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File 1040ez online free Index A Advance EIC tables, instructions, Advance Payment Methods for the Earned Income Credit (EIC) Aliens, nonresident, Withholding Income Taxes on the Wages of Nonresident Alien Employees Alternative methods of withholding, Alternative Methods for Figuring Withholding C Combined income tax, employee social security tax, and employee Medicare tax withholding tables, Combined Income Tax, Employee Social Security Tax, and Employee Medicare Tax Withholding Tables F Formula tables for percentage method withholding (for automated payroll systems), Formula Tables for Percentage Method Withholding (for Automated Payroll Systems) I Introduction, Introduction N Nonresident alien employees, Withholding Income Taxes on the Wages of Nonresident Alien Employees Notice to employers, Notice to Employers Q Qualified transportation benefits Commuter highway vehicle transportation, Increased Exclusion Amount for Combined Commuter Highway Vehicle Transportation and Transit Passes Transit passes, Increased Exclusion Amount for Combined Commuter Highway Vehicle Transportation and Transit Passes W Wage bracket percentage method tables (for automated payroll systems), Wage Bracket Percentage Method Tables (for Automated Payroll Systems) Withholding income taxes on wages Nonresident alien employees, Withholding Income Taxes on the Wages of Nonresident Alien Employees Withholding: Alternative methods, Alternative Methods for Figuring Withholding Percentage method, Percentage Method Wage bracket method, Wage Bracket Method Prev  Up     Home   More Online Publications
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File 1040ez online free 4. File 1040ez online free   Farm Business Expenses Table of Contents What's New for 2013 Introduction Topics - This chapter discusses: Useful Items - You may want to see: Deductible ExpensesReasonable allocation. File 1040ez online free Prepaid Farm Supplies Prepaid Livestock Feed Labor Hired Repairs and Maintenance Interest Breeding Fees Fertilizer and Lime Taxes Insurance Rent and Leasing Depreciation Business Use of Your Home Truck and Car Expenses Travel Expenses Marketing Quota Penalties Tenant House Expenses Items Purchased for Resale Other Expenses Domestic Production Activities Deduction Capital ExpensesForestation and reforestation costs. File 1040ez online free Nondeductible ExpensesPersonal, Living, and Family Expenses Other Nondeductible Items Losses From Operating a FarmAt-Risk Limits Passive Activity Limits Excess Farm Loss Limit Not-for-Profit FarmingUsing the presumption later. File 1040ez online free Category 1. File 1040ez online free Category 2. File 1040ez online free Category 3. File 1040ez online free What's New for 2013 Standard mileage rate. File 1040ez online free  For 2013, the standard mileage rate for the cost of operating your car, van, pickup, or panel truck for each mile of business use is 56. File 1040ez online free 5 cents. File 1040ez online free See Truck and Car Expenses , later. File 1040ez online free Simplified method for business use of home deduction. File 1040ez online free  The IRS now provides a simplified method to determine your expenses for business use of your home. File 1040ez online free For more information, see Schedule C (Form 1040), Part II, and its instructions. File 1040ez online free Introduction You can generally deduct the current costs of operating your farm. File 1040ez online free Current costs are expenses you do not have to capitalize or include in inventory costs. File 1040ez online free However, your deduction for the cost of livestock feed and certain other supplies may be limited. File 1040ez online free If you have an operating loss, you may not be able to deduct all of it. File 1040ez online free Topics - This chapter discusses: Deductible expenses Domestic production activities deduction Capital expenses Nondeductible expenses Losses from operating a farm Not-for-profit farming Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 535 Business Expenses 587 Business Use of Your Home 925 Passive Activity and At-Risk Rules 936 Home Mortgage Interest Deduction Form (and Instructions) Sch A (Form 1040) Itemized Deductions Sch F (Form 1040) Profit or Loss From Farming 1045 Application for Tentative Refund 5213 Election To Postpone Determination as To Whether the Presumption Applies That an Activity Is Engaged in for Profit 8903 Domestic Production Activities Deduction See chapter 16 for information about getting publications and forms. File 1040ez online free Deductible Expenses The ordinary and necessary costs of operating a farm for profit are deductible business expenses. File 1040ez online free “Ordinary” means what most farmers do and “necessary” means what is useful and helpful in farming. File 1040ez online free Schedule F, Part II, lists some common farm expenses that are typically deductible. File 1040ez online free This chapter discusses many of these expenses, as well as others not listed on Schedule F. File 1040ez online free Reimbursed expenses. File 1040ez online free   If the reimbursement is received in the same year that the expense is claimed, reduce the expense by the amount of the reimbursement. File 1040ez online free If the reimbursement is received in a year after the expense is claimed, include the reimbursement amount in income. File 1040ez online free See Refund or reimbursement under Income From Other Sources in chapter 3. File 1040ez online free Personal and business expenses. File 1040ez online free   Some expenses you pay during the tax year may be part personal and part business. File 1040ez online free These may include expenses for gasoline, oil, fuel, water, rent, electricity, telephone, automobile upkeep, repairs, insurance, interest, and taxes. File 1040ez online free   You must allocate these mixed expenses between their business and personal parts. File 1040ez online free Generally, the personal part of these expenses is not deductible. File 1040ez online free The business portion of the expenses is deductible on Schedule F. File 1040ez online free Example. File 1040ez online free You paid $1,500 for electricity during the tax year. File 1040ez online free You used 1/3 of the electricity for personal purposes and 2/3 for farming. File 1040ez online free Under these circumstances, you can deduct $1,000 (2/3 of $1,500) of your electricity expense as a farm business expense. File 1040ez online free Reasonable allocation. File 1040ez online free   It is not always easy to determine the business and nonbusiness parts of an expense. File 1040ez online free There is no method of allocation that applies to all mixed expenses. File 1040ez online free Any reasonable allocation is acceptable. File 1040ez online free What is reasonable depends on the circumstances in each case. File 1040ez online free Prepaid Farm Supplies Prepaid farm supplies include the following items if paid for during the year. File 1040ez online free Feed, seed, fertilizer, and similar farm supplies not used or consumed during the year, but not including farm supplies that you would have consumed during the year if not for a fire, storm, flood, other casualty, disease, or drought. File 1040ez online free Poultry (including egg-laying hens and baby chicks) bought for use (or for both use and resale) in your farm business. File 1040ez online free However, include only the amount that would be deductible in the following year if you had capitalized the cost and deducted it ratably over the lesser of 12 months or the useful life of the poultry. File 1040ez online free Poultry bought for resale and not resold during the year. File 1040ez online free Deduction limit. File 1040ez online free   If you use the cash method of accounting to report your income and expenses, your deduction for prepaid farm supplies in the year you pay for them may be limited to 50% of your other deductible farm expenses for the year (all Schedule F deductions except prepaid farm supplies). File 1040ez online free This limit does not apply if you meet one of the exceptions described later. File 1040ez online free See Chapter 2 for a discussion of the cash method of accounting. File 1040ez online free   If the limit applies, you can deduct the excess cost of farm supplies other than poultry in the year you use or consume the supplies. File 1040ez online free The excess cost of poultry bought for use (or for both use and resale) in your farm business is deductible in the year following the year you pay for it. File 1040ez online free The excess cost of poultry bought for resale is deductible in the year you sell or otherwise dispose of that poultry. File 1040ez online free Example. File 1040ez online free You may not qualify for the exception described next. File 1040ez online free During 2013, you bought fertilizer ($4,000), feed ($1,000), and seed ($500) for use on your farm in the following year. File 1040ez online free Your total prepaid farm supplies expense for 2013 is $5,500. File 1040ez online free Your other deductible farm expenses totaled $10,000 for 2013. File 1040ez online free Therefore, your deduction for prepaid farm supplies cannot be more than $5,000 (50% of $10,000) for 2013. File 1040ez online free The excess prepaid farm supplies expense of $500 ($5,500 − $5,000) is deductible in a later tax year when you use or consume the supplies. File 1040ez online free Exceptions. File 1040ez online free   This limit on the deduction for prepaid farm supplies expense does not apply if you are a farm-related taxpayer and either of the following apply. File 1040ez online free Your prepaid farm supplies expense is more than 50% of your other deductible farm expenses because of a change in business operations caused by unusual circumstances. File 1040ez online free Your total prepaid farm supplies expense for the preceding 3 tax years is less than 50% of your total other deductible farm expenses for those 3 tax years. File 1040ez online free   You are a farm-related taxpayer if any of the following tests apply. File 1040ez online free Your main home is on a farm. File 1040ez online free Your principal business is farming. File 1040ez online free A member of your family meets (1) or (2). File 1040ez online free For this purpose, your family includes your brothers and sisters, half-brothers and half-sisters, spouse, parents, grandparents, children, grandchildren, and aunts and uncles and their children. File 1040ez online free    Whether or not the deduction limit for prepaid farm supplies applies, your expenses for prepaid livestock feed may be subject to the rules for advance payment of livestock feed, discussed next. File 1040ez online free Prepaid Livestock Feed If you report your income and expenses under the cash method of accounting, you cannot deduct in the year paid the cost of feed your livestock will consume in a later year unless you meet all the following tests. File 1040ez online free The payment is for the purchase of feed rather than a deposit. File 1040ez online free The prepayment has a business purpose and is not merely for tax avoidance. File 1040ez online free Deducting the prepayment does not result in a material distortion of your income. File 1040ez online free If you meet all three tests, you can deduct the prepaid feed, subject to the limit on prepaid farm supplies discussed earlier. File 1040ez online free If you fail any of these tests, you can deduct the prepaid feed only in the year it is consumed. File 1040ez online free This rule does not apply to the purchase of commodity futures contracts. File 1040ez online free Payment for the purchase of feed. File 1040ez online free   Whether a payment is for the purchase of feed or a deposit depends on the facts and circumstances in each case. File 1040ez online free It is for the purchase of feed if you can show you made it under a binding commitment to accept delivery of a specific quantity of feed at a fixed price and you are not entitled, by contract or business custom, to a refund or repurchase. File 1040ez online free   The following are some factors that show a payment is a deposit rather than for the purchase of feed. File 1040ez online free The absence of specific quantity terms. File 1040ez online free The right to a refund of any unapplied payment credit at the end of the contract. File 1040ez online free The seller's treatment of the payment as a deposit. File 1040ez online free The right to substitute other goods or products for those specified in the contract. File 1040ez online free   A provision permitting substitution of ingredients to vary the particular feed mix to meet your livestock's current diet requirements will not suggest a deposit. File 1040ez online free Further, a price adjustment to reflect market value at the date of delivery is not, by itself, proof of a deposit. File 1040ez online free Business purpose. File 1040ez online free   The prepayment has a business purpose only if you have a reasonable expectation of receiving some business benefit from prepaying the cost of livestock feed. File 1040ez online free The following are some examples of business benefits. File 1040ez online free Fixing maximum prices and securing an assured feed supply. File 1040ez online free Securing preferential treatment in anticipation of a feed shortage. File 1040ez online free   Other factors considered in determining the existence of a business purpose are whether the prepayment was a condition imposed by the seller and whether that condition was meaningful. File 1040ez online free No material distortion of income. File 1040ez online free   The following are some factors considered in determining whether deducting prepaid livestock feed materially distorts income. File 1040ez online free Your customary business practice in conducting your livestock operations. File 1040ez online free The expense in relation to past purchases. File 1040ez online free The time of year you made the purchase. File 1040ez online free The expense in relation to your income for the year. File 1040ez online free Labor Hired You can deduct reasonable wages paid for regular farm labor, piecework, contract labor, and other forms of labor hired to perform your farming operations. File 1040ez online free You can pay wages in cash or in noncash items such as inventory, capital assets, or assets used in your business. File 1040ez online free The cost of boarding farm labor is a deductible labor cost. File 1040ez online free Other deductible costs you incur for farm labor include health insurance, workers' compensation insurance, and other benefits. File 1040ez online free If you must withhold social security, Medicare, and income taxes from your employees' cash wages, you can still deduct the full amount of wages before withholding. File 1040ez online free See chapter 13 for more information on employment taxes. File 1040ez online free Also, deduct the employer's share of the social security and Medicare taxes you must pay on your employees' wages as a farm business expense on Schedule F, line 29. File 1040ez online free See Taxes , later. File 1040ez online free Property for services. File 1040ez online free   If you transfer property to an employee in payment for services, you can deduct as wages paid the fair market value of the property on the date of transfer. File 1040ez online free If the employee pays you anything for the property, deduct as wages the fair market value of the property minus the payment by the employee for the property. File 1040ez online free   Treat the wages deducted as an amount received for the property. File 1040ez online free You may have a gain or loss to report if the property's adjusted basis on the date of transfer is different from its fair market value. File 1040ez online free Any gain or loss has the same character the exchanged property had in your hands. File 1040ez online free For more information, see chapter 8. File 1040ez online free Child as an employee. File 1040ez online free   You can deduct reasonable wages or other compensation you pay to your child for doing farmwork if a true employer-employee relationship exists between you and your child. File 1040ez online free Include these wages in the child's income. File 1040ez online free The child may have to file an income tax return. File 1040ez online free These wages may also be subject to social security and Medicare taxes if your child is age 18 or older. File 1040ez online free For more information, see Family Employees in chapter 13. File 1040ez online free    A Form W-2, Wage and Tax Statement, should be issued to the child employee. File 1040ez online free   The fact that your child spends the wages to buy clothes or other necessities you normally furnish does not prevent you from deducting your child's wages as a farm expense. File 1040ez online free The amount of wages paid to the child could cause a loss of the dependency exemption depending on how the child uses the money. File 1040ez online free Spouse as an employee. File 1040ez online free   You can deduct reasonable wages or other compensation you pay to your spouse if a true employer-employee relationship exists between you and your spouse. File 1040ez online free Wages you pay to your spouse are subject to social security and Medicare taxes. File 1040ez online free For more information, see Family Employees in chapter 13. File 1040ez online free Nondeductible Pay You cannot deduct wages paid for certain household work, construction work, and maintenance of your home. File 1040ez online free However, those wages may be subject to the employment taxes discussed in chapter 13. File 1040ez online free Household workers. File 1040ez online free   Do not deduct amounts paid to persons engaged in household work, except to the extent their services are used in boarding or otherwise caring for farm laborers. File 1040ez online free Construction labor. File 1040ez online free   Do not deduct wages paid to hired help for the construction of new buildings or other improvements. File 1040ez online free These wages are part of the cost of the building or other improvement. File 1040ez online free You must capitalize them. File 1040ez online free Maintaining your home. File 1040ez online free   If your farm employee spends time maintaining or repairing your home, the wages and employment taxes you pay for that work are nondeductible personal expenses. File 1040ez online free For example, assume you have a farm employee for the entire tax year and the employee spends 5% of the time maintaining your home. File 1040ez online free The employee devotes the remaining time to work on your farm. File 1040ez online free You cannot deduct 5% of the wages and employment taxes you pay for that employee. File 1040ez online free Employment Credits Reduce your deduction for wages by the amount of any employment credits you claim such as the work opportunity credit for qualified tax-exempt organizations hiring qualified veterans (Form 5884-C). File 1040ez online free Repairs and Maintenance You can deduct most expenses for the repair and maintenance of your farm property. File 1040ez online free Common items of repair and maintenance are repainting, replacing shingles and supports on farm buildings, and periodic or routine maintenance of trucks, tractors, and other farm machinery. File 1040ez online free However, repairs to, or overhauls of, depreciable property that substantially prolong the life of the property, increase its value, or adapt it to a different use are capital expenses. File 1040ez online free For example, if you repair the barn roof, the cost is deductible. File 1040ez online free But if you replace the roof, it is a capital expense. File 1040ez online free For more information, see Capital Expenses , later. File 1040ez online free Interest You can deduct as a farm business expense interest paid on farm mortgages and other obligations you incur in your farm business. File 1040ez online free Cash method. File 1040ez online free   If you use the cash method of accounting, you can generally deduct interest paid during the tax year. File 1040ez online free You cannot deduct interest paid with funds received from the original lender through another loan, advance, or other arrangement similar to a loan. File 1040ez online free You can, however, deduct the interest when you start making payments on the new loan. File 1040ez online free For more information, see Cash Method in chapter 2. File 1040ez online free Prepaid interest. File 1040ez online free   Under the cash method, you generally cannot deduct any interest paid before the year it is due. File 1040ez online free Interest paid in advance may be deducted only in the tax year in which it is due. File 1040ez online free Accrual method. File 1040ez online free   If you use an accrual method of accounting, you can deduct only interest that has accrued during the tax year. File 1040ez online free However, you cannot deduct interest owed to a related person who uses the cash method until payment is made and the interest is includible in the gross income of that person. File 1040ez online free For more information, see Accrual Method in chapter 2. File 1040ez online free Allocation of interest. File 1040ez online free   If you use the proceeds of a loan for more than one purpose, you must allocate the interest on that loan to each use. File 1040ez online free Allocate the interest to the following categories. File 1040ez online free Trade or business interest. File 1040ez online free Passive activity interest. File 1040ez online free Investment interest. File 1040ez online free Portfolio interest. File 1040ez online free Personal interest. File 1040ez online free   You generally allocate interest on a loan the same way you allocate the loan proceeds. File 1040ez online free You allocate loan proceeds by tracing disbursements to specific uses. File 1040ez online free The easiest way to trace disbursements to specific uses is to keep the proceeds of a particular loan separate from any other funds. File 1040ez online free Secured loan. File 1040ez online free   The allocation of loan proceeds and the related interest is generally not affected by the use of property that secures the loan. File 1040ez online free Example. File 1040ez online free You secure a loan with property used in your farming business. File 1040ez online free You use the loan proceeds to buy a car for personal use. File 1040ez online free You must allocate interest expense on the loan to personal use (purchase of the car) even though the loan is secured by farm business property. File 1040ez online free If the property that secures the loan is your home, you generally do not allocate the loan proceeds or the related interest. File 1040ez online free The interest is usually deductible as qualified home mortgage interest, regardless of how the loan proceeds are used. File 1040ez online free However, you can choose to treat the loan as not secured by your home. File 1040ez online free For more information, see Publication 936. File 1040ez online free Allocation period. File 1040ez online free   The period for which a loan is allocated to a particular use begins on the date the proceeds are used and ends on the earlier of the following dates. File 1040ez online free The date the loan is repaid. File 1040ez online free The date the loan is reallocated to another use. File 1040ez online free More information. File 1040ez online free   For more information on interest, see chapter 4 in Publication 535. File 1040ez online free Breeding Fees You can deduct breeding fees as a farm business expense. File 1040ez online free However, if you use an accrual method of accounting, you must capitalize breeding fees and allocate them to the cost basis of the calf, foal, etc. File 1040ez online free For more information on who must use an accrual method of accounting, see Accrual Method Required under Accounting Methods in chapter 2. File 1040ez online free Fertilizer and Lime You can deduct in the year paid or incurred the cost of fertilizer, lime, and other materials applied to farmland to enrich, neutralize, or condition it if the benefits last a year or less. File 1040ez online free You can also deduct the cost of applying these materials in the year you pay or incur it. File 1040ez online free However, see Prepaid Farm Supplies , earlier, for a rule that may limit your deduction for these materials. File 1040ez online free If the benefits of the fertilizer, lime, or other materials last substantially more than one year, you generally capitalize their cost and deduct a part each year the benefits last. File 1040ez online free However, you can choose to deduct these expenses in the year paid or incurred. File 1040ez online free If you make this choice, you will need IRS approval if you later decide to capitalize the cost of previously deducted items. File 1040ez online free If you sell farmland on which fertilizer or lime has been applied and if the selling price of the land includes part or all of the cost of the fertilizer or lime, you report the sale amount attributable to the fertilizer or lime as ordinary income. File 1040ez online free Farmland, for these purposes, is land used for producing crops, fruits, or other agricultural products or for sustaining livestock. File 1040ez online free It does not include land you have never used previously for producing crops or sustaining livestock. File 1040ez online free You cannot deduct initial land preparation costs. File 1040ez online free (See Capital Expenses , later. File 1040ez online free ) Include government payments you receive for lime or fertilizer in income. File 1040ez online free See Fertilizer and Lime under Agricultural Program Payments in chapter 3. File 1040ez online free Taxes You can deduct as a farm business expense the real estate and personal property taxes on farm business assets, such as farm equipment, animals, farmland, and farm buildings. File 1040ez online free You also can deduct the social security and Medicare taxes you pay to match the amount withheld from the wages of farm employees and any federal unemployment tax you pay. File 1040ez online free For information on employment taxes, see chapter 13. File 1040ez online free Allocation of taxes. File 1040ez online free   The taxes on the part of your farm you use as your home (including the furnishings and surrounding land not used for farming) are nonbusiness taxes. File 1040ez online free You may be able to deduct these nonbusiness taxes as itemized deductions on Schedule A (Form 1040). File 1040ez online free To determine the nonbusiness part, allocate the taxes between the farm assets and nonbusiness assets. File 1040ez online free The allocation can be done from the assessed valuations. File 1040ez online free If your tax statement does not show the assessed valuations, you can usually get them from the tax assessor. File 1040ez online free State and local general sales taxes. File 1040ez online free   State and local general sales taxes on nondepreciable farm business expense items are deductible as part of the cost of those items. File 1040ez online free Include state and local general sales taxes imposed on the purchase of assets for use in your farm business as part of the cost you depreciate. File 1040ez online free Also treat the taxes as part of your cost if they are imposed on the seller and passed on to you. File 1040ez online free State and federal income taxes. File 1040ez online free   Individuals cannot deduct state and federal income taxes as farm business expenses. File 1040ez online free Individuals can deduct state and local income taxes only as an itemized deduction on Schedule A (Form 1040). File 1040ez online free However, you cannot deduct federal income tax. File 1040ez online free Highway use tax. File 1040ez online free   You can deduct the federal use tax on highway motor vehicles paid on a truck or truck tractor used in your farm business. File 1040ez online free For information on the tax itself, including information on vehicles subject to the tax, see the Instructions for Form 2290, Heavy Highway Vehicle Use Tax Return. File 1040ez online free Self-employment tax deduction. File 1040ez online free   You can deduct as an adjustment to income on Form 1040 one-half of your self-employment tax in figuring your adjusted gross income. File 1040ez online free For more information, see chapter 12. File 1040ez online free Insurance You generally can deduct the ordinary and necessary cost of insurance for your farm business as a business expense. File 1040ez online free This includes premiums you pay for the following types of insurance. File 1040ez online free Fire, storm, crop, theft, liability, and other insurance on farm business assets. File 1040ez online free Health and accident insurance on your farm employees. File 1040ez online free Workers' compensation insurance set by state law that covers any claims for job-related bodily injuries or diseases suffered by employees on your farm, regardless of fault. File 1040ez online free Business interruption insurance. File 1040ez online free State unemployment insurance on your farm employees (deductible as taxes if they are considered taxes under state law). File 1040ez online free Insurance to secure a loan. File 1040ez online free   If you take out a policy on your life or on the life of another person with a financial interest in your farm business to get or protect a business loan, you cannot deduct the premiums as a business expense. File 1040ez online free In the event of death, the proceeds of the policy are not taxed as income even if they are used to liquidate the debt. File 1040ez online free Advance premiums. File 1040ez online free   Deduct advance payments of insurance premiums only in the year to which they apply, regardless of your accounting method. File 1040ez online free Example. File 1040ez online free On June 28, 2013, you paid a premium of $3,000 for fire insurance on your barn. File 1040ez online free The policy will cover a period of 3 years beginning on July 1, 2013. File 1040ez online free Only the cost for the 6 months in 2013 is deductible as an insurance expense on your 2013 calendar year tax return. File 1040ez online free Deduct $500, which is the premium for 6 months of the 36-month premium period, or 6/36 of $3,000. File 1040ez online free In both 2014 and 2015, deduct $1,000 (12/36 of $3,000). File 1040ez online free Deduct the remaining $500 in 2016. File 1040ez online free Had the policy been effective on January 1, 2013, the deductible expense would have been $1,000 for each of the years 2013, 2014, and 2015, based on one-third of the premium used each year. File 1040ez online free Business interruption insurance. File 1040ez online free   Use and occupancy and business interruption insurance premiums are deductible as a business expense. File 1040ez online free This insurance pays for lost profits if your business is shut down due to a fire or other cause. File 1040ez online free Report any proceeds in full on Schedule F, Part I. File 1040ez online free Self-employed health insurance deduction. File 1040ez online free   If you are self-employed, you can deduct as an adjustment to income on Form 1040 your payments for medical, dental, and qualified long-term care insurance coverage for yourself, your spouse, and your dependents when figuring your adjusted gross income on your Form 1040. File 1040ez online free Effective March 30, 2010, the insurance can also cover any child of yours under age 27 at the end of 2013, even if the child was not your dependent. File 1040ez online free Generally, this deduction cannot be more than the net profit from the business under which the plan was established. File 1040ez online free   If you or your spouse is also an employee of another person, you cannot take the deduction for any month in which you are eligible to participate in a subsidized health plan maintained by your employer or your spouse's employer. File 1040ez online free   Generally, use the Self-Employed Health Insurance Deduction Worksheet in the Instructions for Form 1040 to figure your deduction. File 1040ez online free Include the remaining part of the insurance payment in your medical expenses on Schedule A (Form 1040) if you itemize your deductions. File 1040ez online free   For more information, see Deductible Premiums in Publication 535, chapter 6. File 1040ez online free Rent and Leasing If you lease property for use in your farm business, you can generally deduct the rent you pay on Schedule F. File 1040ez online free However, you cannot deduct rent you pay in crop shares if you deduct the cost of raising the crops as farm expenses. File 1040ez online free Advance payments. File 1040ez online free   Deduct advance payments of rent only in the year to which they apply, regardless of your accounting method. File 1040ez online free Farm home. File 1040ez online free   If you rent a farm, do not deduct the part of the rental expense that represents the fair rental value of the farm home in which you live. File 1040ez online free Lease or Purchase If you lease a farm building or equipment, you must determine whether or not the agreement must be treated as a conditional sales contract rather than a lease. File 1040ez online free If the agreement is treated as a conditional sales contract, the payments under the agreement (so far as they do not represent interest or other charges) are payments for the purchase of the property. File 1040ez online free Do not deduct these payments as rent, but capitalize the cost of the property and recover this cost through depreciation. File 1040ez online free Conditional sales contract. File 1040ez online free   Whether an agreement is a conditional sales contract depends on the intent of the parties. File 1040ez online free Determine intent based on the provisions of the agreement and the facts and circumstances that exist when you make the agreement. File 1040ez online free No single test, or special combination of tests, always applies. File 1040ez online free However, in general, an agreement may be considered a conditional sales contract rather than a lease if any of the following is true. File 1040ez online free The agreement applies part of each payment toward an equity interest you will receive. File 1040ez online free You get title to the property after you make a stated amount of required payments. File 1040ez online free The amount you must pay to use the property for a short time is a large part of the amount you would pay to get title to the property. File 1040ez online free You pay much more than the current fair rental value of the property. File 1040ez online free You have an option to buy the property at a nominal price compared to the value of the property when you may exercise the option. File 1040ez online free Determine this value when you make the agreement. File 1040ez online free You have an option to buy the property at a nominal price compared to the total amount you have to pay under the agreement. File 1040ez online free The agreement designates part of the payments as interest, or part of the payments can be easily recognized as interest. File 1040ez online free Example. File 1040ez online free You lease new farm equipment from a dealer who both sells and leases. File 1040ez online free The agreement includes an option to purchase the equipment for a specified price. File 1040ez online free The lease payments and the specified option price equal the sales price of the equipment plus interest. File 1040ez online free Under the agreement, you are responsible for maintenance, repairs, and the risk of loss. File 1040ez online free For federal income tax purposes, the agreement is a conditional sales contract. File 1040ez online free You cannot deduct any of the lease payments as rent. File 1040ez online free You can deduct interest, repairs, insurance, depreciation, and other expenses related to the equipment. File 1040ez online free Motor vehicle leases. File 1040ez online free   Special rules apply to lease agreements that have a terminal rental adjustment clause. File 1040ez online free In general, this is a clause that provides for a rental price adjustment based on the amount the lessor is able to sell the vehicle for at the end of the lease. File 1040ez online free If your rental agreement contains a terminal rental adjustment clause, treat the agreement as a lease if the agreement otherwise qualifies as a lease. File 1040ez online free For more information, see Internal Revenue Code (IRC) section 7701(h). File 1040ez online free Leveraged leases. File 1040ez online free   Special rules apply to leveraged leases of equipment (arrangements in which the equipment is financed by a nonrecourse loan from a third party). File 1040ez online free For more information, see Publication 535, chapter 3, and Revenue Procedure 2001-28, which begins on page 1156 of Internal Revenue Bulletin 2001-19 at www. File 1040ez online free irs. File 1040ez online free gov/pub/irs-irbs/irb01-19. File 1040ez online free pdf. File 1040ez online free Depreciation If property you acquire to use in your farm business is expected to last more than one year, you generally cannot deduct the entire cost in the year you acquire it. File 1040ez online free You must recover the cost over more than one year and deduct part of it each year on Schedule F as depreciation or amortization. File 1040ez online free However, you can choose to deduct part or all of the cost of certain qualifying property, up to a limit, as a section 179 deduction in the year you place it in service. File 1040ez online free Depreciation, amortization, and the section 179 deduction are discussed in chapter 7. File 1040ez online free Business Use of Your Home You can deduct expenses for the business use of your home if you use part of your home exclusively and regularly: As the principal place of business for any trade or business in which you engage, As a place to meet or deal with patients, clients, or customers in the normal course of your trade or business, or In connection with your trade or business, if you are using a separate structure that is not attached to your home. File 1040ez online free Your home office will qualify as your principal place of business for deducting expenses for its use if you meet both of the following requirements. File 1040ez online free You use it exclusively and regularly for the administrative or management activities of your trade or business. File 1040ez online free You have no other fixed location where you conduct substantial administrative or management activities of your trade or business. File 1040ez online free If you use part of your home for business, you must divide the expenses of operating your home between personal and business use. File 1040ez online free The IRS now provides a simplified method to determine your expenses for business use of your home. File 1040ez online free For more information, see Schedule C (Form 1040), Part II, and its instructions. File 1040ez online free Deduction limit. File 1040ez online free   If your gross income from farming equals or exceeds your total farm expenses (including expenses for the business use of your home), you can deduct all your farm expenses. File 1040ez online free But if your gross income from farming is less than your total farm expenses, your deduction for certain expenses for the use of your home in your farming business is limited. File 1040ez online free   Your deduction for otherwise nondeductible expenses, such as utilities, insurance, and depreciation (with depreciation taken last), cannot be more than the gross income from farming minus the following expenses. File 1040ez online free The business part of expenses you could deduct even if you did not use your home for business (such as deductible mortgage interest, real estate taxes, and casualty and theft losses). File 1040ez online free Farm expenses other than expenses that relate to the use of your home. File 1040ez online free If you are self-employed, do not include your deduction for half of your self-employment tax. File 1040ez online free   Deductions over the current year's limit can be carried over to your next tax year. File 1040ez online free They are subject to the deduction limit for the next tax year. File 1040ez online free More information. File 1040ez online free   See Publication 587 for more information on deducting expenses for the business use of your home. File 1040ez online free Telephone expense. File 1040ez online free   You cannot deduct the cost of basic local telephone service (including any taxes) for the first telephone line you have in your home, even if you have an office in your home. File 1040ez online free However, charges for business long-distance phone calls on that line, as well as the cost of a second line into your home used exclusively for your farm business, are deductible business expenses. File 1040ez online free Cell phone charges for calls relating to your farm business are deductible. File 1040ez online free If the cell phone you use for your farm business is part of a family cell phone plan, you must allocate and deduct only the portion of the charges attributable to farm business calls. File 1040ez online free Truck and Car Expenses You can deduct the actual cost of operating a truck or car in your farm business. File 1040ez online free Only expenses for business use are deductible. File 1040ez online free These include such items as gasoline, oil, repairs, license tags, insurance, and depreciation (subject to certain limits). File 1040ez online free Standard mileage rate. File 1040ez online free   Instead of using actual costs, under certain conditions you can use the standard mileage rate. File 1040ez online free The standard mileage rate for each mile of business use is 56. File 1040ez online free 5 cents in 2013. File 1040ez online free You can use the standard mileage rate for a car or a light truck, such as a van, pickup, or panel truck, you own or lease. File 1040ez online free   You cannot use the standard mileage rate if you operate five or more cars or light trucks at the same time. File 1040ez online free You are not using five or more vehicles at the same time if you alternate using the vehicles (you use them at different times) for business. File 1040ez online free Example. File 1040ez online free Maureen owns a car and four pickup trucks that are used in her farm business. File 1040ez online free Her farm employees use the trucks and she uses the car for business. File 1040ez online free Maureen cannot use the standard mileage rate for the car or the trucks. File 1040ez online free This is because all five vehicles are used in Maureen's farm business at the same time. File 1040ez online free She must use actual expenses for all vehicles. File 1040ez online free Business use percentage. File 1040ez online free   You can claim 75% of the use of a car or light truck as business use without any records if you used the vehicle during most of the normal business day directly in connection with the business of farming. File 1040ez online free You choose this method of substantiating business use the first year the vehicle is placed in service. File 1040ez online free Once you make this choice, you may not change to another method later. File 1040ez online free The following are uses directly connected with the business of farming. File 1040ez online free Cultivating land. File 1040ez online free Raising or harvesting any agricultural or horticultural commodity. File 1040ez online free Raising, shearing, feeding, caring for, training, and managing animals. File 1040ez online free Driving to the feed or supply store. File 1040ez online free   If you keep records and they show that your business use was more than 75%, you may be able to claim more. File 1040ez online free See Recordkeeping requirements under Travel Expenses , below. File 1040ez online free More information. File 1040ez online free   For more information on deductible truck and car expenses, see Publication 463, chapter 4. File 1040ez online free If you pay your employees for the use of their truck or car in your farm business, see Reimbursements to employees under Travel Expenses next. File 1040ez online free Travel Expenses You can deduct ordinary and necessary expenses you incur while traveling away from home for your farm business. File 1040ez online free You cannot deduct lavish or extravagant expenses. File 1040ez online free Usually, the location of your farm business is considered your home for tax purposes. File 1040ez online free You are traveling away from home if: Your duties require you to be absent from your farm substantially longer than an ordinary work day, and You need to get sleep or rest to meet the demands of your work while away from home. File 1040ez online free If you meet these requirements and can prove the time, place, and business purpose of your travel, you can deduct your ordinary and necessary travel expenses. File 1040ez online free The following are some types of deductible travel expenses. File 1040ez online free Air, rail, bus, and car transportation; Meals and lodging; Dry cleaning and laundry; Telephone and fax; Transportation between your hotel and your temporary work or business meeting location; and Tips for any of the above expenses. File 1040ez online free Meals. File 1040ez online free   You ordinarily can deduct only 50% of your business-related meals expenses. File 1040ez online free You can deduct the cost of your meals while traveling on business only if your business trip is overnight or long enough to require you to stop for sleep or rest to properly perform your duties. File 1040ez online free You cannot deduct any of the cost of meals if it is not necessary for you to rest, unless you meet the rules for business entertainment. File 1040ez online free For information on entertainment expenses, see Publication 463, chapter 2. File 1040ez online free   The expense of a meal includes amounts you spend for your food, beverages, taxes, and tips relating to the meal. File 1040ez online free You can deduct either 50% of the actual cost or 50% of a standard meal allowance that covers your daily meal and incidental expenses. File 1040ez online free    Recordkeeping requirements. File 1040ez online free You must be able to prove your deductions for travel by adequate records or other evidence that will support your own statement. File 1040ez online free Estimates or approximations do not qualify as proof of an expense. File 1040ez online free   You should keep an account book or similar record, supported by adequate documentary evidence, such as receipts, that together support each element of an expense. File 1040ez online free Generally, it is best to record the expense and get documentation of it at the time you pay it. File 1040ez online free   If you choose to deduct a standard meal allowance rather than the actual expense, you do not have to keep records to prove amounts spent for meals and incidental items. File 1040ez online free However, you must still keep records to prove the actual amount of other travel expenses, and the time, place, and business purpose of your travel. File 1040ez online free More information. File 1040ez online free   For detailed information on travel, recordkeeping, and the standard meal allowance, see Publication 463. File 1040ez online free Reimbursements to employees. File 1040ez online free   You generally can deduct reimbursements you pay to your employees for travel and transportation expenses they incur in the conduct of your business. File 1040ez online free Employees may be reimbursed under an accountable or nonaccountable plan. File 1040ez online free Under an accountable plan, the employee must provide evidence of expenses. File 1040ez online free Under a nonaccountable plan, no evidence of expenses is required. File 1040ez online free If you reimburse expenses under an accountable plan, deduct them as travel and transportation expenses. File 1040ez online free If you reimburse expenses under a nonaccountable plan, you must report the reimbursements as wages on Form W-2 and deduct them as wages. File 1040ez online free For more information, see Publication 535, chapter 11. File 1040ez online free Marketing Quota Penalties You can deduct as Other expenses on Schedule F penalties you pay for marketing crops in excess of farm marketing quotas. File 1040ez online free However, if you do not pay the penalty, but instead the purchaser of your crop deducts it from the payment to you, include in gross income only the amount you received. File 1040ez online free Do not take a separate deduction for the penalty. File 1040ez online free Tenant House Expenses You can deduct the costs of maintaining houses and their furnishings for tenants or hired help as farm business expenses. File 1040ez online free These costs include repairs, utilities, insurance, and depreciation. File 1040ez online free The value of a dwelling you furnish to a tenant under the usual tenant-farmer arrangement is not taxable income to the tenant. File 1040ez online free Items Purchased for Resale If you use the cash method of accounting, you ordinarily deduct the cost of livestock and other items purchased for resale only in the year of sale. File 1040ez online free You deduct this cost, including freight charges for transporting the livestock to the farm, on Schedule F, Part I. File 1040ez online free However, see Chickens, seeds, and young plants , below. File 1040ez online free Example. File 1040ez online free You use the cash method of accounting. File 1040ez online free In 2013, you buy 50 steers you will sell in 2014. File 1040ez online free You cannot deduct the cost of the steers on your 2013 tax return. File 1040ez online free You deduct their cost on your 2014 Schedule F, Part I. File 1040ez online free Chickens, seeds, and young plants. File 1040ez online free   If you are a cash method farmer, you can deduct the cost of hens and baby chicks bought for commercial egg production, or for raising and resale, as an expense on Schedule F, Part I, in the year paid if you do it consistently and it does not distort income. File 1040ez online free You also can deduct the cost of seeds and young plants bought for further development and cultivation before sale as an expense on Schedule F, Part I, when paid if you do this consistently and you do not figure your income on the crop method. File 1040ez online free However, see Prepaid Farm Supplies , earlier, for a rule that may limit your deduction for these items. File 1040ez online free   If you deduct the cost of chickens, seeds, and young plants as an expense, report their entire selling price as income. File 1040ez online free You cannot also deduct the cost from the selling price. File 1040ez online free   You cannot deduct the cost of seeds and young plants for Christmas trees and timber as an expense. File 1040ez online free Deduct the cost of these seeds and plants through depletion allowances. File 1040ez online free For more information, see Depletion in chapter 7. File 1040ez online free   The cost of chickens and plants used as food for your family is never deductible. File 1040ez online free   Capitalize the cost of plants with a preproductive period of more than 2 years, unless you can elect out of the uniform capitalization rules. File 1040ez online free These rules are discussed in chapter 6. File 1040ez online free Example. File 1040ez online free You use the cash method of accounting. File 1040ez online free In 2013, you buy 500 baby chicks to raise for resale in 2014. File 1040ez online free You also buy 50 bushels of winter wheat seed in 2013 that you sow in the fall. File 1040ez online free Unless you previously adopted the method of deducting these costs in the year you sell the chickens or the harvested crops, you can deduct the cost of both the baby chicks and the seed wheat in 2013. File 1040ez online free Election to use crop method. File 1040ez online free   If you use the crop method, you can delay deducting the cost of seeds and young plants until you sell them. File 1040ez online free You must get IRS approval to use the crop method. File 1040ez online free If you follow this method, deduct the cost from the selling price to determine your profit on Schedule F, Part I. File 1040ez online free For more information, see Crop method under Special Methods of Accounting in chapter 2. File 1040ez online free Choosing a method. File 1040ez online free   You can adopt either the crop method or the cash method for deducting the cost in the first year you buy egg-laying hens, pullets, chicks, or seeds and young plants. File 1040ez online free   Although you must use the same method for egg-laying hens, pullets, and chicks, you can use a different method for seeds and young plants. File 1040ez online free Once you use a particular method for any of these items, use it for those items until you get IRS approval to change your method. File 1040ez online free For more information, see Change in Accounting Method in chapter 2. File 1040ez online free Other Expenses The following list, while not all-inclusive, shows some expenses you can deduct as other farm expenses on Schedule F, Part II. File 1040ez online free These expenses must be for business purposes and  (1) paid, if you use the cash method of accounting, or (2) incurred, if you use an accrual method of accounting. File 1040ez online free Accounting fees. File 1040ez online free Advertising. File 1040ez online free Business travel and meals. File 1040ez online free Commissions. File 1040ez online free Consultant fees. File 1040ez online free Crop scouting expenses. File 1040ez online free Dues to cooperatives. File 1040ez online free Educational expenses (to maintain and improve farming skills). File 1040ez online free Farm-related attorney fees. File 1040ez online free Farm magazines. File 1040ez online free Ginning. File 1040ez online free Insect sprays and dusts. File 1040ez online free Litter and bedding. File 1040ez online free Livestock fees. File 1040ez online free Marketing fees. File 1040ez online free Milk assessment. File 1040ez online free Recordkeeping expenses. File 1040ez online free Service charges. File 1040ez online free Small tools expected to last one year or less. File 1040ez online free Stamps and stationery. File 1040ez online free Subscriptions to professional, technical, and trade journals that deal with farming. File 1040ez online free Tying material and containers. File 1040ez online free Loan expenses. File 1040ez online free   You prorate and deduct loan expenses, such as legal fees and commissions, you pay to get a farm loan over the term of the loan. File 1040ez online free Tax preparation fees. File 1040ez online free   You can deduct as a farm business expense on Schedule F the cost of preparing that part of your tax return relating to your farm business. File 1040ez online free You may be able to deduct the remaining cost on Schedule A (Form 1040) if you itemize your deductions. File 1040ez online free   You also can deduct on Schedule F the amount you pay or incur in resolving tax issues relating to your farm business. File 1040ez online free Domestic Production Activities Deduction Generally, you are allowed a deduction for income attributable to domestic production activities. File 1040ez online free You can deduct 9% of the lesser of your qualified production activities income or your taxable income (adjusted gross income for individuals) for the tax year. File 1040ez online free Your deduction is limited to 50% of the Form W-2 wages you paid for the tax year that are properly allocable to domestic production gross receipts. File 1040ez online free For this purpose, Form W-2 wages do not include noncash wages paid for agricultural labor, such as compensation paid as commodities. File 1040ez online free Also, excluded from Form W-2 wages are wages paid to your children under age 18 and nontaxable fringe benefits. File 1040ez online free Income from cooperatives. File 1040ez online free   If you receive a patronage dividend or qualified per-unit retain allocation from a cooperative which is engaged in the manufacturing, production, growth, or extraction in whole or in significant part of any agricultural or horticultural product or in the marketing of agricultural or horticultural products, your income from the cooperative can give rise to a domestic production activities deduction. File 1040ez online free This deduction amount is reported on Form 1099-PATR, box 6. File 1040ez online free In order for you to qualify for the deduction, the cooperative is required to send you a written notice designating your portion of the domestic production activities deduction. File 1040ez online free More information. File 1040ez online free   For more information on the domestic production activities deduction, see the Instructions for Form 8903. File 1040ez online free Capital Expenses A capital expense is a payment, or a debt incurred, for the acquisition, improvement, or restoration of an asset that is expected to last more than one year. File 1040ez online free You include the expense in the basis of the asset. File 1040ez online free Uniform capitalization rules also require you to capitalize or include in inventory certain other expenses. File 1040ez online free See chapters 2  and 6. File 1040ez online free Capital expenses are generally not deductible, but they may be depreciable. File 1040ez online free However, you can elect to deduct certain capital expenses, such as the following. File 1040ez online free The cost of fertilizer, lime, etc. File 1040ez online free (See Fertilizer and Lime under Deductible Expenses , earlier. File 1040ez online free ) Soil and water conservation expenses. File 1040ez online free (See chapter 5. File 1040ez online free ) The cost of property that qualifies for a deduction under section 179. File 1040ez online free (See chapter 7. File 1040ez online free ) Business start-up costs. File 1040ez online free (See Business start-up and organizational costs , later. File 1040ez online free ) Forestation and reforestation costs. File 1040ez online free (See Forestation and reforestation costs , later. File 1040ez online free ) Generally, the costs of the following items, including the costs of material, hired labor, and installation, are capital expenses. File 1040ez online free Land and buildings. File 1040ez online free Additions, alterations, and improvements to buildings, etc. File 1040ez online free Cars and trucks. File 1040ez online free Equipment and machinery. File 1040ez online free Fences. File 1040ez online free Draft, breeding, sport, and dairy livestock. File 1040ez online free Repairs to machinery, equipment, trucks, and cars that prolong their useful life, increase their value, or adapt them to different use. File 1040ez online free Water wells, including drilling and equipping costs. File 1040ez online free Land preparation costs, such as: Clearing land for farming, Leveling and conditioning land, Purchasing and planting trees, Building irrigation canals and ditches, Laying irrigation pipes, Installing drain tile, Modifying channels or streams, Constructing earthen, masonry, or concrete tanks, reservoirs, or dams, and Building roads. File 1040ez online free Business start-up and organizational costs. File 1040ez online free   You can elect to deduct up to $5,000 of business start-up costs and $5,000 of organizational costs paid or incurred after October 22, 2004. File 1040ez online free The $5,000 deduction is reduced by the amount your total start-up or organizational costs exceed $50,000. File 1040ez online free Any remaining costs must be amortized. File 1040ez online free See chapter 7. File 1040ez online free   You elect to deduct start-up or organizational costs by claiming the deduction on the income tax return filed by the due date (including extensions) for the tax year in which the active trade or business begins. File 1040ez online free However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). File 1040ez online free Clearly indicate the election on your amended return and write “Filed pursuant to section 301. File 1040ez online free 9100-2” at the top of the amended return. File 1040ez online free File the amended return at the same address you filed the original return. File 1040ez online free The election applies when figuring taxable income for the current tax year and all subsequent years. File 1040ez online free   You can choose to forgo the election by clearly electing to capitalize your start-up or organizational costs on an income tax return filed by the due date (including extensions) for the tax year in which the active trade or business begins. File 1040ez online free For more information about start-up and organizational costs, see chapter 7. File 1040ez online free Crop production expenses. File 1040ez online free   The uniform capitalization rules generally require you to capitalize expenses incurred in producing plants. File 1040ez online free However, except for certain taxpayers required to use an accrual method of accounting, the capitalization rules do not apply to plants with a preproductive period of 2 years or less. File 1040ez online free For more information, see Uniform Capitalization Rules in chapter 6. File 1040ez online free Timber. File 1040ez online free   Capitalize the cost of acquiring timber. File 1040ez online free Do not include the cost of land in the cost of the timber. File 1040ez online free You must generally capitalize direct costs incurred in reforestation. File 1040ez online free However, you can elect to deduct some forestation and reforestation costs. File 1040ez online free See Forestation and reforestation costs next. File 1040ez online free Reforestation costs include the following. File 1040ez online free Site preparation costs, such as: Girdling, Applying herbicide, Baiting rodents, and Clearing and controlling brush. File 1040ez online free The cost of seed or seedlings. File 1040ez online free Labor and tool expenses. File 1040ez online free Depreciation on equipment used in planting or seeding. File 1040ez online free Costs incurred in replanting to replace lost seedlings. File 1040ez online free You can choose to capitalize certain indirect reforestation costs. File 1040ez online free   These capitalized amounts are your basis for the timber. File 1040ez online free Recover your basis when you sell the timber or take depletion allowances when you cut the timber. File 1040ez online free See Depletion in chapter 7. File 1040ez online free Forestation and reforestation costs. File 1040ez online free   You can elect to deduct up to $10,000 ($5,000 if married filing separately; $0 for a trust) of qualifying reforestation costs paid or incurred after October 22, 2004, for each qualified timber property. File 1040ez online free Any remaining costs can be amortized over an 84-month period. File 1040ez online free See chapter 7. File 1040ez online free If you make an election to deduct or amortize qualifying reforestation costs, you should create and maintain separate timber accounts for each qualified timber property. File 1040ez online free The accounts should include all reforestation treatments and the dates they were applied. File 1040ez online free Any qualified timber property that is subject to the deduction or amortization election cannot be included in any other timber account for which depletion is allowed. File 1040ez online free The timber account should be maintained until the timber is disposed of. File 1040ez online free For more information, see Notice 2006-47, 2006-20 I. File 1040ez online free R. File 1040ez online free B. File 1040ez online free 892, available at  www. File 1040ez online free irs. File 1040ez online free gov/irb/2006-20_IRB/ar11. File 1040ez online free html. File 1040ez online free   You elect to deduct forestation and reforestation costs by claiming the deduction on the income tax return filed by the due date (including extensions) for the tax year in which the expenses were paid or incurred. File 1040ez online free If you are filing Form T (Timber), Forest Activities Schedule, also complete Form T (Timber), Part IV. File 1040ez online free If you are not filing Form T (Timber), attach a statement to your return with the following information. File 1040ez online free The unique stand identification numbers. File 1040ez online free The total number of acres reforested during the tax year. File 1040ez online free The nature of the reforestation treatments. File 1040ez online free The total amounts of the qualified reforestation expenditures eligible to be amortized or deducted. File 1040ez online free   However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). File 1040ez online free Clearly indicate the election on your amended return and write “Filed pursuant to section 301. File 1040ez online free 9100-2” at the top of the amended return. File 1040ez online free File the amended return at the same address you filed the original return. File 1040ez online free    For more information about forestation and reforestation costs, see chapter 7. File 1040ez online free    For more information about timber, see Agriculture Handbook Number 731, Forest Landowners' Guide to the Federal Income Tax. File 1040ez online free You can view this publication on the Internet at  www. File 1040ez online free fs. File 1040ez online free fed. File 1040ez online free us/publications. File 1040ez online free Christmas tree cultivation. File 1040ez online free   If you are in the business of planting and cultivating Christmas trees to sell when they are more than 6 years old, capitalize expenses incurred for planting and stump culture and add them to the basis of the standing trees. File 1040ez online free Recover these expenses as part of your adjusted basis when you sell the standing trees or as depletion allowances when you cut the trees. File 1040ez online free For more information, see Timber Depletion under Depletion in chapter 7. File 1040ez online free   You can deduct as business expenses the costs incurred for shearing and basal pruning of these trees. File 1040ez online free Expenses incurred for silvicultural practices, such as weeding or cleaning, and noncommercial thinning are also deductible as business expenses. File 1040ez online free   Capitalize the cost of land improvements, such as road grading, ditching, and fire breaks, that have a useful life beyond the tax year. File 1040ez online free If the improvements do not have a determinable useful life, add their cost to the basis of the land. File 1040ez online free The cost is recovered when you sell or otherwise dispose of it. File 1040ez online free If the improvements have a determinable useful life, recover their cost through depreciation. File 1040ez online free Capitalize the cost of equipment and other depreciable assets, such as culverts and fences, to the extent you do not use them in planting Christmas trees. File 1040ez online free Recover these costs through depreciation. File 1040ez online free Nondeductible Expenses You cannot deduct personal expenses and certain other items on your tax return even if they relate to your farm. File 1040ez online free Personal, Living, and Family Expenses You cannot deduct certain personal, living, and family expenses as business expenses. File 1040ez online free These include rent and insurance premiums paid on property used as your home, life insurance premiums on yourself or your family, the cost of maintaining cars, trucks, or horses for personal use, allowances to minor children, attorneys' fees and legal expenses incurred in personal matters, and household expenses. File 1040ez online free Likewise, the cost of purchasing or raising produce or livestock consumed by you or your family is not deductible. File 1040ez online free Other Nondeductible Items You cannot deduct the following items on your tax return. File 1040ez online free Loss of growing plants, produce, and crops. File 1040ez online free   Losses of plants, produce, and crops raised for sale are generally not deductible. File 1040ez online free However, you may have a deductible loss on plants with a preproductive period of more than 2 years. File 1040ez online free See chapter 11 for more information. File 1040ez online free Repayment of loans. File 1040ez online free   You cannot deduct the repayment of a loan. File 1040ez online free However, if you use the proceeds of a loan for farm business expenses, you can deduct the interest on the loan. File 1040ez online free See Interest , earlier. File 1040ez online free Estate, inheritance, legacy, succession, and gift taxes. File 1040ez online free   You cannot deduct estate, inheritance, legacy, succession, and gift taxes. File 1040ez online free Loss of livestock. File 1040ez online free   You cannot deduct as a loss the value of raised livestock that die if you deducted the cost of raising them as an expense. File 1040ez online free Losses from sales or exchanges between related persons. File 1040ez online free   You cannot deduct losses from sales or exchanges of property between you and certain related persons, including your spouse, brother, sister, ancestor, or lineal descendant. File 1040ez online free For more information, see chapter 2 of Publication 544, Sales and Other Dispositions of Assets. File 1040ez online free Cost of raising unharvested crops. File 1040ez online free   You cannot deduct the cost of raising unharvested crops sold with land owned more than one year if you sell both at the same time and to the same person. File 1040ez online free Add these costs to the basis of the land to determine the gain or loss on the sale. File 1040ez online free For more information, see Section 1231 Gains and Losses in chapter 9. File 1040ez online free Cost of unharvested crops bought with land. File 1040ez online free   Capitalize the purchase price of land, including the cost allocable to unharvested crops. File 1040ez online free You cannot deduct the cost of the crops at the time of purchase. File 1040ez online free However, you can deduct this cost in figuring net profit or loss in the tax year you sell the crops. File 1040ez online free Cost related to gifts. File 1040ez online free   You cannot deduct costs related to your gifts of agricultural products or property held for sale in the ordinary course of your business. File 1040ez online free The costs are not deductible in the year of the gift or any later year. File 1040ez online free For example, you cannot deduct the cost of raising cattle or the cost of planting and raising unharvested wheat on parcels of land given as a gift to your children. File 1040ez online free Club dues and membership fees. File 1040ez online free   Generally, you cannot deduct amounts you pay or incur for membership in any club organized for business, pleasure, recreation, or any other social purpose. File 1040ez online free This includes country clubs, golf and athletic clubs, hotel clubs, sporting clubs, airline clubs, and clubs operated to provide meals under circumstances generally considered to be conducive to business discussions. File 1040ez online free Exception. File 1040ez online free   The following organizations will not be treated as a club organized for business, pleasure, recreation, or other social purposes, unless one of its main purposes is to conduct entertainment activities for members or their guests or to provide members or their guests with access to entertainment facilities. File 1040ez online free Boards of trade. File 1040ez online free Business leagues. File 1040ez online free Chambers of commerce. File 1040ez online free Civic or public service organizations. File 1040ez online free Professional associations. File 1040ez online free Trade associations. File 1040ez online free Real estate boards. File 1040ez online free Fines and penalties. File 1040ez online free   You cannot deduct fines and penalties, except penalties for exceeding marketing quotas, discussed earlier. File 1040ez online free Losses From Operating a Farm If your deductible farm expenses are more than your farm income, you have a loss from the operation of your farm. File 1040ez online free The amount of the loss you can deduct when figuring your taxable income may be limited. File 1040ez online free To figure your deductible loss, you must apply the following limits. File 1040ez online free The at-risk limits. File 1040ez online free The passive activity limits. File 1040ez online free The following discussions explain these limits. File 1040ez online free If your deductible loss after applying these limits is more than your other income for the year, you may have a net operating loss. File 1040ez online free See Publication 536, Net Operating Losses (NOLs) for Individuals, Estates, and Trusts. File 1040ez online free If you do not carry on your farming activity to make a profit, your loss deduction may be limited by the not-for-profit rules. File 1040ez online free See Not-for-Profit Farming, later. File 1040ez online free At-Risk Limits The at-risk rules limit your deduction for losses from most business or income-producing activities, including farming. File 1040ez online free These rules limit the losses you can deduct when figuring your taxable income. File 1040ez online free The deductible loss from an activity is limited to the amount you have at risk in the activity. File 1040ez online free You are at risk in any activity for: The money and adjusted basis of property you contribute to the activity, and Amounts you borrow for use in the activity if: You are personally liable for repayment, or You pledge property (other than property used in the activity) as security for the loan. File 1040ez online free You are not at risk, however, for amounts you borrow for use in a farming activity from a person who has an interest in the activity (other than as a creditor) or a person related to someone (other than you) having such an interest. File 1040ez online free For more information, see Publication 925. File 1040ez online free Passive Activity Limits A passive activity is generally any activity involving the conduct of any trade or business in which you do not materially participate. File 1040ez online free Generally, a rental activity is a passive activity. File 1040ez online free If you have a passive activity, special rules limit the loss you can deduct in the tax year. File 1040ez online free You generally can deduct losses from passive activities only up to income from passive activities. File 1040ez online free Credits are similarly limited. File 1040ez online free For more information, see Publication 925. File 1040ez online free Excess Farm Loss Limit For tax years beginning after 2009, excess farm losses (defined below) are not deductible if you received certain applicable subsidies. File 1040ez online free This limit applies to any farming businesses, other than a C corporation, that received a direct or counter-cyclical payment (or any payment in lieu of such payments) under title I of the Food, Conservation, and Energy Act of 2008, or from a Commodity Credit Corporation loan. File 1040ez online free Your farming losses are limited to the greater of: $300,000 ($150,000 for a married person filing a separate return), or The total net farm income for the prior five tax years. File 1040ez online free Farming losses from casualty losses or losses by reason of disease or drought are disregarded for purposes of figuring this limitation. File 1040ez online free Also, the limitation on farm losses should be applied before the passive activity loss rules are applied. File 1040ez online free For more details, see IRC section 461(j). File 1040ez online free Excess farm loss. File 1040ez online free   Generally, an excess farm loss is the amount of your farming loss that exceeds the amount of the limitation (as described above). File 1040ez online free This loss can be determined by taking the excess of: The total deductions for the tax year from your farming businesses, over The total gross income or gain for the tax year from your farming businesses, plus the greater of: $300,000 ($150,000 for a married person filing a separate return), or The excess (if any) of the total gross income or gain from your farming businesses for the prior five tax years over the total deductions from your farming businesses for the prior five tax years. File 1040ez online free   Excess farm losses that are disallowed can be carried forward to the next tax year and treated as a deduction from that year. File 1040ez online free Not-for-Profit Farming If you operate a farm for profit, you can deduct all the ordinary and necessary expenses of carrying on the business of farming on Schedule F. File 1040ez online free However, if you do not carry on your farming activity, or other activity you engage or invest in, to make a profit, you report the income from the activity on Form 1040, line 21, and you can deduct expenses of carrying on the activity only if you itemize your deductions on Schedule A (Form 1040). File 1040ez online free Also, there is a limit on the deductions you can take. File 1040ez online free You cannot use a loss from that activity to offset income from other activities. File 1040ez online free Activities you do as a hobby, or mainly for sport or recreation, come under this limit. File 1040ez online free An investment activity intended only to produce tax losses for the investors also comes under this limit. File 1040ez online free The limit on not-for-profit losses applies to individuals, partnerships, estates, trusts, and S corporations. File 1040ez online free It does not apply to corporations other than S corporations. File 1040ez online free In determining whether you are carrying on your farming activity for profit, all the facts are taken into account. File 1040ez online free No one factor alone is decisive. File 1040ez online free Among the factors to consider are whether: You operate your farm in a businesslike manner; The time and effort you spend on farming indicate you intend to make it profitable; You depend on income from farming for your livelihood; Your losses are due to circumstances beyond your control or are normal in the start-up phase of farming; You change your methods of operation in an attempt to improve profitability; You, or your advisors, have the knowledge needed to carry on the farming activity as a successful business; You were successful in making a profit in similar activities in the past; You make a profit from farming in some years and the amount of profit you make; and You can expect to make a future profit from the appreciation of the assets used in the farming activity. File 1040ez online free Presumption of profit. File 1040ez online free   Your farming or other activity is presumed carried on for profit if it produced a profit in at least 3 of the last 5 tax years, including the current year. File 1040ez online free Activities that consist primarily of breeding, training, showing, or racing horses are presumed carried on for profit if they produced a profit in at least 2 of the last 7 tax years, including the current year. File 1040ez online free The activity must be substantially the same for each year within this period. File 1040ez online free You have a profit when the gross income from an activity is more than the deductions for it. File 1040ez online free   If a taxpayer dies before the end of the 5-year (or 7-year) period, the period ends on the date of the taxpayer's death. File 1040ez online free   If your business or investment activity passes this 3- (or 2-) years-of-profit test, presume it is carried on for profit. File 1040ez online free This means the limits discussed here do not apply. File 1040ez online free You can take all your business deductions from the activity on Schedule F, even for the years that you have a loss. File 1040ez online free You can rely on this presumption in every case, unless the IRS shows it is not valid. File 1040ez online free   If you fail the 3- (or 2-) years-of-profit test, you still may be considered to operate your farm for profit by considering the factors listed earlier. File 1040ez online free Using the presumption later. File 1040ez online free   If you are starting out in farming and do not have 3 (or 2) years showing a profit, you may want to take advantage of this presumption later, after you have had the 5 (or 7) years of experience allowed by the test. File 1040ez online free   You can choose to do this by filing Form 5213. File 1040ez online free Filing this form postpones any determination that your farming activity is not carried on for profit until 5 (or 7) years have passed since you first started farming. File 1040ez online free You must file Form 5213 within 3 years after the due date of your return for the year in which you first carried on the activity, or, if earlier, within 60 days after receiving a written notice from the IRS proposing to disallow deductions attributable to the activity. File 1040ez online free   The benefit gained by making this choice is that the IRS will not immediately question whether your farming activity is engaged in for profit. File 1040ez online free Accordingly, it will not limit your deductions. File 1040ez online free Rather, you will gain time to earn a profit in 3 (or 2) out of the first 5 (or 7) years you carry on the farming activity. File 1040ez online free If you show 3 (or 2) years of profit at the end of this period, your deductions are not limited under these rules. File 1040ez online free If you do not have 3 (or 2) years of profit (and cannot otherwise show that you operated your farm for profit), the limit applies retroactively to any year in the 5-year (or 7-year) period with a loss. File 1040ez online free   Filing Form 5213 automatically extends the period of limitations on any year