Amend a tax return 2010 Medicare wages and self-employment income are combined to determine if income exceeds the threshold. Amend a tax return 2010 A self-employment loss is not considered for purposes of this tax. Amend a tax return 2010 RRTA compensation is separately compared to the threshold. Amend a tax return 2010 There is no employer match for Additional Medicare Tax. Amend a tax return 2010 For more information, see Form 8959, Additional Medicare Tax, and its separate instructions. Amend a tax return 2010 This publication contains information for the following classes of taxpayers. Amend a tax return 2010 Ministers. Amend a tax return 2010 Members of a religious order. Amend a tax return 2010 Christian Science practitioners and readers. Amend a tax return 2010 Religious workers (church employees). Amend a tax return 2010 Members of a recognized religious sect. Amend a tax return 2010 Note. Amend a tax return 2010 Unless otherwise noted, in this publication references to members of the clergy include ministers, members of a religious order (but not members of a recognized religious sect), and Christian Science practitioners and readers. Amend a tax return 2010 This publication covers the following topics about the collection of social security and Medicare taxes from members of the clergy, religious workers, and members of a recognized religious sect. Amend a tax return 2010 Which earnings are taxed under FICA and which under SECA. Amend a tax return 2010 See Table 1 above. Amend a tax return 2010 How a member of the clergy can apply for an exemption from self-employment tax. Amend a tax return 2010 How a member of a recognized religious sect can apply for an exemption from both self-employment tax and FICA taxes. Amend a tax return 2010 How a member of the clergy or religious worker figures net earnings from self-employment. Amend a tax return 2010 This publication also covers certain income tax rules of interest to ministers and members of a religious order. Amend a tax return 2010 A Comprehensive Example shows filled-in forms for a minister who has income taxed under SECA, other income taxed under FICA, and income tax reporting of items specific to a minister. Amend a tax return 2010 In the back of Publication 517 is a set of worksheets that you can use to figure the amount of your taxable ministerial income and allowable deductions. Amend a tax return 2010 You will find these worksheets right after the Comprehensive Example . Amend a tax return 2010 Note. Amend a tax return 2010 In this publication, the term “church” is generally used in its generic sense and not in reference to any particular religion. Amend a tax return 2010 Comments and suggestions. Amend a tax return 2010   We welcome your comments about this publication and your suggestions for future editions. Amend a tax return 2010   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Amend a tax return 2010 NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Amend a tax return 2010 Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Amend a tax return 2010   You can send your comments from www. Amend a tax return 2010 irs. Amend a tax return 2010 gov/formspubs/. Amend a tax return 2010 Click on “More Information” and then on “Give us feedback”. Amend a tax return 2010   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Amend a tax return 2010 Ordering forms and publications. Amend a tax return 2010   Visit www. Amend a tax return 2010 irs. Amend a tax return 2010 gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. Amend a tax return 2010 Internal Revenue Service 1201 N. Amend a tax return 2010 Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Amend a tax return 2010   If you have a tax question, check the information available on IRS. Amend a tax return 2010 gov or call 1-800-829-1040. Amend a tax return 2010 We cannot answer tax questions sent to either of the above addresses. Amend a tax return 2010 Useful Items - You may want to see: Publication 54 Tax Guide for U. Amend a tax return 2010 S. Amend a tax return 2010 Citizens and Resident Aliens Abroad 525 Taxable and Nontaxable Income 529 Miscellaneous Deductions 535 Business Expenses 590 Individual Retirement Arrangements (IRAs) 596 Earned Income Credit (EIC) Form (and Instructions) SS-8 Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding SS-16 Certificate of Election of Coverage Under the Federal Insurance Contributions Act Schedule C (Form 1040) Profit or Loss From Business (Sole Proprietorship) Schedule C-EZ (Form 1040) Net Profit From Business (Sole Proprietorship) Schedule SE (Form 1040) Self-Employment Tax 1040-ES Estimated Tax for Individuals 1040X Amended U. Amend a tax return 2010 S. Amend a tax return 2010 Individual Income Tax Return 4029 Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits 4361 Application for Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders and Christian Science Practitioners 8274 Certification by Churches and Qualified Church-Controlled Organizations Electing Exemption From Employer Social Security and Medicare Taxes 8959 Additional Medicare Tax Ordering publications and forms. Amend a tax return 2010   See How To Get Tax Help , near the end of this publication, for information about getting these publications and forms. Amend a tax return 2010 Prev  Up  Next   Home   More Online Publications
Print - Click this link to Print this page

Form 1099-K, Payment Card and Third Party Network Transactions

A payment settlement entity (PSE) must file Form 1099-K for payments made in settlement of reportable payment transactions for each calendar year. A PSE makes a payment in settlement of a reportable payment transaction, that is, any payment card or third party network transaction, if the PSE submits the instruction to transfer funds to the account of the participating payee to settle the reportable payment transaction.


Current Products

Form 1099-K

Instructions for 1099-K (HTML)

General Instructions for Certain Information Returns (Forms 1097, 1098, 1099, 3921, 3922, 5498, and W-2G)


Other Items You May Find Useful:

All Form 1099-K Revisions

Third Party Reporting Information Center

Online Ordering for Information Returns and Employer Returns

Other Current Products


Comment on Form 1099-K

Use the Comment on Tax Forms and Publications  web form to provide feedback on the content of this product. Although we cannot respond individually to each comment, we do appreciate your feedback and will consider all comments submitted.

CAUTION: We cannot respond to tax-related questions submitted using this page. Instead, please visit Tax Law Questions or call our toll-free number at 1-800-829-1040 (Individuals) or 1-800-829-4933 (Business).

Information reporting customer service site. If you have questions about reporting on forms 1096, 1097, 1098, 1099, 3921, 3922, 5498, W-2, W-2C, W-2G, W-3 and W-3C, you may call 1-866-455-7438 (toll-free) or 304-263-8700 (not toll free). Persons with a hearing or speech disability with access to TTY/TDD equipment can call 304-579-4827 (not toll free).

Page Last Reviewed or Updated: 06-Dec-2013

The Amend A Tax Return 2010

Amend a tax return 2010 4. Amend a tax return 2010   Figuring Depreciation Under MACRS Table of Contents Introduction Useful Items - You may want to see: Which Depreciation System (GDS or ADS) Applies? Which Property Class Applies Under GDS?Rent-to-own dealer. Amend a tax return 2010 Rent-to-own contract. Amend a tax return 2010 What Is the Placed in Service Date? What Is the Basis for Depreciation? Which Recovery Period Applies?Recovery Periods Under GDS Recovery Periods Under ADS Additions and Improvements Which Convention Applies? Which Depreciation Method Applies?Depreciation Methods for Farm Property Electing a Different Method How Is the Depreciation Deduction Figured?Using the MACRS Percentage Tables Figuring the Deduction Without Using the Tables Figuring the Deduction for Property Acquired in a Nontaxable Exchange Figuring the Deduction for a Short Tax Year How Do You Use General Asset Accounts?Grouping Property Figuring Depreciation for a GAA Disposing of GAA Property Terminating GAA Treatment Electing To Use a GAA When Do You Recapture MACRS Depreciation? Introduction The Modified Accelerated Cost Recovery System (MACRS) is used to recover the basis of most business and investment property placed in service after 1986. Amend a tax return 2010 MACRS consists of two depreciation systems, the General Depreciation System (GDS) and the Alternative Depreciation System (ADS). Amend a tax return 2010 Generally, these systems provide different methods and recovery periods to use in figuring depreciation deductions. Amend a tax return 2010 To be sure you can use MACRS to figure depreciation for your property, see What Method Can You Use To Depreciate Your Property in chapter 1. Amend a tax return 2010 This chapter explains how to determine which MACRS depreciation system applies to your property. Amend a tax return 2010 It also discusses other information you need to know before you can figure depreciation under MACRS. Amend a tax return 2010 This information includes the property's recovery class, placed in service date, and basis, as well as the applicable recovery period, convention, and depreciation method. Amend a tax return 2010 It explains how to use this information to figure your depreciation deduction and how to use a general asset account to depreciate a group of properties. Amend a tax return 2010 Finally, it explains when and how to recapture MACRS depreciation. Amend a tax return 2010 Useful Items - You may want to see: Publication 225 Farmer's Tax Guide 463 Travel, Entertainment, Gift, and Car  Expenses 544 Sales and Other Dispositions of Assets 551 Basis of Assets 587 Business Use of Your Home (Including Use by Daycare Providers) Form (and Instructions) 2106 Employee Business Expenses 2106-EZ Unreimbursed Employee Business Expenses 4562 Depreciation and Amortization See chapter 6 for information about getting publications and forms. Amend a tax return 2010 Which Depreciation System (GDS or ADS) Applies? Your use of either the General Depreciation System (GDS) or the Alternative Depreciation System (ADS) to depreciate property under MACRS determines what depreciation method and recovery period you use. Amend a tax return 2010 You generally must use GDS unless you are specifically required by law to use ADS or you elect to use ADS. Amend a tax return 2010 If you placed your property in service in 2013, complete Part III of Form 4562 to report depreciation using MACRS. Amend a tax return 2010 Complete section B of Part III to report depreciation using GDS, and complete section C of Part III to report depreciation using ADS. Amend a tax return 2010 If you placed your property in service before 2013 and are required to file Form 4562, report depreciation using either GDS or ADS on line 17 in Part III. Amend a tax return 2010 Required use of ADS. Amend a tax return 2010   You must use ADS for the following property. Amend a tax return 2010 Listed property used 50% or less in a qualified business use. Amend a tax return 2010 See chapter 5 for information on listed property. Amend a tax return 2010 Any tangible property used predominantly outside the United States during the year. Amend a tax return 2010 Any tax-exempt use property. Amend a tax return 2010 Any tax-exempt bond-financed property. Amend a tax return 2010 All property used predominantly in a farming business and placed in service in any tax year during which an election not to apply the uniform capitalization rules to certain farming costs is in effect. Amend a tax return 2010 Any property imported from a foreign country for which an Executive Order is in effect because the country maintains trade restrictions or engages in other discriminatory acts. Amend a tax return 2010 If you are required to use ADS to depreciate your property, you cannot claim any special depreciation allowance (discussed in chapter 3) for the property. Amend a tax return 2010 Electing ADS. Amend a tax return 2010   Although your property may qualify for GDS, you can elect to use ADS. Amend a tax return 2010 The election generally must cover all property in the same property class that you placed in service during the year. Amend a tax return 2010 However, the election for residential rental property and nonresidential real property can be made on a property-by-property basis. Amend a tax return 2010 Once you make this election, you can never revoke it. Amend a tax return 2010   You make the election by completing line 20 in Part III of Form 4562. Amend a tax return 2010 Which Property Class Applies Under GDS? The following is a list of the nine property classifications under GDS and examples of the types of property included in each class. Amend a tax return 2010 These property classes are also listed under column (a) in section B, Part III, of Form 4562. Amend a tax return 2010 For detailed information on property classes, see Appendix B, Table of Class Lives and Recovery Periods, in this publication. Amend a tax return 2010 3-year property. Amend a tax return 2010 Tractor units for over-the-road use. Amend a tax return 2010 Any race horse over 2 years old when placed in service. Amend a tax return 2010 (All race horses placed in service after December 31, 2008, and before January 1, 2014, are deemed to be 3-year property, regardless of age. Amend a tax return 2010 ) Any other horse (other than a race horse) over 12 years old when placed in service. Amend a tax return 2010 Qualified rent-to-own property (defined later). Amend a tax return 2010 5-year property. Amend a tax return 2010 Automobiles, taxis, buses, and trucks. Amend a tax return 2010 Computers and peripheral equipment. Amend a tax return 2010 Office machinery (such as typewriters, calculators, and copiers). Amend a tax return 2010 Any property used in research and experimentation. Amend a tax return 2010 Breeding cattle and dairy cattle. Amend a tax return 2010 Appliances, carpets, furniture, etc. Amend a tax return 2010 , used in a residential rental real estate activity. Amend a tax return 2010 Certain geothermal, solar, and wind energy property. Amend a tax return 2010 7-year property. Amend a tax return 2010 Office furniture and fixtures (such as desks, files, and safes). Amend a tax return 2010 Agricultural machinery and equipment. Amend a tax return 2010 Any property that does not have a class life and has not been designated by law as being in any other class. Amend a tax return 2010 Certain motorsports entertainment complex property (defined later) placed in service before January 1, 2014. Amend a tax return 2010 Any natural gas gathering line placed in service after April 11, 2005. Amend a tax return 2010 See Natural gas gathering line and electric transmission property , later. Amend a tax return 2010 10-year property. Amend a tax return 2010 Vessels, barges, tugs, and similar water transportation equipment. Amend a tax return 2010 Any single purpose agricultural or horticultural structure. Amend a tax return 2010 Any tree or vine bearing fruits or nuts. Amend a tax return 2010 Qualified small electric meter and qualified smart electric grid system (defined later) placed in service on or after October 3, 2008. Amend a tax return 2010 15-year property. Amend a tax return 2010 Certain improvements made directly to land or added to it (such as shrubbery, fences, roads, sidewalks, and bridges). Amend a tax return 2010 Any retail motor fuels outlet (defined later), such as a convenience store. Amend a tax return 2010 Any municipal wastewater treatment plant. Amend a tax return 2010 Any qualified leasehold improvement property (defined later) placed in service before January 1, 2014. Amend a tax return 2010 Any qualified restaurant property (defined later) placed in service before January 1, 2014. Amend a tax return 2010 Initial clearing and grading land improvements for gas utility property. Amend a tax return 2010 Electric transmission property (that is section 1245 property) used in the transmission at 69 or more kilovolts of electricity placed in service after April 11, 2005. Amend a tax return 2010 See Natural gas gathering line and electric transmission property , later. Amend a tax return 2010 Any natural gas distribution line placed in service after April 11, 2005 and before January 1, 2011. Amend a tax return 2010 Any qualified retail improvement property placed in service before January 1, 2014. Amend a tax return 2010 20-year property. Amend a tax return 2010 Farm buildings (other than single purpose agricultural or horticultural structures). Amend a tax return 2010 Municipal sewers not classified as 25-year property. Amend a tax return 2010 Initial clearing and grading land improvements for electric utility transmission and distribution plants. Amend a tax return 2010 25-year property. Amend a tax return 2010 This class is water utility property, which is either of the following. Amend a tax return 2010 Property that is an integral part of the gathering, treatment, or commercial distribution of water, and that, without regard to this provision, would be 20-year property. Amend a tax return 2010 Municipal sewers other than property placed in service under a binding contract in effect at all times since June 9, 1996. Amend a tax return 2010 Residential rental property. Amend a tax return 2010 This is any building or structure, such as a rental home (including a mobile home), if 80% or more of its gross rental income for the tax year is from dwelling units. Amend a tax return 2010 A dwelling unit is a house or apartment used to provide living accommodations in a building or structure. Amend a tax return 2010 It does not include a unit in a hotel, motel, or other establishment where more than half the units are used on a transient basis. Amend a tax return 2010 If you occupy any part of the building or structure for personal use, its gross rental income includes the fair rental value of the part you occupy. Amend a tax return 2010 Nonresidential real property. Amend a tax return 2010 This is section 1250 property, such as an office building, store, or warehouse, that is neither residential rental property nor property with a class life of less than 27. Amend a tax return 2010 5 years. Amend a tax return 2010 Qualified rent-to-own property. Amend a tax return 2010   Qualified rent-to-own property is property held by a rent-to-own dealer for purposes of being subject to a rent-to-own contract. Amend a tax return 2010 It is tangible personal property generally used in the home for personal use. Amend a tax return 2010 It includes computers and peripheral equipment, televisions, videocassette recorders, stereos, camcorders, appliances, furniture, washing machines and dryers, refrigerators, and other similar consumer durable property. Amend a tax return 2010 Consumer durable property does not include real property, aircraft, boats, motor vehicles, or trailers. Amend a tax return 2010   If some of the property you rent to others under a rent-to-own agreement is of a type that may be used by the renters for either personal or business purposes, you still can treat this property as qualified property as long as it does not represent a significant portion of your leasing property. Amend a tax return 2010 However, if this dual-use property does represent a significant portion of your leasing property, you must prove that this property is qualified rent-to-own property. Amend a tax return 2010 Rent-to-own dealer. Amend a tax return 2010   You are a rent-to-own dealer if you meet all the following requirements. Amend a tax return 2010 You regularly enter into rent-to-own contracts (defined below) in the ordinary course of your business for the use of consumer property. Amend a tax return 2010 A substantial portion of these contracts end with the customer returning the property before making all the payments required to transfer ownership. Amend a tax return 2010 The property is tangible personal property of a type generally used within the home for personal use. Amend a tax return 2010 Rent-to-own contract. Amend a tax return 2010   This is any lease for the use of consumer property between a rent-to-own dealer and a customer who is an individual which— Is titled “Rent-to-Own Agreement,” “Lease Agreement with Ownership Option,” or other similar language. Amend a tax return 2010 Provides a beginning date and a maximum period of time, not to exceed 156 weeks or 36 months from the beginning date, for which the contract can be in effect (including renewals or options to extend). Amend a tax return 2010 Provides for regular periodic (weekly or monthly) payments that can be either level or decreasing. Amend a tax return 2010 If the payments are decreasing, no payment can be less than 40% of the largest payment. Amend a tax return 2010 Provides for total payments that generally exceed the normal retail price of the property plus interest. Amend a tax return 2010 Provides for total payments that do not exceed $10,000 for each item of property. Amend a tax return 2010 Provides that the customer has no legal obligation to make all payments outlined in the contract and that, at the end of each weekly or monthly payment period, the customer can either continue to use the property by making the next payment or return the property in good working order with no further obligations and no entitlement to a return of any prior payments. Amend a tax return 2010 Provides that legal title to the property remains with the rent-to-own dealer until the customer makes either all the required payments or the early purchase payments required under the contract to acquire legal title. Amend a tax return 2010 Provides that the customer has no right to sell, sublease, mortgage, pawn, pledge, or otherwise dispose of the property until all contract payments have been made. Amend a tax return 2010 Motorsports entertainment complex. Amend a tax return 2010   This is a racing track facility permanently situated on land that hosts one or more racing events for automobiles, trucks, or motorcycles during the 36-month period after the first day of the month in which the facility is placed in service. Amend a tax return 2010 The events must be open to the public for the price of admission. Amend a tax return 2010 Qualified smart electric grid system. Amend a tax return 2010   A qualified smart electric grid system means any smart grid property used as part of a system for electric distribution grid communications, monitoring, and management placed in service after October 3, 2008, by a taxpayer who is a supplier of electrical energy or a provider of electrical energy services. Amend a tax return 2010 Smart grid property includes electronics and related equipment that is capable of: Sensing, collecting, and monitoring data of or from all portions of a utility's electric distribution grid, Providing real-time, two-way communications to monitor or to manage the grid, and Providing real-time analysis of an event prediction based on collected data that can be used to provide electric distribution system reliability, quality, and performance. Amend a tax return 2010 Retail motor fuels outlet. Amend a tax return 2010   Real property is a retail motor fuels outlet if it is used to a substantial extent in the retail marketing of petroleum or petroleum products (whether or not it is also used to sell food or other convenience items) and meets any one of the following three tests. Amend a tax return 2010 It is not larger than 1,400 square feet. Amend a tax return 2010 50% or more of the gross revenues generated from the property are derived from petroleum sales. Amend a tax return 2010 50% or more of the floor space in the property is devoted to petroleum marketing sales. Amend a tax return 2010 A retail motor fuels outlet does not include any facility related to petroleum and natural gas trunk pipelines. Amend a tax return 2010 Qualified leasehold improvement property. Amend a tax return 2010    Generally, this is any improvement to an interior part of a building (placed in service before January 1, 2014) that is nonresidential real property, provided all of the requirements discussed in chapter 3 under Qualified leasehold improvement property are met. Amend a tax return 2010   In addition, an improvement made by the lessor does not qualify as qualified leasehold improvement property to any subsequent owner unless it is acquired from the original lessor by reason of the lessor's death or in any of the following types of transactions. Amend a tax return 2010 A transaction to which section 381(a) applies, A mere change in the form of conducting the trade or business so long as the property is retained in the trade or business as qualified leasehold improvement property and the taxpayer retains a substantial interest in the trade or business, A like-kind exchange, involuntary conversion, or reacquisition of real property to the extent that the basis in the property represents the carryover basis, or Certain nonrecognition transactions to the extent that your basis in the property is determined by reference to the transferor's or distributor's basis in the property. Amend a tax return 2010 Examples include the following. Amend a tax return 2010 A complete liquidation of a subsidiary. Amend a tax return 2010 A transfer to a corporation controlled by the transferor. Amend a tax return 2010 An exchange of property by a corporation solely for stock or securities in another corporation in a reorganization. Amend a tax return 2010 Qualified restaurant property. Amend a tax return 2010   Qualified restaurant property is any section 1250 property that is a building placed in service after December 31, 2008, and before January 1, 2014. Amend a tax return 2010 Also, more than 50% of the building's square footage must be devoted to preparation of meals and seating for on-premises consumption of prepared meals. Amend a tax return 2010 Qualified smart electric meter. Amend a tax return 2010   A qualified smart electric meter is any time-based meter and related communication equipment which is placed in service by a supplier of electric energy or a provider of electric energy services and which is capable of being used by you as part of a system that: Measures and records electricity usage data on a time-differentiated basis in at least 24 separate time segments per day; Provides for the exchange of information between the supplier or provider and the customer's smart electric meter in support of time-based rates or other forms of demand response; Provides data to the supplier or provider so that the supplier or provider can provide energy usage information to customers electronically, and Provides all commercial and residential customers of such supplier or provider with net metering. Amend a tax return 2010 Net metering means allowing a customer a credit, if any, as complies with applicable federal and state laws and regulations for providing electricity to the supplier or provider. Amend a tax return 2010 Natural gas gathering line and electric transmission property. Amend a tax return 2010   Any natural gas gathering line placed in service after April 11, 2005, is treated as 7-year property, and electric transmission property (that is section 1245 property) used in the transmission at 69 or more kilovolts of electricity and any natural gas distribution line placed in service after April 11, 2005, are treated as 15-year property, if the following requirements are met. Amend a tax return 2010 The original use of the property must have begun with you after April 11, 2005. Amend a tax return 2010 Original use means the first use to which the property is put, whether or not by you. Amend a tax return 2010 Therefore, property used by any person before April 12, 2005, is not original use. Amend a tax return 2010 Original use includes additional capital expenditures you incurred to recondition or rebuild your property. Amend a tax return 2010 However, original use does not include the cost of reconditioned or rebuilt property you acquired. Amend a tax return 2010 Property containing used parts will not be treated as reconditioned or rebuilt if the cost of the used parts is not more than 20% of the total cost of the property. Amend a tax return 2010 The property must not be placed in service under a binding contract in effect before April 12, 2005. Amend a tax return 2010 The property must not be self-constructed property (property you manufacture, construct, or produce for your own use), if you began the manufacture, construction, or production of the property before April 12, 2005. Amend a tax return 2010 Property that is manufactured, constructed, or produced for your use by another person under a written binding contract entered into by you or a related party before the manufacture, construction, or production of the property is considered to be manufactured, constructed, or produced by you. Amend a tax return 2010 What Is the Placed in Service Date? You begin to claim depreciation when your property is placed in service for either use in a trade or business or the production of income. Amend a tax return 2010 The placed in service date for your property is the date the property is ready and available for a specific use. Amend a tax return 2010 It is therefore not necessarily the date it is first used. Amend a tax return 2010 If you converted property held for personal use to use in a trade or business or for the production of income, treat the property as being placed in service on the conversion date. Amend a tax return 2010 See Placed in Service under When Does Depreciation Begin and End in chapter 1 for examples illustrating when property is placed in service. Amend a tax return 2010 What Is the Basis for Depreciation? The basis for depreciation of MACRS property is the property's cost or other basis multiplied by the percentage of business/investment use. Amend a tax return 2010 For a discussion of business/investment use, see Partial business or investment use under Property Used in Your Business or Income-Producing Activity in chapter 1 . Amend a tax return 2010 Reduce that amount by any credits and deductions allocable to the property. Amend a tax return 2010 The following are examples of some credits and deductions that reduce basis. Amend a tax return 2010 Any deduction for section 179 property. Amend a tax return 2010 Any deduction under section 179B of the Internal Revenue Code for capital costs to comply with Environmental Protection Agency sulfur regulations. Amend a tax return 2010 Any deduction under section 179C of the Internal Revenue Code for certain qualified refinery property placed in service after August 8, 2005, and before January 1, 2014. Amend a tax return 2010 Any deduction under section 179D of the Internal Revenue Code for certain energy efficient commercial building property placed in service after December 31, 2005, and before January 1, 2014. Amend a tax return 2010 Any deduction under section 179E of the Internal Revenue Code for qualified advanced mine safety equipment property placed in service after December 20, 2006, and before January 1, 2014 . Amend a tax return 2010 Any deduction for removal of barriers to the disabled and the elderly. Amend a tax return 2010 Any disabled access credit, enhanced oil recovery credit, and credit for employer-provided childcare facilities and services. Amend a tax return 2010 Any special depreciation allowance. Amend a tax return 2010 Basis adjustment for investment credit property under section 50(c) of the Internal Revenue Code. Amend a tax return 2010 For additional credits and deductions that affect basis, see section 1016 of the Internal Revenue Code. Amend a tax return 2010 Enter the basis for depreciation under column (c) in Part III of Form 4562. Amend a tax return 2010 For information about how to determine the cost or other basis of property, see What Is the Basis of Your Depreciable Property in chapter 1 . Amend a tax return 2010 Which Recovery Period Applies? The recovery period of property is the number of years over which you recover its cost or other basis. Amend a tax return 2010 It is determined based on the depreciation system (GDS or ADS) used. Amend a tax return 2010 Recovery Periods Under GDS Under GDS, property that is not qualified Indian reservation property is depreciated over one of the following recovery periods. Amend a tax return 2010 Property Class Recovery Period 3-year property   3 years 1   5-year property   5 years     7-year property   7 years     10-year property   10 years     15-year property   15 years 2   20-year property   20 years     25-year property   25 years 3   Residential rental property   27. Amend a tax return 2010 5 years     Nonresidential real property   39 years 4   15 years for qualified rent-to-own property placed in service before August 6, 1997. Amend a tax return 2010 239 years for property that is a retail motor fuels outlet placed in service before August 20, 1996 (31. Amend a tax return 2010 5 years if placed in service before May 13, 1993), unless you elected to depreciate it over 15 years. Amend a tax return 2010 320 years for property placed in service before June 13, 1996, or under a binding contract in effect before June 10, 1996. Amend a tax return 2010 431. Amend a tax return 2010 5 years for property placed in service before May 13, 1993 (or before January 1, 1994, if the purchase or construction of the property is under a binding contract in effect before May 13, 1993, or if construction began before May 13, 1993). Amend a tax return 2010 The GDS recovery periods for property not listed above can be found in Appendix B, Table of Class Lives and Recovery Periods. Amend a tax return 2010 Residential rental property and nonresidential real property are defined earlier under Which Depreciation System (GDS or ADS) Applies. Amend a tax return 2010 Enter the appropriate recovery period on Form 4562 under column (d) in section B of Part III, unless already shown (for 25-year property, residential rental property, and nonresidential real property). Amend a tax return 2010 Office in the home. Amend a tax return 2010   If your home is a personal-use single family residence and you begin to use part of your home as an office, depreciate that part of your home as nonresidential real property over 39 years (31. Amend a tax return 2010 5 years if you began using it for business before May 13, 1993). Amend a tax return 2010 However, if your home is an apartment in an apartment building that you own and the building is residential rental property as defined earlier under Which Depreciation System (GDS or ADS) Applies , depreciate the part used as an office as residential rental property over 27. Amend a tax return 2010 5 years. Amend a tax return 2010 See Publication 587 for a discussion of the tests you must meet to claim expenses, including depreciation, for the business use of your home. Amend a tax return 2010 Home changed to rental use. Amend a tax return 2010   If you begin to rent a home that was your personal home before 1987, you depreciate it as residential rental property over 27. Amend a tax return 2010 5 years. Amend a tax return 2010 Indian Reservation Property The recovery periods for qualified property you placed in service on an Indian reservation after 1993 and before 2014 are shorter than those listed earlier. Amend a tax return 2010 The following table shows these shorter recovery periods. Amend a tax return 2010 Property Class Recovery  Period 3-year property 2 years 5-year property 3 years 7-year property 4 years 10-year property 6 years 15-year property 9 years 20-year property 12 years Nonresidential real property 22 years Nonresidential real property is defined earlier under Which Property Class Applies Under GDS . Amend a tax return 2010 Use this chart to find the correct percentage table to use for qualified Indian reservation property. Amend a tax return 2010 IF your recovery period is: THEN use the following table in Appendix A: 2 years A-21 3 years A-1, A-2, A-3, A-4, or A-5 4 years A-22 6 years A-23 9 years A-14, A-15, A-16, A-17, or A-18 12 years A-14, A-15, A-16, A-17, or A-18 22 years A-24 Qualified property. Amend a tax return 2010   Property eligible for the shorter recovery periods are 3-, 5-, 7-, 10-, 15-, and 20-year property and nonresidential real property. Amend a tax return 2010 You must use this property predominantly in the active conduct of a trade or business within an Indian reservation. Amend a tax return 2010 The rental of real property that is located on an Indian reservation is treated as the active conduct of a trade or business within an Indian reservation. Amend a tax return 2010   The following property is not qualified property. Amend a tax return 2010 Property used or located outside an Indian reservation on a regular basis, other than qualified infrastructure property. Amend a tax return 2010 Property acquired directly or indirectly from a related person. Amend a tax return 2010 Property placed in service for purposes of conducting or housing class I, II, or III gaming activities. Amend a tax return 2010 These activities are defined in section 4 of the Indian Regulatory Act (25 U. Amend a tax return 2010 S. Amend a tax return 2010 C. Amend a tax return 2010 2703). Amend a tax return 2010 Any property you must depreciate under ADS. Amend a tax return 2010 Determine whether property is qualified without regard to the election to use ADS and after applying the special rules for listed property not used predominantly for qualified business use (discussed in chapter 5). Amend a tax return 2010 Qualified infrastructure property. Amend a tax return 2010   Item (1) above does not apply to qualified infrastructure property located outside the reservation that is used to connect with qualified infrastructure property within the reservation. Amend a tax return 2010 Qualified infrastructure property is property that meets all the following rules. Amend a tax return 2010 It is qualified property, as defined earlier, except that it is outside the reservation. Amend a tax return 2010 It benefits the tribal infrastructure. Amend a tax return 2010 It is available to the general public. Amend a tax return 2010 It is placed in service in connection with the active conduct of a trade or business within a reservation. Amend a tax return 2010 Infrastructure property includes, but is not limited to, roads, power lines, water systems, railroad spurs, and communications facilities. Amend a tax return 2010 Related person. Amend a tax return 2010   For purposes of item (2) above, see Related persons in the discussion on property owned or used in 1986 under What Method Can You Use To Depreciate Your Property in chapter 1 for a description of related persons. Amend a tax return 2010 Indian reservation. Amend a tax return 2010   The term Indian reservation means a reservation as defined in section 3(d) of the Indian Financing Act of 1974 (25 U. Amend a tax return 2010 S. Amend a tax return 2010 C. Amend a tax return 2010 1452(d)) or section 4(10) of the Indian Child Welfare Act of 1978 (25 U. Amend a tax return 2010 S. Amend a tax return 2010 C. Amend a tax return 2010 1903(10)). Amend a tax return 2010 Section 3(d) of the Indian Financing Act of 1974 defines reservation to include former Indian reservations in Oklahoma. Amend a tax return 2010 For a definition of the term “former Indian reservations in Oklahoma,” see Notice 98-45 in Internal Revenue Bulletin 1998-35. Amend a tax return 2010 Recovery Periods Under ADS The recovery periods for most property generally are longer under ADS than they are under GDS. Amend a tax return 2010 The following table shows some of the ADS recovery periods. Amend a tax return 2010 Property Recovery  Period Rent-to-own property 4 years Automobiles and light duty trucks 5 years Computers and peripheral equipment 5 years High technology telephone station equipment installed on customer premises 5 years High technology medical equipment 5 years Personal property with no class life 12 years Natural gas gathering lines 14 years Single purpose agricultural and horticultural structures 15 years Any tree or vine bearing fruit or nuts 20 years Initial clearing and grading land  improvements for gas utility property 20 years Initial clearing and grading land  improvements for electric utility  transmission and distribution plants 25 years Electric transmission property used in the transmission at 69 or more kilovolts of electricity 30 years Natural gas distribution lines 35 years Any qualified leasehold improvement property 39 years Any qualified restaurant property 39 years Nonresidential real property 40 years Residential rental property 40 years Section 1245 real property not listed in Appendix B 40 years Railroad grading and tunnel bore 50 years The ADS recovery periods for property not listed above can be found in the tables in Appendix B. Amend a tax return 2010 Rent-to-own property, qualified leasehold improvement property, qualified restaurant property, residential rental property, and nonresidential real property are defined earlier under Which Property Class Applies Under GDS . Amend a tax return 2010 Tax-exempt use property subject to a lease. Amend a tax return 2010   The ADS recovery period for any property leased under a lease agreement to a tax-exempt organization, governmental unit, or foreign person or entity (other than a partnership) cannot be less than 125% of the lease term. Amend a tax return 2010 Additions and Improvements An addition or improvement you make to depreciable property is treated as separate depreciable property. Amend a tax return 2010 See How Do You Treat Repairs and Improvements in chapter 1 for a definition of improvements. Amend a tax return 2010 Its property class and recovery period are the same as those that would apply to the original property if you had placed it in service at the same time you placed the addition or improvement in service. Amend a tax return 2010 The recovery period begins on the later of the following dates. Amend a tax return 2010 The date you place the addition or improvement in service. Amend a tax return 2010 The date you place in service the property to which you made the addition or improvement. Amend a tax return 2010 If the improvement you make is qualified leasehold improvement property, qualified restaurant property, or qualified retail improvement property, the GDS recovery period is 15 years (39 years under ADS). Amend a tax return 2010 Example. Amend a tax return 2010 You own a rental home that you have been renting out since 1981. Amend a tax return 2010 If you put an addition on the home and place the addition in service this year, you would use MACRS to figure your depreciation deduction for the addition. Amend a tax return 2010 Under GDS, the property class for the addition is residential rental property and its recovery period is 27. Amend a tax return 2010 5 years because the home to which the addition is made would be residential rental property if you had placed it in service this year. Amend a tax return 2010 Which Convention Applies? Under MACRS, averaging conventions establish when the recovery period begins and ends. Amend a tax return 2010 The convention you use determines the number of months for which you can claim depreciation in the year you place property in service and in the year you dispose of the property. Amend a tax return 2010 The mid-month convention. Amend a tax return 2010   Use this convention for nonresidential real property, residential rental property, and any railroad grading or tunnel bore. Amend a tax return 2010   Under this convention, you treat all property placed in service or disposed of during a month as placed in service or disposed of at the midpoint of the month. Amend a tax return 2010 This means that a one-half month of depreciation is allowed for the month the property is placed in service or disposed of. Amend a tax return 2010   Your use of the mid-month convention is indicated by the “MM” already shown under column (e) in Part III of Form 4562. Amend a tax return 2010 The mid-quarter convention. Amend a tax return 2010   Use this convention if the mid-month convention does not apply and the total depreciable bases of MACRS property you placed in service during the last 3 months of the tax year (excluding nonresidential real property, residential rental property, any railroad grading or tunnel bore, property placed in service and disposed of in the same year, and property that is being depreciated under a method other than MACRS) are more than 40% of the total depreciable bases of all MACRS property you placed in service during the entire year. Amend a tax return 2010   Under this convention, you treat all property placed in service or disposed of during any quarter of the tax year as placed in service or disposed of at the midpoint of that quarter. Amend a tax return 2010 This means that 1½ months of depreciation is allowed for the quarter the property is placed in service or disposed of. Amend a tax return 2010   If you use this convention, enter “MQ” under column (e) in Part III of Form 4562. Amend a tax return 2010    For purposes of determining whether the mid-quarter convention applies, the depreciable basis of property you placed in service during the tax year reflects the reduction in basis for amounts expensed under section 179 and the part of the basis of property attributable to personal use. Amend a tax return 2010 However, it does not reflect any reduction in basis for any special depreciation allowance. Amend a tax return 2010 The half-year convention. Amend a tax return 2010   Use this convention if neither the mid-quarter convention nor the mid-month convention applies. Amend a tax return 2010   Under this convention, you treat all property placed in service or disposed of during a tax year as placed in service or disposed of at the midpoint of the year. Amend a tax return 2010 This means that a one-half year of depreciation is allowed for the year the property is placed in service or disposed of. Amend a tax return 2010   If you use this convention, enter “HY” under column (e) in Part III of Form 4562. Amend a tax return 2010 Which Depreciation Method Applies? MACRS provides three depreciation methods under GDS and one depreciation method under ADS. Amend a tax return 2010 The 200% declining balance method over a GDS recovery period. Amend a tax return 2010 The 150% declining balance method over a GDS recovery period. Amend a tax return 2010 The straight line method over a GDS recovery period. Amend a tax return 2010 The straight line method over an ADS recovery period. Amend a tax return 2010 For property placed in service before 1999, you could have elected the 150% declining balance method using the ADS recovery periods for certain property classes. Amend a tax return 2010 If you made this election, continue to use the same method and recovery period for that property. Amend a tax return 2010 Table 4–1 lists the types of property you can depreciate under each method. Amend a tax return 2010 It also gives a brief explanation of the method, including any benefits that may apply. Amend a tax return 2010 Depreciation Methods for Farm Property If you place personal property in service in a farming business after 1988, you generally must depreciate it under GDS using the 150% declining balance method unless you are a farmer who must depreciate the property under ADS using the straight line method or you elect to depreciate the property under GDS or ADS using the straight line method. Amend a tax return 2010 You can depreciate real property using the straight line method under either GDS or ADS. Amend a tax return 2010 Fruit or nut trees and vines. Amend a tax return 2010   Depreciate trees and vines bearing fruit or nuts under GDS using the straight line method over a recovery period of 10 years. Amend a tax return 2010 ADS required for some farmers. Amend a tax return 2010   If you elect not to apply the uniform capitalization rules to any plant produced in your farming business, you must use ADS. Amend a tax return 2010 You must use ADS for all property you place in service in any year the election is in effect. Amend a tax return 2010 See the regulations under section 263A of the Internal Revenue Code for information on the uniform capitalization rules that apply to farm property. Amend a tax return 2010 Electing a Different Method As shown in Table 4–1 , you can elect a different method for depreciation for certain types of property. Amend a tax return 2010 You must make the election by the due date of the return (including extensions) for the year you placed the property in service. Amend a tax return 2010 However, if you timely filed your return for the year without making the election, you still can make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Amend a tax return 2010 Attach the election to the amended return and write “Filed pursuant to section 301. Amend a tax return 2010 9100-2” on the election statement. Amend a tax return 2010 File the amended return at the same address you filed the original return. Amend a tax return 2010 Once you make the election, you cannot change it. Amend a tax return 2010 If you elect to use a different method for one item in a property class, you must apply the same method to all property in that class placed in service during the year of the election. Amend a tax return 2010 However, you can make the election on a property-by-property basis for nonresidential real and residential rental property. Amend a tax return 2010 150% election. Amend a tax return 2010   Instead of using the 200% declining balance method over the GDS recovery period for nonfarm property in the 3-, 5-, 7-, and 10-year property classes, you can elect to use the 150% declining balance method. Amend a tax return 2010 Make the election by entering “150 DB” under column (f) in Part III of Form 4562. Amend a tax return 2010 Straight line election. Amend a tax return 2010   Instead of using either the 200% or 150% declining balance methods over the GDS recovery period, you can elect to use the straight line method over the GDS recovery period. Amend a tax return 2010 Make the election by entering  “S/L” under column (f) in Part III of Form 4562. Amend a tax return 2010 Election of ADS. Amend a tax return 2010   As explained earlier under Which Depreciation System (GDS or ADS) Applies , you can elect to use ADS even though your property may come under GDS. Amend a tax return 2010 ADS uses the straight line method of depreciation over fixed ADS recovery periods. Amend a tax return 2010 Most ADS recovery periods are listed in Appendix B, or see the table under Recovery Periods Under ADS , earlier. Amend a tax return 2010   Make the election by completing line 20 in Part III of Form 4562. Amend a tax return 2010 Farm property. Amend a tax return 2010   Instead of using the 150% declining balance method over a GDS recovery period for property you use in a farming business (other than real property), you can elect to depreciate it using either of the following methods. Amend a tax return 2010 The straight line method over a GDS recovery period. Amend a tax return 2010 The straight line method over an ADS recovery period. Amend a tax return 2010 Table 4-1. Amend a tax return 2010 Depreciation Methods Note. Amend a tax return 2010 The declining balance method is abbreviated as DB and the straight line method is abbreviated as SL. Amend a tax return 2010 Method Type of Property Benefit GDS using 200% DB • Nonfarm 3-, 5-, 7-, and 10-year property • Provides a greater deduction during the earlier recovery years • Changes to SL when that method provides an equal or greater deduction GDS using 150% DB • All farm property (except real property) • All 15- and 20-year property (except qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property placed in service before January 1, 2014) • Nonfarm 3-, 5-, 7-, and 10-year property • Provides a greater deduction during the earlier recovery years • Changes to SL when that method provides an equal or greater deduction1 GDS using SL • Nonresidential real property • Qualified leasehold improvement property placed in service before January 1, 2014 • Qualified restaurant property placed in service before January 1, 2014 • Qualified retail improvement property placed in service before January 1, 2014 • Residential rental property • Trees or vines bearing fruit or nuts • Water utility property • All 3-, 5-, 7-, 10-, 15-, and 20-year property2 • Property for which you elected section 168(k)(4) • Provides for equal yearly deductions (except for the first and last years) ADS using SL • Listed property used 50% or less for business • Property used predominantly outside the U. Amend a tax return 2010 S. Amend a tax return 2010  • Tax-exempt property • Tax-exempt bond-financed property • Farm property used when an election not to apply the uniform capitalization rules is in effect • Imported property3 • Any property for which you elect to use this method4 • Provides for equal yearly deductions (except for the first and last years) 1The MACRS percentage tables in Appendix A have the switch to the straight line method built into their rates 2See section 168(b)(5) of the Internal Revenue Code. Amend a tax return 2010 3See section 168(g)(6) of the Internal Revenue Code 4See section 168(g)(7) of the Internal Revenue Code How Is the Depreciation Deduction Figured? To figure your depreciation deduction under MACRS, you first determine the depreciation system, property class, placed in service date, basis amount, recovery period, convention, and depreciation method that applies to your property. Amend a tax return 2010 Then, you are ready to figure your depreciation deduction. Amend a tax return 2010 You can figure it using a percentage table provided by the IRS, or you can figure it yourself without using the table. Amend a tax return 2010 Using the MACRS Percentage Tables To help you figure your deduction under MACRS, the IRS has established percentage tables that incorporate the applicable convention and depreciation method. Amend a tax return 2010 These percentage tables are in Appendix A near the end of this publication. Amend a tax return 2010 Which table to use. Amend a tax return 2010    Appendix A contains the MACRS Percentage Table Guide, which is designed to help you locate the correct percentage table to use for depreciating your property. Amend a tax return 2010 The percentage tables immediately follow the guide. Amend a tax return 2010 Rules Covering the Use of the Tables The following rules cover the use of the percentage tables. Amend a tax return 2010 You must apply the rates in the percentage tables to your property's unadjusted basis. Amend a tax return 2010 You cannot use the percentage tables for a short tax year. Amend a tax return 2010 See Figuring the Deduction for a Short Tax Year, later, for information on the short tax year rules. Amend a tax return 2010 Once you start using the percentage tables for any item of property, you generally must continue to use them for the entire recovery period of the property. Amend a tax return 2010 You must stop using the tables if you adjust the basis of the property for any reason other than— Depreciation allowed or allowable, or An addition or improvement to that property that is depreciated as a separate item of property. Amend a tax return 2010 Basis adjustments other than those made due to the items listed in (4) include an increase in basis for the recapture of a clean-fuel deduction or credit and a reduction in basis for a casualty loss. Amend a tax return 2010 Basis adjustment due to recapture of clean-fuel vehicle deduction or credit. Amend a tax return 2010   If you increase the basis of your property because of the recapture of part or all of a deduction for clean-fuel vehicles or the credit for clean-fuel vehicle refueling property placed in service before January 1, 2006, you cannot continue to use the percentage tables. Amend a tax return 2010 For the year of the adjustment and the remaining recovery period, you must figure the depreciation deduction yourself using the property's adjusted basis at the end of the year. Amend a tax return 2010 See Figuring the Deduction Without Using the Tables, later. Amend a tax return 2010 Basis adjustment due to casualty loss. Amend a tax return 2010   If you reduce the basis of your property because of a casualty, you cannot continue to use the percentage tables. Amend a tax return 2010 For the year of the adjustment and the remaining recovery period, you must figure the depreciation yourself using the property's adjusted basis at the end of the year. Amend a tax return 2010 See Figuring the Deduction Without Using the Tables, later. Amend a tax return 2010 Example. Amend a tax return 2010 On October 26, 2012, Sandra Elm, a calendar year taxpayer, bought and placed in service in her business a new item of 7-year property. Amend a tax return 2010 It cost $39,000 and she elected a section 179 deduction of $24,000. Amend a tax return 2010 She also took a special depreciation allowance of $7,500 [50% of $15,000 ($39,000 − $24,000)]. Amend a tax return 2010 Her unadjusted basis after the section 179 deduction and special depreciation allowance was $7,500 ($15,000 − $7,500). Amend a tax return 2010 She figured her MACRS depreciation deduction using the percentage tables. Amend a tax return 2010 For 2012, her MACRS depreciation deduction was $268. Amend a tax return 2010 In July 2013, the property was vandalized and Sandra had a deductible casualty loss of $3,000. Amend a tax return 2010 She must adjust the property's basis for the casualty loss, so she can no longer use the percentage tables. Amend a tax return 2010 Her adjusted basis at the end of 2013, before figuring her 2013 depreciation, is $4,232. Amend a tax return 2010 She figures that amount by subtracting the 2012 MACRS depreciation of $268 and the casualty loss of $3,000 from the unadjusted basis of $7,500. Amend a tax return 2010 She must now figure her depreciation for 2013 without using the percentage tables. Amend a tax return 2010 Figuring the Unadjusted Basis of Your Property You must apply the table rates to your property's unadjusted basis each year of the recovery period. Amend a tax return 2010 Unadjusted basis is the same basis amount you would use to figure gain on a sale, but you figure it without reducing your original basis by any MACRS depreciation taken in earlier years. Amend a tax return 2010 However, you do reduce your original basis by other amounts, including the following. Amend a tax return 2010 Any amortization taken on the property. Amend a tax return 2010 Any section 179 deduction claimed. Amend a tax return 2010 Any special depreciation allowance taken on the property. Amend a tax return 2010 For business property you purchase during the year, the unadjusted basis is its cost minus these and other applicable adjustments. Amend a tax return 2010 If you trade property, your unadjusted basis in the property received is the cash paid plus the adjusted basis of the property traded minus these adjustments. Amend a tax return 2010 MACRS Worksheet You can use this worksheet to help you figure your depreciation deduction using the percentage tables. Amend a tax return 2010 Use a separate worksheet for each item of property. Amend a tax return 2010 Then, use the information from this worksheet to prepare Form 4562. Amend a tax return 2010 Do not use this worksheet for automobiles. Amend a tax return 2010 Use the Depreciation Worksheet for Passenger Automobiles in chapter 5. Amend a tax return 2010 MACRS Worksheet Part I   1. Amend a tax return 2010 MACRS system (GDS or ADS)   2. Amend a tax return 2010 Property class   3. Amend a tax return 2010 Date placed in service   4. Amend a tax return 2010 Recovery period   5. Amend a tax return 2010 Method and convention   6. Amend a tax return 2010 Depreciation rate (from tables)   Part II   7. Amend a tax return 2010 Cost or other basis* $     8. Amend a tax return 2010 Business/investment use   %   9. Amend a tax return 2010 Multiply line 7 by line 8   $ 10. Amend a tax return 2010 Total claimed for section 179 deduction and other items   $ 11. Amend a tax return 2010 Subtract line 10 from line 9. Amend a tax return 2010 This is your tentative basis for depreciation   $ 12. Amend a tax return 2010 Multiply line 11 by . Amend a tax return 2010 50 if the 50% special depreciation allowance applies. Amend a tax return 2010 This is your special depreciation allowance. Amend a tax return 2010 Enter -0- if this is not the year you placed the property in service, the property is not qualified property, or you elected not to claim a special allowance   $ 13. Amend a tax return 2010 Subtract line 12 from line 11. Amend a tax return 2010 This is your basis for depreciation     14. Amend a tax return 2010 Depreciation rate (from line 6)     15. Amend a tax return 2010 Multiply line 13 by line 14. Amend a tax return 2010 This is your MACRS depreciation deduction   $ *If real estate, do not include cost (basis) of land. Amend a tax return 2010 The following example shows how to figure your MACRS depreciation deduction using the percentage tables and the MACRS worksheet. Amend a tax return 2010 Example. Amend a tax return 2010 You bought office furniture (7-year property) for $10,000 and placed it in service on August 11, 2013. Amend a tax return 2010 You use the furniture only for business. Amend a tax return 2010 This is the only property you placed in service this year. Amend a tax return 2010 You did not elect a section 179 deduction and the property is not qualified property for purposes of claiming a special depreciation allowance so your property's unadjusted basis is its cost, $10,000. Amend a tax return 2010 You use GDS and the half-year convention to figure your depreciation. Amend a tax return 2010 You refer to the MACRS Percentage Table Guide in Appendix A and find that you should use Table A-1. Amend a tax return 2010 Multiply your property's unadjusted basis each year by the percentage for 7-year property given in Table A-1. Amend a tax return 2010 You figure your depreciation deduction using the MACRS worksheet as follows. Amend a tax return 2010 MACRS Worksheet Part I 1. Amend a tax return 2010 MACRS system (GDS or ADS) GDS 2. Amend a tax return 2010 Property class 7-year 3. Amend a tax return 2010 Date placed in service 8/11/13 4. Amend a tax return 2010 Recovery period 7-Year 5. Amend a tax return 2010 Method and convention 200%DB/Half-Year 6. Amend a tax return 2010 Depreciation rate (from tables) . Amend a tax return 2010 1429 Part II 7. Amend a tax return 2010 Cost or other basis* $10,000     8. Amend a tax return 2010 Business/investment use 100 %   9. Amend a tax return 2010 Multiply line 7 by line 8   $10,000 10. Amend a tax return 2010 Total claimed for section 179 deduction and other items   -0- 11. Amend a tax return 2010 Subtract line 10 from line 9. Amend a tax return 2010 This is your tentative basis for depreciation   $10,000 12. Amend a tax return 2010 Multiply line 11 by . Amend a tax return 2010 50 if the 50% special depreciation allowance applies. Amend a tax return 2010 This is your special depreciation allowance. Amend a tax return 2010 Enter -0- if this is not the year you placed the property in service, the property is not qualified property, or you elected not to claim a special allowance   -0- 13. Amend a tax return 2010 Subtract line 12 from line 11. Amend a tax return 2010 This is your basis for depreciation   $10,000 14. Amend a tax return 2010 Depreciation rate (from line 6)   . Amend a tax return 2010 1429 15. Amend a tax return 2010 Multiply line 13 by line 14. Amend a tax return 2010 This is your MACRS depreciation deduction   $1,429 *If real estate, do not include cost (basis) of land. Amend a tax return 2010 If there are no adjustments to the basis of the property other than depreciation, your depreciation deduction for each subsequent year of the recovery period will be as follows. Amend a tax return 2010 Year   Basis Percentage Deduction 2014 $ 10,000 24. Amend a tax return 2010 49%   $2,449   2015   10,000 17. Amend a tax return 2010 49   1,749   2016   10,000 12. Amend a tax return 2010 49   1,249   2017   10,000 8. Amend a tax return 2010 93   893   2018   10,000 8. Amend a tax return 2010 92   892   2019   10,000 8. Amend a tax return 2010 93   893   2020   10,000 4. Amend a tax return 2010 46   446   Examples The following examples are provided to show you how to use the percentage tables. Amend a tax return 2010 In both examples, assume the following. Amend a tax return 2010 You use the property only for business. Amend a tax return 2010 You use the calendar year as your tax year. Amend a tax return 2010 You use GDS for all the properties. Amend a tax return 2010 Example 1. Amend a tax return 2010 You bought a building and land for $120,000 and placed it in service on March 8. Amend a tax return 2010 The sales contract showed that the building cost $100,000 and the land cost $20,000. Amend a tax return 2010 It is nonresidential real property. Amend a tax return 2010 The building's unadjusted basis is its original cost, $100,000. Amend a tax return 2010 You refer to the MACRS Percentage Table Guide in Appendix A and find that you should use Table A-7a. Amend a tax return 2010 March is the third month of your tax year, so multiply the building's unadjusted basis, $100,000, by the percentages for the third month in Table A-7a. Amend a tax return 2010 Your depreciation deduction for each of the first 3 years is as follows: Year   Basis Percentage Deduction 1st $ 100,000 2. Amend a tax return 2010 033%   $2,033   2nd   100,000 2. Amend a tax return 2010 564   2,564   3rd   100,000 2. Amend a tax return 2010 564   2,564   Example 2. Amend a tax return 2010 During the year, you bought a machine (7-year property) for $4,000, office furniture (7-year property) for $1,000, and a computer (5-year property) for $5,000. Amend a tax return 2010 You placed the machine in service in January, the furniture in September, and the computer in October. Amend a tax return 2010 You do not elect a section 179 deduction and none of these items is qualified property for purposes of claiming a special depreciation allowance. Amend a tax return 2010 You placed property in service during the last 3 months of the year, so you must first determine if you have to use the mid-quarter convention. Amend a tax return 2010 The total bases of all property you placed in service during the year is $10,000. Amend a tax return 2010 The $5,000 basis of the computer, which you placed in service during the last 3 months (the fourth quarter) of your tax year, is more than 40% of the total bases of all property ($10,000) you placed in service during the year. Amend a tax return 2010 Therefore, you must use the mid-quarter convention for all three items. Amend a tax return 2010 You refer to the MACRS Percentage Table Guide in Appendix A to determine which table you should use under the mid-quarter convention. Amend a tax return 2010 The machine is 7-year property placed in service in the first quarter, so you use Table A-2. Amend a tax return 2010 The furniture is 7-year property placed in service in the third quarter, so you use Table A-4. Amend a tax return 2010 Finally, because the computer is 5-year property placed in service in the fourth quarter, you use Table A-6. Amend a tax return 2010 Knowing what table to use for each property, you figure the depreciation for the first 2 years as follows. Amend a tax return 2010 Year Property Basis Percentage Deduction 1st Machine $4,000 25. Amend a tax return 2010 00 $1,000   2nd Machine 4,000 21. Amend a tax return 2010 43 857   1st Furniture 1,000 10. Amend a tax return 2010 71 107   2nd Furniture 1,000 25. Amend a tax return 2010 51 255   1st Computer 5,000 5. Amend a tax return 2010 00 250   2nd Computer 5,000 38. Amend a tax return 2010 00 1,900   Sale or Other Disposition Before the Recovery Period Ends If you sell or otherwise dispose of your property before the end of its recovery period, your depreciation deduction for the year of the disposition will be only part of the depreciation amount for the full year. Amend a tax return 2010 You have disposed of your property if you have permanently withdrawn it from use in your business or income-producing activity because of its sale, exchange, retirement, abandonment, involuntary conversion, or destruction. Amend a tax return 2010 After you figure the full-year depreciation amount, figure the deductible part using the convention that applies to the property. Amend a tax return 2010 Half-year convention used. Amend a tax return 2010   For property for which you used a half-year convention, the depreciation deduction for the year of the disposition is half the depreciation determined for the full year. Amend a tax return 2010 Mid-quarter convention used. Amend a tax return 2010   For property for which you used the mid-quarter convention, figure your depreciation deduction for the year of the disposition by multiplying a full year of depreciation by the percentage listed below for the quarter in which you disposed of the property. Amend a tax return 2010 Quarter Percentage First 12. Amend a tax return 2010 5% Second 37. Amend a tax return 2010 5 Third 62. Amend a tax return 2010 5 Fourth 87. Amend a tax return 2010 5 Example. Amend a tax return 2010 On December 2, 2010, you placed in service an item of 5-year property costing $10,000. Amend a tax return 2010 You did not claim a section 179 deduction and the property does not qualify for a special depreciation allowance. Amend a tax return 2010 Your unadjusted basis for the property was $10,000. Amend a tax return 2010 You used the mid-quarter convention because this was the only item of business property you placed in service in 2010 and it was placed in service during the last 3 months of your tax year. Amend a tax return 2010 Your property is in the 5-year property class, so you used Table A-5 to figure your depreciation deduction. Amend a tax return 2010 Your deductions for 2010, 2011, and 2012 were $500 (5% of $10,000), $3,800 (38% of $10,000), and $2,280 (22. Amend a tax return 2010 80% of $10,000). Amend a tax return 2010 You disposed of the property on April 6, 2013. Amend a tax return 2010 To determine your depreciation deduction for 2013, first figure the deduction for the full year. Amend a tax return 2010 This is $1,368 (13. Amend a tax return 2010 68% of $10,000). Amend a tax return 2010 April is in the second quarter of the year, so you multiply $1,368 by 37. Amend a tax return 2010 5% to get your depreciation deduction of $513 for 2013. Amend a tax return 2010 Mid-month convention used. Amend a tax return 2010   If you dispose of residential rental or nonresidential real property, figure your depreciation deduction for the year of the disposition by multiplying a full year of depreciation by a fraction. Amend a tax return 2010 The numerator of the fraction is the number of months (including partial months) in the year that the property is considered in service. Amend a tax return 2010 The denominator is 12. Amend a tax return 2010 Example. Amend a tax return 2010 On July 2, 2011, you purchased and placed in service residential rental property. Amend a tax return 2010 The property cost $100,000, not including the cost of land. Amend a tax return 2010 You used Table A-6 to figure your MACRS depreciation for this property. Amend a tax return 2010 You sold the property on March 2, 2013. Amend a tax return 2010 You file your tax return based on the calendar year. Amend a tax return 2010 A full year of depreciation for 2013 is $3,636. Amend a tax return 2010 This is $100,000 multiplied by . Amend a tax return 2010 03636 (the percentage for the seventh month of the third recovery year) from Table A-6 . Amend a tax return 2010 You then apply the mid-month convention for the 2½ months of use in 2013. Amend a tax return 2010 Treat the month of disposition as one-half month of use. Amend a tax return 2010 Multiply $3,636 by the fraction, 2. Amend a tax return 2010 5 over 12, to get your 2013 depreciation deduction of $757. Amend a tax return 2010 50. Amend a tax return 2010 Figuring the Deduction Without Using the Tables Instead of using the rates in the percentage tables to figure your depreciation deduction, you can figure it yourself. Amend a tax return 2010 Before making the computation each year, you must reduce your adjusted basis in the property by the depreciation claimed the previous year. Amend a tax return 2010 Figuring MACRS deductions without using the tables generally will result in a slightly different amount than using the tables. Amend a tax return 2010 Declining Balance Method When using a declining balance method, you apply the same depreciation rate each year to the adjusted basis of your property. Amend a tax return 2010 You must use the applicable convention for the first tax year and you must switch to the straight line method beginning in the first year for which it will give an equal or greater deduction. Amend a tax return 2010 The straight line method is explained later. Amend a tax return 2010 You figure depreciation for the year you place property in service as follows. Amend a tax return 2010 Multiply your adjusted basis in the property by the declining balance rate. Amend a tax return 2010 Apply the applicable convention. Amend a tax return 2010 You figure depreciation for all other years (before the year you switch to the straight line method) as follows. Amend a tax return 2010 Reduce your adjusted basis in the property by the depreciation allowed or allowable in earlier years. Amend a tax return 2010 Multiply this new adjusted basis by the same declining balance rate used in earlier years. Amend a tax return 2010 If you dispose of property before the end of its recovery period, see Using the Applicable Convention, later, for information on how to figure depreciation for the year you dispose of it. Amend a tax return 2010 Figuring depreciation under the declining balance method and switching to the straight line method is illustrated in Example 1 , later, under Examples. Amend a tax return 2010 Declining balance rate. Amend a tax return 2010   You figure your declining balance rate by dividing the specified declining balance percentage (150% or 200% changed to a decimal) by the number of years in the property's recovery period. Amend a tax return 2010 For example, for 3-year property depreciated using the 200% declining balance method, divide 2. Amend a tax return 2010 00 (200%) by 3 to get 0. Amend a tax return 2010 6667, or a 66. Amend a tax return 2010 67% declining balance rate. Amend a tax return 2010 For 15-year property depreciated using the 150% declining balance method, divide 1. Amend a tax return 2010 50 (150%) by 15 to get 0. Amend a tax return 2010 10, or a 10% declining balance rate. Amend a tax return 2010   The following table shows the declining balance rate for each property class and the first year for which the straight line method gives an equal or greater deduction. Amend a tax return 2010 Property Class Method Declining Balance Rate Year 3-year 200% DB 66. Amend a tax return 2010 667% 3rd 5-year 200% DB 40. Amend a tax return 2010 0 4th 7-year 200% DB 28. Amend a tax return 2010 571 5th 10-year 200% DB 20. Amend a tax return 2010 0 7th 15-year 150% DB 10. Amend a tax return 2010 0 7th 20-year 150% DB 7. Amend a tax return 2010 5 9th Straight Line Method When using the straight line method, you apply a different depreciation rate each year to the adjusted basis of your property. Amend a tax return 2010 You must use the applicable convention in the year you place the property in service and the year you dispose of the property. Amend a tax return 2010 You figure depreciation for the year you place property in service as follows. Amend a tax return 2010 Multiply your adjusted basis in the property by the straight line rate. Amend a tax return 2010 Apply the applicable convention. Amend a tax return 2010 You figure depreciation for all other years (including the year you switch from the declining balance method to the straight line method) as follows. Amend a tax return 2010 Reduce your adjusted basis in the property by the depreciation allowed or allowable in earlier years (under any method). Amend a tax return 2010 Determine the depreciation rate for the year. Amend a tax return 2010 Multiply the adjusted basis figured in (1) by the depreciation rate figured in (2). Amend a tax return 2010 If you dispose of property before the end of its recovery period, see Using the Applicable Convention , later, for information on how to figure depreciation for the year you dispose of it. Amend a tax return 2010 Straight line rate. Amend a tax return 2010   You determine the straight line depreciation rate for any tax year by dividing the number 1 by the years remaining in the recovery period at the beginning of that year. Amend a tax return 2010 When figuring the number of years remaining, you must take into account the convention used in the year you placed the property in service. Amend a tax return 2010 If the number of years remaining is less than 1, the depreciation rate for that tax year is 1. Amend a tax return 2010 0 (100%). Amend a tax return 2010 Using the Applicable Convention The applicable convention (discussed earlier under Which Convention Applies ) affects how you figure your depreciation deduction for the year you place your property in service and for the year you dispose of it. Amend a tax return 2010 It determines how much of the recovery period remains at the beginning of each year, so it also affects the depreciation rate for property you depreciate under the straight line method. Amend a tax return 2010 See Straight line rate in the previous discussion. Amend a tax return 2010 Use the applicable convention as explained in the following discussions. Amend a tax return 2010 Half-year convention. Amend a tax return 2010   If this convention applies, you deduct a half-year of depreciation for the first year and the last year that you depreciate the property. Amend a tax return 2010 You deduct a full year of depreciation for any other year during the recovery period. Amend a tax return 2010   Figure your depreciation deduction for the year you place the property in service by dividing the depreciation for a full year by 2. Amend a tax return 2010 If you dispose of the property before the end of the recovery period, figure your depreciation deduction for the year of the disposition the same way. Amend a tax return 2010 If you hold the property for the entire recovery period, your depreciation deduction for the year that includes the final 6 months of the recovery period is the amount of your unrecovered basis in the property. Amend a tax return 2010 Mid-quarter convention. Amend a tax return 2010   If this convention applies, the depreciation you can deduct for the first year you depreciate the property depends on the quarter in which you place the property in service. Amend a tax return 2010   A quarter of a full 12-month tax year is a period of 3 months. Amend a tax return 2010 The first quarter in a year begins on the first day of the tax year. Amend a tax return 2010 The second quarter begins on the first day of the fourth month of the tax year. Amend a tax return 2010 The third quarter begins on the first day of the seventh month of the tax year. Amend a tax return 2010 The fourth quarter begins on the first day of the tenth month of the tax year. Amend a tax return 2010 A calendar year is divided into the following quarters. Amend a tax return 2010 Quarter Months First January, February, March Second April, May, June Third July, August, September Fourth October, November, December   Figure your depreciation deduction for the year you place the property in service by multiplying the depreciation for a full year by the percentage listed below for the quarter you place the property in service. Amend a tax return 2010 Quarter Percentage First 87. Amend a tax return 2010 5% Second 62. Amend a tax return 2010 5 Third 37. Amend a tax return 2010 5 Fourth 12. Amend a tax return 2010 5   If you dispose of the property before the end of the recovery period, figure your depreciation deduction for the year of the disposition by multiplying a full year of depreciation by the percentage listed below for the quarter you dispose of the property. Amend a tax return 2010 Quarter Percentage First 12. Amend a tax return 2010 5% Second 37. Amend a tax return 2010 5 Third 62. Amend a tax return 2010 5 Fourth 87. Amend a tax return 2010 5   If you hold the property for the entire recovery period, your depreciation deduction for the year that includes the final quarter of the recovery period is the amount of your unrecovered basis in the property. Amend a tax return 2010 Mid-month convention. Amend a tax return 2010   If this convention applies, the depreciation you can deduct for the first year that you depreciate the property depends on the month in which you place the property in service. Amend a tax return 2010 Figure your depreciation deduction for the year you place the property in service by multiplying the depreciation for a full year by a fraction. Amend a tax return 2010 The numerator of the fraction is the number of full months in the year that the property is in service plus ½ (or 0. Amend a tax return 2010 5). Amend a tax return 2010 The denominator is 12. Amend a tax return 2010   If you dispose of the property before the end of the recovery period, figure your depreciation deduction for the year of the disposition the same way. Amend a tax return 2010 If you hold the property for the entire recovery period, your depreciation deduction for the year that includes the final month of the recovery period is the amount of your unrecovered basis in the property. Amend a tax return 2010 Example. Amend a tax return 2010 You use the calendar year and place nonresidential real property in service in August. Amend a tax return 2010 The property is in service 4 full months (September, October, November, and December). Amend a tax return 2010 Your numerator is 4. Amend a tax return 2010 5 (4 full months plus 0. Amend a tax return 2010 5). Amend a tax return 2010 You multiply the depreciation for a full year by 4. Amend a tax return 2010 5/12, or 0. Amend a tax return 2010 375. Amend a tax return 2010 Examples The following examples show how to figure depreciation under MACRS without using the percentage tables. Amend a tax return 2010 Figures are rounded for purposes of the examples. Amend a tax return 2010 Assume for all the examples that you use a calendar year as your tax year. Amend a tax return 2010 Example 1—200% DB method and half-year convention. Amend a tax return 2010 In February, you placed in service depreciable property with a 5-year recovery period and a basis of $1,000. Amend a tax return 2010 You do not elect to take the section 179 deduction and the property does not qualify for a special depreciation allowance. Amend a tax return 2010 You use GDS and the 200% declining balance (DB) method to figure your depreciation. Amend a tax return 2010 When the straight line (SL) method results in an equal or larger deduction, you switch to the SL method. Amend a tax return 2010 You did not place any property in service in the last 3 months of the year, so you must use the half-year convention. Amend a tax return 2010 First year. Amend a tax return 2010 You figure the depreciation rate under the 200% DB method by dividing 2 (200%) by 5 (the number of years in the recovery period). Amend a tax return 2010 The result is 40%. Amend a tax return 2010 You multiply the adjusted basis of the property ($1,000) by the 40% DB rate. Amend a tax return 2010 You apply the half-year convention by dividing the result ($400) by 2. Amend a tax return 2010 Depreciation for the first year under the 200% DB method is $200. Amend a tax return 2010 You figure the depreciation rate under the straight line (SL) method by dividing 1 by 5, the number of years in the recovery period. Amend a tax return 2010 The result is 20%. Amend a tax return 2010 You multiply the adjusted basis of the property ($1,000) by the 20% SL rate. Amend a tax return 2010 You apply the half-year convention by dividing the result ($200) by 2. Amend a tax return 2010 Depreciation for the first year under the SL method is $100. Amend a tax return 2010 The DB method provides a larger deduction, so you deduct the $200 figured under the 200% DB method. Amend a tax return 2010 Second year. Amend a tax return 2010 You reduce the adjusted basis ($1,000) by the depreciation claimed in the first year ($200). Amend a tax return 2010 You multiply the result ($800) by the DB rate (40%). Amend a tax return 2010 Depreciation for the second year under the 200% DB method is $320. Amend a tax return 2010 You figure the SL depreciation rate by dividing 1 by 4. Amend a tax return 2010 5, the number of years remaining in the recovery period. Amend a tax return 2010 (Based on the half-year convention, you used only half a year of the recovery period in the first year. Amend a tax return 2010 ) You multiply the reduced adjusted basis ($800) by the result (22. Amend a tax return 2010 22%). Amend a tax return 2010 Depreciation under the SL method for the second year is $178. Amend a tax return 2010 The DB method provides a larger deduction, so you deduct the $320 figured under the 200% DB method. Amend a tax return 2010 Third year. Amend a tax return 2010 You reduce the adjusted basis ($800) by the depreciation claimed in the second year ($320). Amend a tax return 2010 You multiply the result ($480) by the DB rate (40%). Amend a tax return 2010 Depreciation for the third year under the 200% DB method is $192. Amend a tax return 2010 You figure the SL depreciation rate by dividing 1 by 3. Amend a tax return 2010 5. Amend a tax return 2010 You multiply the reduced adjusted basis ($480) by the result (28. Amend a tax return 2010 57%). Amend a tax return 2010 Depreciation under the SL method for the third year is $137. Amend a tax return 2010 The DB method provides a larger deduction, so you deduct the $192 figured under the 200% DB method. Amend a tax return 2010 Fourth year. Amend a tax return 2010 You reduce the adjusted basis ($480) by the de