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File 2011 Taxes Online Turbotax

File 2011 taxes online turbotax 4. File 2011 taxes online turbotax   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 2011 taxes online turbotax 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 2011 taxes online turbotax 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 2011 taxes online turbotax Category 1. File 2011 taxes online turbotax Category 2. File 2011 taxes online turbotax Category 3. File 2011 taxes online turbotax What's New for 2013 Standard mileage rate. File 2011 taxes online turbotax  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 2011 taxes online turbotax 5 cents. File 2011 taxes online turbotax See Truck and Car Expenses , later. File 2011 taxes online turbotax Simplified method for business use of home deduction. File 2011 taxes online turbotax  The IRS now provides a simplified method to determine your expenses for business use of your home. File 2011 taxes online turbotax For more information, see Schedule C (Form 1040), Part II, and its instructions. File 2011 taxes online turbotax Introduction You can generally deduct the current costs of operating your farm. File 2011 taxes online turbotax Current costs are expenses you do not have to capitalize or include in inventory costs. File 2011 taxes online turbotax However, your deduction for the cost of livestock feed and certain other supplies may be limited. File 2011 taxes online turbotax If you have an operating loss, you may not be able to deduct all of it. File 2011 taxes online turbotax 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 2011 taxes online turbotax Deductible Expenses The ordinary and necessary costs of operating a farm for profit are deductible business expenses. File 2011 taxes online turbotax “Ordinary” means what most farmers do and “necessary” means what is useful and helpful in farming. File 2011 taxes online turbotax Schedule F, Part II, lists some common farm expenses that are typically deductible. File 2011 taxes online turbotax This chapter discusses many of these expenses, as well as others not listed on Schedule F. File 2011 taxes online turbotax Reimbursed expenses. File 2011 taxes online turbotax   If the reimbursement is received in the same year that the expense is claimed, reduce the expense by the amount of the reimbursement. File 2011 taxes online turbotax If the reimbursement is received in a year after the expense is claimed, include the reimbursement amount in income. File 2011 taxes online turbotax See Refund or reimbursement under Income From Other Sources in chapter 3. File 2011 taxes online turbotax Personal and business expenses. File 2011 taxes online turbotax   Some expenses you pay during the tax year may be part personal and part business. File 2011 taxes online turbotax These may include expenses for gasoline, oil, fuel, water, rent, electricity, telephone, automobile upkeep, repairs, insurance, interest, and taxes. File 2011 taxes online turbotax   You must allocate these mixed expenses between their business and personal parts. File 2011 taxes online turbotax Generally, the personal part of these expenses is not deductible. File 2011 taxes online turbotax The business portion of the expenses is deductible on Schedule F. File 2011 taxes online turbotax Example. File 2011 taxes online turbotax You paid $1,500 for electricity during the tax year. File 2011 taxes online turbotax You used 1/3 of the electricity for personal purposes and 2/3 for farming. File 2011 taxes online turbotax Under these circumstances, you can deduct $1,000 (2/3 of $1,500) of your electricity expense as a farm business expense. File 2011 taxes online turbotax Reasonable allocation. File 2011 taxes online turbotax   It is not always easy to determine the business and nonbusiness parts of an expense. File 2011 taxes online turbotax There is no method of allocation that applies to all mixed expenses. File 2011 taxes online turbotax Any reasonable allocation is acceptable. File 2011 taxes online turbotax What is reasonable depends on the circumstances in each case. File 2011 taxes online turbotax Prepaid Farm Supplies Prepaid farm supplies include the following items if paid for during the year. File 2011 taxes online turbotax 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 2011 taxes online turbotax Poultry (including egg-laying hens and baby chicks) bought for use (or for both use and resale) in your farm business. File 2011 taxes online turbotax 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 2011 taxes online turbotax Poultry bought for resale and not resold during the year. File 2011 taxes online turbotax Deduction limit. File 2011 taxes online turbotax   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 2011 taxes online turbotax This limit does not apply if you meet one of the exceptions described later. File 2011 taxes online turbotax See Chapter 2 for a discussion of the cash method of accounting. File 2011 taxes online turbotax   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 2011 taxes online turbotax 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 2011 taxes online turbotax The excess cost of poultry bought for resale is deductible in the year you sell or otherwise dispose of that poultry. File 2011 taxes online turbotax Example. File 2011 taxes online turbotax You may not qualify for the exception described next. File 2011 taxes online turbotax During 2013, you bought fertilizer ($4,000), feed ($1,000), and seed ($500) for use on your farm in the following year. File 2011 taxes online turbotax Your total prepaid farm supplies expense for 2013 is $5,500. File 2011 taxes online turbotax Your other deductible farm expenses totaled $10,000 for 2013. File 2011 taxes online turbotax Therefore, your deduction for prepaid farm supplies cannot be more than $5,000 (50% of $10,000) for 2013. File 2011 taxes online turbotax 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 2011 taxes online turbotax Exceptions. File 2011 taxes online turbotax   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 2011 taxes online turbotax 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 2011 taxes online turbotax 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 2011 taxes online turbotax   You are a farm-related taxpayer if any of the following tests apply. File 2011 taxes online turbotax Your main home is on a farm. File 2011 taxes online turbotax Your principal business is farming. File 2011 taxes online turbotax A member of your family meets (1) or (2). File 2011 taxes online turbotax 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 2011 taxes online turbotax    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 2011 taxes online turbotax 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 2011 taxes online turbotax The payment is for the purchase of feed rather than a deposit. File 2011 taxes online turbotax The prepayment has a business purpose and is not merely for tax avoidance. File 2011 taxes online turbotax Deducting the prepayment does not result in a material distortion of your income. File 2011 taxes online turbotax If you meet all three tests, you can deduct the prepaid feed, subject to the limit on prepaid farm supplies discussed earlier. File 2011 taxes online turbotax If you fail any of these tests, you can deduct the prepaid feed only in the year it is consumed. File 2011 taxes online turbotax This rule does not apply to the purchase of commodity futures contracts. File 2011 taxes online turbotax Payment for the purchase of feed. File 2011 taxes online turbotax   Whether a payment is for the purchase of feed or a deposit depends on the facts and circumstances in each case. File 2011 taxes online turbotax 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 2011 taxes online turbotax   The following are some factors that show a payment is a deposit rather than for the purchase of feed. File 2011 taxes online turbotax The absence of specific quantity terms. File 2011 taxes online turbotax The right to a refund of any unapplied payment credit at the end of the contract. File 2011 taxes online turbotax The seller's treatment of the payment as a deposit. File 2011 taxes online turbotax The right to substitute other goods or products for those specified in the contract. File 2011 taxes online turbotax   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 2011 taxes online turbotax Further, a price adjustment to reflect market value at the date of delivery is not, by itself, proof of a deposit. File 2011 taxes online turbotax Business purpose. File 2011 taxes online turbotax   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 2011 taxes online turbotax The following are some examples of business benefits. File 2011 taxes online turbotax Fixing maximum prices and securing an assured feed supply. File 2011 taxes online turbotax Securing preferential treatment in anticipation of a feed shortage. File 2011 taxes online turbotax   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 2011 taxes online turbotax No material distortion of income. File 2011 taxes online turbotax   The following are some factors considered in determining whether deducting prepaid livestock feed materially distorts income. File 2011 taxes online turbotax Your customary business practice in conducting your livestock operations. File 2011 taxes online turbotax The expense in relation to past purchases. File 2011 taxes online turbotax The time of year you made the purchase. File 2011 taxes online turbotax The expense in relation to your income for the year. File 2011 taxes online turbotax 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 2011 taxes online turbotax You can pay wages in cash or in noncash items such as inventory, capital assets, or assets used in your business. File 2011 taxes online turbotax The cost of boarding farm labor is a deductible labor cost. File 2011 taxes online turbotax Other deductible costs you incur for farm labor include health insurance, workers' compensation insurance, and other benefits. File 2011 taxes online turbotax 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 2011 taxes online turbotax See chapter 13 for more information on employment taxes. File 2011 taxes online turbotax 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 2011 taxes online turbotax See Taxes , later. File 2011 taxes online turbotax Property for services. File 2011 taxes online turbotax   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 2011 taxes online turbotax 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 2011 taxes online turbotax   Treat the wages deducted as an amount received for the property. File 2011 taxes online turbotax 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 2011 taxes online turbotax Any gain or loss has the same character the exchanged property had in your hands. File 2011 taxes online turbotax For more information, see chapter 8. File 2011 taxes online turbotax Child as an employee. File 2011 taxes online turbotax   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 2011 taxes online turbotax Include these wages in the child's income. File 2011 taxes online turbotax The child may have to file an income tax return. File 2011 taxes online turbotax These wages may also be subject to social security and Medicare taxes if your child is age 18 or older. File 2011 taxes online turbotax For more information, see Family Employees in chapter 13. File 2011 taxes online turbotax    A Form W-2, Wage and Tax Statement, should be issued to the child employee. File 2011 taxes online turbotax   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 2011 taxes online turbotax 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 2011 taxes online turbotax Spouse as an employee. File 2011 taxes online turbotax   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 2011 taxes online turbotax Wages you pay to your spouse are subject to social security and Medicare taxes. File 2011 taxes online turbotax For more information, see Family Employees in chapter 13. File 2011 taxes online turbotax Nondeductible Pay You cannot deduct wages paid for certain household work, construction work, and maintenance of your home. File 2011 taxes online turbotax However, those wages may be subject to the employment taxes discussed in chapter 13. File 2011 taxes online turbotax Household workers. File 2011 taxes online turbotax   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 2011 taxes online turbotax Construction labor. File 2011 taxes online turbotax   Do not deduct wages paid to hired help for the construction of new buildings or other improvements. File 2011 taxes online turbotax These wages are part of the cost of the building or other improvement. File 2011 taxes online turbotax You must capitalize them. File 2011 taxes online turbotax Maintaining your home. File 2011 taxes online turbotax   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 2011 taxes online turbotax 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 2011 taxes online turbotax The employee devotes the remaining time to work on your farm. File 2011 taxes online turbotax You cannot deduct 5% of the wages and employment taxes you pay for that employee. File 2011 taxes online turbotax 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 2011 taxes online turbotax Repairs and Maintenance You can deduct most expenses for the repair and maintenance of your farm property. File 2011 taxes online turbotax 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 2011 taxes online turbotax 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 2011 taxes online turbotax For example, if you repair the barn roof, the cost is deductible. File 2011 taxes online turbotax But if you replace the roof, it is a capital expense. File 2011 taxes online turbotax For more information, see Capital Expenses , later. File 2011 taxes online turbotax Interest You can deduct as a farm business expense interest paid on farm mortgages and other obligations you incur in your farm business. File 2011 taxes online turbotax Cash method. File 2011 taxes online turbotax   If you use the cash method of accounting, you can generally deduct interest paid during the tax year. File 2011 taxes online turbotax You cannot deduct interest paid with funds received from the original lender through another loan, advance, or other arrangement similar to a loan. File 2011 taxes online turbotax You can, however, deduct the interest when you start making payments on the new loan. File 2011 taxes online turbotax For more information, see Cash Method in chapter 2. File 2011 taxes online turbotax Prepaid interest. File 2011 taxes online turbotax   Under the cash method, you generally cannot deduct any interest paid before the year it is due. File 2011 taxes online turbotax Interest paid in advance may be deducted only in the tax year in which it is due. File 2011 taxes online turbotax Accrual method. File 2011 taxes online turbotax   If you use an accrual method of accounting, you can deduct only interest that has accrued during the tax year. File 2011 taxes online turbotax 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 2011 taxes online turbotax For more information, see Accrual Method in chapter 2. File 2011 taxes online turbotax Allocation of interest. File 2011 taxes online turbotax   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 2011 taxes online turbotax Allocate the interest to the following categories. File 2011 taxes online turbotax Trade or business interest. File 2011 taxes online turbotax Passive activity interest. File 2011 taxes online turbotax Investment interest. File 2011 taxes online turbotax Portfolio interest. File 2011 taxes online turbotax Personal interest. File 2011 taxes online turbotax   You generally allocate interest on a loan the same way you allocate the loan proceeds. File 2011 taxes online turbotax You allocate loan proceeds by tracing disbursements to specific uses. File 2011 taxes online turbotax The easiest way to trace disbursements to specific uses is to keep the proceeds of a particular loan separate from any other funds. File 2011 taxes online turbotax Secured loan. File 2011 taxes online turbotax   The allocation of loan proceeds and the related interest is generally not affected by the use of property that secures the loan. File 2011 taxes online turbotax Example. File 2011 taxes online turbotax You secure a loan with property used in your farming business. File 2011 taxes online turbotax You use the loan proceeds to buy a car for personal use. File 2011 taxes online turbotax 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 2011 taxes online turbotax If the property that secures the loan is your home, you generally do not allocate the loan proceeds or the related interest. File 2011 taxes online turbotax The interest is usually deductible as qualified home mortgage interest, regardless of how the loan proceeds are used. File 2011 taxes online turbotax However, you can choose to treat the loan as not secured by your home. File 2011 taxes online turbotax For more information, see Publication 936. File 2011 taxes online turbotax Allocation period. File 2011 taxes online turbotax   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 2011 taxes online turbotax The date the loan is repaid. File 2011 taxes online turbotax The date the loan is reallocated to another use. File 2011 taxes online turbotax More information. File 2011 taxes online turbotax   For more information on interest, see chapter 4 in Publication 535. File 2011 taxes online turbotax Breeding Fees You can deduct breeding fees as a farm business expense. File 2011 taxes online turbotax 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 2011 taxes online turbotax For more information on who must use an accrual method of accounting, see Accrual Method Required under Accounting Methods in chapter 2. File 2011 taxes online turbotax 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 2011 taxes online turbotax You can also deduct the cost of applying these materials in the year you pay or incur it. File 2011 taxes online turbotax However, see Prepaid Farm Supplies , earlier, for a rule that may limit your deduction for these materials. File 2011 taxes online turbotax 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 2011 taxes online turbotax However, you can choose to deduct these expenses in the year paid or incurred. File 2011 taxes online turbotax If you make this choice, you will need IRS approval if you later decide to capitalize the cost of previously deducted items. File 2011 taxes online turbotax 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 2011 taxes online turbotax Farmland, for these purposes, is land used for producing crops, fruits, or other agricultural products or for sustaining livestock. File 2011 taxes online turbotax It does not include land you have never used previously for producing crops or sustaining livestock. File 2011 taxes online turbotax You cannot deduct initial land preparation costs. File 2011 taxes online turbotax (See Capital Expenses , later. File 2011 taxes online turbotax ) Include government payments you receive for lime or fertilizer in income. File 2011 taxes online turbotax See Fertilizer and Lime under Agricultural Program Payments in chapter 3. File 2011 taxes online turbotax 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 2011 taxes online turbotax 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 2011 taxes online turbotax For information on employment taxes, see chapter 13. File 2011 taxes online turbotax Allocation of taxes. File 2011 taxes online turbotax   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 2011 taxes online turbotax You may be able to deduct these nonbusiness taxes as itemized deductions on Schedule A (Form 1040). File 2011 taxes online turbotax To determine the nonbusiness part, allocate the taxes between the farm assets and nonbusiness assets. File 2011 taxes online turbotax The allocation can be done from the assessed valuations. File 2011 taxes online turbotax If your tax statement does not show the assessed valuations, you can usually get them from the tax assessor. File 2011 taxes online turbotax State and local general sales taxes. File 2011 taxes online turbotax   State and local general sales taxes on nondepreciable farm business expense items are deductible as part of the cost of those items. File 2011 taxes online turbotax 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 2011 taxes online turbotax Also treat the taxes as part of your cost if they are imposed on the seller and passed on to you. File 2011 taxes online turbotax State and federal income taxes. File 2011 taxes online turbotax   Individuals cannot deduct state and federal income taxes as farm business expenses. File 2011 taxes online turbotax Individuals can deduct state and local income taxes only as an itemized deduction on Schedule A (Form 1040). File 2011 taxes online turbotax However, you cannot deduct federal income tax. File 2011 taxes online turbotax Highway use tax. File 2011 taxes online turbotax   You can deduct the federal use tax on highway motor vehicles paid on a truck or truck tractor used in your farm business. File 2011 taxes online turbotax 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 2011 taxes online turbotax Self-employment tax deduction. File 2011 taxes online turbotax   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 2011 taxes online turbotax For more information, see chapter 12. File 2011 taxes online turbotax Insurance You generally can deduct the ordinary and necessary cost of insurance for your farm business as a business expense. File 2011 taxes online turbotax This includes premiums you pay for the following types of insurance. File 2011 taxes online turbotax Fire, storm, crop, theft, liability, and other insurance on farm business assets. File 2011 taxes online turbotax Health and accident insurance on your farm employees. File 2011 taxes online turbotax 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 2011 taxes online turbotax Business interruption insurance. File 2011 taxes online turbotax State unemployment insurance on your farm employees (deductible as taxes if they are considered taxes under state law). File 2011 taxes online turbotax Insurance to secure a loan. File 2011 taxes online turbotax   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 2011 taxes online turbotax 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 2011 taxes online turbotax Advance premiums. File 2011 taxes online turbotax   Deduct advance payments of insurance premiums only in the year to which they apply, regardless of your accounting method. File 2011 taxes online turbotax Example. File 2011 taxes online turbotax On June 28, 2013, you paid a premium of $3,000 for fire insurance on your barn. File 2011 taxes online turbotax The policy will cover a period of 3 years beginning on July 1, 2013. File 2011 taxes online turbotax Only the cost for the 6 months in 2013 is deductible as an insurance expense on your 2013 calendar year tax return. File 2011 taxes online turbotax Deduct $500, which is the premium for 6 months of the 36-month premium period, or 6/36 of $3,000. File 2011 taxes online turbotax In both 2014 and 2015, deduct $1,000 (12/36 of $3,000). File 2011 taxes online turbotax Deduct the remaining $500 in 2016. File 2011 taxes online turbotax 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 2011 taxes online turbotax Business interruption insurance. File 2011 taxes online turbotax   Use and occupancy and business interruption insurance premiums are deductible as a business expense. File 2011 taxes online turbotax This insurance pays for lost profits if your business is shut down due to a fire or other cause. File 2011 taxes online turbotax Report any proceeds in full on Schedule F, Part I. File 2011 taxes online turbotax Self-employed health insurance deduction. File 2011 taxes online turbotax   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 2011 taxes online turbotax 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 2011 taxes online turbotax Generally, this deduction cannot be more than the net profit from the business under which the plan was established. File 2011 taxes online turbotax   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 2011 taxes online turbotax   Generally, use the Self-Employed Health Insurance Deduction Worksheet in the Instructions for Form 1040 to figure your deduction. File 2011 taxes online turbotax Include the remaining part of the insurance payment in your medical expenses on Schedule A (Form 1040) if you itemize your deductions. File 2011 taxes online turbotax   For more information, see Deductible Premiums in Publication 535, chapter 6. File 2011 taxes online turbotax 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 2011 taxes online turbotax However, you cannot deduct rent you pay in crop shares if you deduct the cost of raising the crops as farm expenses. File 2011 taxes online turbotax Advance payments. File 2011 taxes online turbotax   Deduct advance payments of rent only in the year to which they apply, regardless of your accounting method. File 2011 taxes online turbotax Farm home. File 2011 taxes online turbotax   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 2011 taxes online turbotax 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 2011 taxes online turbotax 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 2011 taxes online turbotax Do not deduct these payments as rent, but capitalize the cost of the property and recover this cost through depreciation. File 2011 taxes online turbotax Conditional sales contract. File 2011 taxes online turbotax   Whether an agreement is a conditional sales contract depends on the intent of the parties. File 2011 taxes online turbotax Determine intent based on the provisions of the agreement and the facts and circumstances that exist when you make the agreement. File 2011 taxes online turbotax No single test, or special combination of tests, always applies. File 2011 taxes online turbotax However, in general, an agreement may be considered a conditional sales contract rather than a lease if any of the following is true. File 2011 taxes online turbotax The agreement applies part of each payment toward an equity interest you will receive. File 2011 taxes online turbotax You get title to the property after you make a stated amount of required payments. File 2011 taxes online turbotax 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 2011 taxes online turbotax You pay much more than the current fair rental value of the property. File 2011 taxes online turbotax 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 2011 taxes online turbotax Determine this value when you make the agreement. File 2011 taxes online turbotax 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 2011 taxes online turbotax The agreement designates part of the payments as interest, or part of the payments can be easily recognized as interest. File 2011 taxes online turbotax Example. File 2011 taxes online turbotax You lease new farm equipment from a dealer who both sells and leases. File 2011 taxes online turbotax The agreement includes an option to purchase the equipment for a specified price. File 2011 taxes online turbotax The lease payments and the specified option price equal the sales price of the equipment plus interest. File 2011 taxes online turbotax Under the agreement, you are responsible for maintenance, repairs, and the risk of loss. File 2011 taxes online turbotax For federal income tax purposes, the agreement is a conditional sales contract. File 2011 taxes online turbotax You cannot deduct any of the lease payments as rent. File 2011 taxes online turbotax You can deduct interest, repairs, insurance, depreciation, and other expenses related to the equipment. File 2011 taxes online turbotax Motor vehicle leases. File 2011 taxes online turbotax   Special rules apply to lease agreements that have a terminal rental adjustment clause. File 2011 taxes online turbotax 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 2011 taxes online turbotax 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 2011 taxes online turbotax For more information, see Internal Revenue Code (IRC) section 7701(h). File 2011 taxes online turbotax Leveraged leases. File 2011 taxes online turbotax   Special rules apply to leveraged leases of equipment (arrangements in which the equipment is financed by a nonrecourse loan from a third party). File 2011 taxes online turbotax 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 2011 taxes online turbotax irs. File 2011 taxes online turbotax gov/pub/irs-irbs/irb01-19. File 2011 taxes online turbotax pdf. File 2011 taxes online turbotax 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 2011 taxes online turbotax 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 2011 taxes online turbotax 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 2011 taxes online turbotax Depreciation, amortization, and the section 179 deduction are discussed in chapter 7. File 2011 taxes online turbotax 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 2011 taxes online turbotax 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 2011 taxes online turbotax You use it exclusively and regularly for the administrative or management activities of your trade or business. File 2011 taxes online turbotax You have no other fixed location where you conduct substantial administrative or management activities of your trade or business. File 2011 taxes online turbotax If you use part of your home for business, you must divide the expenses of operating your home between personal and business use. File 2011 taxes online turbotax The IRS now provides a simplified method to determine your expenses for business use of your home. File 2011 taxes online turbotax For more information, see Schedule C (Form 1040), Part II, and its instructions. File 2011 taxes online turbotax Deduction limit. File 2011 taxes online turbotax   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 2011 taxes online turbotax 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 2011 taxes online turbotax   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 2011 taxes online turbotax 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 2011 taxes online turbotax Farm expenses other than expenses that relate to the use of your home. File 2011 taxes online turbotax If you are self-employed, do not include your deduction for half of your self-employment tax. File 2011 taxes online turbotax   Deductions over the current year's limit can be carried over to your next tax year. File 2011 taxes online turbotax They are subject to the deduction limit for the next tax year. File 2011 taxes online turbotax More information. File 2011 taxes online turbotax   See Publication 587 for more information on deducting expenses for the business use of your home. File 2011 taxes online turbotax Telephone expense. File 2011 taxes online turbotax   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 2011 taxes online turbotax 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 2011 taxes online turbotax Cell phone charges for calls relating to your farm business are deductible. File 2011 taxes online turbotax 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 2011 taxes online turbotax Truck and Car Expenses You can deduct the actual cost of operating a truck or car in your farm business. File 2011 taxes online turbotax Only expenses for business use are deductible. File 2011 taxes online turbotax These include such items as gasoline, oil, repairs, license tags, insurance, and depreciation (subject to certain limits). File 2011 taxes online turbotax Standard mileage rate. File 2011 taxes online turbotax   Instead of using actual costs, under certain conditions you can use the standard mileage rate. File 2011 taxes online turbotax The standard mileage rate for each mile of business use is 56. File 2011 taxes online turbotax 5 cents in 2013. File 2011 taxes online turbotax 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 2011 taxes online turbotax   You cannot use the standard mileage rate if you operate five or more cars or light trucks at the same time. File 2011 taxes online turbotax 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 2011 taxes online turbotax Example. File 2011 taxes online turbotax Maureen owns a car and four pickup trucks that are used in her farm business. File 2011 taxes online turbotax Her farm employees use the trucks and she uses the car for business. File 2011 taxes online turbotax Maureen cannot use the standard mileage rate for the car or the trucks. File 2011 taxes online turbotax This is because all five vehicles are used in Maureen's farm business at the same time. File 2011 taxes online turbotax She must use actual expenses for all vehicles. File 2011 taxes online turbotax Business use percentage. File 2011 taxes online turbotax   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 2011 taxes online turbotax You choose this method of substantiating business use the first year the vehicle is placed in service. File 2011 taxes online turbotax Once you make this choice, you may not change to another method later. File 2011 taxes online turbotax The following are uses directly connected with the business of farming. File 2011 taxes online turbotax Cultivating land. File 2011 taxes online turbotax Raising or harvesting any agricultural or horticultural commodity. File 2011 taxes online turbotax Raising, shearing, feeding, caring for, training, and managing animals. File 2011 taxes online turbotax Driving to the feed or supply store. File 2011 taxes online turbotax   If you keep records and they show that your business use was more than 75%, you may be able to claim more. File 2011 taxes online turbotax See Recordkeeping requirements under Travel Expenses , below. File 2011 taxes online turbotax More information. File 2011 taxes online turbotax   For more information on deductible truck and car expenses, see Publication 463, chapter 4. File 2011 taxes online turbotax 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 2011 taxes online turbotax Travel Expenses You can deduct ordinary and necessary expenses you incur while traveling away from home for your farm business. File 2011 taxes online turbotax You cannot deduct lavish or extravagant expenses. File 2011 taxes online turbotax Usually, the location of your farm business is considered your home for tax purposes. File 2011 taxes online turbotax 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 2011 taxes online turbotax 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 2011 taxes online turbotax The following are some types of deductible travel expenses. File 2011 taxes online turbotax 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 2011 taxes online turbotax Meals. File 2011 taxes online turbotax   You ordinarily can deduct only 50% of your business-related meals expenses. File 2011 taxes online turbotax 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 2011 taxes online turbotax 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 2011 taxes online turbotax For information on entertainment expenses, see Publication 463, chapter 2. File 2011 taxes online turbotax   The expense of a meal includes amounts you spend for your food, beverages, taxes, and tips relating to the meal. File 2011 taxes online turbotax 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 2011 taxes online turbotax    Recordkeeping requirements. File 2011 taxes online turbotax You must be able to prove your deductions for travel by adequate records or other evidence that will support your own statement. File 2011 taxes online turbotax Estimates or approximations do not qualify as proof of an expense. File 2011 taxes online turbotax   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 2011 taxes online turbotax Generally, it is best to record the expense and get documentation of it at the time you pay it. File 2011 taxes online turbotax   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 2011 taxes online turbotax 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 2011 taxes online turbotax More information. File 2011 taxes online turbotax   For detailed information on travel, recordkeeping, and the standard meal allowance, see Publication 463. File 2011 taxes online turbotax Reimbursements to employees. File 2011 taxes online turbotax   You generally can deduct reimbursements you pay to your employees for travel and transportation expenses they incur in the conduct of your business. File 2011 taxes online turbotax Employees may be reimbursed under an accountable or nonaccountable plan. File 2011 taxes online turbotax Under an accountable plan, the employee must provide evidence of expenses. File 2011 taxes online turbotax Under a nonaccountable plan, no evidence of expenses is required. File 2011 taxes online turbotax If you reimburse expenses under an accountable plan, deduct them as travel and transportation expenses. File 2011 taxes online turbotax 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 2011 taxes online turbotax For more information, see Publication 535, chapter 11. File 2011 taxes online turbotax 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 2011 taxes online turbotax 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 2011 taxes online turbotax Do not take a separate deduction for the penalty. File 2011 taxes online turbotax Tenant House Expenses You can deduct the costs of maintaining houses and their furnishings for tenants or hired help as farm business expenses. File 2011 taxes online turbotax These costs include repairs, utilities, insurance, and depreciation. File 2011 taxes online turbotax The value of a dwelling you furnish to a tenant under the usual tenant-farmer arrangement is not taxable income to the tenant. File 2011 taxes online turbotax 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 2011 taxes online turbotax You deduct this cost, including freight charges for transporting the livestock to the farm, on Schedule F, Part I. File 2011 taxes online turbotax However, see Chickens, seeds, and young plants , below. File 2011 taxes online turbotax Example. File 2011 taxes online turbotax You use the cash method of accounting. File 2011 taxes online turbotax In 2013, you buy 50 steers you will sell in 2014. File 2011 taxes online turbotax You cannot deduct the cost of the steers on your 2013 tax return. File 2011 taxes online turbotax You deduct their cost on your 2014 Schedule F, Part I. File 2011 taxes online turbotax Chickens, seeds, and young plants. File 2011 taxes online turbotax   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 2011 taxes online turbotax 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 2011 taxes online turbotax However, see Prepaid Farm Supplies , earlier, for a rule that may limit your deduction for these items. File 2011 taxes online turbotax   If you deduct the cost of chickens, seeds, and young plants as an expense, report their entire selling price as income. File 2011 taxes online turbotax You cannot also deduct the cost from the selling price. File 2011 taxes online turbotax   You cannot deduct the cost of seeds and young plants for Christmas trees and timber as an expense. File 2011 taxes online turbotax Deduct the cost of these seeds and plants through depletion allowances. File 2011 taxes online turbotax For more information, see Depletion in chapter 7. File 2011 taxes online turbotax   The cost of chickens and plants used as food for your family is never deductible. File 2011 taxes online turbotax   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 2011 taxes online turbotax These rules are discussed in chapter 6. File 2011 taxes online turbotax Example. File 2011 taxes online turbotax You use the cash method of accounting. File 2011 taxes online turbotax In 2013, you buy 500 baby chicks to raise for resale in 2014. File 2011 taxes online turbotax You also buy 50 bushels of winter wheat seed in 2013 that you sow in the fall. File 2011 taxes online turbotax 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 2011 taxes online turbotax Election to use crop method. File 2011 taxes online turbotax   If you use the crop method, you can delay deducting the cost of seeds and young plants until you sell them. File 2011 taxes online turbotax You must get IRS approval to use the crop method. File 2011 taxes online turbotax If you follow this method, deduct the cost from the selling price to determine your profit on Schedule F, Part I. File 2011 taxes online turbotax For more information, see Crop method under Special Methods of Accounting in chapter 2. File 2011 taxes online turbotax Choosing a method. File 2011 taxes online turbotax   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 2011 taxes online turbotax   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 2011 taxes online turbotax 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 2011 taxes online turbotax For more information, see Change in Accounting Method in chapter 2. File 2011 taxes online turbotax 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 2011 taxes online turbotax 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 2011 taxes online turbotax Accounting fees. File 2011 taxes online turbotax Advertising. File 2011 taxes online turbotax Business travel and meals. File 2011 taxes online turbotax Commissions. File 2011 taxes online turbotax Consultant fees. File 2011 taxes online turbotax Crop scouting expenses. File 2011 taxes online turbotax Dues to cooperatives. File 2011 taxes online turbotax Educational expenses (to maintain and improve farming skills). File 2011 taxes online turbotax Farm-related attorney fees. File 2011 taxes online turbotax Farm magazines. File 2011 taxes online turbotax Ginning. File 2011 taxes online turbotax Insect sprays and dusts. File 2011 taxes online turbotax Litter and bedding. File 2011 taxes online turbotax Livestock fees. File 2011 taxes online turbotax Marketing fees. File 2011 taxes online turbotax Milk assessment. File 2011 taxes online turbotax Recordkeeping expenses. File 2011 taxes online turbotax Service charges. File 2011 taxes online turbotax Small tools expected to last one year or less. File 2011 taxes online turbotax Stamps and stationery. File 2011 taxes online turbotax Subscriptions to professional, technical, and trade journals that deal with farming. File 2011 taxes online turbotax Tying material and containers. File 2011 taxes online turbotax Loan expenses. File 2011 taxes online turbotax   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 2011 taxes online turbotax Tax preparation fees. File 2011 taxes online turbotax   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 2011 taxes online turbotax You may be able to deduct the remaining cost on Schedule A (Form 1040) if you itemize your deductions. File 2011 taxes online turbotax   You also can deduct on Schedule F the amount you pay or incur in resolving tax issues relating to your farm business. File 2011 taxes online turbotax Domestic Production Activities Deduction Generally, you are allowed a deduction for income attributable to domestic production activities. File 2011 taxes online turbotax 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 2011 taxes online turbotax 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 2011 taxes online turbotax For this purpose, Form W-2 wages do not include noncash wages paid for agricultural labor, such as compensation paid as commodities. File 2011 taxes online turbotax Also, excluded from Form W-2 wages are wages paid to your children under age 18 and nontaxable fringe benefits. File 2011 taxes online turbotax Income from cooperatives. File 2011 taxes online turbotax   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 2011 taxes online turbotax This deduction amount is reported on Form 1099-PATR, box 6. File 2011 taxes online turbotax 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 2011 taxes online turbotax More information. File 2011 taxes online turbotax   For more information on the domestic production activities deduction, see the Instructions for Form 8903. File 2011 taxes online turbotax 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 2011 taxes online turbotax You include the expense in the basis of the asset. File 2011 taxes online turbotax Uniform capitalization rules also require you to capitalize or include in inventory certain other expenses. File 2011 taxes online turbotax See chapters 2  and 6. File 2011 taxes online turbotax Capital expenses are generally not deductible, but they may be depreciable. File 2011 taxes online turbotax However, you can elect to deduct certain capital expenses, such as the following. File 2011 taxes online turbotax The cost of fertilizer, lime, etc. File 2011 taxes online turbotax (See Fertilizer and Lime under Deductible Expenses , earlier. File 2011 taxes online turbotax ) Soil and water conservation expenses. File 2011 taxes online turbotax (See chapter 5. File 2011 taxes online turbotax ) The cost of property that qualifies for a deduction under section 179. File 2011 taxes online turbotax (See chapter 7. File 2011 taxes online turbotax ) Business start-up costs. File 2011 taxes online turbotax (See Business start-up and organizational costs , later. File 2011 taxes online turbotax ) Forestation and reforestation costs. File 2011 taxes online turbotax (See Forestation and reforestation costs , later. File 2011 taxes online turbotax ) Generally, the costs of the following items, including the costs of material, hired labor, and installation, are capital expenses. File 2011 taxes online turbotax Land and buildings. File 2011 taxes online turbotax Additions, alterations, and improvements to buildings, etc. File 2011 taxes online turbotax Cars and trucks. File 2011 taxes online turbotax Equipment and machinery. File 2011 taxes online turbotax Fences. File 2011 taxes online turbotax Draft, breeding, sport, and dairy livestock. File 2011 taxes online turbotax Repairs to machinery, equipment, trucks, and cars that prolong their useful life, increase their value, or adapt them to different use. File 2011 taxes online turbotax Water wells, including drilling and equipping costs. File 2011 taxes online turbotax 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 2011 taxes online turbotax Business start-up and organizational costs. File 2011 taxes online turbotax   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 2011 taxes online turbotax The $5,000 deduction is reduced by the amount your total start-up or organizational costs exceed $50,000. File 2011 taxes online turbotax Any remaining costs must be amortized. File 2011 taxes online turbotax See chapter 7. File 2011 taxes online turbotax   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 2011 taxes online turbotax 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 2011 taxes online turbotax Clearly indicate the election on your amended return and write “Filed pursuant to section 301. File 2011 taxes online turbotax 9100-2” at the top of the amended return. File 2011 taxes online turbotax File the amended return at the same address you filed the original return. File 2011 taxes online turbotax The election applies when figuring taxable income for the current tax year and all subsequent years. File 2011 taxes online turbotax   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 2011 taxes online turbotax For more information about start-up and organizational costs, see chapter 7. File 2011 taxes online turbotax Crop production expenses. File 2011 taxes online turbotax   The uniform capitalization rules generally require you to capitalize expenses incurred in producing plants. File 2011 taxes online turbotax 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 2011 taxes online turbotax For more information, see Uniform Capitalization Rules in chapter 6. File 2011 taxes online turbotax Timber. File 2011 taxes online turbotax   Capitalize the cost of acquiring timber. File 2011 taxes online turbotax Do not include the cost of land in the cost of the timber. File 2011 taxes online turbotax You must generally capitalize direct costs incurred in reforestation. File 2011 taxes online turbotax However, you can elect to deduct some forestation and reforestation costs. File 2011 taxes online turbotax See Forestation and reforestation costs next. File 2011 taxes online turbotax Reforestation costs include the following. File 2011 taxes online turbotax Site preparation costs, such as: Girdling, Applying herbicide, Baiting rodents, and Clearing and controlling brush. File 2011 taxes online turbotax The cost of seed or seedlings. File 2011 taxes online turbotax Labor and tool expenses. File 2011 taxes online turbotax Depreciation on equipment used in planting or seeding. File 2011 taxes online turbotax Costs incurred in replanting to replace lost seedlings. File 2011 taxes online turbotax You can choose to capitalize certain indirect reforestation costs. File 2011 taxes online turbotax   These capitalized amounts are your basis for the timber. File 2011 taxes online turbotax Recover your basis when you sell the timber or take depletion allowances when you cut the timber. File 2011 taxes online turbotax See Depletion in chapter 7. File 2011 taxes online turbotax Forestation and reforestation costs. File 2011 taxes online turbotax   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 2011 taxes online turbotax Any remaining costs can be amortized over an 84-month period. File 2011 taxes online turbotax See chapter 7. File 2011 taxes online turbotax 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 2011 taxes online turbotax The accounts should include all reforestation treatments and the dates they were applied. File 2011 taxes online turbotax 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 2011 taxes online turbotax The timber account should be maintained until the timber is disposed of. File 2011 taxes online turbotax For more information, see Notice 2006-47, 2006-20 I. File 2011 taxes online turbotax R. File 2011 taxes online turbotax B. File 2011 taxes online turbotax 892, available at  www. File 2011 taxes online turbotax irs. File 2011 taxes online turbotax gov/irb/2006-20_IRB/ar11. File 2011 taxes online turbotax html. File 2011 taxes online turbotax   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 2011 taxes online turbotax If you are filing Form T (Timber), Forest Activities Schedule, also complete Form T (Timber), Part IV. File 2011 taxes online turbotax If you are not filing Form T (Timber), attach a statement to your return with the following information. File 2011 taxes online turbotax The unique stand identification numbers. File 2011 taxes online turbotax The total number of acres reforested during the tax year. File 2011 taxes online turbotax The nature of the reforestation treatments. File 2011 taxes online turbotax The total amounts of the qualified reforestation expenditures eligible to be amortized or deducted. File 2011 taxes online turbotax   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 2011 taxes online turbotax Clearly indicate the election on your amended return and write “Filed pursuant to section 301. File 2011 taxes online turbotax 9100-2” at the top of the amended return. File 2011 taxes online turbotax File the amended return at the same address you filed the original return. File 2011 taxes online turbotax    For more information about forestation and reforestation costs, see chapter 7. File 2011 taxes online turbotax    For more information about timber, see Agriculture Handbook Number 731, Forest Landowners' Guide to the Federal Income Tax. File 2011 taxes online turbotax You can view this publication on the Internet at  www. File 2011 taxes online turbotax fs. File 2011 taxes online turbotax fed. File 2011 taxes online turbotax us/publications. File 2011 taxes online turbotax Christmas tree cultivation. File 2011 taxes online turbotax   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 2011 taxes online turbotax 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 2011 taxes online turbotax For more information, see Timber Depletion under Depletion in chapter 7. File 2011 taxes online turbotax   You can deduct as business expenses the costs incurred for shearing and basal pruning of these trees. File 2011 taxes online turbotax Expenses incurred for silvicultural practices, such as weeding or cleaning, and noncommercial thinning are also deductible as business expenses. File 2011 taxes online turbotax   Capitalize the cost of land improvements, such as road grading, ditching, and fire breaks, that have a useful life beyond the tax year. File 2011 taxes online turbotax If the improvements do not have a determinable useful life, add their cost to the basis of the land. File 2011 taxes online turbotax The cost is recovered when you sell or otherwise dispose of it. File 2011 taxes online turbotax If the improvements have a determinable useful life, recover their cost through depreciation. File 2011 taxes online turbotax 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 2011 taxes online turbotax Recover these costs through depreciation. File 2011 taxes online turbotax Nondeductible Expenses You cannot deduct personal expenses and certain other items on your tax return even if they relate to your farm. File 2011 taxes online turbotax Personal, Living, and Family Expenses You cannot deduct certain personal, living, and family expenses as business expenses. File 2011 taxes online turbotax 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 2011 taxes online turbotax Likewise, the cost of purchasing or raising produce or livestock consumed by you or your family is not deductible. File 2011 taxes online turbotax Other Nondeductible Items You cannot deduct the following items on your tax return. File 2011 taxes online turbotax Loss of growing plants, produce, and crops. File 2011 taxes online turbotax   Losses of plants, produce, and crops raised for sale are generally not deductible. File 2011 taxes online turbotax However, you may have a deductible loss on plants with a preproductive period of more than 2 years. File 2011 taxes online turbotax See chapter 11 for more information. File 2011 taxes online turbotax Repayment of loans. File 2011 taxes online turbotax   You cannot deduct the repayment of a loan. File 2011 taxes online turbotax However, if you use the proceeds of a loan for farm business expenses, you can deduct the interest on the loan. File 2011 taxes online turbotax See Interest , earlier. File 2011 taxes online turbotax Estate, inheritance, legacy, succession, and gift taxes. File 2011 taxes online turbotax   You cannot deduct estate, inheritance, legacy, succession, and gift taxes. File 2011 taxes online turbotax Loss of livestock. File 2011 taxes online turbotax   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 2011 taxes online turbotax Losses from sales or exchanges between related persons. File 2011 taxes online turbotax   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 2011 taxes online turbotax For more information, see chapter 2 of Publication 544, Sales and Other Dispositions of Assets. File 2011 taxes online turbotax Cost of raising unharvested crops. File 2011 taxes online turbotax   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 2011 taxes online turbotax Add these costs to the basis of the land to determine the gain or loss on the sale. File 2011 taxes online turbotax For more information, see Section 1231 Gains and Losses in chapter 9. File 2011 taxes online turbotax Cost of unharvested crops bought with land. File 2011 taxes online turbotax   Capitalize the purchase price of land, including the cost allocable to unharvested crops. File 2011 taxes online turbotax You cannot deduct the cost of the crops at the time of purchase. File 2011 taxes online turbotax However, you can deduct this cost in figuring net profit or loss in the tax year you sell the crops. File 2011 taxes online turbotax Cost related to gifts. File 2011 taxes online turbotax   You cannot deduct costs related to your gifts of agricultural products or property held for sale in the ordinary course of your business. File 2011 taxes online turbotax The costs are not deductible in the year of the gift or any later year. File 2011 taxes online turbotax 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 2011 taxes online turbotax Club dues and membership fees. File 2011 taxes online turbotax   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 2011 taxes online turbotax 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 2011 taxes online turbotax Exception. File 2011 taxes online turbotax   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 2011 taxes online turbotax Boards of trade. File 2011 taxes online turbotax Business leagues. File 2011 taxes online turbotax Chambers of commerce. File 2011 taxes online turbotax Civic or public service organizations. File 2011 taxes online turbotax Professional associations. File 2011 taxes online turbotax Trade associations. File 2011 taxes online turbotax Real estate boards. File 2011 taxes online turbotax Fines and penalties. File 2011 taxes online turbotax   You cannot deduct fines and penalties, except penalties for exceeding marketing quotas, discussed earlier. File 2011 taxes online turbotax 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 2011 taxes online turbotax The amount of the loss you can deduct when figuring your taxable income may be limited. File 2011 taxes online turbotax To figure your deductible loss, you must apply the following limits. File 2011 taxes online turbotax The at-risk limits. File 2011 taxes online turbotax The passive activity limits. File 2011 taxes online turbotax The following discussions explain these limits. File 2011 taxes online turbotax 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 2011 taxes online turbotax See Publication 536, Net Operating Losses (NOLs) for Individuals, Estates, and Trusts. File 2011 taxes online turbotax 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 2011 taxes online turbotax See Not-for-Profit Farming, later. File 2011 taxes online turbotax At-Risk Limits The at-risk rules limit your deduction for losses from most business or income-producing activities, including farming. File 2011 taxes online turbotax These rules limit the losses you can deduct when figuring your taxable income. File 2011 taxes online turbotax The deductible loss from an activity is limited to the amount you have at risk in the activity. File 2011 taxes online turbotax 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 2011 taxes online turbotax 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 2011 taxes online turbotax For more information, see Publication 925. File 2011 taxes online turbotax 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 2011 taxes online turbotax Generally, a rental activity is a passive activity. File 2011 taxes online turbotax If you have a passive activity, special rules limit the loss you can deduct in the tax year. File 2011 taxes online turbotax You generally can deduct losses from passive activities only up to income from passive activities. File 2011 taxes online turbotax Credits are similarly limited. File 2011 taxes online turbotax For more information, see Publication 925. File 2011 taxes online turbotax 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 2011 taxes online turbotax 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 2011 taxes online turbotax 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 2011 taxes online turbotax Farming losses from casualty losses or losses by reason of disease or drought are disregarded for purposes of figuring this limitation. File 2011 taxes online turbotax Also, the limitation on farm losses should be applied before the passive activity loss rules are applied. File 2011 taxes online turbotax For more details, see IRC section 461(j). File 2011 taxes online turbotax Excess farm loss. File 2011 taxes online turbotax   Generally, an excess farm loss is the amount of your farming loss that exceeds the amount of the limitation (as described above). File 2011 taxes online turbotax 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 2011 taxes online turbotax   Excess farm losses that are disallowed can be carried forward to the next tax year and treated as a deduction from that year. File 2011 taxes online turbotax 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 2011 taxes online turbotax 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 2011 taxes online turbotax Also, there is a limit on the deductions you can take. File 2011 taxes online turbotax You cannot use a loss from that activity to offset income from other activities. File 2011 taxes online turbotax Activities you do as a hobby, or mainly for sport or recreation, come under this limit. File 2011 taxes online turbotax An investment activity intended only to produce tax losses for the investors also comes under this limit. File 2011 taxes online turbotax The limit on not-for-profit losses applies to individuals, partnerships, estates, trusts, and S corporations. File 2011 taxes online turbotax It does not apply to corporations other than S corporations. File 2011 taxes online turbotax In determining whether you are carrying on your farming activity for profit, all the facts are taken into account. File 2011 taxes online turbotax No one factor alone is decisive. File 2011 taxes online turbotax 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 2011 taxes online turbotax Presumption of profit. File 2011 taxes online turbotax   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 2011 taxes online turbotax 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 2011 taxes online turbotax The activity must be substantially the same for each year within this period. File 2011 taxes online turbotax You have a profit when the gross income from an activity is more than the deductions for it. File 2011 taxes online turbotax   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 2011 taxes online turbotax   If your business or investment activity passes this 3- (or 2-) years-of-profit test, presume it is carried on for profit. File 2011 taxes online turbotax This means the limits discussed here do not apply. File 2011 taxes online turbotax You can take all your business deductions from the activity on Schedule F, even for the years that you have a loss. File 2011 taxes online turbotax You can rely on this presumption in every case, unless the IRS shows it is not valid. File 2011 taxes online turbotax   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 2011 taxes online turbotax Using the presumption later. File 2011 taxes online turbotax   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 2011 taxes online turbotax   You can choose to do this by filing Form 5213. File 2011 taxes online turbotax 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 2011 taxes online turbotax 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 2011 taxes online turbotax   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 2011 taxes online turbotax Accordingly, it will not limit your deductions. File 2011 taxes online turbotax 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 2011 taxes online turbotax If you show 3 (or 2) years of profit at the end of this period, your deductions are not limited under these rules. File 2011 taxes online turbotax 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 2011 taxes online turbotax   Filing Form 5213 automatically extends the period of limitations on any year
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File 2011 taxes online turbotax 4. File 2011 taxes online turbotax   Communications and Air Transportation Taxes Table of Contents Uncollected Tax Report Communications TaxLocal-only service. File 2011 taxes online turbotax Private communication service. File 2011 taxes online turbotax Exemptions Credits or Refunds Air Transportation TaxesTransportation of Persons by Air International Air Travel Facilities Transportation of Property by Air Special Rules on Transportation Taxes Excise taxes are imposed on amounts paid for certain facilities and services. File 2011 taxes online turbotax If you receive any payment on which tax is imposed, you are required to collect the tax, file returns, and pay the tax over to the government. File 2011 taxes online turbotax If you fail to collect and pay over the taxes, you may be liable for the trust fund recovery penalty. File 2011 taxes online turbotax See chapter 14, later. File 2011 taxes online turbotax Uncollected Tax Report A separate report is required to be filed by collecting agents of communications services and air transportation taxes if the person from whom the facilities or services tax (the tax) is required to be collected (the taxpayer) refuses to pay the tax, or it is impossible for the collecting agent to collect the tax. File 2011 taxes online turbotax The report must contain the name and address of the taxpayer, the type of facility provided or service rendered, the amount paid for the facility or service (the amount on which the tax is based), and the date paid. File 2011 taxes online turbotax Regular method taxpayers. File 2011 taxes online turbotax   For regular method taxpayers, the report must be filed by the due date of the Form 720 on which the tax would have been reported. File 2011 taxes online turbotax Alternative method taxpayers. File 2011 taxes online turbotax   For alternative method taxpayers, the report must be filed by the due date of the Form 720 that includes an adjustment to the separate account for the uncollected tax. File 2011 taxes online turbotax See Alternative method in  chapter 11. File 2011 taxes online turbotax Where to file. File 2011 taxes online turbotax    Do not file the uncollected tax report with Form 720. File 2011 taxes online turbotax Instead, mail the report to: Internal Revenue Service Excise Tax Program SE:S:SP:EX MS C9-109 5000 Ellin Rd. File 2011 taxes online turbotax  Lanham, MD 20706 Communications Tax A 3% tax is imposed on amounts paid for local telephone service and teletypewriter exchange service. File 2011 taxes online turbotax Local telephone service. File 2011 taxes online turbotax   This includes access to a local telephone system and the privilege of telephonic quality communication with most people who are part of the system. File 2011 taxes online turbotax Local telephone service also includes any facility or services provided in connection with this service. File 2011 taxes online turbotax The tax applies to lease payments for certain customer premises equipment (CPE) even though the lessor does not also provide access to a local telecommunications system. File 2011 taxes online turbotax Local-only service. File 2011 taxes online turbotax   Local-only service is local telephone service as described above, provided under a plan that does not include long distance telephone service or that separately states the charge for local service on the bill to customers. File 2011 taxes online turbotax Local-only service also includes any facility or services provided in connection with this service, even though these services and facilities may also be used with long-distance service. File 2011 taxes online turbotax Private communication service. File 2011 taxes online turbotax   Private communication service is not local telephone service. File 2011 taxes online turbotax Private communication service includes accessory-type services provided in connection with a Centrex, PBX, or other similar system for dual use accessory equipment. File 2011 taxes online turbotax However, the charge for the service must be stated separately from the charge for the basic system, and the accessory must function, in whole or in part, in connection with intercommunication among the subscriber's stations. File 2011 taxes online turbotax Teletypewriter exchange service. File 2011 taxes online turbotax   This includes access from a teletypewriter or other data station to a teletypewriter exchange system and the privilege of intercommunication by that station with most persons having teletypewriter or other data stations in the same exchange system. File 2011 taxes online turbotax Figuring the tax. File 2011 taxes online turbotax   The tax is based on the sum of all charges for local telephone service included in the bill. File 2011 taxes online turbotax However, if the bill groups individual items for billing and tax purposes, the tax is based on the sum of the individual items within that group. File 2011 taxes online turbotax The tax on the remaining items not included in any group is based on the charge for each item separately. File 2011 taxes online turbotax Do not include in the tax base state or local sales or use taxes that are separately stated on the taxpayer's bill. File 2011 taxes online turbotax Exemptions Payments for certain services or payments from certain users are exempt from the communications tax. File 2011 taxes online turbotax Nontaxable service. File 2011 taxes online turbotax   Nontaxable service means bundled service and long distance service. File 2011 taxes online turbotax Nontaxable service also includes pre-paid telephone cards and pre-paid cellular service. File 2011 taxes online turbotax Bundled service. File 2011 taxes online turbotax   Bundled service is local and long distance service provided under a plan that does not separately state the charge for the local telephone service. File 2011 taxes online turbotax Bundled service includes plans that provide both local and long distance service for either a flat monthly fee or a charge that varies with the elapsed transmission time for which the service is used. File 2011 taxes online turbotax Telecommunications companies provide bundled service for both landlines and wireless (cellular) service. File 2011 taxes online turbotax If Voice over Internet Protocol service provides both local and long distance service and the charges are not separately stated, such service is bundled service. File 2011 taxes online turbotax   The method for sending or receiving a call, such as on a landline telephone, wireless (cellular), or some other method, does not affect whether a service is local-only or bundled. File 2011 taxes online turbotax Long distance service. File 2011 taxes online turbotax   Long distance service is telephonic quality communication with persons whose telephones are outside the local telephone system of the caller. File 2011 taxes online turbotax Pre-paid telephone cards (PTC). File 2011 taxes online turbotax   A PTC will be treated as bundled service unless a PTC expressly states it is for local-only service. File 2011 taxes online turbotax Generally, the person responsible for collecting the tax is the carrier who transfers the PTC to the transferee. File 2011 taxes online turbotax The transferee is the first person that is not a carrier to whom a PTC is transferred by the carrier. File 2011 taxes online turbotax The transferee is the person liable for the tax and is eligible to request a credit or refund. File 2011 taxes online turbotax For more information, see Regulations section 49. File 2011 taxes online turbotax 4251-4. File 2011 taxes online turbotax   The holder is the person that purchases a PTC to use and not to resell. File 2011 taxes online turbotax Holders are not liable for the tax and cannot request a credit or refund. File 2011 taxes online turbotax Pre-paid cellular telephones. File 2011 taxes online turbotax   Rules similar to the PTC rules described above apply to pre-paid cellular telephones. File 2011 taxes online turbotax The transferee is the person eligible to request the credit or refund. File 2011 taxes online turbotax Installation charges. File 2011 taxes online turbotax   The tax does not apply to payments received for the installation of any instrument, wire, pole, switchboard, apparatus, or equipment. File 2011 taxes online turbotax However, the tax does apply to payments for the repair or replacement of those items incidental to ordinary maintenance. File 2011 taxes online turbotax Answering services. File 2011 taxes online turbotax   The tax does not apply to amounts paid for a private line, an answering service, and a one-way paging or message service if they do not provide access to a local telephone system and the privilege of telephonic communication as part of the local telephone system. File 2011 taxes online turbotax Mobile radio telephone service. File 2011 taxes online turbotax   The tax does not apply to payments for a two-way radio service that does not provide access to a local telephone system. File 2011 taxes online turbotax Coin-operated telephones. File 2011 taxes online turbotax   The tax for local telephone service does not apply to payments made for services by inserting coins in public coin-operated telephones. File 2011 taxes online turbotax But the tax applies if the coin-operated telephone service is furnished for a guaranteed amount. File 2011 taxes online turbotax Figure the tax on the amount paid under the guarantee plus any fixed monthly or other periodic charge. File 2011 taxes online turbotax Telephone-operated security systems. File 2011 taxes online turbotax   The tax does not apply to amounts paid for telephones used only to originate calls to a limited number of telephone stations for security entry into a building. File 2011 taxes online turbotax In addition, the tax does not apply to any amounts paid for rented communication equipment used in the security system. File 2011 taxes online turbotax News services. File 2011 taxes online turbotax   The tax on teletypewriter exchange service does not apply to charges for the following news services. File 2011 taxes online turbotax Services dealing exclusively with the collection or dissemination of news for or through the public press or radio or television broadcasting. File 2011 taxes online turbotax Services used exclusively in the collection or dissemination of news by a news ticker service furnishing a general news service similar to that of the public press. File 2011 taxes online turbotax This exemption applies to payments received for messages from one member of the news media to another member (or to or from their bona fide correspondents). File 2011 taxes online turbotax For the exemption to apply, the charge for these services must be billed in writing to the person paying for the service and that person must certify in writing that the services are used for an exempt purpose. File 2011 taxes online turbotax Services not exempted. File 2011 taxes online turbotax   The tax applies to amounts paid by members of the news media for local telephone service. File 2011 taxes online turbotax International organizations and the American Red Cross. File 2011 taxes online turbotax   The tax does not apply to communication services furnished to an international organization or to the American National Red Cross. File 2011 taxes online turbotax Nonprofit hospitals. File 2011 taxes online turbotax   The tax does not apply to telephone services furnished to income tax-exempt nonprofit hospitals for their use. File 2011 taxes online turbotax Also, the tax does not apply to amounts paid by these hospitals to provide local telephone service in the homes of their personnel who must be reached during their off-duty hours. File 2011 taxes online turbotax Nonprofit educational organizations. File 2011 taxes online turbotax   The tax does not apply to payments received for services and facilities furnished to a nonprofit educational organization for its use. File 2011 taxes online turbotax A nonprofit educational organization is one that satisfies all the following requirements. File 2011 taxes online turbotax It normally maintains a regular faculty and curriculum. File 2011 taxes online turbotax It normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on. File 2011 taxes online turbotax It is exempt from income tax under section 501(a). File 2011 taxes online turbotax This includes a school operated by an organization exempt under section 501(c)(3) if the school meets the above qualifications. File 2011 taxes online turbotax Qualified blood collector organizations. File 2011 taxes online turbotax   The tax does not apply to telephone services furnished to qualified blood collector organizations for their use. File 2011 taxes online turbotax A qualified blood collector organization is one that is: Described in section 501(c)(3) and exempt from tax under section 501(a), Primarily engaged in the activity of collecting human blood, Registered with the IRS, and Registered by the Food and Drug Administration to collect blood. File 2011 taxes online turbotax Federal, state, and local government. File 2011 taxes online turbotax   The tax does not apply to communication services provided to the government of the United States, the government of any state or its political subdivisions, the District of Columbia, or the United Nations. File 2011 taxes online turbotax Treat an Indian tribal government as a state for the exemption from the communications tax only if the services involve the exercise of an essential tribal government function. File 2011 taxes online turbotax Exemption certificate. File 2011 taxes online turbotax   Any form of exemption certificate will be acceptable if it includes all the information required by the Internal Revenue Code and Regulations. File 2011 taxes online turbotax See Regulations section 49. File 2011 taxes online turbotax 4253-11. File 2011 taxes online turbotax File the certificate with the provider of the communication services. File 2011 taxes online turbotax An exemption certificate is not required for nontaxable services. File 2011 taxes online turbotax   The following users that are exempt from the communications tax do not have to file an annual exemption certificate after they have filed the initial certificate to claim an exemption from the communications tax. File 2011 taxes online turbotax The American National Red Cross and other international organizations. File 2011 taxes online turbotax Nonprofit hospitals. File 2011 taxes online turbotax Nonprofit educational organizations. File 2011 taxes online turbotax Qualified blood collector organizations. File 2011 taxes online turbotax State and local governments. File 2011 taxes online turbotax   The federal government does not have to file any exemption certificate. File 2011 taxes online turbotax   All other organizations must furnish exemption certificates when required. File 2011 taxes online turbotax Credits or Refunds If tax is collected and paid over for nontaxable services, or for certain services or users exempt from the communications tax, the collector or taxpayer may claim a credit or refund if it has repaid the tax to the person from whom the tax was collected or obtained the consent of that person to the allowance of the credit or refund. File 2011 taxes online turbotax Alternatively, the person who paid the tax may claim a refund. File 2011 taxes online turbotax For more information on how to file for credits or refunds, see the Instructions for Form 720 or Form 8849. File 2011 taxes online turbotax Collectors. File 2011 taxes online turbotax   The collector may request a credit or refund if it has repaid the tax to the person from whom the tax was collected, or obtained the consent of that person to the allowance of the credit or refund. File 2011 taxes online turbotax These requirements also apply to nontaxable service refunds. File 2011 taxes online turbotax Collectors using the regular method for deposits. File 2011 taxes online turbotax   Collectors using the regular method for deposits must use Form 720X to request a credit or refund if the collector has repaid the tax to the person from whom the tax was collected, or obtained the consent of that person to the allowance of the credit or refund. File 2011 taxes online turbotax Collectors using the alternative method for deposits. File 2011 taxes online turbotax   Collectors using the alternative method for deposits must adjust their separate accounts for the credit or refund if it has repaid the tax to the person from whom the tax was collected, or obtained the consent of that person to the allowance of the credit or refund. File 2011 taxes online turbotax For more information, see the Instructions for Form 720. File 2011 taxes online turbotax Air Transportation Taxes Taxes are imposed on amounts paid for: Transportation of persons by air, Use of international air travel facilities, and Transportation of property by air. File 2011 taxes online turbotax Transportation of Persons by Air The tax on transportation of persons by air is made up of the: Percentage tax, and Domestic-segment tax. File 2011 taxes online turbotax Percentage tax. File 2011 taxes online turbotax   A tax of 7. File 2011 taxes online turbotax 5% applies to amounts paid for taxable transportation of persons by air. File 2011 taxes online turbotax Amounts paid for transportation include charges for layover or waiting time and movement of aircraft in deadhead service. File 2011 taxes online turbotax Mileage awards. File 2011 taxes online turbotax   The percentage tax may apply to an amount paid (in cash or in kind) to an air carrier (or any related person) for the right to provide mileage awards for, or other reductions in the cost of, any transportation of persons by air. File 2011 taxes online turbotax For example, this applies to mileage awards purchased by credit card companies, telephone companies, restaurants, hotels, and other businesses. File 2011 taxes online turbotax   Generally, the percentage tax does not apply to amounts paid for mileage awards where the mileage awards cannot, under any circumstances, be redeemed for air transportation that is subject to the tax. File 2011 taxes online turbotax Until regulations are issued, the following rules apply to mileage awards. File 2011 taxes online turbotax Amounts paid for mileage awards that cannot be redeemed for taxable transportation beginning and ending in the United States are not subject to the tax. File 2011 taxes online turbotax For this rule, mileage awards issued by a foreign air carrier are considered to be usable only on that foreign air carrier and thus not redeemable for taxable transportation beginning and ending in the United States. File 2011 taxes online turbotax Therefore, amounts paid to a foreign air carrier for mileage awards are not subject to the tax. File 2011 taxes online turbotax Amounts paid by an air carrier to a domestic air carrier for mileage awards that can be redeemed for taxable transportation are not subject to the tax to the extent those miles will be awarded in connection with the purchase of taxable transportation. File 2011 taxes online turbotax Amounts paid by an air carrier to a domestic air carrier for mileage awards that can be redeemed for taxable transportation are subject to the tax to the extent those miles will not be awarded in connection with the purchase of taxable transportation. File 2011 taxes online turbotax Domestic-segment tax. File 2011 taxes online turbotax   The domestic-segment tax is a flat dollar amount for each segment of taxable transportation for which an amount is paid. File 2011 taxes online turbotax However, see Rural airports, later. File 2011 taxes online turbotax A segment is a single takeoff and a single landing. File 2011 taxes online turbotax The amount of the domestic-segment tax is in the Instructions for Form 720. File 2011 taxes online turbotax Charter flights. File 2011 taxes online turbotax    If an aircraft is chartered, the domestic-segment tax for each segment of taxable transportation is figured by multiplying the tax by the number of passengers transported on the aircraft. File 2011 taxes online turbotax Rural airports. File 2011 taxes online turbotax   The domestic-segment tax does not apply to a segment to or from a rural airport. File 2011 taxes online turbotax An airport is a rural airport for a calendar year if fewer than 100,000 commercial passengers departed from the airport by air during the second preceding calendar year (the 100,000 passenger rule), and one of the following is true: The airport is not located within 75 miles of another airport from which 100,000 or more commercial passengers departed during the second preceding calendar year, The airport was receiving essential air service subsidies as of August 5, 1997, or The airport is not connected by paved roads to another airport. File 2011 taxes online turbotax   To apply the 100,000 passenger rule to any airport described in (3) above, only count commercial passengers departing from the airport by air on flight segments of at least 100 miles. File 2011 taxes online turbotax   An updated list of rural airports can be found on the Department of Transportation website at www. File 2011 taxes online turbotax dot. File 2011 taxes online turbotax gov and enter the phrase “Essential Air Service” in the search box. File 2011 taxes online turbotax Taxable transportation. File 2011 taxes online turbotax   Taxable transportation is transportation by air that meets either of the following tests. File 2011 taxes online turbotax It begins and ends either in the United States or at any place in Canada or Mexico not more than 225 miles from the nearest point on the continental United States boundary (this is the 225-mile zone). File 2011 taxes online turbotax It is directly or indirectly from one port or station in the United States to another port or station in the United States, but only if it is not a part of uninterrupted international air transportation, discussed later. File 2011 taxes online turbotax Round trip. File 2011 taxes online turbotax   A round trip is considered two separate trips. File 2011 taxes online turbotax The first trip is from the point of departure to the destination. File 2011 taxes online turbotax The second trip is the return trip from that destination. File 2011 taxes online turbotax Uninterrupted international air transportation. File 2011 taxes online turbotax   This means transportation entirely by air that does not begin and end in the United States or in the 225-mile zone if there is not more than a 12-hour scheduled interval between arrival and departure at any station in the United States. File 2011 taxes online turbotax For a special rule that applies to military personnel, see Exemptions, later. File 2011 taxes online turbotax Transportation between the continental U. File 2011 taxes online turbotax S. File 2011 taxes online turbotax and Alaska or Hawaii. File 2011 taxes online turbotax   This transportation is partially exempt from the tax on transportation of persons by air. File 2011 taxes online turbotax The tax does not apply to the part of the trip between the point at which the route of transportation leaves or enters the continental United States (or a port or station in the 225-mile zone) and the point at which it enters or leaves Hawaii or Alaska. File 2011 taxes online turbotax Leaving or entering occurs when the route of the transportation passes over either the United States border or a point 3 nautical miles (3. File 2011 taxes online turbotax 45 statute miles) from low tide on the coast line, or when it leaves a port or station in the 225-mile zone. File 2011 taxes online turbotax Therefore, this transportation is subject to the percentage tax on the part of the trip in U. File 2011 taxes online turbotax S. File 2011 taxes online turbotax airspace, the domestic-segment tax for each domestic segment, and the tax on the use of international air travel facilities, discussed later. File 2011 taxes online turbotax Transportation within Alaska or Hawaii. File 2011 taxes online turbotax   The tax on transportation of persons by air applies to the entire fare paid in the case of flights between any of the Hawaiian Islands, and between any ports or stations in the Aleutian Islands or other ports or stations elsewhere in Alaska. File 2011 taxes online turbotax The tax applies even though parts of the flights may be over international waters or over Canada, if no point on the direct line of transportation between the ports or stations is more than 225 miles from the United States (Hawaii or Alaska). File 2011 taxes online turbotax Package tours. File 2011 taxes online turbotax   The air transportation taxes apply to “complimentary” air transportation furnished solely to participants in package holiday tours. File 2011 taxes online turbotax The amount paid for these package tours includes a charge for air transportation even though it may be advertised as “free. File 2011 taxes online turbotax ” This rule also applies to the tax on the use of international air travel facilities, discussed later. File 2011 taxes online turbotax Liability for tax. File 2011 taxes online turbotax   The person paying for taxable transportation is liable for the tax and, ordinarily, the person receiving the payment collects the tax, files the returns, and pays the tax over to the government. File 2011 taxes online turbotax However, if payment is made outside the United States for a prepaid order, exchange order, or similar order, the person furnishing the initial transportation provided for under that order must collect the tax. File 2011 taxes online turbotax    A travel agency that is an independent broker and sells tours on aircraft that it charters must collect the transportation tax, file the returns, and pay the tax over to the government. File 2011 taxes online turbotax However, a travel agency that sells tours as the agent of an airline must collect the tax and remit it to the airline for the filing of returns and for the payment of the tax over to the government. File 2011 taxes online turbotax An independent third party that is not under the airline's supervision or control, but is acting on behalf of, and receiving compensation from, a passenger, is not required to collect the tax and pay it to the government. File 2011 taxes online turbotax For more information on resellers of air transportation, see Revenue Ruling 2006-52. File 2011 taxes online turbotax You can find Revenue Ruling 2006-52 on page 761 of I. File 2011 taxes online turbotax R. File 2011 taxes online turbotax B. File 2011 taxes online turbotax 2006-43 at www. File 2011 taxes online turbotax irs. File 2011 taxes online turbotax gov/pub/irs-irbs/irb06-43. File 2011 taxes online turbotax pdf. File 2011 taxes online turbotax   The fact that the aircraft does not use public or commercial airports in taking off and landing has no effect on the tax. File 2011 taxes online turbotax But see Certain helicopter uses, later. File 2011 taxes online turbotax   For taxable transportation that begins and ends in the United States, the tax applies regardless of whether the payment is made in or outside the United States. File 2011 taxes online turbotax   If the tax is not paid when payment for the transportation is made, the air carrier providing the initial segment of the transportation that begins or ends in the United States becomes liable for the tax. File 2011 taxes online turbotax Exemptions. File 2011 taxes online turbotax   The tax on transportation of persons by air does not apply in the following situations. File 2011 taxes online turbotax See also Special Rules on Transportation Taxes, later. File 2011 taxes online turbotax Military personnel on international trips. File 2011 taxes online turbotax   When traveling in uniform at their own expense, United States military personnel on authorized leave are deemed to be traveling in uninterrupted international air transportation (defined earlier) even if the scheduled interval between arrival and departure at any station in the United States is actually more than 12 hours. File 2011 taxes online turbotax However, such personnel must buy their tickets within 12 hours after landing at the first domestic airport and accept the first available accommodation of the type called for by their tickets. File 2011 taxes online turbotax The trip must begin or end outside the United States and the 225-mile zone. File 2011 taxes online turbotax Certain helicopter uses. File 2011 taxes online turbotax   The tax does not apply to air transportation by helicopter if the helicopter is used for any of the following purposes. File 2011 taxes online turbotax Transporting individuals, equipment, or supplies in the exploration for, or the development or removal of, hard minerals, oil, or gas. File 2011 taxes online turbotax Planting, cultivating, cutting, transporting, or caring for trees (including logging operations). File 2011 taxes online turbotax Providing emergency medical transportation. File 2011 taxes online turbotax   However, during a use described in items (1) or (2), the tax applies if the helicopter takes off from, or lands at, a facility eligible for assistance under the Airport and Airway Development Act of 1970, or otherwise uses services provided under section 44509 or 44913(b) or subchapter I of chapter 471 of title 49, United States Code. File 2011 taxes online turbotax For item (1), treat each flight segment as a separate flight. File 2011 taxes online turbotax Fixed-wing aircraft uses. File 2011 taxes online turbotax   The tax does not apply to air transportation by fixed-wing aircraft if the fixed-wing aircraft is used for any of the following purposes. File 2011 taxes online turbotax Planting, cultivating, cutting, transporting, or caring for trees (including logging operations). File 2011 taxes online turbotax Providing emergency medical transportation. File 2011 taxes online turbotax The aircraft must be equipped for and exclusively dedicated on that flight to acute care emergency medical services. File 2011 taxes online turbotax   However, during a use described in item (1), the tax applies if the fixed-wing aircraft takes off from, or lands at, a facility eligible for assistance under the Airport and Airway Development Act of 1970, or otherwise uses services provided under section 44509 or 44913(b) or subchapter I of chapter 471 of title 49, United States Code. File 2011 taxes online turbotax Skydiving. File 2011 taxes online turbotax   The tax does not apply to any air transportation exclusively for the purpose of skydiving. File 2011 taxes online turbotax Seaplanes. File 2011 taxes online turbotax   The tax does not apply to any air transportation by seaplane for any segment consisting of a takeoff from, and a landing on, water if the places where the takeoff and landing occur are not receiving financial assistance from the Airport and Airways Trust Fund. File 2011 taxes online turbotax Bonus tickets. File 2011 taxes online turbotax   The tax does not apply to free bonus tickets issued by an airline company to its customers who have satisfied all requirements to qualify for the bonus tickets. File 2011 taxes online turbotax However, the tax applies to amounts paid by customers for advance bonus tickets when customers have traveled insufficient mileage to fully qualify for the free advance bonus tickets. File 2011 taxes online turbotax International Air Travel Facilities A tax per person is imposed (whether in or outside the United States) for international flights that begin or end in the United States. File 2011 taxes online turbotax However, for a domestic segment that begins or ends in Alaska or Hawaii, a reduced tax per person applies only to departures. File 2011 taxes online turbotax This tax does not apply if all the transportation is subject to the percentage tax, discussed earlier. File 2011 taxes online turbotax It also doesn't apply if the surtax on fuel used in a fractional ownership program aircraft (discussed earlier) is imposed. File 2011 taxes online turbotax See the Instructions for Form 720 for the tax rates. File 2011 taxes online turbotax Transportation of Property by Air A tax of 6. File 2011 taxes online turbotax 25% is imposed on amounts paid (whether in or outside the United States) for transportation of property by air. File 2011 taxes online turbotax The fact that the aircraft may not use public or commercial airports in taking off and landing has no effect on the tax. File 2011 taxes online turbotax The tax applies only to amounts paid to a person engaged in the business of transporting property by air for hire. File 2011 taxes online turbotax The tax applies only to transportation (including layover time and movement of aircraft in deadhead service) that begins and ends in the United States. File 2011 taxes online turbotax Thus, the tax does not apply to transportation of property by air that begins or ends outside the United States. File 2011 taxes online turbotax Exemptions. File 2011 taxes online turbotax   The tax on transportation of property by air does not apply in the following situations. File 2011 taxes online turbotax See also Special Rules on Transportation Taxes, later. File 2011 taxes online turbotax Cropdusting and firefighting service. File 2011 taxes online turbotax   The tax does not apply to amounts paid for cropdusting or aerial firefighting service. File 2011 taxes online turbotax Exportation. File 2011 taxes online turbotax    The tax does not apply to payments for transportation of property by air in the course of exportation (including to United States possessions) by continuous movement, as evidenced by the execution of Form 1363, Export Exemption Certificate. File 2011 taxes online turbotax See Form 1363 for more information. File 2011 taxes online turbotax Certain helicopter and fixed-wing air ambulance uses. File 2011 taxes online turbotax   The tax does not apply to amounts paid for the use of helicopters in construction to set heating and air conditioning units on roofs of buildings, to dismantle tower cranes, and to aid in construction of power lines and ski lifts. File 2011 taxes online turbotax   The tax also does not apply to air transportation by helicopter or fixed-wing aircraft for the purpose of providing emergency medical services. File 2011 taxes online turbotax The fixed-wing aircraft must be equipped for and exclusively dedicated on that flight to acute care emergency medical services. File 2011 taxes online turbotax Skydiving. File 2011 taxes online turbotax   The tax does not apply to any air transportation exclusively for the purpose of skydiving. File 2011 taxes online turbotax Excess baggage. File 2011 taxes online turbotax    The tax does not apply to excess baggage accompanying a passenger on an aircraft operated on an established line. File 2011 taxes online turbotax Surtax on fuel used in a fractional ownership program aircraft. File 2011 taxes online turbotax   The tax does not apply if the surtax on fuel used in a fractional ownership program aircraft (discussed earlier) is imposed. File 2011 taxes online turbotax Alaska and Hawaii. File 2011 taxes online turbotax   For transportation of property to and from Alaska and Hawaii, the tax in general does not apply to the portion of the transportation that is entirely outside the continental United States (or the 225-mile zone if the aircraft departs from or arrives at an airport in the 225-mile zone). File 2011 taxes online turbotax But the tax applies to flights between ports or stations in Alaska and the Aleutian Islands, as well as between ports or stations in Hawaii. File 2011 taxes online turbotax The tax applies even though parts of the flights may be over international waters or over Canada, if no point on a line drawn from where the route of transportation leaves the United States (Alaska) to where it reenters the United States (Alaska) is more than 225 miles from the United States. File 2011 taxes online turbotax Liability for tax. File 2011 taxes online turbotax   The person paying for taxable transportation is liable for the tax and, ordinarily, the person engaged in the business of transporting property by air for hire receives the payment, collects the tax, files the returns, and pays the tax over to the government. File 2011 taxes online turbotax   If tax is not paid when a payment is made outside the United States, the person furnishing the last segment of taxable transportation collects the tax from the person to whom the property is delivered in the United States. File 2011 taxes online turbotax Special Rules on Transportation Taxes In certain circumstances, special rules apply to the taxes on transportation of persons and property by air. File 2011 taxes online turbotax Aircraft used by affiliated corporations. File 2011 taxes online turbotax   The taxes do not apply to payments received by one member of an affiliated group of corporations from another member for services furnished in connection with the use of an aircraft. File 2011 taxes online turbotax However, the aircraft must be owned or leased by a member of the affiliated group and cannot be available for hire by a nonmember of the affiliated group. File 2011 taxes online turbotax Determine whether an aircraft is available for hire by a nonmember of an affiliated group on a flight-by-flight basis. File 2011 taxes online turbotax   For this rule, an affiliated group of corporations is any group of corporations connected with a common parent corporation through 80% or more of stock ownership. File 2011 taxes online turbotax Small aircraft. File 2011 taxes online turbotax   The taxes do not apply to transportation furnished by an aircraft having a maximum certificated takeoff weight of 6,000 pounds or less. File 2011 taxes online turbotax However, the taxes do apply if the aircraft is operated on an established line. File 2011 taxes online turbotax “Operated on an established line” means the aircraft operates with some degree of regularity between definite points. File 2011 taxes online turbotax However, it does not include any time an aircraft is being operated on a flight that is solely for sightseeing. File 2011 taxes online turbotax   Consider an aircraft to be operated on an established line if it is operated on a charter basis between two cities also served by that carrier on a regularly scheduled basis. File 2011 taxes online turbotax   Also, the taxes apply if the aircraft is jet-powered, regardless of its maximum certificated takeoff weight or whether or not it is operated on an established line. File 2011 taxes online turbotax Mixed load of persons and property. File 2011 taxes online turbotax   If a single amount is paid for air transportation of persons and property, the payment must be allocated between the amount subject to the tax on transportation of persons and the amount subject to the tax on transportation of property. File 2011 taxes online turbotax The allocation must be reasonable and supported by adequate records. File 2011 taxes online turbotax Credits or refunds. File 2011 taxes online turbotax   If tax is collected and paid over for air transportation that is not taxable air transportation, the collector may claim a credit or refund if it has repaid the tax to the person from whom the tax was collected or obtained the consent of that person to the allowance of the credit or refund. File 2011 taxes online turbotax Alternatively, the person who paid the tax may claim a refund. File 2011 taxes online turbotax For information on how to file for credits or refunds, see the Instructions for Form 720 or Form 8849. 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