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Amended Kansas Tax Return

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Amended Kansas Tax Return

Amended kansas tax return 4. Amended kansas tax return   Student Loan Interest Deduction Table of Contents Introduction Student Loan Interest DefinedQualified Student Loan Qualified Education Expenses Include As Interest Do Not Include As Interest When Must Interest Be Paid Can You Claim the DeductionNo Double Benefit Allowed Figuring the DeductionEffect of the Amount of Your Income on the Amount of Your Deduction Which Worksheet To Use Claiming the Deduction Introduction Generally, personal interest you pay, other than certain mortgage interest, is not deductible on your tax return. Amended kansas tax return However, if your modified adjusted gross income (MAGI) is less than $75,000 ($155,000 if filing a joint return) there is a special deduction allowed for paying interest on a student loan (also known as an education loan) used for higher education. Amended kansas tax return For most taxpayers, MAGI is the adjusted gross income as figured on their federal income tax return before subtracting any deduction for student loan interest. Amended kansas tax return This deduction can reduce the amount of your income subject to tax by up to $2,500 in 2013. Amended kansas tax return The student loan interest deduction is taken as an adjustment to income. Amended kansas tax return This means you can claim this deduction even if you do not itemize deductions on Schedule A (Form 1040). Amended kansas tax return This chapter explains: What type of loan interest you can deduct, Whether you can claim the deduction, What expenses you must have paid with the student loan, Who is an eligible student, How to figure the deduction, and How to claim the deduction. Amended kansas tax return Table 4-1. Amended kansas tax return Student Loan Interest Deduction at a Glance This table summarizes the features of the student loan interest deduction. Amended kansas tax return Do not rely on this table alone. Amended kansas tax return Refer to the text for complete details. Amended kansas tax return Feature   Description Maximum benefit   You can reduce your income subject to tax by up to $2,500. Amended kansas tax return Loan qualifications   Your student loan: •must have been taken out solely to pay qualified education expenses, and •cannot be from a related person or made under a qualified employer plan. Amended kansas tax return Student qualifications   The student must be: •you, your spouse, or your dependent, and  •enrolled at least half-time in a degree program. Amended kansas tax return Time limit on deduction   You can deduct interest paid during the remaining period of your student loan. Amended kansas tax return Limit on modified adjusted gross income (MAGI)   $155,000 if married filing a joint return; $75,000 if single, head of household, or qualifying widow(er). Amended kansas tax return Student Loan Interest Defined Student loan interest is interest you paid during the year on a qualified student loan. Amended kansas tax return It includes both required and voluntary interest payments. Amended kansas tax return Qualified Student Loan This is a loan you took out solely to pay qualified education expenses (defined later) that were: For you, your spouse, or a person who was your dependent when you took out the loan, Paid or incurred within a reasonable period of time before or after you took out the loan, and For education provided during an academic period for an eligible student. Amended kansas tax return Loans from the following sources are not qualified student loans. Amended kansas tax return A related person. Amended kansas tax return A qualified employer plan. Amended kansas tax return Your dependent. Amended kansas tax return   Generally, your dependent is someone who is either a: Qualifying child, or Qualifying relative. Amended kansas tax return You can find more information about dependents in Publication 501. Amended kansas tax return Exceptions. Amended kansas tax return   For purposes of the student loan interest deduction, there are the following exceptions to the general rules for dependents. Amended kansas tax return An individual can be your dependent even if you are the dependent of another taxpayer. Amended kansas tax return An individual can be your dependent even if the individual files a joint return with a spouse. Amended kansas tax return An individual can be your dependent even if the individual had gross income for the year that was equal to or more than the exemption amount for the year ($3,900 for 2013). Amended kansas tax return Reasonable period of time. Amended kansas tax return   Qualified education expenses are treated as paid or incurred within a reasonable period of time before or after you take out the loan if they are paid with the proceeds of student loans that are part of a federal postsecondary education loan program. Amended kansas tax return   Even if not paid with the proceeds of that type of loan, the expenses are treated as paid or incurred within a reasonable period of time if both of the following requirements are met. Amended kansas tax return The expenses relate to a specific academic period, and The loan proceeds are disbursed within a period that begins 90 days before the start of that academic period and ends 90 days after the end of that academic period. Amended kansas tax return   If neither of the above situations applies, the reasonable period of time usually is determined based on all the relevant facts and circumstances. Amended kansas tax return Academic period. Amended kansas tax return   An academic period includes a semester, trimester, quarter, or other period of study (such as a summer school session) as reasonably determined by an educational institution. Amended kansas tax return In the case of an educational institution that uses credit hours or clock hours and does not have academic terms, each payment period can be treated as an academic period. Amended kansas tax return Eligible student. Amended kansas tax return   This is a student who was enrolled at least half-time in a program leading to a degree, certificate, or other recognized educational credential. Amended kansas tax return Enrolled at least half-time. Amended kansas tax return   A student was enrolled at least half-time if the student was taking at least half the normal full-time work load for his or her course of study. Amended kansas tax return   The standard for what is half of the normal full-time work load is determined by each eligible educational institution. Amended kansas tax return However, the standard may not be lower than any of those established by the U. Amended kansas tax return S. Amended kansas tax return Department of Education under the Higher Education Act of 1965. Amended kansas tax return Related person. Amended kansas tax return   You cannot deduct interest on a loan you get from a related person. Amended kansas tax return Related persons include: Your spouse, Your brothers and sisters, Your half brothers and half sisters, Your ancestors (parents, grandparents, etc. Amended kansas tax return ), Your lineal descendants (children, grandchildren, etc. Amended kansas tax return ), and Certain corporations, partnerships, trusts, and exempt organizations. Amended kansas tax return Qualified employer plan. Amended kansas tax return   You cannot deduct interest on a loan made under a qualified employer plan or under a contract purchased under such a plan. Amended kansas tax return Qualified Education Expenses For purposes of the student loan interest deduction, these expenses are the total costs of attending an eligible educational institution, including graduate school. Amended kansas tax return They include amounts paid for the following items. Amended kansas tax return Tuition and fees. Amended kansas tax return Room and board. Amended kansas tax return Books, supplies, and equipment. Amended kansas tax return Other necessary expenses (such as transportation). Amended kansas tax return The cost of room and board qualifies only to the extent that it is not more than the greater of: The allowance for room and board, as determined by the eligible educational institution, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student, or The actual amount charged if the student is residing in housing owned or operated by the eligible educational institution. Amended kansas tax return Eligible educational institution. Amended kansas tax return   An eligible educational institution is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U. Amended kansas tax return S. Amended kansas tax return Department of Education. Amended kansas tax return It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Amended kansas tax return   Certain educational institutions located outside the United States also participate in the U. Amended kansas tax return S. Amended kansas tax return Department of Education's Federal Student Aid (FSA) programs. Amended kansas tax return   For purposes of the student loan interest deduction, an eligible educational institution also includes an institution conducting an internship or residency program leading to a degree or certificate from an institution of higher education, a hospital, or a health care facility that offers postgraduate training. Amended kansas tax return   An educational institution must meet the above criteria only during the academic period(s) for which the student loan was incurred. Amended kansas tax return The deductibility of interest on the loan is not affected by the institution's subsequent loss of eligibility. Amended kansas tax return    The educational institution should be able to tell you if it is an eligible educational institution. Amended kansas tax return Adjustments to Qualified Education Expenses You must reduce your qualified education expenses by the total amount paid for them with the following tax-free items. Amended kansas tax return Employer-provided educational assistance. Amended kansas tax return See chapter 11, Employer-Provided Educational Assistance . Amended kansas tax return Tax-free distribution of earnings from a Coverdell education savings account (ESA). Amended kansas tax return See Tax-Free Distributions in chapter 7, Coverdell Education Savings Account. Amended kansas tax return Tax-free distribution of earnings from a qualified tuition program (QTP). Amended kansas tax return See Figuring the Taxable Portion of a Distribution in chapter 8, Qualified Tuition Program. Amended kansas tax return U. Amended kansas tax return S. Amended kansas tax return savings bond interest that you exclude from income because it is used to pay qualified education expenses. Amended kansas tax return See chapter 10, Education Savings Bond Program . Amended kansas tax return The tax-free part of scholarships and fellowships. Amended kansas tax return See Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. Amended kansas tax return Veterans' educational assistance. Amended kansas tax return See Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. Amended kansas tax return Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. Amended kansas tax return Include As Interest In addition to simple interest on the loan, if all other requirements are met, the items discussed below can be student loan interest. Amended kansas tax return Loan origination fee. Amended kansas tax return   In general, this is a one-time fee charged by the lender when a loan is made. Amended kansas tax return To be deductible as interest, a loan origination fee must be for the use of money rather than for property or services (such as commitment fees or processing costs) provided by the lender. Amended kansas tax return A loan origination fee treated as interest accrues over the term of the loan. Amended kansas tax return   Loan origination fees were not required to be reported on Form 1098-E, Student Loan Interest Statement, for loans made before September 1, 2004. Amended kansas tax return If loan origination fees are not included in the amount reported on your Form 1098-E, you can use any reasonable method to allocate the loan origination fees over the term of the loan. Amended kansas tax return The method shown in the example below allocates equal portions of the loan origination fee to each payment required under the terms of the loan. Amended kansas tax return A method that results in the double deduction of the same portion of a loan origination fee would not be reasonable. Amended kansas tax return Example. Amended kansas tax return In August 2004, Bill took out a student loan for $16,000 to pay the tuition for his senior year of college. Amended kansas tax return The lender charged a 3% loan origination fee ($480) that was withheld from the funds Bill received. Amended kansas tax return Bill began making payments on his student loan in 2013. Amended kansas tax return Because the loan origination fee was not included in his 2013 Form 1098-E, Bill can use any reasonable method to allocate that fee over the term of the loan. Amended kansas tax return Bill's loan is payable in 120 equal monthly payments. Amended kansas tax return He allocates the $480 fee equally over the total number of payments ($480 ÷ 120 months = $4 per month). Amended kansas tax return Bill made 7 payments in 2013, so he paid $28 ($4 × 7) of interest attributable to the loan origination fee. Amended kansas tax return To determine his student loan interest deduction, he will add the $28 to the amount of other interest reported to him on Form 1098-E. Amended kansas tax return Capitalized interest. Amended kansas tax return   This is unpaid interest on a student loan that is added by the lender to the outstanding principal balance of the loan. Amended kansas tax return Capitalized interest is treated as interest for tax purposes and is deductible as payments of principal are made on the loan. Amended kansas tax return No deduction for capitalized interest is allowed in a year in which no loan payments were made. Amended kansas tax return Interest on revolving lines of credit. Amended kansas tax return   This interest, which includes interest on credit card debt, is student loan interest if the borrower uses the line of credit (credit card) only to pay qualified education expenses. Amended kansas tax return See Qualified Education Expenses , earlier. Amended kansas tax return Interest on refinanced student loans. Amended kansas tax return   This includes interest on both: Consolidated loans—loans used to refinance more than one student loan of the same borrower, and Collapsed loans—two or more loans of the same borrower that are treated by both the lender and the borrower as one loan. Amended kansas tax return    If you refinance a qualified student loan for more than your original loan and you use the additional amount for any purpose other than qualified education expenses, you cannot deduct any interest paid on the refinanced loan. Amended kansas tax return Voluntary interest payments. Amended kansas tax return   These are payments made on a qualified student loan during a period when interest payments are not required, such as when the borrower has been granted a deferment or the loan has not yet entered repayment status. Amended kansas tax return Example. Amended kansas tax return The payments on Roger's student loan were scheduled to begin in June 2012, 6 months after he graduated from college. Amended kansas tax return He began making payments as required. Amended kansas tax return In September 2013, Roger enrolled in graduate school on a full-time basis. Amended kansas tax return He applied for and was granted deferment of his loan payments while in graduate school. Amended kansas tax return Wanting to pay down his student loan as much as possible, he made loan payments in October and November 2013. Amended kansas tax return Even though these were voluntary (not required) payments, Roger can deduct the interest paid in October and November. Amended kansas tax return Allocating Payments Between Interest and Principal The allocation of payments between interest and principal for tax purposes might not be the same as the allocation shown on the Form 1098-E or other statement you receive from the lender or loan servicer. Amended kansas tax return To make the allocation for tax purposes, a payment generally applies first to stated interest that remains unpaid as of the date the payment is due, second to any loan origination fees allocable to the payment, third to any capitalized interest that remains unpaid as of the date the payment is due, and fourth to the outstanding principal. Amended kansas tax return Example. Amended kansas tax return In August 2012, Peg took out a $10,000 student loan to pay the tuition for her senior year of college. Amended kansas tax return The lender charged a 3% loan origination fee ($300) that was withheld from the funds Peg received. Amended kansas tax return The interest (5% simple) on this loan accrued while she completed her senior year and for 6 months after she graduated. Amended kansas tax return At the end of that period, the lender determined the amount to be repaid by capitalizing all accrued but unpaid interest ($625 interest accrued from August 2012 through October 2013) and adding it to the outstanding principal balance of the loan. Amended kansas tax return The loan is payable over 60 months, with a payment of $200. Amended kansas tax return 51 due on the first of each month, beginning November 2013. Amended kansas tax return Peg did not receive a Form 1098-E for 2013 from her lender because the amount of interest she paid did not require the lender to issue an information return. Amended kansas tax return However, she did receive an account statement from the lender that showed the following 2013 payments on her outstanding loan of $10,625 ($10,000 principal + $625 accrued but unpaid interest). Amended kansas tax return Payment Date   Payment   Stated Interest   Principal November 2013   $200. Amended kansas tax return 51   $44. Amended kansas tax return 27   $156. Amended kansas tax return 24 December 2013   $200. Amended kansas tax return 51   $43. Amended kansas tax return 62   $156. Amended kansas tax return 89 Totals   $401. Amended kansas tax return 02   $87. Amended kansas tax return 89   $313. Amended kansas tax return 13 To determine the amount of interest that could be deducted on the loan for 2013, Peg starts with the total amount of stated interest she paid, $87. Amended kansas tax return 89. Amended kansas tax return Next, she allocates the loan origination fee over the term of the loan ($300 ÷ 60 months = $5 per month). Amended kansas tax return A total of $10 ($5 of each of the two principal payments) should be treated as interest for tax purposes. Amended kansas tax return Peg then applies the unpaid capitalized interest ($625) to the two principal payments in the order in which they were made, and determines that the remaining amount of principal of both payments is treated as interest for tax purposes. Amended kansas tax return Assuming that Peg qualifies to take the student loan interest deduction, she can deduct $401. Amended kansas tax return 02 ($87. Amended kansas tax return 89 + $10 + $303. Amended kansas tax return 13). Amended kansas tax return For 2014, Peg will continue to allocate $5 of the loan origination fee to the principal portion of each monthly payment she makes and treat that amount as interest for tax purposes. Amended kansas tax return She also will apply the remaining amount of capitalized interest ($625 − $303. Amended kansas tax return 13 = $321. Amended kansas tax return 87) to the principal payments in the order in which they are made until the balance is zero, and treat those amounts as interest for tax purposes. Amended kansas tax return Do Not Include As Interest You cannot claim a student loan interest deduction for any of the following items. Amended kansas tax return Interest you paid on a loan if, under the terms of the loan, you are not legally obligated to make interest payments. Amended kansas tax return Loan origination fees that are payments for property or services provided by the lender, such as commitment fees or processing costs. Amended kansas tax return Interest you paid on a loan to the extent payments were made through your participation in the National Health Service Corps Loan Repayment Program (the “NHSC Loan Repayment Program”) or certain other loan repayment assistance programs. Amended kansas tax return For more information, see Student Loan Repayment Assistance in chapter 5, Student Loan Cancellations and Repayment Assistance. Amended kansas tax return When Must Interest Be Paid You can deduct all interest you paid during the year on your student loan, including voluntary payments, until the loan is paid off. Amended kansas tax return Can You Claim the Deduction Generally, you can claim the deduction if all of the following requirements are met. Amended kansas tax return Your filing status is any filing status except married filing separately. Amended kansas tax return No one else is claiming an exemption for you on his or her tax return. Amended kansas tax return You are legally obligated to pay interest on a qualified student loan. Amended kansas tax return You paid interest on a qualified student loan. Amended kansas tax return Claiming an exemption for you. Amended kansas tax return   Another taxpayer is claiming an exemption for you if he or she lists your name and other required information on his or her Form 1040 (or Form 1040A), line 6c, or Form 1040NR, line 7c. Amended kansas tax return Example 1. Amended kansas tax return During 2013, Josh paid $600 interest on his qualified student loan. Amended kansas tax return Only he is legally obligated to make the payments. Amended kansas tax return No one claimed an exemption for Josh for 2013. Amended kansas tax return Assuming all other requirements are met, Josh can deduct the $600 of interest he paid on his 2013 Form 1040 or 1040A. Amended kansas tax return Example 2. Amended kansas tax return During 2013, Jo paid $1,100 interest on her qualified student loan. Amended kansas tax return Only she is legally obligated to make the payments. Amended kansas tax return Jo's parents claimed an exemption for her on their 2013 tax return. Amended kansas tax return In this case, neither Jo nor her parents may deduct the student loan interest Jo paid in 2013. Amended kansas tax return Interest paid by others. Amended kansas tax return   If you are the person legally obligated to make interest payments and someone else makes a payment of interest on your behalf, you are treated as receiving the payments from the other person and, in turn, paying the interest. Amended kansas tax return Example 1. Amended kansas tax return Darla obtained a qualified student loan to attend college. Amended kansas tax return After Darla's graduation from college, she worked as an intern for a nonprofit organization. Amended kansas tax return As part of the internship program, the nonprofit organization made an interest payment on behalf of Darla. Amended kansas tax return This payment was treated as additional compensation and reported in box 1 of her Form W-2. Amended kansas tax return Assuming all other qualifications are met, Darla can deduct this payment of interest on her tax return. Amended kansas tax return Example 2. Amended kansas tax return Ethan obtained a qualified student loan to attend college. Amended kansas tax return After graduating from college, the first monthly payment on his loan was due in December. Amended kansas tax return As a gift, Ethan's mother made this payment for him. Amended kansas tax return No one is claiming a dependency exemption for Ethan on his or her tax return. Amended kansas tax return Assuming all other qualifications are met, Ethan can deduct this payment of interest on his tax return. Amended kansas tax return No Double Benefit Allowed You cannot deduct as interest on a student loan any amount that is an allowable deduction under any other provision of the tax law (for example, as home mortgage interest). Amended kansas tax return Figuring the Deduction Your student loan interest deduction for 2013 is generally the smaller of: $2,500, or The interest you paid in 2013. Amended kansas tax return However, the amount determined above may be gradually reduced (phased out) or eliminated based on your filing status and MAGI as explained below. Amended kansas tax return You can use Worksheet 4-1. Amended kansas tax return Student Loan Interest Deduction Worksheet (at the end of this chapter) to figure both your MAGI and your deduction. Amended kansas tax return Form 1098-E. Amended kansas tax return   To help you figure your student loan interest deduction, you should receive Form 1098-E. Amended kansas tax return Generally, an institution (such as a bank or governmental agency) that received interest payments of $600 or more during 2013 on one or more qualified student loans must send Form 1098-E (or acceptable substitute) to each borrower by January 31, 2014. Amended kansas tax return   For qualified student loans taken out before September 1, 2004, the institution is required to include on Form 1098-E only payments of stated interest. Amended kansas tax return Other interest payments, such as certain loan origination fees and capitalized interest, may not appear on the form you receive. Amended kansas tax return However, if you pay qualifying interest that is not included on Form 1098-E, you can also deduct those amounts. Amended kansas tax return See Allocating Payments Between Interest and Principal , earlier. Amended kansas tax return    The lender may ask for a completed Form W-9S, or similar statement to obtain the borrower's name, address, and taxpayer identification number. Amended kansas tax return The form may also be used by the borrower to certify that the student loan was incurred solely to pay for qualified education expenses. Amended kansas tax return Effect of the Amount of Your Income on the Amount of Your Deduction The amount of your student loan interest deduction is phased out (gradually reduced) if your MAGI is between $60,000 and $75,000 ($125,000 and $155,000 if you file a joint return). Amended kansas tax return You cannot take a student loan interest deduction if your MAGI is $75,000 or more ($155,000 or more if you file a joint return). Amended kansas tax return Modified adjusted gross income (MAGI). Amended kansas tax return   For most taxpayers, MAGI is adjusted gross income (AGI) as figured on their federal income tax return before subtracting any deduction for student loan interest. Amended kansas tax return However, as discussed below, there may be other modifications. Amended kansas tax return Table 4-2 shows how the amount of your MAGI can affect your student loan interest deduction. Amended kansas tax return Table 4-2. Amended kansas tax return Effect of MAGI on Student Loan Interest Deduction IF your filing status is. Amended kansas tax return . Amended kansas tax return . Amended kansas tax return AND your MAGI is. Amended kansas tax return . Amended kansas tax return . Amended kansas tax return THEN your student loan interest deduction is. Amended kansas tax return . Amended kansas tax return . Amended kansas tax return single,  head of household, or qualifying widow(er) not more than $60,000 not affected by the phaseout. Amended kansas tax return more than $60,000  but less than $75,000 reduced because of the phaseout. Amended kansas tax return $75,000 or more eliminated by the phaseout. Amended kansas tax return married filing joint return not more than $125,000 not affected by the phaseout. Amended kansas tax return more than $125,000 but less than $155,000 reduced because of the phaseout. Amended kansas tax return $155,000 or more eliminated by the phaseout. Amended kansas tax return MAGI when using Form 1040A. Amended kansas tax return   If you file Form 1040A, your MAGI is the AGI on line 22 of that form figured without taking into account any amount on line 18 (student loan interest deduction) and line 19 (tuition and fees deduction). Amended kansas tax return MAGI when using Form 1040. Amended kansas tax return   If you file Form 1040, your MAGI is the AGI on line 38 of that form figured without taking into account any amount on line 33 (student loan interest deduction), line 34 (tuition and fees deduction), or line 35 (domestic production activities deduction), and modified by adding back any: Foreign earned income exclusion, Foreign housing exclusion, Foreign housing deduction, Exclusion of income by bona fide residents of American Samoa, and Exclusion of income by bona fide residents of Puerto Rico. Amended kansas tax return MAGI when using Form 1040NR. Amended kansas tax return   If you file Form 1040NR, your MAGI is the AGI on line 36 of that form figured without taking into account any amount on line 33 (student loan interest deduction) and line 34 (domestic production activities deduction). Amended kansas tax return MAGI when using Form 1040NR-EZ. Amended kansas tax return   If you file Form 1040NR-EZ, your MAGI is the AGI on line 10 of that form figured without taking into account any amount on line 9 (student loan interest deduction). Amended kansas tax return Phaseout. Amended kansas tax return   If your MAGI is within the range of incomes where the credit must be reduced, you must figure your reduced deduction. Amended kansas tax return To figure the phaseout, multiply your interest deduction (before the phaseout) by a fraction. Amended kansas tax return The numerator is your MAGI minus $60,000 ($125,000 in the case of a joint return). Amended kansas tax return The denominator is $15,000 ($30,000 in the case of a joint return). Amended kansas tax return Subtract the result from your deduction (before the phaseout) to give you the amount you can deduct. Amended kansas tax return Example 1. Amended kansas tax return During 2013 you paid $800 interest on a qualified student loan. Amended kansas tax return Your 2013 MAGI is $145,000 and you are filing a joint return. Amended kansas tax return You must reduce your deduction by $533, figured as follows. Amended kansas tax return   $800 × $145,000 − $125,000  $30,000 = $533   Your reduced student loan interest deduction is $267 ($800 − $533). Amended kansas tax return Example 2. Amended kansas tax return The facts are the same as in Example 1 except that you paid $2,750 interest. Amended kansas tax return Your maximum deduction for 2013 is $2,500. Amended kansas tax return You must reduce your maximum deduction by $1,667, figured as follows. Amended kansas tax return   $2,500 × $145,000 − $125,000  $30,000 = $1,667   In this example, your reduced student loan interest deduction is $833 ($2,500 − $1,667). Amended kansas tax return Which Worksheet To Use Generally, you figure the deduction using the Student Loan Interest Deduction Worksheet in the instructions for Form 1040, Form 1040A, or Form 1040NR. Amended kansas tax return However, if you are filing Form 2555, Foreign Earned Income, Form 2555-EZ, Foreign Earned Income Exclusion, or Form 4563, Exclusion of Income for Bona Fide Residents of American Samoa, or you are excluding income from sources within Puerto Rico, you must complete Worksheet 4-1. Amended kansas tax return Student Loan Interest Deduction Worksheet at the end of this chapter. Amended kansas tax return Claiming the Deduction The student loan interest deduction is an adjustment to income. Amended kansas tax return To claim the deduction, enter the allowable amount on line 33 (Form 1040), line 18 (Form 1040A), line 33 (Form 1040NR), or line 9 (Form 1040NR-EZ). Amended kansas tax return Worksheet 4-1. Amended kansas tax return Student Loan Interest Deduction Worksheet Use this worksheet instead of the worksheet in the Form 1040 instructions if you are filing Form 2555, 2555-EZ, or 4563, or you are excluding income from sources within Puerto Rico. Amended kansas tax return Before using this worksheet, you must complete Form 1040, lines 7 through 32, plus any amount to be entered on the dotted line next to line 36. Amended kansas tax return 1. Amended kansas tax return Enter the total interest you paid in 2013 on qualified student loans. Amended kansas tax return Do not enter  more than $2,500 1. Amended kansas tax return   2. Amended kansas tax return Enter the amount from Form 1040, line 22 2. Amended kansas tax return       3. Amended kansas tax return Enter the total of the amounts from Form 1040,  lines 23 through 32 3. Amended kansas tax return           4. Amended kansas tax return Enter the total of any amounts entered on the dotted line next to Form 1040, line 36 4. Amended kansas tax return           5. Amended kansas tax return Add lines 3 and 4 5. Amended kansas tax return       6. Amended kansas tax return Subtract line 5 from line 2 6. Amended kansas tax return       7. Amended kansas tax return Enter any foreign earned income exclusion and/or housing  exclusion (Form 2555, line 45, or Form 2555-EZ, line 18) 7. Amended kansas tax return       8. Amended kansas tax return Enter any foreign housing deduction (Form 2555, line 50) 8. Amended kansas tax return       9. Amended kansas tax return Enter the amount of income from Puerto Rico you are excluding 9. Amended kansas tax return       10. Amended kansas tax return Enter the amount of income from American Samoa  you are excluding (Form 4563, line 15) 10. Amended kansas tax return       11. Amended kansas tax return Add lines 6 through 10. Amended kansas tax return This is your modified adjusted gross income 11. Amended kansas tax return   12. Amended kansas tax return Enter the amount shown below for your filing status 12. Amended kansas tax return     •Single, head of household, or qualifying widow(er)—$60,000       •Married filing jointly—$125,000     13. Amended kansas tax return Is the amount on line 11 more than the amount on line 12?       □ No. Amended kansas tax return Skip lines 13 and 14, enter -0- on line 15, and go to line 16. Amended kansas tax return       □ Yes. Amended kansas tax return Subtract line 12 from line 11 13. Amended kansas tax return   14. Amended kansas tax return Divide line 13 by $15,000 ($30,000 if married filing jointly). Amended kansas tax return Enter the result as a decimal  (rounded to at least three places). Amended kansas tax return If the result is 1. Amended kansas tax return 000 or more, enter 1. Amended kansas tax return 000 14. Amended kansas tax return . Amended kansas tax return 15. Amended kansas tax return Multiply line 1 by line 14 15. Amended kansas tax return   16. Amended kansas tax return Student loan interest deduction. Amended kansas tax return Subtract line 15 from line 1. Amended kansas tax return Enter the result here  and on Form 1040, line 33. Amended kansas tax return Do not include this amount in figuring any other  deduction on your return (such as on Schedule A, C, E, etc. Amended kansas tax return ) 16. Amended kansas tax return   Prev  Up  Next   Home   More Online Publications
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The Amended Kansas Tax Return

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