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Do Military Pay Taxes

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Do Military Pay Taxes

Do military pay taxes 7. Do military pay taxes   Depreciation, Depletion, and Amortization Table of Contents What's New for 2013 Introduction Topics - This chapter discusses: Useful Items - You may want to see: Overview of DepreciationWhat Property Can Be Depreciated? What Property Cannot Be Depreciated? When Does Depreciation Begin and End? Can You Use MACRS To Depreciate Your Property? What Is the Basis of Your Depreciable Property? How Do You Treat Repairs and Improvements? Do You Have To File Form 4562? How Do You Correct Depreciation Deductions? Section 179 Expense DeductionWhat Property Qualifies? What Property Does Not Qualify? How Much Can You Deduct? How Do You Elect the Deduction? When Must You Recapture the Deduction? Claiming the Special Depreciation AllowanceWhat is Qualified Property? How Can You Elect Not To Claim the Allowance? When Must You Recapture an Allowance Figuring Depreciation Under MACRSWhich Depreciation System (GDS or ADS) Applies? Which Property Class Applies Under GDS? What Is the Placed-in-Service Date? What Is the Basis for Depreciation? Which Recovery Period Applies? Which Convention Applies? Which Depreciation Method Applies? How Is the Depreciation Deduction Figured? How Do You Use General Asset Accounts? When Do You Recapture MACRS Depreciation? Additional Rules for Listed PropertyWhat Is Listed Property? What Is the Business-Use Requirement? Do the Passenger Automobile Limits Apply? Depletion Who Can Claim Depletion? Figuring Depletion AmortizationBusiness Start-Up Costs Reforestation Costs Section 197 Intangibles What's New for 2013 Increased section 179 expense deduction dollar limits. Do military pay taxes  The maximum amount you can elect to deduct for most section 179 property you placed in service in 2013 is $500,000. Do military pay taxes This limit is reduced by the amount by which the cost of the property placed in service during the tax year exceeds $2 million. Do military pay taxes See Dollar Limits under Section 179 Expense Deduction , later. Do military pay taxes Extension of special depreciation allowance for certain qualified property acquired after December 31, 2007. Do military pay taxes . Do military pay taxes  You may be able to take a 50% special depreciation allowance for certain qualified property acquired after December 31, 2007, and placed in service before January 1, 2014. Do military pay taxes See Claiming the Special Depreciation Allowance , later. Do military pay taxes Expiration of the 3- year recovery period for certain race horses. Do military pay taxes  The 3-year recovery period for race horses two years old or younger will expire for such horses placed in service after December 31, 2013. Do military pay taxes Introduction If you buy or make improvements to farm property such as machinery, equipment, livestock, or a structure with a useful life of more than a year, you generally cannot deduct its entire cost in one year. Do military pay taxes Instead, you must spread the cost over the time you use the property and deduct part of it each year. Do military pay taxes For most types of property, this is called depreciation. Do military pay taxes This chapter gives information on depreciation methods that generally apply to property placed in service after 1986. Do military pay taxes For information on depreciating pre-1987 property, see Publication 534, Depreciating Property Placed in Service Before 1987. Do military pay taxes Topics - This chapter discusses: Overview of depreciation Section 179 expense deduction Special depreciation allowance Modified Accelerated Cost Recovery System (MACRS) Listed property Basic information on cost depletion (including timber depletion) and percentage depletion Amortization of the costs of going into business, reforestation costs, the costs of pollution control facilities, and the costs of section 197 intangibles Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 534 Depreciating Property Placed in Service Before 1987 535 Business Expenses 544 Sales and Other Dispositions of Assets 551 Basis of Assets 946 How To Depreciate Property Form (and Instructions) T (Timber), Forest Activities Schedule 3115 Application for Change in Accounting Method 4562 Depreciation and Amortization 4797 Sales of Business Property See chapter 16 for information about getting publications and forms. Do military pay taxes It is important to keep good records for property you depreciate. Do military pay taxes Do not file these records with your return. Do military pay taxes Instead, you should keep them as part of the permanent records of the depreciated property. Do military pay taxes They will help you verify the accuracy of the depreciation of assets placed in service in the current and previous tax years. Do military pay taxes For general information on recordkeeping, see Publication 583, Starting a Business and Keeping Records. Do military pay taxes For specific information on keeping records for section 179 property and listed property, see Publication 946, How To Depreciate Property. Do military pay taxes Overview of Depreciation This overview discusses basic information on the following. Do military pay taxes What property can be depreciated. Do military pay taxes What property cannot be depreciated. Do military pay taxes When depreciation begins and ends. Do military pay taxes Whether MACRS can be used to figure depreciation. Do military pay taxes What is the basis of your depreciable property. Do military pay taxes How to treat repairs and improvements. Do military pay taxes When you must file Form 4562. Do military pay taxes How you can correct depreciation claimed incorrectly. Do military pay taxes What Property Can Be Depreciated? You can depreciate most types of tangible property (except land), such as buildings, machinery, equipment, vehicles, certain livestock, and furniture. Do military pay taxes You can also depreciate certain intangible property, such as copyrights, patents, and computer software. Do military pay taxes To be depreciable, the property must meet all the following requirements. Do military pay taxes It must be property you own. Do military pay taxes It must be used in your business or income-producing activity. Do military pay taxes It must have a determinable useful life. Do military pay taxes It must have a useful life that extends substantially beyond the year you place it in service. Do military pay taxes Property You Own To claim depreciation, you usually must be the owner of the property. Do military pay taxes You are considered as owning property even if it is subject to a debt. Do military pay taxes Leased property. Do military pay taxes   You can depreciate leased property only if you retain the incidents of ownership in the property. Do military pay taxes This means you bear the burden of exhaustion of the capital investment in the property. Do military pay taxes Therefore, if you lease property from someone to use in your trade or business or for the production of income, you generally cannot depreciate its cost because you do not retain the incidents of ownership. Do military pay taxes You can, however, depreciate any capital improvements you make to the leased property. Do military pay taxes See Additions and Improvements under Which Recovery Period Applies in chapter 4 of Publication 946. Do military pay taxes   If you lease property to someone, you generally can depreciate its cost even if the lessee (the person leasing from you) has agreed to preserve, replace, renew, and maintain the property. Do military pay taxes However, you cannot depreciate the cost of the property if the lease provides that the lessee is to maintain the property and return to you the same property or its equivalent in value at the expiration of the lease in as good condition and value as when leased. Do military pay taxes Life tenant. Do military pay taxes   Generally, if you hold business or investment property as a life tenant, you can depreciate it as if you were the absolute owner of the property. Do military pay taxes See Certain term interests in property , later, for an exception. Do military pay taxes Property Used in Your Business or Income-Producing Activity To claim depreciation on property, you must use it in your business or income-producing activity. Do military pay taxes If you use property to produce income (investment use), the income must be taxable. Do military pay taxes You cannot depreciate property that you use solely for personal activities. Do military pay taxes However, if you use property for business or investment purposes and for personal purposes, you can deduct depreciation based only on the percentage of business or investment use. Do military pay taxes Example 1. Do military pay taxes   If you use your car for farm business, you can deduct depreciation based on its percentage of use in farming. Do military pay taxes If you also use it for investment purposes, you can depreciate it based on its percentage of investment use. Do military pay taxes Example 2. Do military pay taxes   If you use part of your home for business, you may be able to deduct depreciation on that part based on its business use. Do military pay taxes For more information, see Business Use of Your Home in chapter 4. Do military pay taxes Inventory. Do military pay taxes   You can never depreciate inventory because it is not held for use in your business. Do military pay taxes Inventory is any property you hold primarily for sale to customers in the ordinary course of your business. Do military pay taxes Livestock. Do military pay taxes   Livestock purchased for draft, breeding, or dairy purposes can be depreciated only if they are not kept in an inventory account. Do military pay taxes Livestock you raise usually has no depreciable basis because the costs of raising them are deducted and not added to their basis. Do military pay taxes However, see Immature livestock under When Does Depreciation Begin and End , later, for a special rule. Do military pay taxes Property Having a Determinable Useful Life To be depreciable, your property must have a determinable useful life. Do military pay taxes This means it must be something that wears out, decays, gets used up, becomes obsolete, or loses its value from natural causes. Do military pay taxes Irrigation systems and water wells. Do military pay taxes   Irrigation systems and wells used in a trade or business can be depreciated if their useful life can be determined. Do military pay taxes You can depreciate irrigation systems and wells composed of masonry, concrete, tile, metal, or wood. Do military pay taxes In addition, you can depreciate costs for moving dirt to construct irrigation systems and water wells composed of these materials. Do military pay taxes However, land preparation costs for center pivot irrigation systems are not depreciable. Do military pay taxes Dams, ponds, and terraces. Do military pay taxes   In general, you cannot depreciate earthen dams, ponds, and terraces unless the structures have a determinable useful life. Do military pay taxes What Property Cannot Be Depreciated? Certain property cannot be depreciated, even if the requirements explained earlier are met. Do military pay taxes This includes the following. Do military pay taxes Land. Do military pay taxes You can never depreciate the cost of land because land does not wear out, become obsolete, or get used up. Do military pay taxes The cost of land generally includes the cost of clearing, grading, planting, and landscaping. Do military pay taxes Although you cannot depreciate land, you can depreciate certain costs incurred in preparing land for business use. Do military pay taxes See chapter 1 of Publication 946. Do military pay taxes Property placed in service and disposed of in the same year. Do military pay taxes Determining when property is placed in service is explained later. Do military pay taxes Equipment used to build capital improvements. Do military pay taxes You must add otherwise allowable depreciation on the equipment during the period of construction to the basis of your improvements. Do military pay taxes Intangible property such as section 197 intangibles. Do military pay taxes This property does not have a determinable useful life and generally cannot be depreciated. Do military pay taxes However, see Amortization , later. Do military pay taxes Special rules apply to computer software (discussed below). Do military pay taxes Certain term interests (discussed below). Do military pay taxes Computer software. Do military pay taxes   Computer software is generally not a section 197 intangible even if acquired in connection with the acquisition of a business, if it meets all of the following tests. Do military pay taxes It is readily available for purchase by the general public. Do military pay taxes It is subject to a nonexclusive license. Do military pay taxes It has not been substantially modified. Do military pay taxes   If the software meets the tests above, it can be depreciated and may qualify for the section 179 expense deduction and the special depreciation allowance (if applicable), discussed later. Do military pay taxes Certain term interests in property. Do military pay taxes   You cannot depreciate a term interest in property created or acquired after July 27, 1989, for any period during which the remainder interest is held, directly or indirectly, by a person related to you. Do military pay taxes This rule does not apply to the holder of a term interest in property acquired by gift, bequest, or inheritance. Do military pay taxes For more information, see chapter 1 of Publication 946. Do military pay taxes When Does Depreciation Begin and End? You begin to depreciate your property when you place it in service for use in your trade or business or for the production of income. Do military pay taxes You stop depreciating property either when you have fully recovered your cost or other basis or when you retire it from service, whichever happens first. Do military pay taxes Placed in Service Property is placed in service when it is ready and available for a specific use, whether in a business activity, an income-producing activity, a tax-exempt activity, or a personal activity. Do military pay taxes Even if you are not using the property, it is in service when it is ready and available for its specific use. Do military pay taxes Example. Do military pay taxes You bought a planter for use in your farm business. Do military pay taxes The planter was delivered in December 2012 after harvest was over. Do military pay taxes You begin to depreciate the planter for 2012 because it was ready and available for its specific use in 2012, even though it will not be used until the spring of 2013. Do military pay taxes If your planter comes unassembled in December 2012 and is put together in February 2013, it is not placed in service until 2013. Do military pay taxes You begin to depreciate it in 2013. Do military pay taxes If your planter was delivered and assembled in February 2013 but not used until April 2013, it is placed in service in February 2013, because this is when the planter was ready for its specified use. Do military pay taxes You begin to depreciate it in 2013. Do military pay taxes Fruit or nut trees and vines. Do military pay taxes   If you acquire an orchard, grove, or vineyard before the trees or vines have reached the income-producing stage, and they have a preproductive period of more than 2 years, you must capitalize the preproductive-period costs under the uniform capitalization rules (unless you elect not to use these rules). Do military pay taxes See chapter 6 for information about the uniform capitalization rules. Do military pay taxes Your depreciation begins when the trees and vines reach the income-producing stage (that is, when they bear fruit, nuts, or grapes in quantities sufficient to commercially warrant harvesting). Do military pay taxes Immature livestock. Do military pay taxes   Depreciation for livestock begins when the livestock reaches the age of maturity. Do military pay taxes If you bought immature livestock for drafting purposes, depreciation begins when they can be worked. Do military pay taxes If you bought immature livestock for dairy purposes, depreciation begins when they can be milked. Do military pay taxes If you bought immature livestock for breeding purposes, depreciation begins when they can be bred. Do military pay taxes Your basis for depreciation is your initial cost for the immature livestock. Do military pay taxes Idle Property Continue to claim a deduction for depreciation on property used in your business or for the production of income even if it is temporarily idle. Do military pay taxes For example, if you stop using a machine because there is a temporary lack of a market for a product made with that machine, continue to deduct depreciation on the machine. Do military pay taxes Cost or Other Basis Fully Recovered You stop depreciating property when you have fully recovered your cost or other basis. Do military pay taxes This happens when your section 179 and allowed or allowable depreciation deductions equal your cost or investment in the property. Do military pay taxes Retired From Service You stop depreciating property when you retire it from service, even if you have not fully recovered its cost or other basis. Do military pay taxes You retire property from service when you permanently withdraw it from use in a trade or business or from use in the production of income because of any of the following events. Do military pay taxes You sell or exchange the property. Do military pay taxes You convert the property to personal use. Do military pay taxes You abandon the property. Do military pay taxes You transfer the property to a supplies or scrap account. Do military pay taxes The property is destroyed. Do military pay taxes For information on abandonment of property, see chapter 8. Do military pay taxes For information on destroyed property, see chapter 11 and Publication 547, Casualties, Disasters, and Thefts. Do military pay taxes Can You Use MACRS To Depreciate Your Property? You must use the Modified Accelerated Cost Recovery System (MACRS) to depreciate most business and investment property placed in service after 1986. Do military pay taxes MACRS is explained later under Figuring Depreciation Under MACRS . Do military pay taxes You cannot use MACRS to depreciate the following property. Do military pay taxes Property you placed in service before 1987. Do military pay taxes Use the methods discussed in Publication 534. Do military pay taxes Certain property owned or used in 1986. Do military pay taxes See chapter 1 of Publication 946. Do military pay taxes Intangible property. Do military pay taxes Films, video tapes, and recordings. Do military pay taxes Certain corporate or partnership property acquired in a nontaxable transfer. Do military pay taxes Property you elected to exclude from MACRS. Do military pay taxes For more information, see chapter 1 of Publication 946. Do military pay taxes What Is the Basis of Your Depreciable Property? To figure your depreciation deduction, you must determine the basis of your property. Do military pay taxes To determine basis, you need to know the cost or other basis of your property. Do military pay taxes Cost or other basis. Do military pay taxes   The basis of property you buy is usually its cost plus amounts you paid for items such as sales tax, freight charges, and installation and testing fees. Do military pay taxes The cost includes the amount you pay in cash, debt obligations, other property, or services. Do military pay taxes   There are times when you cannot use cost as basis. Do military pay taxes In these situations, the fair market value (FMV) or the adjusted basis of the property may be used. Do military pay taxes Adjusted basis. Do military pay taxes   To find your property's basis for depreciation, you may have to make certain adjustments (increases and decreases) to the basis of the property for events occurring between the time you acquired the property and the time you placed it in service. Do military pay taxes Basis adjustment for depreciation allowed or allowable. Do military pay taxes   After you place your property in service, you must reduce the basis of the property by the depreciation allowed or allowable, whichever is greater. Do military pay taxes Depreciation allowed is depreciation you actually deducted (from which you received a tax benefit). Do military pay taxes Depreciation allowable is depreciation you are entitled to deduct. Do military pay taxes   If you do not claim depreciation you are entitled to deduct, you must still reduce the basis of the property by the full amount of depreciation allowable. Do military pay taxes   If you deduct more depreciation than you should, you must reduce your basis by any amount deducted from which you received a tax benefit (the depreciation allowed). Do military pay taxes   For more information, see chapter 6. Do military pay taxes How Do You Treat Repairs and Improvements? You generally deduct the cost of repairing business property in the same way as any other business expense. Do military pay taxes However, if a repair or replacement increases the value of your property, makes it more useful, or lengthens its life, you must treat it as an improvement and depreciate it. Do military pay taxes Treat improvements as separate depreciable property. Do military pay taxes See chapter 1 of Publication 946 for more information. Do military pay taxes Example. Do military pay taxes You repair a small section on a corner of the roof of a barn that you rent to others. Do military pay taxes You deduct the cost of the repair as a business expense. Do military pay taxes However, if you replace the entire roof, the new roof is considered to be an improvement because it increases the value and lengthens the life for the property. Do military pay taxes You depreciate the cost of the new roof. Do military pay taxes Improvements to rented property. Do military pay taxes   You can depreciate permanent improvements you make to business property you rent from someone else. Do military pay taxes Do You Have To File Form 4562? Use Form 4562 to claim your deduction for depreciation and amortization. Do military pay taxes You must complete and attach Form 4562 to your tax return if you are claiming any of the following. Do military pay taxes A section 179 expense deduction for the current year or a section 179 carryover from a prior year. Do military pay taxes Depreciation for property placed in service during the current year. Do military pay taxes Depreciation on any vehicle or other listed property, regardless of when it was placed in service. Do military pay taxes Amortization of costs that began in the current year. Do military pay taxes For more information, see the Instructions for Form 4562. Do military pay taxes How Do You Correct Depreciation Deductions? If you deducted an incorrect amount of depreciation in any year, you may be able to make a correction by filing an amended return for that year. Do military pay taxes You can file an amended return to correct the amount of depreciation claimed for any property in any of the following situations. Do military pay taxes You claimed the incorrect amount because of a mathematical error made in any year. Do military pay taxes You claimed the incorrect amount because of a posting error made in any year, for example, omitting an asset from the depreciation schedule. Do military pay taxes You have not adopted a method of accounting for the property placed in service by you in tax years ending after December 29, 2003. Do military pay taxes You claimed the incorrect amount on property placed in service by you in tax years ending before December 30, 2003. Do military pay taxes Note. Do military pay taxes You have adopted a method of accounting if you used the same incorrect method of depreciation for two or more consecutively filed returns. Do military pay taxes If you are not allowed to make the correction on an amended return, you may be able to change your accounting method to claim the correct amount of depreciation. Do military pay taxes See the Instructions for Form 3115. Do military pay taxes Section 179 Expense Deduction You can elect to recover all or part of the cost of certain qualifying property, up to a limit, by deducting it in the year you place the property in service. Do military pay taxes This is the section 179 expense deduction. Do military pay taxes You can elect the section 179 expense deduction instead of recovering the cost by taking depreciation deductions. Do military pay taxes This part of the chapter explains the rules for the section 179 expense deduction. Do military pay taxes It explains what property qualifies for the deduction, what property does not qualify for the deduction, the limits that may apply, how to elect the deduction, and when you may have to recapture the deduction. Do military pay taxes For more information, see chapter 2 of Publication 946. Do military pay taxes What Property Qualifies? To qualify for the section 179 expense deduction, your property must meet all the following requirements. Do military pay taxes It must be eligible property. Do military pay taxes It must be acquired for business use. Do military pay taxes It must have been acquired by purchase. Do military pay taxes Eligible Property To qualify for the section 179 expense deduction, your property must be one of the following types of depreciable property. Do military pay taxes Tangible personal property. Do military pay taxes Qualified real property. Do military pay taxes (Special rules apply to qualified real property that you elect to treat as qualified section 179 real property. Do military pay taxes For more information, see chapter 2 of Publication 946 and section 179(f) of the Internal Revenue Code. Do military pay taxes ) Other tangible property (except buildings and their structural components) used as: An integral part of manufacturing, production, or extraction or of furnishing transportation, communications, electricity, gas, water, or sewage disposal services; A research facility used in connection with any of the activities in (a) above; or A facility used in connection with any of the activities in (a) for the bulk storage of fungible commodities. Do military pay taxes Single purpose agricultural (livestock) or horticultural structures. Do military pay taxes Storage facilities (except buildings and their structural components) used in connection with distributing petroleum or any primary product of petroleum. Do military pay taxes Off-the-shelf computer software that is readily available for purchase by the general public, is subject to a nonexclusive lease, and has not been substantially modified. Do military pay taxes Tangible personal property. Do military pay taxes   Tangible personal property is any tangible property that is not real property. Do military pay taxes It includes the following property. Do military pay taxes Machinery and equipment. Do military pay taxes Property contained in or attached to a building (other than structural components), such as milk tanks, automatic feeders, barn cleaners, and office equipment. Do military pay taxes Gasoline storage tanks and pumps at retail service stations. Do military pay taxes Livestock, including horses, cattle, hogs, sheep, goats, and mink and other fur-bearing animals. Do military pay taxes Facility used for the bulk storage of fungible commodities. Do military pay taxes   A facility used for the bulk storage of fungible commodities is qualifying property for purposes of the section 179 expense deduction if it is used in connection with any of the activities listed earlier in item (3)(a). Do military pay taxes Bulk storage means the storage of a commodity in a large mass before it is used. Do military pay taxes Grain bins. Do military pay taxes   A grain bin is an example of a storage facility that is qualifying section 179 property. Do military pay taxes It is a facility used in connection with the production of grain or livestock for the bulk storage of fungible commodities. Do military pay taxes Single purpose agricultural or horticultural structures. Do military pay taxes   A single purpose agricultural (livestock) or horticultural structure is qualifying property for purposes of the section 179 expense deduction. Do military pay taxes Agricultural structure. Do military pay taxes   A single purpose agricultural (livestock) structure is any building or enclosure specifically designed, constructed, and used for both the following reasons. Do military pay taxes To house, raise, and feed a particular type of livestock and its produce. Do military pay taxes To house the equipment, including any replacements, needed to house, raise, or feed the livestock. Do military pay taxes For this purpose, livestock includes poultry. Do military pay taxes   Single purpose structures are qualifying property if used, for example, to breed chickens or hogs, produce milk from dairy cattle, or produce feeder cattle or pigs, broiler chickens, or eggs. Do military pay taxes The facility must include, as an integral part of the structure or enclosure, equipment necessary to house, raise, and feed the livestock. Do military pay taxes Horticultural structure. Do military pay taxes   A single purpose horticultural structure is either of the following. Do military pay taxes A greenhouse specifically designed, constructed, and used for the commercial production of plants. Do military pay taxes A structure specifically designed, constructed, and used for the commercial production of mushrooms. Do military pay taxes Use of structure. Do military pay taxes   A structure must be used only for the purpose that qualified it. Do military pay taxes For example, a hog barn will not be qualifying property if you use it to house poultry. Do military pay taxes Similarly, using part of your greenhouse to sell plants will make the greenhouse nonqualifying property. Do military pay taxes   If a structure includes work space, the work space can be used only for the following activities. Do military pay taxes Stocking, caring for, or collecting livestock or plants or their produce. Do military pay taxes Maintaining the enclosure or structure. Do military pay taxes Maintaining or replacing the equipment or stock enclosed or housed in the structure. Do military pay taxes Property Acquired by Purchase To qualify for the section 179 expense deduction, your property must have been acquired by purchase. Do military pay taxes For example, property acquired by gift or inheritance does not qualify. Do military pay taxes Property acquired from a related person (that is, your spouse, ancestors, or lineal descendants) is not considered acquired by purchase. Do military pay taxes Example. Do military pay taxes Ken is a farmer. Do military pay taxes He purchased two tractors, one from his brother and one from his father. Do military pay taxes He placed both tractors in service in the same year he bought them. Do military pay taxes The tractor purchased from his father does not qualify for the section 179 expense deduction because he is a related person (as defined above). Do military pay taxes The tractor purchased from his brother does qualify for the deduction because Ken is not a related person (as defined above). Do military pay taxes What Property Does Not Qualify? Land and improvements. Do military pay taxes   Land and land improvements, do not qualify as section 179 property. Do military pay taxes Land improvements include nonagricultural fences, swimming pools, paved parking areas, wharves, docks, bridges, and fences. Do military pay taxes However, agricultural fences do qualify as section 179 property. Do military pay taxes Similarly, field drainage tile also qualifies as section 179 property. Do military pay taxes Excepted property. Do military pay taxes   Even if the requirements explained in the preceding discussions are met, farmers cannot elect the section 179 expense deduction for the following property. Do military pay taxes Certain property you lease to others (if you are a noncorporate lessor). Do military pay taxes Certain property used predominantly to furnish lodging or in connection with the furnishing of lodging. Do military pay taxes Property used by a tax-exempt organization (other than a tax-exempt farmers' cooperative) unless the property is used mainly in a taxable unrelated trade or business. Do military pay taxes Property used by governmental units or foreign persons or entities (except property used under a lease with a term of less than 6 months). Do military pay taxes How Much Can You Deduct? Your section 179 expense deduction is generally the cost of the qualifying property. Do military pay taxes However, the total amount you can elect to deduct under section 179 is subject to a dollar limit and a business income limit. Do military pay taxes These limits apply to each taxpayer, not to each business. Do military pay taxes However, see Married individuals under Dollar Limits , later. Do military pay taxes See also the special rules for applying the limits for partnerships and S corporations under Partnerships and S Corporations , later. Do military pay taxes If you deduct only part of the cost of qualifying property as a section 179 expense deduction, you can generally depreciate the cost you do not deduct. Do military pay taxes Use Part I of Form 4562 to figure your section 179 expense deduction. Do military pay taxes Partial business use. Do military pay taxes   When you use property for business and nonbusiness purposes, you can elect the section 179 expense deduction only if you use it more than 50% for business in the year you place it in service. Do military pay taxes If you used the property more than 50% for business, multiply the cost of the property by the percentage of business use. Do military pay taxes Use the resulting business cost to figure your section 179 expense deduction. Do military pay taxes Trade-in of other property. Do military pay taxes   If you buy qualifying property with cash and a trade-in, its cost for purposes of the section 179 expense deduction includes only the cash you paid. Do military pay taxes For example, if you buy (for cash and a trade-in) a new tractor for use in your business, your cost for the section 179 expense deduction is the cash you paid. Do military pay taxes It does not include the adjusted basis of the old tractor you trade for the new tractor. Do military pay taxes Example. Do military pay taxes J-Bar Farms traded two cultivators having a total adjusted basis of $6,800 for a new cultivator costing $13,200. Do military pay taxes They received an $8,000 trade-in allowance for the old cultivators and paid $5,200 cash for the new cultivator. Do military pay taxes J-Bar also traded a used pickup truck with an adjusted basis of $8,000 for a new pickup truck costing $35,000. Do military pay taxes They received a $5,000 trade-in allowance and paid $30,000 cash for the new pickup truck. Do military pay taxes Only the cash paid by J-Bar qualifies for the section 179 expense deduction. Do military pay taxes J-Bar's business costs that qualify for a section 179 expense deduction are $35,200 ($5,200 + $30,000). Do military pay taxes Dollar Limits The total amount you can elect to deduct under section 179 for most property placed in service in 2013 is $500,000. Do military pay taxes If you acquire and place in service more than one item of qualifying property during the year, you can allocate the section 179 expense deduction among the items in any way, as long as the total deduction is not more than $500,000. Do military pay taxes Qualified real property that you elect to treat as section 179 property is limited to $250,000 of the maximum section 179 deduction of $500,000 for 2013. Do military pay taxes You do not have to claim the full $500,000. Do military pay taxes For specific information on the section 179 dollar limits, see chapter 2 of Publication 946. Do military pay taxes Reduced dollar limit for cost exceeding $2 million. Do military pay taxes   If the cost of your qualifying section 179 property placed in service in 2013 is over $2 million, you must reduce the dollar limit (but not below zero) by the amount of cost over $2 million. Do military pay taxes If the cost of your section 179 property placed in service during 2013 is $2,500,000 or more, you cannot take a section 179 expense deduction and you cannot carry over the cost that is more than $2,500,000. Do military pay taxes Example. Do military pay taxes This year, James Smith placed in service machinery costing $2,050,000. Do military pay taxes Because this cost is $50,000 more than $2 million, he must reduce his dollar limit to $450,000 ($500,000 − $50,000). Do military pay taxes Limits for sport utility vehicles. Do military pay taxes   The total amount you can elect to deduct for certain sport utility vehicles and certain other vehicles placed in service in 2013 is $25,000. Do military pay taxes This rule applies to any 4-wheeled vehicle primarily designed or used to carry passengers over public streets, roads, and highways that is rated at more than 6,000 pounds gross vehicle weight and not more than 14,000 pounds gross vehicle weight. Do military pay taxes   For more information, see chapter 2 of Publication 946. Do military pay taxes Limits for passenger automobiles. Do military pay taxes   For a passenger automobile that is placed in service in 2013, the total section 179 and depreciation deduction is limited. Do military pay taxes See Do the Passenger Automobile Limits Apply , later. Do military pay taxes Married individuals. Do military pay taxes   If you are married, how you figure your section 179 expense deduction depends on whether you file jointly or separately. Do military pay taxes If you file a joint return, you and your spouse are treated as one taxpayer in determining any reduction to the dollar limit, regardless of which of you purchased the property or placed it in service. Do military pay taxes If you and your spouse file separate returns, you are treated as one taxpayer for the dollar limit, including the reduction for costs over $2 million. Do military pay taxes You must allocate the dollar limit (after any reduction) equally between you, unless you both elect a different allocation. Do military pay taxes If the percentages elected by each of you do not total 100%, 50% will be allocated to each of you. Do military pay taxes Joint return after separate returns. Do military pay taxes   If you and your spouse elect to amend your separate returns by filing a joint return after the due date for filing your return, the dollar limit on the joint return is the lesser of the following amounts. Do military pay taxes The dollar limit (after reduction for any cost of section 179 property over $2 million). Do military pay taxes The total cost of section 179 property you and your spouse elected to expense on your separate returns. Do military pay taxes Business Income Limit The total cost you can deduct each year after you apply the dollar limit is limited to the taxable income from the active conduct of any trade or business during the year. Do military pay taxes Generally, you are considered to actively conduct a trade or business if you meaningfully participate in the management or operations of the trade or business. Do military pay taxes Any cost not deductible in one year under section 179 because of this limit can be carried to the next year. Do military pay taxes See Carryover of disallowed deduction , later. Do military pay taxes Taxable income. Do military pay taxes   In general, figure taxable income for this purpose by totaling the net income and losses from all trades and businesses you actively conducted during the year. Do military pay taxes In addition to net income or loss from a sole proprietorship, partnership, or S corporation, net income or loss derived from a trade or business also includes the following items. Do military pay taxes Section 1231 gains (or losses) as discussed in chapter 9. Do military pay taxes Interest from working capital of your trade or business. Do military pay taxes Wages, salaries, tips, or other pay earned by you (or your spouse if you file a joint return) as an employee of any employer. Do military pay taxes   In addition, figure taxable income without regard to any of the following. Do military pay taxes The section 179 expense deduction. Do military pay taxes The self-employment tax deduction. Do military pay taxes Any net operating loss carryback or carryforward. Do military pay taxes Any unreimbursed employee business expenses. Do military pay taxes Two different taxable income limits. Do military pay taxes   In addition to the business income limit for your section 179 expense deduction, you may have a taxable income limit for some other deduction (for example, charitable contributions). Do military pay taxes You may have to figure the limit for this other deduction taking into account the section 179 expense deduction. Do military pay taxes If so, complete the following steps. Do military pay taxes Step Action 1 Figure taxable income without the section 179 expense deduction or the other deduction. Do military pay taxes 2 Figure a hypothetical section 179 expense deduction using the taxable income figured in Step 1. Do military pay taxes 3 Subtract the hypothetical section 179 expense deduction figured in Step 2 from the taxable income figured in Step 1. Do military pay taxes 4 Figure a hypothetical amount for the other deduction using the amount figured in Step 3 as taxable income. Do military pay taxes 5 Subtract the hypothetical other deduction figured in Step 4 from the taxable income figured in  Step 1. Do military pay taxes 6 Figure your actual section 179 expense deduction using the taxable income figured in Step 5. Do military pay taxes 7 Subtract your actual section 179 expense deduction figured in Step 6 from the taxable income figured in Step 1. Do military pay taxes 8 Figure your actual other deduction using the taxable income figured in Step 7. Do military pay taxes Example. Do military pay taxes On February 1, 2013, the XYZ farm corporation purchased and placed in service qualifying section 179 property that cost $500,000. Do military pay taxes It elects to expense the entire $500,000 cost under section 179. Do military pay taxes In June, the corporation gave a charitable contribution of $10,000. Do military pay taxes A corporation's limit on charitable contributions is figured after subtracting any section 179 expense deduction. Do military pay taxes The business income limit for the section 179 expense deduction is figured after subtracting any allowable charitable contributions. Do military pay taxes XYZ's taxable income figured without the section 179 expense deduction or the deduction for charitable contributions is $520,000. Do military pay taxes XYZ figures its section 179 expense deduction and its deduction for charitable contributions as follows. Do military pay taxes Step 1. Do military pay taxes Taxable income figured without either deduction is $520,000. Do military pay taxes Step 2. Do military pay taxes Using $520,000 as taxable income, XYZ's hypothetical section 179 expense deduction is $500,000. Do military pay taxes Step 3. Do military pay taxes $20,000 ($520,000 − $500,000). Do military pay taxes Step 4. Do military pay taxes Using $20,000 (from Step 3) as taxable income, XYZ's hypothetical charitable contribution (limited to 10% of taxable income) is $2,000. Do military pay taxes Step 5. Do military pay taxes $518,000 ($520,000 − $2,000). Do military pay taxes Step 6. Do military pay taxes Using $518,000 (from Step 5) as taxable income, XYZ figures the actual section 179 expense deduction. Do military pay taxes Because the taxable income is at least $500,000, XYZ can take a $500,000 section 179 expense deduction. Do military pay taxes Step 7. Do military pay taxes $20,000 ($520,000 − $500,000). Do military pay taxes Step 8. Do military pay taxes Using $20,000 (from Step 7) as taxable income, XYZ's actual charitable contribution (limited to 10% of taxable income) is $2,000. Do military pay taxes Carryover of disallowed deduction. Do military pay taxes   You can carry over for an unlimited number of years the cost of any section 179 property you elected to expense but were unable to because of the business income limit. Do military pay taxes   The amount you carry over is used in determining your section 179 expense deduction in the next year. Do military pay taxes However, it is subject to the limits in that year. Do military pay taxes If you place more than one property in service in a year, you can select the properties for which all or a part of the cost will be carried forward. Do military pay taxes Your selections must be shown in your books and records. Do military pay taxes Example. Do military pay taxes Last year, Joyce Jones placed in service a machine that cost $8,000 and elected to deduct all $8,000 under section 179. Do military pay taxes The taxable income from her business (determined without regard to both a section 179 expense deduction for the cost of the machine and the self-employment tax deduction) was $6,000. Do military pay taxes Her section 179 expense deduction was limited to $6,000. Do military pay taxes The $2,000 cost that was not allowed as a section 179 expense deduction (because of the business income limit) is carried to this year. Do military pay taxes This year, Joyce placed another machine in service that cost $9,000. Do military pay taxes Her taxable income from business (determined without regard to both a section 179 expense deduction for the cost of the machine and the self-employment tax deduction) is $10,000. Do military pay taxes Joyce can deduct the full cost of the machine ($9,000) but only $1,000 of the carryover from last year because of the business income limit. Do military pay taxes She can carry over the balance of $1,000 to next year. Do military pay taxes Partnerships and S Corporations The section 179 expense deduction limits apply both to the partnership or S corporation and to each partner or shareholder. Do military pay taxes The partnership or S corporation determines its section 179 expense deduction subject to the limits. Do military pay taxes It then allocates the deduction among its partners or shareholders. Do military pay taxes If you are a partner in a partnership or shareholder of an S corporation, you add the amount allocated from the partnership or S corporation to any section 179 costs not related to the partnership or S corporation and then apply the dollar limit to this total. Do military pay taxes To determine any reduction in the dollar limit for costs over $560,000, you do not include any of the cost of section 179 property placed in service by the partnership or S corporation. Do military pay taxes After you apply the dollar limit, you apply the business income limit to any remaining section 179 costs. Do military pay taxes For more information, see chapter 2 of Publication 946. Do military pay taxes Example. Do military pay taxes In 2013, Partnership P placed in service section 179 property with a total cost of $2,160,000. Do military pay taxes P must reduce its dollar limit by $160,000 ($2,160,000 − $2,000,000). Do military pay taxes Its maximum section 179 expense deduction is $340,000 ($500,000 − $160,000), and it elects to expense that amount. Do military pay taxes Because P's taxable income from the active conduct of all its trades or businesses for the year was $400,000, it can deduct the full $340,000. Do military pay taxes P allocates $100,000 of its section 179 expense deduction and $110,000 of its taxable income to John, one of its partners. Do military pay taxes John also conducts a business as a sole proprietor and in 2013, placed in service in that business, section 179 property costing $28,000. Do military pay taxes John's taxable income from that business was $10,000. Do military pay taxes In addition to the $100,000 allocated from P, he elects to expense the $28,000 of his sole proprietorship's section 179 costs. Do military pay taxes However, John's deduction is limited to his business taxable income of $120,000 ($110,000 from P plus $10,000 from his sole proprietorship). Do military pay taxes He carries over $8,000 ($128,000 − $120,000) of the elected section 179 costs to 2014. Do military pay taxes How Do You Elect the Deduction? You elect to take the section 179 expense deduction by completing Part I of Form 4562. Do military pay taxes If you elect the deduction for listed property, complete Part V of  Form 4562 before completing Part I. Do military pay taxes   File Form 4562 with either of the following: Your original tax return (whether or not you filed it timely), or An amended return filed within the time prescribed by law. Do military pay taxes An election made on an amended return must specify the item of section 179 property to which the election applies and the part of the cost of each such item to be taken into account. Do military pay taxes The amended return must also include any resulting adjustments to taxable income. Do military pay taxes Revoking an election. Do military pay taxes   An election (or any specification made in the election) to take a section 179 expense deduction for 2013 can be revoked without IRS approval by filing an amended return. Do military pay taxes The amended return must be filed within the time prescribed by law. Do military pay taxes The amended return must also include any resulting adjustments to taxable income (for example, allowable depreciation in that tax year for the item of section 179 property for which the election pertains. Do military pay taxes ) Once made, the revocation is irrevocable. Do military pay taxes When Must You Recapture the Deduction? You may have to recapture the section 179 expense deduction if, in any year during the property's recovery period, the percentage of business use drops to 50% or less. Do military pay taxes In the year the business use drops to 50% or less, you include the recapture amount as ordinary income. Do military pay taxes You also increase the basis of the property by the recapture amount. Do military pay taxes Recovery periods for property are discussed later. Do military pay taxes If you sell, exchange, or otherwise dispose of the property, do not figure the recapture amount under the rules explained in this discussion. Do military pay taxes Instead, use the rules for recapturing depreciation explained in  chapter 9 under Section 1245 Property. Do military pay taxes   If the property is listed property, do not figure the recapture amount under the rules explained in this discussion when the percentage of business use drops to 50% or less. Do military pay taxes Instead, use the rules for recapturing depreciation explained in chapter 5 of Publication 946 under Recapture of Excess Depreciation. Do military pay taxes Figuring the recapture amount. Do military pay taxes   To figure the amount to recapture, take the following steps. Do military pay taxes Figure the allowable depreciation for the section 179 expense deduction you claimed. Do military pay taxes Begin with the year you placed the property in service and include the year of recapture. Do military pay taxes Subtract the depreciation figured in (1) from the section 179 expense deduction you actually claimed. Do military pay taxes The result is the amount you must recapture. Do military pay taxes Example. Do military pay taxes In January 2011, Paul Lamb, a calendar year taxpayer, bought and placed in service section 179 property costing $10,000. Do military pay taxes The property is not listed property. Do military pay taxes He elected a $5,000 section 179 expense deduction for the property and also elected not to claim a special depreciation allowance. Do military pay taxes He used the property only for business in 2011 and 2012. Do military pay taxes During 2013, he used the property 40% for business and 60% for personal use. Do military pay taxes He figures his recapture amount as follows. Do military pay taxes Section 179 expense deduction claimed (2011) $5,000 Minus: Allowable depreciation (instead of section 179 expense deduction):   2011 $1,250   2012 1,875   2013 ($1,250 × 40% (business)) 500 3,625 2013 — Recapture amount $1,375     Paul must include $1,375 in income for 2013. Do military pay taxes Where to report recapture. Do military pay taxes   Report any recapture of the section 179 expense deduction as ordinary income in Part IV of Form 4797 and include it in income on Schedule F (Form 1040). Do military pay taxes Recapture for qualified section 179 GO Zone property. Do military pay taxes   If any qualified section 179 GO Zone property ceases to be used in the GO Zone in a later year, you must recapture the benefit of the increased section 179 expense deduction as “other income. Do military pay taxes ” Claiming the Special Depreciation Allowance For qualified property (defined below) placed in service in 2013, you can take an additional 50% special depreciation allowance. Do military pay taxes The allowance is an additional deduction you can take after any section 179 expense deduction and before you figure regular depreciation under MACRS. Do military pay taxes Figure the special depreciation allowance by multiplying the depreciable basis of the qualified property by 50%. Do military pay taxes What is Qualified Property? For farmers, qualified property generally is certain qualified property acquired after December 31, 2007, and placed in service before January 1, 2014. Do military pay taxes Certain qualified property acquired after December 31, 2007, and placed in service before January 1, 2014. Do military pay taxes   Certain qualified property (defined below) acquired after December 31, 2007, and before January 1, 2014, is eligible for a 50% special depreciation allowance. Do military pay taxes   Qualified property includes the following: Tangible property depreciated under the Modified Accelerated Cost Recovery System (MACRS) with a recovery period of 20 years or less. Do military pay taxes Water utility property. Do military pay taxes Off-the-shelf computer software. Do military pay taxes Qualified leasehold improvement property. Do military pay taxes   Qualified property must also meet all of the following tests: You must have acquired qualified property by purchase after December 31, 2007. Do military pay taxes If a binding contract to acquire the property existed before January 1, 2008, the property does not qualify. Do military pay taxes Qualified property must be placed in service after December 31, 2007 and placed in service before January 1, 2014 (before January 1, 2015 for certain property with a long production period and for certain aircraft). Do military pay taxes The original use of the property must begin with you after December 31, 2007. Do military pay taxes For more information, see chapter 3 of Publication 946. Do military pay taxes How Can You Elect Not To Claim the Allowance? You can elect, for any class of property, not to deduct the special depreciation allowance for all property in such class placed in service during the tax year. Do military pay taxes To make the election, attach a statement to your return indicating the class of property for which you are making the election. Do military pay taxes Generally, you must make the election on a timely filed tax return (including extensions) for the year in which you place the property in service. Do military pay taxes 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 original return (not including extensions). Do military pay taxes Attach the election statement to the amended return. Do military pay taxes On the amended return, write “Filed pursuant to section 301. Do military pay taxes 9100-2. Do military pay taxes ” Once made, the election may not be revoked without IRS consent. Do military pay taxes If you elect not to have the special depreciation allowance apply, the property may be subject to an alternative minimum tax adjustment for depreciation. Do military pay taxes When Must You Recapture an Allowance When you dispose of property for which you claimed a special depreciation allowance, any gain on the disposition is generally recaptured (included in income) as ordinary income up to the amount of the special depreciation allowance previously allowed or allowable. Do military pay taxes For more information, see chapter 3 of Publication 946. Do military pay taxes Figuring Depreciation Under MACRS The Modified Accelerated Cost Recovery System (MACRS) is used to recover the basis of most business and investment property placed in service after 1986. Do military pay taxes MACRS consists of two depreciation systems, the General Depreciation System (GDS) and the Alternative Depreciation System (ADS). Do military pay taxes Generally, these systems provide different methods and recovery periods to use in figuring depreciation deductions. Do military pay taxes To be sure you can use MACRS to figure depreciation for your property, see Can You Use MACRS To Depreciate Your Property, earlier. Do military pay taxes This part explains how to determine which MACRS depreciation system applies to your property. Do military pay taxes It also discusses the following information that you need to know before you can figure depreciation under MACRS. Do military pay taxes Property's recovery class. Do military pay taxes Placed-in-service date. Do military pay taxes Basis for depreciation. Do military pay taxes Recovery period. Do military pay taxes Convention. Do military pay taxes Depreciation method. Do military pay taxes Finally, this part explains how to use this information to figure your depreciation deduction. Do military pay taxes 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. Do military pay taxes You generally must use GDS unless you are specifically required by law to use ADS or you elect to use ADS. Do military pay taxes Required use of ADS. Do military pay taxes   You must use ADS for the following property. Do military pay taxes 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. Do military pay taxes Listed property used 50% or less in a qualified business use. Do military pay taxes See Additional Rules for Listed Property , later. Do military pay taxes Any tax-exempt use property. Do military pay taxes Any tax-exempt bond-financed property. Do military pay taxes 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. Do military pay taxes Any tangible property used predominantly outside the United States during the year. Do military pay taxes If you are required to use ADS to depreciate your property, you cannot claim the special depreciation allowance. Do military pay taxes Electing ADS. Do military pay taxes   Although your property may qualify for GDS, you can elect to use ADS. Do military pay taxes The election generally must cover all property in the same property class you placed in service during the year. Do military pay taxes However, the election for residential rental property and nonresidential real property can be made on a property-by-property basis. Do military pay taxes Once you make this election, you can never revoke it. Do military pay taxes   You make the election by completing line 20 in Part III of Form 4562. Do military pay taxes Which Property Class Applies Under GDS? The following is a list of the nine property classes under GDS. Do military pay taxes 3-year property. Do military pay taxes 5-year property. Do military pay taxes 7-year property. Do military pay taxes 10-year property. Do military pay taxes 15-year property. Do military pay taxes 20-year property. Do military pay taxes 25-year property. Do military pay taxes Residential rental property. Do military pay taxes Nonresidential real property. Do military pay taxes See Which Property Class Applies Under GDS in chapter 4 of Publication 946 for examples of the types of property included in each class. Do military pay taxes What Is the Placed-in-Service Date? You begin to claim depreciation when your property is placed in service for use either in a trade or business or for the production of income. Do military pay taxes The placed-in-service date for your property is the date the property is ready and available for a specific use. Do military pay taxes It is therefore not necessarily the date it is first used. Do military pay taxes 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. Do military pay taxes See Placed in Service under When Does Depreciation Begin and End , earlier, for examples illustrating when property is placed in service. Do military pay taxes 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. Do military pay taxes Reduce that amount by any credits and deductions allocable to the property. Do military pay taxes The following are examples of some of the credits and deductions that reduce basis. Do military pay taxes Any deduction for section 179 property. Do military pay taxes Any deduction for removal of barriers to the disabled and the elderly. Do military pay taxes Any disabled access credit, enhanced oil recovery credit, and credit for employer-provided childcare facilities and services. Do military pay taxes Any special depreciation allowance. Do military pay taxes Basis adjustment for investment credit property under section 50(c) of the Internal Revenue Code. Do military pay taxes For information about how to determine the cost or other basis of property, see What Is the Basis of Your Depreciable Property , earlier. Do military pay taxes Also, see chapter 6. Do military pay taxes For additional credits and deductions that affect basis, see section 1016 of the Internal Revenue Code. Do military pay taxes Which Recovery Period Applies? The recovery period of property is the number of years over which you recover its cost or other basis. Do military pay taxes It is determined based on the depreciation system (GDS or ADS) used. Do military pay taxes See Table 7-1 for recovery periods under both GDS and ADS for some commonly used assets. Do military pay taxes For a complete list of recovery periods, see the Table of Class Lives and Recovery Periods in Appendix B of Publication 946. Do military pay taxes House trailers for farm laborers. Do military pay taxes   To depreciate a house trailer you supply as housing for those who work on your farm, use one of the following recovery periods if the house trailer is mobile (it has wheels and a history of movement). Do military pay taxes A 7-year recovery period under GDS. Do military pay taxes A 10-year recovery period under ADS. Do military pay taxes   However, if the house trailer is not mobile (its wheels have been removed and permanent utilities and pipes attached to it), use one of the following recovery periods. Do military pay taxes A 20-year recovery period under GDS. Do military pay taxes A 25-year recovery period under ADS. Do military pay taxes Water wells. Do military pay taxes   Water wells used to provide water for raising poultry and livestock are land improvements. Do military pay taxes If they are depreciable, use one of the following recovery periods. Do military pay taxes A 15-year recovery period under GDS. Do military pay taxes A 20-year recovery period under ADS. Do military pay taxes   The types of water wells that can be depreciated were discussed earlier in Irrigation systems and water wells under Property Having a Determinable Useful Life . Do military pay taxes Table 7-1. Do military pay taxes Farm Property Recovery Periods   Recovery Period in Years Assets GDS ADS Agricultural structures (single purpose) 10 15 Automobiles 5 5 Calculators and copiers 5 6 Cattle (dairy or breeding) 5 7 Communication equipment1 7 10 Computer and peripheral equipment 5 5 Drainage facilities 15 20 Farm buildings2 20 25 Farm machinery and equipment 7 10 Fences (agricultural) 7 10 Goats and sheep (breeding) 5 5 Grain bin 7 10 Hogs (breeding) 3 3 Horses (age when placed in service)     Breeding and working (12 years or less) 7 10 Breeding and working (more than 12 years) 3 10 Racing horses 3 12 Horticultural structures (single purpose) 10 15 Logging machinery and equipment3 5 6 Nonresidential real property 394 40 Office furniture, fixtures, and equipment (not calculators, copiers, or typewriters) 7 10 Paved lots 15 20 Residential rental property 27. Do military pay taxes 5 40 Tractor units (over-the-road) 3 4 Trees or vines bearing fruit or nuts 10 20 Truck (heavy duty, unloaded weight 13,000 lbs. Do military pay taxes or more) 5 6 Truck (actual weight less than 13,000 lbs) 5 5 Water wells 15 20 1 Not including communication equipment listed in other classes. Do military pay taxes 2 Not including single purpose agricultural or horticultural structures. Do military pay taxes 3 Used by logging and sawmill operators for cutting of timber. Do military pay taxes 4 For property placed in service after May 12, 1993; for property placed in service before May 13, 1993,  the recovery period is 31. Do military pay taxes 5 years. Do military pay taxes Which Convention Applies? Under MACRS, averaging conventions establish when the recovery period begins and ends. Do military pay taxes 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. Do military pay taxes Use one of the following conventions. Do military pay taxes The half-year convention. Do military pay taxes The mid-month convention. Do military pay taxes The mid-quarter convention. Do military pay taxes For a detailed explanation of each convention, see Which Convention Applies in chapter 4 of Publication 946. Do military pay taxes Also, see the Instructions for Form 4562. Do military pay taxes Which Depreciation Method Applies? MACRS provides three depreciation methods under GDS and one depreciation method under ADS. Do military pay taxes The 200% declining balance method over a GDS recovery period. Do military pay taxes The 150% declining balance method over a GDS recovery period. Do military pay taxes The straight line method over a GDS recovery period. Do military pay taxes The straight line method over an ADS recovery period. Do military pay taxes Depreciation Table. Do military pay taxes   The following table lists the types of property you can depreciate under each method. Do military pay taxes The declining balance method is abbreviated as DB and the straight line method is abbreviated as SL. Do military pay taxes Depreciation Table System/Method   Type of Property GDS using  150% DB • All property used in a farming business (except real property)   • All 15- and 20-year property   • Nonfarm 3-, 5-, 7-, and 10-year property1 GDS using SL • Nonresidential real property   • Residential rental property   • Trees or vines bearing fruit or nuts   • All 3-, 5-, 7-, 10-, 15-, and 20-year property1 ADS using SL • Property used predomi- nantly outside the United States   • Farm property used when an election not to apply the uniform capitalization rules is in effect   • Tax-exempt property   • Tax-exempt bond-financed property   • Imported property2   • Any property for which you elect to use this method1 GDS using  200% DB • Nonfarm 3-, 5-, 7-, and 10-year property 1Elective method 2See section 168(g)(6) of the Internal Revenue  Code Property used in farming business. Do military pay taxes   For personal property placed in service after 1988 in a farming business, you must use the 150% declining balance method over a GDS recovery period or you can elect one of the following methods. Do military pay taxes The straight line method over a GDS recovery period. Do military pay taxes The straight line method over an ADS recovery period. Do military pay taxes For property placed in service before 1999, you could have elected to use the 150% declining balance method using the ADS recovery periods for certain property classes. Do military pay taxes If you made this election, continue to use the same method and recovery period for that property. Do military pay taxes Real property. Do military pay taxes   You can depreciate real property using the straight line method under either GDS or ADS. Do military pay taxes Switching to straight line. Do military pay taxes   If you use a declining balance method, you switch to the straight line method in the year it provides an equal or greater deduction. Do military pay taxes If you use the MACRS percentage tables, discussed later under How Is the Depreciation Deduction Figured , you do not need to determine in which year your deduction is greater using the straight line method. Do military pay taxes The tables have the switch to the straight line method built into their rates. Do military pay taxes Fruit or nut trees and vines. Do military pay taxes   Depreciate trees and vines bearing fruit or nuts under GDS using the straight line method over a 10-year recovery period. Do military pay taxes ADS required for some farmers. Do military pay taxes   If you elect not to apply the uniform capitalization rules to any plant shown in Table 6-1 of chapter 6 and produced in your farming business, you must use ADS for all property you place in service in any year the election is in effect. Do military pay taxes See chapter 6 for a discussion of the application of the uniform capitalization rules to farm property. Do military pay taxes Electing a different method. Do military pay taxes   As shown in the Depreciation Table , you can elect a different method for depreciation for certain types of property. Do military pay taxes You must make the election by the due date of the return (including extensions) for the year you placed the property in service. Do military pay taxes However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of your return (excluding extensions). Do military pay taxes Attach the election to the amended return and write “Filed pursuant to section 301. Do military pay taxes 9100-2” on the election statement. Do military pay taxes File the amended return at the same address you filed the original return. Do military pay taxes Once you make the election, you cannot change it. Do military pay taxes    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. Do military pay taxes However, you can make the election on a property-by-property basis for residential rental and nonresidential real property. Do military pay taxes Straight line election. Do military pay taxes   Instead of using the declining balance method, you can elect to use the straight line method over the GDS recovery period. Do military pay taxes Make the election by entering “S/L” under column (f) in Part III of Form 4562. Do military pay taxes ADS election. Do military pay taxes   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. Do military pay taxes ADS uses the straight line method of depreciation over the ADS recovery periods, which are generally longer than the GDS recovery periods. Do military pay taxes The ADS recovery periods for many assets used in the business of farming are listed in Table 7–1. Do military pay taxes Additional ADS recovery periods for other classes of property may be found in the Table of Class Lives and Recovery Periods in Appendix B of Publication 946. Do military pay taxes 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. Do military pay taxes Then you are ready to figure your depreciation deduction. Do military pay taxes You can figure it in one of two ways. Do military pay taxes You can use the percentage tables provided by the IRS. Do military pay taxes You can figure your own deduction without using the tables. Do military pay taxes Figuring your own MACRS deduction will generally result in a slightly different amount than using the tables. Do military pay taxes 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. Do military pay taxes These percentage tables are in Appendix A of Publication 946. Do military pay taxes Rules for using the tables. Do military pay taxes   The following rules cover the use of the percentage tables. Do military pay taxes You must apply the rates in the percentage tables to your property's unadjusted basis. Do military pay taxes Unadjusted basis is the same basis amount you would use to figure gain on a sale but figured without reducing your original basis by any MACRS depreciation taken in earlier years. Do military pay taxes You cannot use the percentage tables for a short tax year. Do military pay taxes See chapter 4 of Publication 946 for information on how to figure the deduction for a short tax year. Do military pay taxes You generally must continue to use them for the entire recovery period of the property. Do military pay taxes 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 the property, which is depreciated as a separate property. Do military pay taxes Basis adjustment due to casualty loss. Do military pay taxes   If you reduce the basis of your property because of a casualty, you cannot continue to use the percentage tables. Do military pay taxes 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. Do military pay taxes See Figuring the Deduction Without Using the Tables in chapter 4 of Publication 946. Do military pay taxes Figuring depreciation using the 150% DB method and half-year convention. Do military pay taxes    Table 7-2 has the percentages for 3-, 5-, 7-, and 20-year property. Do military pay taxes The percentages are based on the 150% declining balance method with a change to the straight line method. Do military pay taxes This table covers only the half-year convention and the first 8 years for 20-year property. Do military pay taxes See Appendix A in Publication 946 for complete MACRS tables, including tables for the mid-quarter and mid-month convention. Do military pay taxes   The following examples show how to figure depreciation under MACRS using the percentages in Table 7-2 . Do military pay taxes Example 1. Do military pay taxes During the year, you bought an item of 7-year property for $10,000 and placed it in service. Do military pay taxes You do not elect a section 179 expense deduction for this property. Do military pay taxes In addition, the property is not qualified property for purposes of the special depreciation allowance. Do military pay taxes The unadjusted basis of the property is $10,000. Do military pay taxes You use the percentages in Table 7-2 to figure your deduction. Do military pay taxes Since this is 7-year property, you multiply $10,000 by 10. Do military pay taxes 71% to get this year's depreciation of $1,071. Do military pay taxes For next year, your depreciation will be $1,913 ($10,000 × 19. Do military pay taxes 13%). Do military pay taxes Example 2. Do military pay taxes You had a barn constructed on your farm at a cost of $20,000. Do military pay taxes You placed the barn in service this year. Do military pay taxes You elect not to claim the special depreciation allowance. Do military pay taxes The barn is 20-year property and you use the table percentages to figure your deduction. Do military pay taxes You figure this year's depreciation by multiplying $20,000 (unadjusted basis) by 3. Do military pay taxes 75% to get $750. Do military pay taxes For next year, your depreciation will be $1,443. Do military pay taxes 80 ($20,000 × 7. Do military pay taxes 219%). Do military pay taxes Table 7-2. Do military pay taxes 150% Declining Balance Method (Half-Year Convention) Year 3-Year 5-Year 7-Year 20-Year 1 25. Do military pay taxes 0 % 15. Do military pay taxes 00 % 10. Do military pay taxes 71 % 3. Do military pay taxes 750 % 2 37. Do military pay taxes 5   25. Do military pay taxes 50   19. Do military pay taxes 13   7. Do military pay taxes 219   3 25. Do military pay taxes 0   17. Do military pay taxes 85   15. Do military pay taxes 03   6. Do military pay taxes 677   4 12. Do military pay taxes 5   16. Do military pay taxes 66   12. Do military pay taxes 25   6. Do military pay taxes 177   5     16. Do military pay taxes 66   12. Do military pay taxes 25   5. Do military pay taxes 713   6     8. Do military pay taxes 33   12. Do military pay taxes 25   5. Do military pay taxes 285   7         12. Do military pay taxes 25   4. Do military pay taxes 888   8         6. Do military pay taxes 13   4. Do military pay taxes 522   Figuring depreciation using the straight line method and half-year convention. Do military pay taxes   The following table has the straight line percentages for 3-, 5-, 7-, and 20-year property using the half-year convention. Do military pay taxes The table covers only the first 8 years for 20-year property. Do military pay taxes See Appendix A in Publication 946 for complete MACRS tables, including tables for the mid-quarter and mid-month convention. Do military pay taxes Table 7-3. Do military pay taxes Straight Line Method (Half-Year Convention) Year 3-Year 5-Year 7-Year 20-Year 1 16. Do military pay taxes 67 % 10 % 7. Do military pay taxes 14 % 2. Do military pay taxes 5 % 2 33. Do military pay taxes 33   20   14. Do military pay taxes 29   5. Do military pay taxes 0   3 33. Do military pay taxes 33   20   14. Do military pay taxes 29   5. Do military pay taxes 0   4 16. Do military pay taxes 67   20   14. Do military pay taxes 28   5. Do military pay taxes 0   5     20   14. Do military pay taxes 29   5. Do military pay taxes 0   6     10   14. Do military pay taxes 28   5. Do military pay taxes 0   7         14. Do military pay taxes 29   5. Do military pay taxes 0   8         7. Do military pay taxes 14   5. Do military pay taxes 0    
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The Do Military Pay Taxes

Do military pay taxes Internal Revenue Bulletin:  2012-14  April 2, 2012  Rev. Do military pay taxes Proc. Do military pay taxes 2012-23 Table of Contents SECTION 1. Do military pay taxes PURPOSE SECTION 2. Do military pay taxes BACKGROUND SECTION 3. Do military pay taxes SCOPE SECTION 4. Do military pay taxes APPLICATION. Do military pay taxes 01 Limitations on Depreciation Deductions for Certain Automobiles. Do military pay taxes . Do military pay taxes 02 Inclusions in Income of Lessees of Passenger Automobiles. Do military pay taxes SECTION 5. Do military pay taxes EFFECTIVE DATE SECTION 6. Do military pay taxes DRAFTING INFORMATION SECTION 1. Do military pay taxes PURPOSE This revenue procedure provides: (1) limitations on depreciation deductions for owners of passenger automobiles first placed in service by the taxpayer during calendar year 2012, including separate tables of limitations on depreciation deductions for trucks and vans; and (2) the amounts that must be included in income by lessees of passenger automobiles first leased by the taxpayer during calendar year 2012, including a separate table of inclusion amounts for lessees of trucks and vans. Do military pay taxes The tables detailing these depreciation limitations and lessee inclusion amounts reflect the automobile price inflation adjustments required by § 280F(d)(7) of the Internal Revenue Code. Do military pay taxes SECTION 2. Do military pay taxes BACKGROUND . Do military pay taxes 01 For owners of passenger automobiles, § 280F(a) imposes dollar limitations on the depreciation deduction for the year the taxpayer places the passenger automobile in service and for each succeeding year. Do military pay taxes For passenger automobiles placed in service after 1988, § 280F(d)(7) requires the Internal Revenue Service to increase the amounts allowable as depreciation deductions by a price inflation adjustment amount. Do military pay taxes The method of calculating this price inflation amount for trucks and vans placed in service in or after calendar year 2003 uses a different CPI “automobile component” (the “new trucks” component) than that used in the price inflation amount calculation for other passenger automobiles (the “new cars” component), resulting in somewhat higher depreciation deductions for trucks and vans. Do military pay taxes This change reflects the higher rate of price inflation for trucks and vans since 1988. Do military pay taxes . Do military pay taxes 02 Section 401(a) of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, Pub. Do military pay taxes L. Do military pay taxes No. Do military pay taxes 111-312, 124 Stat. Do military pay taxes 3296 (Dec. Do military pay taxes 17, 2010) (the “Act”) extended the 50 percent additional first year depreciation deduction under § 168(k) to qualified property acquired by the taxpayer after December 31, 2007, and before January 1, 2013, if no written binding contract for the acquisition of the property existed before January 1, 2008, and if the taxpayer places the property in service generally before January 1, 2013. Do military pay taxes Section 168(k)(2)(F)(i) increases the first year depreciation allowed under § 280F(a)(1)(A)(i) by $8,000 for passenger automobiles to which the additional first year depreciation deduction under § 168(k) (hereinafter, referred to as “§ 168(k) additional first year depreciation deduction”) applies. Do military pay taxes . Do military pay taxes 03 Section 168(k)(2)(D)(i) provides that the § 168(k) additional first year depreciation deduction does not apply to any property required to be depreciated under the alternative depreciation system of § 168(g), including property described in § 280F(b)(1). Do military pay taxes Section 168(k)(2)(D)(iii) permits a taxpayer to elect out of the § 168(k) additional first year depreciation deduction for any class of property. Do military pay taxes Section 168(k)(4), as amended by the Act, permits a corporation to elect to increase the alternative minimum tax (“AMT”) credit limitation under § 53(c), instead of claiming the § 168(k) additional first year depreciation deduction for all eligible qualified property placed in service after December 31, 2010, that is round 2 extension property (as defined in § 168(k)(4)(I)(iv)). Do military pay taxes Accordingly, this revenue procedure provides tables for passenger automobiles for which the § 168(k) additional first year depreciation deduction applies. Do military pay taxes This revenue procedure also provides tables for passenger automobiles for which the § 168(k) additional first year depreciation deduction does not apply, either because taxpayer (1) purchased the passenger automobile used; (2) did not use the passenger automobile during 2012 more than 50 percent for business purposes; (3) elected out of the § 168(k) additional first year depreciation deduction pursuant to § 168(k)(2)(D)(iii); or (4) elected to increase the § 53 AMT credit limitation in lieu of claiming § 168(k) additional first year depreciation. Do military pay taxes . Do military pay taxes 04 Section 280F(c) requires a reduction in the deduction allowed to the lessee of a leased passenger automobile. Do military pay taxes The reduction must be substantially equivalent to the limitations on the depreciation deductions imposed on owners of passenger automobiles. Do military pay taxes Under § 1. Do military pay taxes 280F-7(a) of the Income Tax Regulations, this reduction requires a lessee to include in gross income an amount determined by applying a formula to the amount obtained from a table. Do military pay taxes One table applies to lessees of trucks and vans and another table applies to all other passenger automobiles. Do military pay taxes Each table shows inclusion amounts for a range of fair market values for each taxable year after the passenger automobile is first leased. Do military pay taxes SECTION 3. Do military pay taxes SCOPE . Do military pay taxes 01 The limitations on depreciation deductions in section 4. Do military pay taxes 01(2) of this revenue procedure apply to passenger automobiles (other than leased passenger automobiles) that are placed in service by the taxpayer in calendar year 2012, and continue to apply for each taxable year that the passenger automobile remains in service. Do military pay taxes . Do military pay taxes 02 The tables in section 4. Do military pay taxes 02 of this revenue procedure apply to leased passenger automobiles for which the lease term begins during calendar year 2012. Do military pay taxes Lessees of these passenger automobiles must use these tables to determine the inclusion amount for each taxable year during which the passenger automobile is leased. Do military pay taxes See Rev. Do military pay taxes Proc. Do military pay taxes 2007-30, 2007-1 C. Do military pay taxes B. Do military pay taxes 1104, for passenger automobiles first leased during calendar year 2007; Rev. Do military pay taxes Proc. Do military pay taxes 2008-22, 2008-1 C. Do military pay taxes B. Do military pay taxes 658, for passenger automobiles first leased during calendar year 2008; Rev. Do military pay taxes Proc. Do military pay taxes 2009-24, 2009-17 I. Do military pay taxes R. Do military pay taxes B. Do military pay taxes 885, for passenger automobiles first leased during calendar year 2009; Rev. Do military pay taxes Proc. Do military pay taxes 2010-18, 2010-9 I. Do military pay taxes R. Do military pay taxes B. Do military pay taxes 427, as amplified and modified by section 4. Do military pay taxes 03 of Rev. Do military pay taxes Proc. Do military pay taxes 2011-21, 2011-12 I. Do military pay taxes R. Do military pay taxes B. Do military pay taxes 560, for passenger automobiles first leased during calendar year 2010; and Rev. Do military pay taxes Proc. Do military pay taxes 2011-21, for passenger automobiles first leased during calendar year 2011. Do military pay taxes SECTION 4. Do military pay taxes APPLICATION . Do military pay taxes 01 Limitations on Depreciation Deductions for Certain Automobiles. Do military pay taxes (1) Amount of the inflation adjustment. Do military pay taxes (a) Passenger automobiles (other than trucks or vans). Do military pay taxes Under § 280F(d)(7)(B)(i), the automobile price inflation adjustment for any calendar year is the percentage (if any) by which the CPI automobile component for October of the preceding calendar year exceeds the CPI automobile component for October 1987. Do military pay taxes Section 280F(d)(7)(B)(ii) defines the term “CPI automobile component” as the automobile component of the Consumer Price Index for all Urban Consumers published by the Department of Labor. Do military pay taxes The new car component of the CPI was 115. Do military pay taxes 2 for October 1987 and 143. Do military pay taxes 419 for October 2011. Do military pay taxes The October 2011 index exceeded the October 1987 index by 28. Do military pay taxes 219. Do military pay taxes Therefore, the automobile price inflation adjustment for 2012 for passenger automobiles (other than trucks and vans) is 24. Do military pay taxes 5 percent (28. Do military pay taxes 219/115. Do military pay taxes 2 x 100%). Do military pay taxes The dollar limitations in § 280F(a) are multiplied by a factor of 0. Do military pay taxes 245, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations applicable to passenger automobiles (other than trucks and vans) for calendar year 2012. Do military pay taxes This adjustment applies to all passenger automobiles (other than trucks and vans) that are first placed in service in calendar year 2012. Do military pay taxes (b) Trucks and vans. Do military pay taxes To determine the dollar limitations for trucks and vans first placed in service during calendar year 2012, the Service uses the new truck component of the CPI instead of the new car component. Do military pay taxes The new truck component of the CPI was 112. Do military pay taxes 4 for October 1987 and 146. Do military pay taxes 607 for October 2011. Do military pay taxes The October 2011 index exceeded the October 1987 index by 34. Do military pay taxes 207. Do military pay taxes Therefore, the automobile price inflation adjustment for 2012 for trucks and vans is 30. Do military pay taxes 43 percent (34. Do military pay taxes 207/112. Do military pay taxes 4 x 100%). Do military pay taxes The dollar limitations in § 280F(a) are multiplied by a factor of 0. Do military pay taxes 3043, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations for trucks and vans. Do military pay taxes This adjustment applies to all trucks and vans that are first placed in service in calendar year 2012. Do military pay taxes (2) Amount of the limitation. Do military pay taxes Tables 1 through 4 contain the dollar amount of the depreciation limitation for each taxable year for passenger automobiles a taxpayer places in service in calendar year 2012. Do military pay taxes Use Table 1 for a passenger automobile (other than a truck or van), and Table 2 for a truck or van, placed in service in calendar year 2012 for which the § 168(k) additional first year depreciation deduction applies. Do military pay taxes Use Table 3 for a passenger automobile (other than a truck or van), and Table 4 for a truck or van, placed in service in calendar year 2012 for which the § 168(k) additional first year depreciation deduction does not apply. Do military pay taxes REV. Do military pay taxes PROC. Do military pay taxes 2012-23 TABLE 1 DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) PLACED IN SERVICE IN CALENDAR YEAR 2012 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION APPLIES Tax Year Amount 1st Tax Year $11,160 2nd Tax Year $5,100 3rd Tax Year $3,050 Each Succeeding Year $1,875 REV. Do military pay taxes PROC. Do military pay taxes 2012-23 TABLE 2 DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE IN CALENDAR YEAR 2012 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION APPLIES Tax Year Amount 1st Tax Year $11,360 2nd Tax Year $5,300 3rd Tax Year $3,150 Each Succeeding Year $1,875 REV. Do military pay taxes PROC. Do military pay taxes 2012-23 TABLE 3 DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) PLACED IN SERVICE IN CALENDAR YEAR 2012 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION DOES NOT APPLY Tax Year Amount 1st Tax Year $3,160 2nd Tax Year $5,100 3rd Tax Year $3,050 Each Succeeding Year $1,875 REV. Do military pay taxes PROC. Do military pay taxes 2012-23 TABLE 4 DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE IN CALENDAR YEAR 2012 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION DOES NOT APPLY Tax Year Amount 1st Tax Year $3,360 2nd Tax Year $5,300 3rd Tax Year $3,150 Each Succeeding Year $1,875 . Do military pay taxes 02 Inclusions in Income of Lessees of Passenger Automobiles. Do military pay taxes A taxpayer must follow the procedures in § 1. Do military pay taxes 280F-7(a) for determining the inclusion amounts for passenger automobiles first leased in calendar year 2012. Do military pay taxes In applying these procedures, lessees of passenger automobiles other than trucks and vans should use Table 5 of this revenue procedure, while lessees of trucks and vans should use Table 6 of this revenue procedure. Do military pay taxes REV. Do military pay taxes PROC. Do military pay taxes 2012-23 TABLE 5 DOLLAR AMOUNTS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2012 Fair Market Value of Passenger Automobile Tax Year During Lease Over Not Over 1st 2nd 3rd 4th 5th & Later $18,500 $19,000 2 4 5 6 8 19,000 19,500 2 4 7 7 9 19,500 20,000 2 5 8 8 10 20,000 20,500 3 5 9 10 11 20,500 21,000 3 6 9 12 12 21,000 21,500 3 7 10 12 14 21,500 22,000 3 8 11 13 16 22,000 23,000 4 8 13 15 17 23,000 24,000 4 10 15 17 20 24,000 25,000 5 11 17 19 23 25,000 26,000 6 12 19 21 26 26,000 27,000 6 14 20 24 28 27,000 28,000 7 15 22 26 31 28,000 29,000 7 16 25 28 33 29,000 30,000 8 18 25 32 35 30,000 31,000 9 19 27 34 38 31,000 32,000 9 20 30 36 41 32,000 33,000 10 21 32 38 43 33,000 34,000 10 23 33 41 46 34,000 35,000 11 24 35 43 49 35,000 36,000 12 25 37 45 52 36,000 37,000 12 27 39 47 54 37,000 38,000 13 28 41 49 57 38,000 39,000 13 29 43 52 59 39,000 40,000 14 30 45 54 62 40,000 41,000 14 32 47 56 65 41,000 42,000 15 33 49 58 68 42,000 43,000 16 34 51 61 70 43,000 44,000 16 36 52 63 73 44,000 45,000 17 37 54 66 75 45,000 46,000 17 38 57 67 78 46,000 47,000 18 39 59 70 80 47,000 48,000 19 40 61 72 83 48,000 49,000 19 42 62 75 86 49,000 50,000 20 43 64 77 89 50,000 51,000 20 45 66 79 91 51,000 52,000 21 46 68 81 94 52,000 53,000 21 47 70 84 96 53,000 54,000 22 48 72 86 99 54,000 55,000 23 49 74 88 102 55,000 56,000 23 51 76 90 104 56,000 57,000 24 52 78 92 107 57,000 58,000 24 54 79 95 110 58,000 59,000 25 55 81 97 113 59,000 60,000 26 56 83 100 115 60,000 62,000 26 58 86 103 119 62,000 64,000 28 60 90 108 124 64,000 66,000 29 63 94 112 129 66,000 68,000 30 66 97 117 135 68,000 70,000 31 68 102 121 140 70,000 72,000 32 71 105 126 145 72,000 74,000 33 74 109 130 151 74,000 76,000 35 76 113 135 156 76,000 78,000 36 78 117 140 161 78,000 80,000 37 81 120 145 166 80,000 85,000 39 86 127 152 176 85,000 90,000 42 92 137 163 189 90,000 95,000 45 98 147 175 202 95,000 100,000 48 105 155 187 215 100,000 110,000 52 115 170 203 235 110,000 120,000 58 127 189 227 262 120,000 130,000 64 140 208 250 288 130,000 140,000 70 153 227 272 315 140,000 150,000 75 166 246 296 340 150,000 160,000 81 179 265 318 368 160,000 170,000 87 192 284 341 394 170,000 180,000 93 204 304 364 420 180,000 190,000 99 217 323 387 446 190,000 200,000 105 230 342 409 473 200,000 210,000 111 243 361 432 499 210,000 220,000 116 256 380 455 526 220,000 230,000 122 269 399 478 552 230,000 240,000 128 282 418 501 578 240,000 and up 134 294 437 524 605 REV. Do military pay taxes PROC. Do military pay taxes 2012-23 TABLE 6 DOLLAR AMOUNTS FOR TRUCKS AND VANS WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2012 Fair Market Value of Truck or Van Tax Year During Lease Over Not Over 1st 2nd 3rd 4th 5th & Later $19,000 $19,500 1 4 5 6 7 19,500 20,000 2 4 6 7 9 20,000 20,500 2 5 7 8 10 20,500 21,000 2 5 8 10 11 21,000 21,500 3 6 9 10 13 21,500 22,000 3 6 10 12 14 22,000 23,000 3 8 11 14 15 23,000 24,000 4 9 13 16 18 24,000 25,000 4 10 15 19 21 25,000 26,000 5 11 17 21 24 26,000 27,000 6 12 19 23 26 27,000 28,000 6 14 21 25 29 28,000 29,000 7 15 23 27 32 29,000 30,000 7 17 24 30 34 30,000 31,000 8 18 26 32 37 31,000 32,000 9 19 28 34 40 32,000 33,000 9 20 31 36 42 33,000 34,000 10 21 33 39 44 34,000 35,000 10 23 34 41 48 35,000 36,000 11 24 36 44 50 36,000 37,000 12 25 38 46 53 37,000 38,000 12 27 40 48 55 38,000 39,000 13 28 42 50 58 39,000 40,000 13 29 44 53 60 40,000 41,000 14 31 45 55 63 41,000 42,000 14 32 48 57 66 42,000 43,000 15 33 50 59 69 43,000 44,000 16 34 52 61 72 44,000 45,000 16 36 53 64 74 45,000 46,000 17 37 55 66 77 46,000 47,000 17 38 58 68 79 47,000 48,000 18 40 59 70 82 48,000 49,000 19 41 61 73 84 49,000 50,000 19 42 63 75 87 50,000 51,000 20 43 65 78 89 51,000 52,000 20 45 66 80 93 52,000 53,000 21 46 68 83 95 53,000 54,000 21 48 70 84 98 54,000 55,000 22 49 72 87 100 55,000 56,000 23 50 74 89 103 56,000 57,000 23 51 76 92 105 57,000 58,000 24 52 78 94 108 58,000 59,000 24 54 80 96 111 59,000 60,000 25 55 82 98 114 60,000 62,000 26 57 85 101 118 62,000 64,000 27 60 88 106 123 64,000 66,000 28 62 93 110 128 66,000 68,000 29 65 96 115 134 68,000 70,000 30 67 100 120 139 70,000 72,000 32 70 103 125 144 72,000 74,000 33 72 108 129 149 74,000 76,000 34 75 111 134 155 76,000 78,000 35 78 115 138 160 78,000 80,000 36 80 119 143 165 80,000 85,000 38 85 125 151 175 85,000 90,000 41 91 135 163 187 90,000 95,000 44 98 144 174 201 95,000 100,000 47 104 154 185 214 100,000 110,000 52 113 169 202 234 110,000 120,000 57 127 187 225 261 120,000 130,000 63 139 207 248 287 130,000 140,000 69 152 226 271 313 140,000 150,000 75 165 245 294 339 150,000 160,000 81 178 264 316 366 160,000 170,000 87 190 283 340 392 170,000 180,000 92 204 302 362 419 180,000 190,000 98 216 322 385 445 190,000 200,000 104 229 340 409 471 200,000 210,000 110 242 359 431 498 210,000 220,000 116 255 378 454 524 220,000 230,000 122 267 398 477 551 230,000 240,000 127 281 416 500 577 240,000 and up 133 294 435 523 603 SECTION 5. Do military pay taxes EFFECTIVE DATE This revenue procedure applies to passenger automobiles that a taxpayer first places in service or first leases during calendar year 2012. Do military pay taxes SECTION 6. Do military pay taxes DRAFTING INFORMATION The principal author of this revenue procedure is Bernard P. Do military pay taxes Harvey of the Office of Associate Chief Counsel (Income Tax & Accounting). Do military pay taxes For further information regarding this revenue procedure, contact Mr. Do military pay taxes Harvey at (202) 622-4930 (not a toll-free call). Do military pay taxes Prev  Up  Next   Home   More Internal Revenue Bulletins