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Filing Form 1040ez

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Filing Form 1040ez

Filing form 1040ez 1. Filing form 1040ez   Filing Information Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Filing RequirementsWhen To File and Pay Foreign Currency Does My Return Have To Be On Paper? Where To File Nonresident Alien Spouse Treated as a ResidentSocial Security Number (SSN) How To Make the Choice Suspending the Choice Ending the Choice Estimated Tax Other Forms You May Have To File Topics - This chapter discusses: Whether you have to file a return, When to file your return and pay any tax due, How to treat foreign currency, How to file electronically, Where to file your return, When you can treat your nonresident alien spouse as a resident, and When you may have to make estimated tax payments. Filing form 1040ez Useful Items - You may want to see: Publication 3 Armed Forces' Tax Guide 501 Exemptions, Standard Deduction, and Filing Information 505 Tax Withholding and Estimated Tax 519 U. Filing form 1040ez S. Filing form 1040ez Tax Guide for Aliens 970 Tax Benefits for Education Form (and Instructions) 1040-ES Estimated Tax for Individuals 1040X Amended U. Filing form 1040ez S. Filing form 1040ez Individual Income Tax Return 2350 Application for Extension of Time To File U. Filing form 1040ez S. Filing form 1040ez Income Tax Return 2555 Foreign Earned Income 2555-EZ Foreign Earned Income Exclusion 4868 Application for Automatic Extension of Time To File U. Filing form 1040ez S. Filing form 1040ez Individual Income Tax Return 8822 Change of Address See chapter 7 for information about getting these publications and forms. Filing form 1040ez Filing Requirements If you are a U. Filing form 1040ez S. Filing form 1040ez citizen or resident alien, the rules for filing income, estate, and gift tax returns and for paying estimated tax are generally the same whether you are in the United States or abroad. Filing form 1040ez Your income, filing status, and age generally determine whether you must file an income tax return. Filing form 1040ez Generally, you must file a return for 2013 if your gross income from worldwide sources is at least the amount shown for your filing status in the following table. Filing form 1040ez Filing Status*   Amount Single $10,000 65 or older $11,500 Head of household $12,850 65 or older $14,350 Qualifying widow(er) $16,100 65 or older $17,300 Married filing jointly $20,000 Not living with spouse at end of year $3,900 One spouse 65 or older $21,200 Both spouses 65 or older $22,400 Married filing separately $3,900 *If you are the dependent of another taxpayer, see the instructions for Form 1040 for more information on whether you must file a return. Filing form 1040ez Gross income. Filing form 1040ez   This includes all income you receive in the form of money, goods, property, and services that is not exempt from tax. Filing form 1040ez   For purposes of determining whether you must file a return, gross income includes any income that you can exclude as foreign earned income or as a foreign housing amount. Filing form 1040ez If you are self-employed, your gross income includes the amount on Part I, line 7 of Schedule C (Form 1040), Profit or Loss From Business, or line 1 of Schedule C-EZ (Form 1040), Net Profit From Business. Filing form 1040ez Self-employed individuals. Filing form 1040ez   If your net earnings from self-employment are $400 or more, you must file a return even if your gross income is below the amount listed for your filing status in the table shown earlier. Filing form 1040ez Net earnings from self-employment are defined in Publication 334, Tax Guide for Small Business. Filing form 1040ez 65 or older. Filing form 1040ez   You are considered to be age 65 on the day before your 65th birthday. Filing form 1040ez For example, if your 65th birthday is on January 1, 2014, you are considered 65 for 2013. Filing form 1040ez Residents of U. Filing form 1040ez S. Filing form 1040ez possessions. Filing form 1040ez   If you are (or were) a bona fide resident of a U. Filing form 1040ez S. Filing form 1040ez possession, you may be required to file Form 8898, Statement for Individuals Who Begin or End Bona Fide Residence in a U. Filing form 1040ez S. Filing form 1040ez Possession. Filing form 1040ez See the instructions for the form for more information. Filing form 1040ez When To File and Pay If you file on a calendar year basis, the due date for filing your return is April 15 of the following year. Filing form 1040ez If you file on a fiscal year basis (a year ending on the last day of any month except December), the due date is 3 months and 15 days after the close of your fiscal year. Filing form 1040ez In general, the tax shown on your return should be paid by the due date of the return, without regard to any extension of time for filing the return. Filing form 1040ez When the due date for doing any act for tax purposes—filing a return, paying taxes, etc. Filing form 1040ez — falls on a Saturday, Sunday, or legal holiday, the due date is delayed until the next business day. Filing form 1040ez A tax return delivered by the U. Filing form 1040ez S. Filing form 1040ez mail or a designated delivery service that is postmarked or dated by the delivery service on or before the due date is considered to have been filed on or before that date. Filing form 1040ez See your Form 1040 or Form 1040A instructions for a list of designated delivery services. Filing form 1040ez Foreign wire transfers. Filing form 1040ez   If you have a U. Filing form 1040ez S. Filing form 1040ez bank account, you can use: EFTPS (Electronic Federal Tax Payment System), or Federal Tax Application (same-day wire transfer). Filing form 1040ez If you do not have a U. Filing form 1040ez S. Filing form 1040ez bank account, ask if your financial institution has a U. Filing form 1040ez S. Filing form 1040ez affiliate that can help you make same-day wire transfers. Filing form 1040ez   For more information, visit www. Filing form 1040ez eftps. Filing form 1040ez gov. Filing form 1040ez Extensions You can get an extension of time to file your return. Filing form 1040ez In some circumstances, you also can get an extension of time to file and pay any tax due. Filing form 1040ez However, if you pay the tax due after the regular due date, interest will be charged from the regular due date until the date the tax is paid. Filing form 1040ez This publication discusses four extensions: an automatic 2-month extension, an automatic 6-month extension, an additional extension for taxpayers out of the country, and an extension of time to meet tests. Filing form 1040ez If you served in a combat zone or qualified hazardous duty area, see Publication 3 for a discussion of extensions of deadlines. Filing form 1040ez Automatic 2-month extension. Filing form 1040ez   You are allowed an automatic 2-month extension to file your return and pay federal income tax if you are a U. Filing form 1040ez S. Filing form 1040ez citizen or resident alien, and on the regular due date of your return: You are living outside the United States and Puerto Rico and your main place of business or post of duty is outside the United States and Puerto Rico, or You are in military or naval service on duty outside the United States and Puerto Rico. Filing form 1040ez   If you use a calendar year, the regular due date of your return is April 15. Filing form 1040ez Even if you are allowed an extension, you will have to pay interest on any tax not paid by the regular due date of your return. Filing form 1040ez Married taxpayers. Filing form 1040ez   If you file a joint return, either you or your spouse can qualify for the automatic extension. Filing form 1040ez If you and your spouse file separate returns, this automatic extension applies only to the spouse who qualifies for it. Filing form 1040ez How to get the extension. Filing form 1040ez   To use this automatic 2-month extension, you must attach a statement to your return explaining which of the two situations listed earlier qualified you for the extension. Filing form 1040ez Automatic 6-month extension. Filing form 1040ez   If you are not able to file your return by the due date, you generally can get an automatic 6-month extension of time to file (but not of time to pay). Filing form 1040ez To get this automatic extension, you must file a paper Form 4868 or use IRS e-file (electronic filing). Filing form 1040ez For more information about filing electronically, see E-file options , later. Filing form 1040ez   The form must show your properly estimated tax liability based on the information available to you. Filing form 1040ez    You may not be eligible. Filing form 1040ez You cannot use the automatic 6-month extension of time to file if: You want the IRS to figure your tax, or You are under a court order to file by the regular due date. Filing form 1040ez E-file options. Filing form 1040ez    You can use e-file to get an extension of time to file. Filing form 1040ez You can either file Form 4868 electronically or you can pay part or all of your estimate of tax due using a credit or debit card. Filing form 1040ez   First, complete Form 4868 to use as a worksheet. Filing form 1040ez If you think you may owe tax when you file your return, use Part II of the form to estimate your balance due. Filing form 1040ez    Then, do one of the following. Filing form 1040ez E-file Form 4868. Filing form 1040ez You can use a tax software package with your personal computer or a tax professional to file Form 4868 electronically. Filing form 1040ez You will need to provide certain information from your tax return for 2012. Filing form 1040ez If you wish to make a payment by electronic funds withdrawal, see the instructions for Form 4868. Filing form 1040ez If you e-file Form 4868, do not also send a paper Form 4868. Filing form 1040ez E-file and pay by credit or debit card. Filing form 1040ez You can get an extension by paying part or all of your estimate of tax due by using a credit or debit card. Filing form 1040ez You can do this by phone or over the Internet. Filing form 1040ez If you do this, you do not file Form 4868. Filing form 1040ez For more information, see the instructions for your tax return. Filing form 1040ez When to file. Filing form 1040ez   Generally, you must request the 6-month extension by the regular due date of your return. Filing form 1040ez Previous 2-month extension. Filing form 1040ez   If you cannot file your return within the automatic 2-month extension period, you generally can get an additional 4 months to file your return, for a total of 6 months. Filing form 1040ez The 2-month period and the 6-month period start at the same time. Filing form 1040ez You have to request the additional 4 months by the new due date allowed by the 2-month extension. Filing form 1040ez   The additional 4 months of time to file (unlike the original 2-month extension) is not an extension of time to pay. Filing form 1040ez You must make an accurate estimate of your tax based on the information available to you. Filing form 1040ez If you find you cannot pay the full amount due with Form 4868, you can still get the extension. Filing form 1040ez You will owe interest on the unpaid amount from the original due date of the return. Filing form 1040ez   You also may be charged a penalty for paying the tax late unless you have reasonable cause for not paying your tax when due. Filing form 1040ez Penalties for paying the tax late are assessed from the original due date of your return, unless you qualify for the automatic 2-month extension. Filing form 1040ez In that situation, penalties for paying late are assessed from the extended due date of the payment (June 15 for calendar year taxpayers). Filing form 1040ez Additional extension of time for taxpayers out of the country. Filing form 1040ez   In addition to the 6-month extension, taxpayers who are out of the country can request a discretionary 2-month additional extension of time to file their returns (to December 15 for calendar year taxpayers). Filing form 1040ez   To request this extension, you must send the Internal Revenue Service a letter explaining the reasons why you need the additional 2 months. Filing form 1040ez Send the letter by the extended due date (October 15 for calendar year taxpayers) to the following address: Department of the Treasury Internal Revenue Service Center Austin, TX 73301-0045   You will not receive any notification from the Internal Revenue Service unless your request is denied. Filing form 1040ez   The discretionary 2-month additional extension is not available to taxpayers who have an approved extension of time to file on Form 2350, discussed next. Filing form 1040ez Extension of time to meet tests. Filing form 1040ez   You generally cannot get an extension of more than 6 months. Filing form 1040ez However, if you are outside the United States and meet certain requirements, you may be able to get a longer extension. Filing form 1040ez   You can get an extension of more than 6 months to file your tax return if you need the time to meet either the bona fide residence test or the physical presence test to qualify for either the foreign earned income exclusion or the foreign housing exclusion or deduction. Filing form 1040ez The tests, the exclusions, and the deduction are explained in chapter 4. Filing form 1040ez   You should request an extension if all three of the following apply. Filing form 1040ez You are a U. Filing form 1040ez S. Filing form 1040ez citizen or resident alien. Filing form 1040ez You expect to meet either the bona fide residence test or the physical presence test, but not until after your tax return is due. Filing form 1040ez Your tax home is in a foreign country (or countries) throughout your period of bona fide residence or physical presence, whichever applies. Filing form 1040ez   If you are granted an extension, it generally will be to 30 days beyond the date on which you can reasonably expect to qualify for an exclusion or deduction under either the bona fide residence test or the physical presence test. Filing form 1040ez However, if you have moving expenses that are for services performed in 2 years, you may be granted an extension until after the end of the second year. Filing form 1040ez How to get an extension. Filing form 1040ez   To obtain an extension, file Form 2350 either by giving it to a local IRS representative or other IRS employee or by mailing it to the: Department of the Treasury Internal Revenue Service Center Austin, TX 73301-0045   You must file Form 2350 by the due date for filing your return. Filing form 1040ez Generally, if both your tax home and your abode are outside the United States and Puerto Rico on the regular due date of your return and you file on a calendar year basis, the due date for filing your return is June 15. Filing form 1040ez What if tests are not met. Filing form 1040ez   If you obtain an extension and unforeseen events make it impossible for you to meet either the bona fide residence test or the physical presence test, you should file your income tax return as soon as possible because you must pay interest on any tax due after the regular due date of the return (even though an extension was granted). Filing form 1040ez    You should make any request for an extension early, so that if it is denied you still can file your return on time. Filing form 1040ez Otherwise, if you file late and additional tax is due, you may be subject to a penalty. Filing form 1040ez Return filed before test is met. Filing form 1040ez   If you file a return before you meet the bona fide residence test or the physical presence test, you must include all income from both U. Filing form 1040ez S. Filing form 1040ez and foreign sources and pay the tax on that income. Filing form 1040ez If you later meet either of the tests, you can claim the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction on Form 1040X. Filing form 1040ez Foreign Currency You must express the amounts you report on your U. Filing form 1040ez S. Filing form 1040ez tax return in U. Filing form 1040ez S. Filing form 1040ez dollars. Filing form 1040ez If you receive all or part of your income or pay some or all of your expenses in foreign currency, you must translate the foreign currency into U. Filing form 1040ez S. Filing form 1040ez dollars. Filing form 1040ez How you do this depends on your functional currency. Filing form 1040ez Your functional currency generally is the U. Filing form 1040ez S. Filing form 1040ez dollar unless you are required to use the currency of a foreign country. Filing form 1040ez You must make all federal income tax determinations in your functional currency. Filing form 1040ez The U. Filing form 1040ez S. Filing form 1040ez dollar is the functional currency for all taxpayers except some qualified business units (QBUs). Filing form 1040ez A QBU is a separate and clearly identified unit of a trade or business that maintains separate books and records. Filing form 1040ez Even if you have a QBU, your functional currency is the dollar if any of the following apply. Filing form 1040ez You conduct the business in U. Filing form 1040ez S. Filing form 1040ez dollars. Filing form 1040ez The principal place of business is located in the United States. Filing form 1040ez You choose to or are required to use the U. Filing form 1040ez S. Filing form 1040ez dollar as your functional currency. Filing form 1040ez The business books and records are not kept in the currency of the economic environment in which a significant part of the business activities is conducted. Filing form 1040ez Make all income tax determinations in your functional currency. Filing form 1040ez If your functional currency is the U. Filing form 1040ez S. Filing form 1040ez dollar, you must immediately translate into U. Filing form 1040ez S. Filing form 1040ez dollars all items of income, expense, etc. Filing form 1040ez (including taxes), that you receive, pay, or accrue in a foreign currency and that will affect computation of your income tax. Filing form 1040ez Use the exchange rate prevailing when you receive, pay, or accrue the item. Filing form 1040ez If there is more than one exchange rate, use the one that most properly reflects your income. Filing form 1040ez You can generally get exchange rates from banks and U. Filing form 1040ez S. Filing form 1040ez Embassies. Filing form 1040ez If your functional currency is not the U. Filing form 1040ez S. Filing form 1040ez dollar, make all income tax determinations in your functional currency. Filing form 1040ez At the end of the year, translate the results, such as income or loss, into U. Filing form 1040ez S. Filing form 1040ez dollars to report on your income tax return. Filing form 1040ez Blocked Income You generally must report your foreign income in terms of U. Filing form 1040ez S. Filing form 1040ez dollars and, with one exception (see Fulbright Grant, later), you must pay taxes due on it in U. Filing form 1040ez S. Filing form 1040ez dollars. Filing form 1040ez If, because of restrictions in a foreign country, your income is not readily convertible into U. Filing form 1040ez S. Filing form 1040ez dollars or into other money or property that is readily convertible into U. Filing form 1040ez S. Filing form 1040ez dollars, your income is “blocked” or “deferrable” income. Filing form 1040ez You can report this income in one of two ways: Report the income and pay your federal income tax with U. Filing form 1040ez S. Filing form 1040ez dollars that you have in the United States or in some other country, or Postpone the reporting of the income until it becomes unblocked. Filing form 1040ez If you choose to postpone the reporting of the income, you must file an information return with your tax return. Filing form 1040ez For this information return, you should use another Form 1040 labeled “Report of Deferrable Foreign Income, pursuant to Rev. Filing form 1040ez Rul. Filing form 1040ez 74-351. Filing form 1040ez ” You must declare on the information return that you will include the deferrable income in your taxable income for the year that it becomes unblocked. Filing form 1040ez You also must state that you waive any right to claim that the deferrable income was includible in your income for any earlier year. Filing form 1040ez You must report your income on your information return using the foreign currency in which you received that income. Filing form 1040ez If you have blocked income from more than one foreign country, include a separate information return for each country. Filing form 1040ez Income becomes unblocked and reportable for tax purposes when it becomes convertible, or when it is converted, into U. Filing form 1040ez S. Filing form 1040ez dollars or into other money or property that is convertible into U. Filing form 1040ez S. Filing form 1040ez currency. Filing form 1040ez Also, if you use blocked income for your personal expenses or dispose of it by gift, bequest, or devise, you must treat it as unblocked and reportable. Filing form 1040ez If you have received blocked income on which you have not paid tax, you should check to see whether that income is still blocked. Filing form 1040ez If it is not, you should take immediate steps to pay tax on it, file a declaration or amended declaration of estimated tax, and include the income on your tax return for the year in which the income became unblocked. Filing form 1040ez If you choose to postpone reporting blocked income and in a later tax year you wish to begin including it in gross income although it is still blocked, you must obtain the permission of the IRS to do so. Filing form 1040ez To apply for permission, file Form 3115, Application for Change in Accounting Method. Filing form 1040ez You also must request permission from the IRS on Form 3115 if you have not chosen to defer the reporting of blocked income in the past, but now wish to begin reporting blocked income under the deferred method. Filing form 1040ez See the instructions for Form 3115 for information on changing your accounting method. Filing form 1040ez Fulbright Grant All income must be reported in U. Filing form 1040ez S. Filing form 1040ez dollars. Filing form 1040ez In most cases, the tax also must be paid in U. Filing form 1040ez S. Filing form 1040ez dollars. Filing form 1040ez If, however, at least 70% of your Fulbright grant has been paid in nonconvertible foreign currency (blocked income), you can use the currency of the host country to pay the part of the U. Filing form 1040ez S. Filing form 1040ez tax that is based on the blocked income. Filing form 1040ez Paying U. Filing form 1040ez S. Filing form 1040ez tax in foreign currency. Filing form 1040ez   To qualify for this method of payment, you must prepare a statement that shows the following information. Filing form 1040ez You were a Fulbright grantee and were paid in nonconvertible foreign currency. Filing form 1040ez The total grant you received during the year and the amount you received in nonconvertible foreign currency. Filing form 1040ez At least 70% of the grant was paid in nonconvertible foreign currency. Filing form 1040ez The statement must be certified by the U. Filing form 1040ez S. Filing form 1040ez educational foundation or commission paying the grant or other person having control of grant payments to you. Filing form 1040ez   You should prepare at least two copies of this statement. Filing form 1040ez Attach one copy to your Form 1040 and keep the other copy for identification purposes when you make a tax deposit of nonconvertible foreign currency. Filing form 1040ez Figuring actual tax. Filing form 1040ez   When you prepare your income tax return, you may owe tax or the entire liability may have been satisfied with your estimated tax payments. Filing form 1040ez If you owe tax, figure the part due to (and payable in) the nonconvertible foreign currency by using the following formula. Filing form 1040ez   Adjusted gross income that is blocked income × Total U. Filing form 1040ez S. Filing form 1040ez tax = Tax on blocked income     Total adjusted  gross income     You must attach all of the following to the return. Filing form 1040ez A copy of the certified statement discussed earlier. Filing form 1040ez A detailed statement showing the allocation of tax attributable to amounts received in foreign currency and the rates of exchange used in determining your tax liability in U. Filing form 1040ez S. Filing form 1040ez dollars. Filing form 1040ez The original deposit receipt for any balance of tax due that you paid in nonconvertible foreign currency. Filing form 1040ez Figuring estimated tax on nonconvertible foreign currency. Filing form 1040ez   If you are liable for estimated tax (discussed later), figure the amount you can pay to the IRS in nonconvertible foreign currency using the following formula. Filing form 1040ez   Adjusted gross income that is blocked income × Total estimated U. Filing form 1040ez S. Filing form 1040ez tax = Estimated tax on blocked income     Total adjusted  gross income     If you must pay your host country income tax on your grant, subtract any estimated foreign tax credit that applies to your grant from the estimated tax on the blocked income. Filing form 1040ez Deposit of foreign currency with disbursing officer. Filing form 1040ez   Once you have determined the amount of the actual tax or estimated tax that you can pay in nonconvertible foreign currency, deposit that amount with the disbursing officer of the Department of State in the foreign country in which the foundation or commission paying the grant is located. Filing form 1040ez Estimated tax installments. Filing form 1040ez   You can either deposit the full estimated tax amount before the first installment due date or make four equal payments before the installment due dates. Filing form 1040ez See Estimated Tax , later. Filing form 1040ez Deposit receipt. Filing form 1040ez   Upon accepting the foreign currency, the disbursing officer will give you a receipt in duplicate. Filing form 1040ez The original of this receipt (showing the amount of foreign currency deposited and its equivalent in U. Filing form 1040ez S. Filing form 1040ez dollars) should be attached to your Form 1040 or payment voucher from Form 1040-ES. Filing form 1040ez Keep the copy for your records. Filing form 1040ez Does My Return Have To Be On Paper? IRS e-file (electronic filing) is the fastest, easiest, and most convenient way to file your income tax return electronically. Filing form 1040ez IRS e-file offers accurate, safe, and fast alternatives to filing on paper. Filing form 1040ez IRS computers quickly and automatically check for errors or other missing information. Filing form 1040ez Even returns with a foreign address can be e-filed! How to e-file. Filing form 1040ez   There are three ways you can e-file. Filing form 1040ez Use your personal computer. Filing form 1040ez Use a volunteer. Filing form 1040ez Many programs offering free tax help can e-file your return. Filing form 1040ez Use a tax professional. Filing form 1040ez Most tax professionals can e-file your return. Filing form 1040ez These methods are explained in detail in the instructions for your tax return. Filing form 1040ez Where To File If any of the following situations apply to you, do not file your return with the service center listed for your home state. Filing form 1040ez You claim the foreign earned income exclusion. Filing form 1040ez You claim the foreign housing exclusion or deduction. Filing form 1040ez You live in a foreign country. Filing form 1040ez Instead, use one of the following special addresses. Filing form 1040ez If you are not enclosing a check or money order, file your return with the: Department of the Treasury Internal Revenue Service Center Austin, TX 73301-0215 USA If you are enclosing a check or money order, file your return with: Internal Revenue Service Center P. Filing form 1040ez O. Filing form 1040ez Box 1303 Charlotte, NC 28201-1303 USA If you do not know where your legal residence is and you do not have a principal place of business in the United States, you can file with the appropriate address listed above. Filing form 1040ez However, you should not file with the addresses listed above if you are a bona fide resident of the U. Filing form 1040ez S. Filing form 1040ez Virgin Islands, Guam, or the Commonwealth of the Northern Mariana Islands during your entire tax year. Filing form 1040ez Resident of U. Filing form 1040ez S. Filing form 1040ez Virgin Islands (USVI). Filing form 1040ez   If you are a bona fide resident of the USVI during your entire tax year, you generally are not required to file a U. Filing form 1040ez S. Filing form 1040ez return. Filing form 1040ez However, you must file a return with the USVI. Filing form 1040ez    Send your return to the:     Virgin Islands Bureau of Internal Revenue 6115 Estate Smith Bay Suite 225 St. Filing form 1040ez Thomas, Virgin Islands 00802 Non-USVI resident with USVI income. Filing form 1040ez   If you are a U. Filing form 1040ez S. Filing form 1040ez citizen or resident alien and you have income from sources in the USVI or income effectively connected with the conduct of a trade or business in the USVI, and you are not a bona fide resident of the USVI during your entire tax year, you must file identical tax returns with the United States and the USVI. Filing form 1040ez File the original return with the United States and file a signed copy of the U. Filing form 1040ez S. Filing form 1040ez return (including all attachments, forms, and schedules) with the Virgin Islands Bureau of Internal Revenue. Filing form 1040ez   You must complete Form 8689, Allocation of Individual Income Tax to the U. Filing form 1040ez S. Filing form 1040ez Virgin Islands, and attach a copy to both your U. Filing form 1040ez S. Filing form 1040ez return and your USVI return. Filing form 1040ez You should file your U. Filing form 1040ez S. Filing form 1040ez return with the address listed under Where To File. Filing form 1040ez   See Publication 570, Tax Guide for Individuals With Income From U. Filing form 1040ez S. Filing form 1040ez Possessions, for information about filing Virgin Islands returns. Filing form 1040ez Resident of Guam. Filing form 1040ez   If you are a bona fide resident of Guam during your entire tax year, you should file a return with Guam. Filing form 1040ez    Send your return to the:     Department of Revenue and Taxation Government of Guam P. Filing form 1040ez O. Filing form 1040ez Box 23607 GMF, GU 96921   However, if you have income from sources within Guam and you are a U. Filing form 1040ez S. Filing form 1040ez citizen or resident alien, but not a bona fide resident of Guam during the entire tax year, you should file a return with the United States. Filing form 1040ez Send your return to the address listed under Where To File. Filing form 1040ez   See Publication 570 for information about filing Guam returns. Filing form 1040ez Resident of the Commonwealth of the Northern Mariana Islands. Filing form 1040ez   If you are a bona fide resident of the Commonwealth of the Northern Mariana Islands (CNMI) during your entire tax year, you should file a return with the Northern Mariana Islands. Filing form 1040ez    Send your return to the:      Division of Revenue and Taxation Commonwealth of the Northern Mariana Islands P. Filing form 1040ez O. Filing form 1040ez Box 5234, CHRB Saipan, MP 96950   However, if you have income from sources within the CNMI and you are a U. Filing form 1040ez S. Filing form 1040ez citizen or resident alien, but not a bona fide resident of the CNMI during the entire tax year, you should file a return with the United States. Filing form 1040ez Send your return to the address listed under Where To File. Filing form 1040ez   See Publication 570 for information about filing Northern Mariana Islands returns. Filing form 1040ez Nonresident Alien Spouse Treated as a Resident If, at the end of your tax year, you are married and one spouse is a U. Filing form 1040ez S. Filing form 1040ez citizen or a resident alien and the other is a nonresident alien, you can choose to treat the nonresident as a U. Filing form 1040ez S. Filing form 1040ez resident. Filing form 1040ez This includes situations in which one of you is a nonresident alien at the beginning of the tax year and a resident alien at the end of the year and the other is a nonresident alien at the end of the year. Filing form 1040ez If you make this choice, the following two rules apply. Filing form 1040ez You and your spouse are treated, for income tax purposes, as residents for all tax years that the choice is in effect. Filing form 1040ez You must file a joint income tax return for the year you make the choice. Filing form 1040ez This means that neither of you can claim under any tax treaty not to be a U. Filing form 1040ez S. Filing form 1040ez resident for a tax year for which the choice is in effect. Filing form 1040ez You can file joint or separate returns in years after the year in which you make the choice. Filing form 1040ez Example 1. Filing form 1040ez Pat Smith, a U. Filing form 1040ez S. Filing form 1040ez citizen, is married to Norman, a nonresident alien. Filing form 1040ez Pat and Norman make the choice to treat Norman as a resident alien by attaching a statement to their joint return. Filing form 1040ez Pat and Norman must report their worldwide income for the year they make the choice and for all later years unless the choice is ended or suspended. Filing form 1040ez Although Pat and Norman must file a joint return for the year they make the choice, they can file either joint or separate returns for later years. Filing form 1040ez Example 2. Filing form 1040ez When Bob and Sharon Williams got married, both were nonresident aliens. Filing form 1040ez In June of last year, Bob became a resident alien and remained a resident for the rest of the year. Filing form 1040ez Bob and Sharon both choose to be treated as resident aliens by attaching a statement to their joint return for last year. Filing form 1040ez Bob and Sharon must report their worldwide income for last year and all later years unless the choice is ended or suspended. Filing form 1040ez Bob and Sharon must file a joint return for last year, but they can file either joint or separate returns for later years. Filing form 1040ez If you do not choose to treat your nonresident alien spouse as a U. Filing form 1040ez S. Filing form 1040ez resident, you may be able to use head of household filing status. Filing form 1040ez To use this status, you must pay more than half the cost of maintaining a household for certain dependents or relatives other than your nonresident alien spouse. Filing form 1040ez For more information, see Publication 501. Filing form 1040ez Social Security Number (SSN) If you choose to treat your nonresident alien spouse as a U. Filing form 1040ez S. Filing form 1040ez resident, your spouse must have either an SSN or an individual taxpayer identification number (ITIN). Filing form 1040ez To get an SSN for a nonresident alien spouse, apply at an office of the U. Filing form 1040ez S. Filing form 1040ez Social Security Administration (SSA) or U. Filing form 1040ez S. Filing form 1040ez consulate. Filing form 1040ez You must complete Form SS-5, Application for a Social Security Card, available at www. Filing form 1040ez socialsecurity. Filing form 1040ez gov or by calling 1-800-772-1213. Filing form 1040ez You must also provide original or certified copies of documents to verify that spouse's age, identity, and citizenship. Filing form 1040ez If the nonresident alien spouse is not eligible to get an SSN, he or she can file Form W-7, Application for IRS Individual Taxpayer Identification Number, with the IRS to apply for an ITIN. Filing form 1040ez How To Make the Choice Attach a statement, signed by both spouses, to your joint return for the first tax year for which the choice applies. Filing form 1040ez It should contain the following: A declaration that one spouse was a nonresident alien and the other spouse a U. Filing form 1040ez S. Filing form 1040ez citizen or resident alien on the last day of your tax year and that you choose to be treated as U. Filing form 1040ez S. Filing form 1040ez residents for the entire tax year, and The name, address, and social security number (or individual taxpayer identification number) of each spouse. Filing form 1040ez (If one spouse died, include the name and address of the person making the choice for the deceased spouse. Filing form 1040ez ) You generally make this choice when you file your joint return. Filing form 1040ez However, you also can make the choice by filing a joint amended return on Form 1040X. Filing form 1040ez Attach Form 1040, 1040A, or 1040EZ and print “Amended” across the top of the amended return. Filing form 1040ez If you make the choice with an amended return, you and your spouse also must amend any returns that you may have filed after the year for which you made the choice. Filing form 1040ez You generally must file the amended joint return within 3 years from the date you filed your original U. Filing form 1040ez S. Filing form 1040ez income tax return or 2 years from the date you paid your income tax for that year, whichever is later. Filing form 1040ez Table 1–1. Filing form 1040ez Ending the Choice To Treat Nonresident Alien Spouse as a Resident Revocation   Either spouse can revoke the choice for any tax year. Filing form 1040ez   • The revocation must be made by the due date for filing the tax return for that tax year. Filing form 1040ez   • The spouse who revokes the choice must attach a signed statement declaring that the choice is being revoked. Filing form 1040ez The statement revoking the choice must include the following:     • The name, address, and social security number (or taxpayer identification number) of each spouse. Filing form 1040ez     • The name and address of any person who is revoking the choice for a deceased spouse. Filing form 1040ez     • A list of any states, foreign countries, and possessions that have community property laws in which either spouse is domiciled or where real property is located from which either spouse receives income. Filing form 1040ez   • If the spouse revoking the choice does not have to file a return and does not file a claim for refund, send the statement to the Internal Revenue Service Center where the last joint return was filed. Filing form 1040ez Death   The death of either spouse ends the choice, beginning with the first tax year following the year in which the spouse died. Filing form 1040ez   • If the surviving spouse is a U. Filing form 1040ez S. Filing form 1040ez citizen or resident alien and is entitled to the joint tax rates as a surviving spouse, the choice will not end until the close of the last year for which these joint rates may be used. Filing form 1040ez   • If both spouses die in the same tax year, the choice ends on the first day after the close of the tax year in which the spouses died. Filing form 1040ez Divorce or  Legal separation   A divorce or legal separation ends the choice as of the beginning of the tax year in which the legal separation occurs. Filing form 1040ez Inadequate records   The Internal Revenue Service can end the choice for any tax year that either spouse has failed to keep adequate books, records, and other information necessary to determine the correct income tax liability, or to provide adequate access to those records. Filing form 1040ez Suspending the Choice The choice to be treated as a resident alien does not apply to any later tax year if neither of you is a U. Filing form 1040ez S. Filing form 1040ez citizen or resident alien at any time during the later tax year. Filing form 1040ez Example. Filing form 1040ez Dick Brown was a resident alien on December 31, 2010, and married to Judy, a nonresident alien. Filing form 1040ez They chose to treat Judy as a resident alien and filed a joint 2010 income tax return. Filing form 1040ez On January 10, 2012, Dick became a nonresident alien. Filing form 1040ez Judy had remained a nonresident alien. Filing form 1040ez Because Dick was a resident alien during part of 2012, Dick and Judy can file joint or separate returns for that year. Filing form 1040ez Neither Dick nor Judy was a resident alien at any time during 2013 and their choice is suspended for that year. Filing form 1040ez For 2013, both are treated as nonresident aliens. Filing form 1040ez If Dick becomes a resident alien again in 2014, their choice is no longer suspended and both are treated as resident aliens. Filing form 1040ez Ending the Choice Once made, the choice to be treated as a resident applies to all later years unless suspended (as explained earlier) or ended in one of the ways shown in Table 1-1. Filing form 1040ez If the choice is ended for any of the reasons listed in Table 1-1, neither spouse can make a choice in any later tax year. Filing form 1040ez Estimated Tax The requirements for determining who must pay estimated tax are the same for a U. Filing form 1040ez S. Filing form 1040ez citizen or resident abroad as for a taxpayer in the United States. Filing form 1040ez For current instructions on making estimated tax payments, see Form 1040-ES. Filing form 1040ez If you had a tax liability for 2013, you may have to pay estimated tax for 2014. Filing form 1040ez Generally, you must make estimated tax payments for 2014 if you expect to owe at least $1,000 in tax for 2014 after subtracting your withholding and credits and you expect your withholding and credits to be less than the smaller of: 90% of the tax to be shown on your 2014 tax return, or 100% of the tax shown on your 2013 tax return. Filing form 1040ez (The return must cover all 12 months. Filing form 1040ez ) If less than two-thirds of your gross income for 2013 and 2014 is from farming or fishing and your adjusted gross income for 2013 is more than $150,000 ($75,000 if you are married and file separately), substitute 110% for 100% in (2). Filing form 1040ez See Publication 505 for more information. Filing form 1040ez The first installment of estimated tax is due on April 15, 2014. Filing form 1040ez Foreign earned income exclusion. Filing form 1040ez   When figuring your estimated gross income, subtract amounts you expect to exclude under the foreign earned income exclusion and the foreign housing exclusion. Filing form 1040ez In addition, you can reduce your income by your estimated foreign housing deduction. Filing form 1040ez However, you must estimate tax on your nonexcluded income using the tax rates that will apply had you not excluded the income. Filing form 1040ez If the actual amount of the exclusion or deduction is less than you estimate, you may have to pay a penalty for underpayment of estimated tax. Filing form 1040ez   For more information about figuring your estimated tax, see Publication 505. Filing form 1040ez Other Forms You May Have To File FinCEN Form 114 (replaces Form TD F 90-22. Filing form 1040ez 1). Filing form 1040ez   Beginning October 1, 2013, Form 114, Report of Foreign Bank and Financial Accounts (FBAR), must be filed instead of Form TD F 90-22. Filing form 1040ez 1. Filing form 1040ez Form 114 is filed electronically with the Financial Crimes Enforcement Network (FinCEN). Filing form 1040ez See the filing instructions at www. Filing form 1040ez bsaefiling. Filing form 1040ez fincen. Filing form 1040ez treas. Filing form 1040ez gov/main. Filing form 1040ez html. Filing form 1040ez   You must file Form 114 if you had any financial interest in, or signature or other authority over a bank, securities, or other financial account in a foreign country. Filing form 1040ez You do not need to file the report if the assets are with a U. Filing form 1040ez S. Filing form 1040ez military banking facility operated by a financial institution or if the combined assets in the account(s) are $10,000 or less during the entire year. Filing form 1040ez   More information about the filing of Form 114 can be found in the instructions for the form. Filing form 1040ez FinCEN Form 105. Filing form 1040ez   You must file Form 105, Report of International Transportation of Currency or Monetary Instruments, if you physically transport, mail, ship, or cause to be physically transported, mailed, or shipped into or out of the United States, currency or other monetary instruments totaling more than $10,000 at one time. Filing form 1040ez Certain recipients of currency or monetary instruments also must file Form 105. Filing form 1040ez   More information about the filing of Form 105 can be found in the instructions on the back of the form. Filing form 1040ez Form 8938. Filing form 1040ez   You must file Form 8938 to report the ownership of specified foreign financial assets if the total value of those assets exceeds an applicable threshold amount (the “reporting threshold ”). Filing form 1040ez The reporting threshold varies depending on whether you live in the United States, are married, or file a joint income tax return with your spouse. Filing form 1040ez Specified foreign financial assets include any financial account maintained by a foreign financial institution and, to the extent held for investment, any stock, securities, or any other interest in a foreign entity and any financial instrument or contract with an issuer or counterparty that is not a U. Filing form 1040ez S. Filing form 1040ez person. Filing form 1040ez   You may have to pay penalties if you are required to file Form 8938 and fail to do so, or if you have an understatement of tax due to any transaction involving an undisclosed foreign financial asset. Filing form 1040ez   More information about the filing of Form 8938 can be found in the separate instructions for Form 8938. Filing form 1040ez Prev  Up  Next   Home   More Online Publications
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The Filing Form 1040ez

Filing form 1040ez 2. Filing form 1040ez   Depreciation of Rental Property Table of Contents The BasicsWhat Rental Property Can Be Depreciated? When Does Depreciation Begin and End? Depreciation Methods Basis of Depreciable Property Claiming the Special Depreciation Allowance MACRS DepreciationDepreciation Systems Property Classes Under GDS Recovery Periods Under GDS Conventions Figuring Your Depreciation Deduction Figuring MACRS Depreciation Under ADS Claiming the Correct Amount of Depreciation You recover the cost of income producing property through yearly tax deductions. Filing form 1040ez You do this by depreciating the property; that is, by deducting some of the cost each year on your tax return. Filing form 1040ez Three factors determine how much depreciation you can deduct each year: (1) your basis in the property, (2) the recovery period for the property, and (3) the depreciation method used. Filing form 1040ez You cannot simply deduct your mortgage or principal payments, or the cost of furniture, fixtures and equipment, as an expense. Filing form 1040ez You can deduct depreciation only on the part of your property used for rental purposes. Filing form 1040ez Depreciation reduces your basis for figuring gain or loss on a later sale or exchange. Filing form 1040ez You may have to use Form 4562 to figure and report your depreciation. Filing form 1040ez See Which Forms To Use in chapter 3. Filing form 1040ez Also see Publication 946. Filing form 1040ez Section 179 deduction. Filing form 1040ez   The section 179 deduction is a means of recovering part or all of the cost of certain qualifying property in the year you place the property in service. Filing form 1040ez This deduction is not allowed for property used in connection with residential rental property. Filing form 1040ez See chapter 2 of Publication 946. Filing form 1040ez Alternative minimum tax (AMT). Filing form 1040ez   If you use accelerated depreciation, you may be subject to the AMT. Filing form 1040ez Accelerated depreciation allows you to deduct more depreciation earlier in the recovery period than you could deduct using a straight line method (same deduction each year). Filing form 1040ez   The prescribed depreciation methods for rental real estate are not accelerated, so the depreciation deduction is not adjusted for the AMT. Filing form 1040ez However, accelerated methods are generally used for other property connected with rental activities (for example, appliances and wall-to-wall carpeting). Filing form 1040ez   To find out if you are subject to the AMT, see the Instructions for Form 6251. Filing form 1040ez The Basics The following section discusses the information you will need to have about the rental property and the decisions to be made before figuring your depreciation deduction. Filing form 1040ez What Rental Property Can Be Depreciated? You can depreciate your property if it meets all the following requirements. Filing form 1040ez You own the property. Filing form 1040ez You use the property in your business or income-producing activity (such as rental property). Filing form 1040ez The property has a determinable useful life. Filing form 1040ez The property is expected to last more than one year. Filing form 1040ez Property you own. Filing form 1040ez   To claim depreciation, you usually must be the owner of the property. Filing form 1040ez You are considered as owning property even if it is subject to a debt. Filing form 1040ez Rented property. Filing form 1040ez   Generally, if you pay rent for property, you cannot depreciate that property. Filing form 1040ez Usually, only the owner can depreciate it. Filing form 1040ez However, if you make permanent improvements to leased property, you may be able to depreciate the improvements. Filing form 1040ez See Additions or improvements to property , later in this chapter, under Recovery Periods Under GDS. Filing form 1040ez Cooperative apartments. Filing form 1040ez   If you are a tenant-stockholder in a cooperative housing corporation and rent your cooperative apartment to others, you can deduct depreciation on your stock in the corporation. Filing form 1040ez See chapter 4, Special Situations. Filing form 1040ez Property having a determinable useful life. Filing form 1040ez   To be depreciable, your property must have a determinable useful life. Filing form 1040ez This means that it must be something that wears out, decays, gets used up, becomes obsolete, or loses its value from natural causes. Filing form 1040ez What Rental Property Cannot Be Depreciated? Certain property cannot be depreciated. Filing form 1040ez This includes land and certain excepted property. Filing form 1040ez Land. Filing form 1040ez   You cannot depreciate the cost of land because land generally does not wear out, become obsolete, or get used up. Filing form 1040ez But if it does, the loss is accounted for upon disposition. Filing form 1040ez The costs of clearing, grading, planting, and landscaping are usually all part of the cost of land and cannot be depreciated. Filing form 1040ez   Although you cannot depreciate land, you can depreciate certain land preparation costs, such as landscaping costs, incurred in preparing land for business use. Filing form 1040ez These costs must be so closely associated with other depreciable property that you can determine a life for them along with the life of the associated property. Filing form 1040ez Example. Filing form 1040ez You built a new house to use as a rental and paid for grading, clearing, seeding, and planting bushes and trees. Filing form 1040ez Some of the bushes and trees were planted right next to the house, while others were planted around the outer border of the lot. Filing form 1040ez If you replace the house, you would have to destroy the bushes and trees right next to it. Filing form 1040ez These bushes and trees are closely associated with the house, so they have a determinable useful life. Filing form 1040ez Therefore, you can depreciate them. Filing form 1040ez Add your other land preparation costs to the basis of your land because they have no determinable life and you cannot depreciate them. Filing form 1040ez Excepted property. Filing form 1040ez   Even if the property meets all the requirements listed earlier under What Rental Property Can Be Depreciated , you cannot depreciate the following property. Filing form 1040ez Property placed in service and disposed of (or taken out of business use) in the same year. Filing form 1040ez Equipment used to build capital improvements. Filing form 1040ez You must add otherwise allowable depreciation on the equipment during the period of construction to the basis of your improvements. Filing form 1040ez For more information, see chapter 1 of Publication 946. Filing form 1040ez When Does Depreciation Begin and End? You begin to depreciate your rental property when you place it in service for the production of income. Filing form 1040ez You stop depreciating it either when you have fully recovered your cost or other basis, or when you retire it from service, whichever happens first. Filing form 1040ez Placed in Service You place property in service in a rental activity when it is ready and available for a specific use in that activity. Filing form 1040ez Even if you are not using the property, it is in service when it is ready and available for its specific use. Filing form 1040ez Example 1. Filing form 1040ez On November 22 of last year, you purchased a dishwasher for your rental property. Filing form 1040ez The appliance was delivered on December 7, but was not installed and ready for use until January 3 of this year. Filing form 1040ez Because the dishwasher was not ready for use last year, it is not considered placed in service until this year. Filing form 1040ez If the appliance had been installed and ready for use when it was delivered in December of last year, it would have been considered placed in service in December, even if it was not actually used until this year. Filing form 1040ez Example 2. Filing form 1040ez On April 6, you purchased a house to use as residential rental property. Filing form 1040ez You made extensive repairs to the house and had it ready for rent on July 5. Filing form 1040ez You began to advertise the house for rent in July and actually rented it beginning September 1. Filing form 1040ez The house is considered placed in service in July when it was ready and available for rent. Filing form 1040ez You can begin to depreciate the house in July. Filing form 1040ez Example 3. Filing form 1040ez You moved from your home in July. Filing form 1040ez During August and September you made several repairs to the house. Filing form 1040ez On October 1, you listed the property for rent with a real estate company, which rented it on December 1. Filing form 1040ez The property is considered placed in service on October 1, the date when it was available for rent. Filing form 1040ez Conversion to business use. Filing form 1040ez   If you place property in service in a personal activity, you cannot claim depreciation. Filing form 1040ez However, if you change the property's use to business or the production of income, you can begin to depreciate it at the time of the change. Filing form 1040ez You place the property in service for business or income-producing use on the date of the change. Filing form 1040ez Example. Filing form 1040ez You bought a house and used it as your personal home several years before you converted it to rental property. Filing form 1040ez Although its specific use was personal and no depreciation was allowable, you placed the home in service when you began using it as your home. Filing form 1040ez You can begin to claim depreciation in the year you converted it to rental property because at that time its use changed to the production of income. Filing form 1040ez Idle Property Continue to claim a deduction for depreciation on property used in your rental activity even if it is temporarily idle (not in use). Filing form 1040ez For example, if you must make repairs after a tenant moves out, you still depreciate the rental property during the time it is not available for rent. Filing form 1040ez Cost or Other Basis Fully Recovered You must stop depreciating property when the total of your yearly depreciation deductions equals your cost or other basis of your property. Filing form 1040ez For this purpose, your yearly depreciation deductions include any depreciation that you were allowed to claim, even if you did not claim it. Filing form 1040ez See Basis of Depreciable Property , later. Filing form 1040ez Retired From Service You stop depreciating property when you retire it from service, even if you have not fully recovered its cost or other basis. Filing form 1040ez You retire property from service when you permanently withdraw it from use in a trade or business or from use in the production of income because of any of the following events. Filing form 1040ez You sell or exchange the property. Filing form 1040ez You convert the property to personal use. Filing form 1040ez You abandon the property. Filing form 1040ez The property is destroyed. Filing form 1040ez Depreciation Methods Generally, you must use the Modified Accelerated Cost Recovery System (MACRS) to depreciate residential rental property placed in service after 1986. Filing form 1040ez If you placed rental property in service before 1987, you are using one of the following methods. Filing form 1040ez ACRS (Accelerated Cost Recovery System) for property placed in service after 1980 but before 1987. Filing form 1040ez Straight line or declining balance method over the useful life of property placed in service before 1981. Filing form 1040ez See MACRS Depreciation , later, for more information. Filing form 1040ez Rental property placed in service before 2013. Filing form 1040ez   Continue to use the same method of figuring depreciation that you used in the past. Filing form 1040ez Use of real property changed. Filing form 1040ez   Generally, you must use MACRS to depreciate real property that you acquired for personal use before 1987 and changed to business or income-producing use after 1986. Filing form 1040ez This includes your residence that you changed to rental use. Filing form 1040ez See Property Owned or Used in 1986 in Publication 946, chapter 1, for those situations in which MACRS is not allowed. Filing form 1040ez Improvements made after 1986. Filing form 1040ez   Treat an improvement made after 1986 to property you placed in service before 1987 as separate depreciable property. Filing form 1040ez As a result, you can depreciate that improvement as separate property under MACRS if it is the type of property that otherwise qualifies for MACRS depreciation. Filing form 1040ez For more information about improvements, see Additions or improvements to property , later in this chapter under Recovery Periods Under GDS. Filing form 1040ez This publication discusses MACRS depreciation only. Filing form 1040ez If you need information about depreciating property placed in service before 1987, see Publication 534. Filing form 1040ez Basis of Depreciable Property The basis of property used in a rental activity is generally its adjusted basis when you place it in service in that activity. Filing form 1040ez This is its cost or other basis when you acquired it, adjusted for certain items occurring before you place it in service in the rental activity. Filing form 1040ez If you depreciate your property under MACRS, you may also have to reduce your basis by certain deductions and credits with respect to the property. Filing form 1040ez Basis and adjusted basis are explained in the following discussions. Filing form 1040ez If you used the property for personal purposes before changing it to rental use, its basis for depreciation is the lesser of its adjusted basis or its fair market value when you change it to rental use. Filing form 1040ez See Basis of Property Changed to Rental Use in chapter 4. Filing form 1040ez Cost Basis The basis of property you buy is usually its cost. Filing form 1040ez The cost is the amount you pay for it in cash, in debt obligation, in other property, or in services. Filing form 1040ez Your cost also includes amounts you pay for: Sales tax charged on the purchase (but see Exception next), Freight charges to obtain the property, and Installation and testing charges. Filing form 1040ez Exception. Filing form 1040ez   If you deducted state and local general sales taxes as an itemized deduction on Schedule A (Form 1040), do not include those sales taxes as part of your cost basis. Filing form 1040ez Such taxes were deductible before 1987 and after 2003. Filing form 1040ez Loans with low or no interest. Filing form 1040ez   If you buy property on any time-payment plan that charges little or no interest, the basis of your property is your stated purchase price, less the amount considered to be unstated interest. Filing form 1040ez See Unstated Interest and Original Issue Discount (OID) in Publication 537, Installment Sales. Filing form 1040ez Real property. Filing form 1040ez   If you buy real property, such as a building and land, certain fees and other expenses you pay are part of your cost basis in the property. Filing form 1040ez Real estate taxes. Filing form 1040ez   If you buy real property and agree to pay real estate taxes on it that were owed by the seller and the seller does not reimburse you, the taxes you pay are treated as part of your basis in the property. Filing form 1040ez You cannot deduct them as taxes paid. Filing form 1040ez   If you reimburse the seller for real estate taxes the seller paid for you, you can usually deduct that amount. Filing form 1040ez Do not include that amount in your basis in the property. Filing form 1040ez Settlement fees and other costs. Filing form 1040ez   The following settlement fees and closing costs for buying the property are part of your basis in the property. Filing form 1040ez Abstract fees. Filing form 1040ez Charges for installing utility services. Filing form 1040ez Legal fees. Filing form 1040ez Recording fees. Filing form 1040ez Surveys. Filing form 1040ez Transfer taxes. Filing form 1040ez Title insurance. Filing form 1040ez Any amounts the seller owes that you agree to pay, such as back taxes or interest, recording or mortgage fees, charges for improvements or repairs, and sales commissions. Filing form 1040ez   The following are settlement fees and closing costs you cannot include in your basis in the property. Filing form 1040ez Fire insurance premiums. Filing form 1040ez Rent or other charges relating to occupancy of the property before closing. Filing form 1040ez Charges connected with getting or refinancing a loan, such as: Points (discount points, loan origination fees), Mortgage insurance premiums, Loan assumption fees, Cost of a credit report, and Fees for an appraisal required by a lender. Filing form 1040ez   Also, do not include amounts placed in escrow for the future payment of items such as taxes and insurance. Filing form 1040ez Assumption of a mortgage. Filing form 1040ez   If you buy property and become liable for an existing mortgage on the property, your basis is the amount you pay for the property plus the amount remaining to be paid on the mortgage. Filing form 1040ez Example. Filing form 1040ez You buy a building for $60,000 cash and assume a mortgage of $240,000 on it. Filing form 1040ez Your basis is $300,000. Filing form 1040ez Separating cost of land and buildings. Filing form 1040ez   If you buy buildings and your cost includes the cost of the land on which they stand, you must divide the cost between the land and the buildings to figure the basis for depreciation of the buildings. Filing form 1040ez The part of the cost that you allocate to each asset is the ratio of the fair market value of that asset to the fair market value of the whole property at the time you buy it. Filing form 1040ez   If you are not certain of the fair market values of the land and the buildings, you can divide the cost between them based on their assessed values for real estate tax purposes. Filing form 1040ez Example. Filing form 1040ez You buy a house and land for $200,000. Filing form 1040ez The purchase contract does not specify how much of the purchase price is for the house and how much is for the land. Filing form 1040ez The latest real estate tax assessment on the property was based on an assessed value of $160,000, of which $136,000 was for the house and $24,000 was for the land. Filing form 1040ez You can allocate 85% ($136,000 ÷ $160,000) of the purchase price to the house and 15% ($24,000 ÷ $160,000) of the purchase price to the land. Filing form 1040ez Your basis in the house is $170,000 (85% of $200,000) and your basis in the land is $30,000 (15% of $200,000). Filing form 1040ez Basis Other Than Cost You cannot use cost as a basis for property that you received: In return for services you performed; In an exchange for other property; As a gift; From your spouse, or from your former spouse as the result of a divorce; or As an inheritance. Filing form 1040ez If you received property in one of these ways, see Publication 551 for information on how to figure your basis. Filing form 1040ez Adjusted Basis To figure your property's basis for depreciation, you may have to make certain adjustments (increases and decreases) to the basis of the property for events occurring between the time you acquired the property and the time you placed it in service for business or the production of income. Filing form 1040ez The result of these adjustments to the basis is the adjusted basis. Filing form 1040ez Increases to basis. Filing form 1040ez   You must increase the basis of any property by the cost of all items properly added to a capital account. Filing form 1040ez These include the following. Filing form 1040ez The cost of any additions or improvements made before placing your property into service as a rental that have a useful life of more than 1 year. Filing form 1040ez Amounts spent after a casualty to restore the damaged property. Filing form 1040ez The cost of extending utility service lines to the property. Filing form 1040ez Legal fees, such as the cost of defending and perfecting title, or settling zoning issues. Filing form 1040ez Additions or improvements. Filing form 1040ez   Add to the basis of your property the amount an addition or improvement actually cost you, including any amount you borrowed to make the addition or improvement. Filing form 1040ez This includes all direct costs, such as material and labor, but does not include your own labor. Filing form 1040ez It also includes all expenses related to the addition or improvement. Filing form 1040ez   For example, if you had an architect draw up plans for remodeling your property, the architect's fee is a part of the cost of the remodeling. Filing form 1040ez Or, if you had your lot surveyed to put up a fence, the cost of the survey is a part of the cost of the fence. Filing form 1040ez   Keep separate accounts for depreciable additions or improvements made after you place the property in service in your rental activity. Filing form 1040ez For information on depreciating additions or improvements, see Additions or improvements to property , later in this chapter, under Recovery Periods Under GDS. Filing form 1040ez    The cost of landscaping improvements is usually treated as an addition to the basis of the land, which is not depreciable. Filing form 1040ez However, see What Rental Property Cannot Be Depreciated, earlier. Filing form 1040ez Assessments for local improvements. Filing form 1040ez   Assessments for items which tend to increase the value of property, such as streets and sidewalks, must be added to the basis of the property. Filing form 1040ez For example, if your city installs curbing on the street in front of your house, and assesses you and your neighbors for its cost, you must add the assessment to the basis of your property. Filing form 1040ez Also add the cost of legal fees paid to obtain a decrease in an assessment levied against property to pay for local improvements. Filing form 1040ez You cannot deduct these items as taxes or depreciate them. Filing form 1040ez    However, you can deduct as taxes, charges or assessments for maintenance, repairs, or interest charges related to the improvements. Filing form 1040ez Do not add them to your basis in the property. Filing form 1040ez Deducting vs. Filing form 1040ez capitalizing costs. Filing form 1040ez   Do not add to your basis costs you can deduct as current expenses. Filing form 1040ez However, there are certain costs you can choose either to deduct or to capitalize. Filing form 1040ez If you capitalize these costs, include them in your basis. Filing form 1040ez If you deduct them, do not include them in your basis. Filing form 1040ez   The costs you may choose to deduct or capitalize include carrying charges, such as interest and taxes, that you must pay to own property. Filing form 1040ez   For more information about deducting or capitalizing costs and how to make the election, see Carrying Charges in Publication 535, chapter 7. Filing form 1040ez Decreases to basis. Filing form 1040ez   You must decrease the basis of your property by any items that represent a return of your cost. Filing form 1040ez These include the following. Filing form 1040ez Insurance or other payment you receive as the result of a casualty or theft loss. Filing form 1040ez Casualty loss not covered by insurance for which you took a deduction. Filing form 1040ez Amount(s) you receive for granting an easement. Filing form 1040ez Residential energy credits you were allowed before 1986, or after 2005, if you added the cost of the energy items to the basis of your home. Filing form 1040ez Exclusion from income of subsidies for energy conservation measures. Filing form 1040ez Special depreciation allowance claimed on qualified property. Filing form 1040ez Depreciation you deducted, or could have deducted, on your tax returns under the method of depreciation you chose. Filing form 1040ez If you did not deduct enough or deducted too much in any year, see Depreciation under Decreases to Basis in Publication 551. Filing form 1040ez   If your rental property was previously used as your main home, you must also decrease the basis by the following. Filing form 1040ez Gain you postponed from the sale of your main home before May 7, 1997, if the replacement home was converted to your rental property. Filing form 1040ez District of Columbia first-time homebuyer credit allowed on the purchase of your main home after August 4, 1997 and before January 1, 2012. Filing form 1040ez Amount of qualified principal residence indebtedness discharged on or after January 1, 2007. Filing form 1040ez Claiming the Special Depreciation Allowance For 2013, your residential rental property may qualify for a special depreciation allowance. Filing form 1040ez This allowance is figured before you figure your regular depreciation deduction. Filing form 1040ez See Publication 946, chapter 3, for details. Filing form 1040ez Also see the Instructions for Form 4562, Line 14. Filing form 1040ez If you qualify for, but choose not to take, a special depreciation allowance, you must attach a statement to your return. Filing form 1040ez The details of this election are in Publication 946, chapter 3, and the Instructions for Form 4562, Line 14. Filing form 1040ez MACRS Depreciation Most business and investment property placed in service after 1986 is depreciated using MACRS. Filing form 1040ez This section explains how to determine which MACRS depreciation system applies to your property. Filing form 1040ez It also discusses other information you need to know before you can figure depreciation under MACRS. Filing form 1040ez This information includes the property's: Recovery class, Applicable recovery period, Convention, Placed-in-service date, Basis for depreciation, and Depreciation method. Filing form 1040ez Depreciation Systems MACRS consists of two systems that determine how you depreciate your property—the General Depreciation System (GDS) and the Alternative Depreciation System (ADS). Filing form 1040ez You must use GDS unless you are specifically required by law to use ADS or you elect to use ADS. Filing form 1040ez Excluded Property You cannot use MACRS for certain personal property (such as furniture or appliances) placed in service in your rental property in 2013 if it had been previously placed in service before 1987 when MACRS became effective. Filing form 1040ez In most cases, personal property is excluded from MACRS if you (or a person related to you) owned or used it in 1986 or if your tenant is a person (or someone related to the person) who owned or used it in 1986. Filing form 1040ez However, the property is not excluded if your 2013 deduction under MACRS (using a half-year convention) is less than the deduction you would have under ACRS. Filing form 1040ez For more information, see What Method Can You Use To Depreciate Your Property? in Publication 946, chapter 1. Filing form 1040ez Electing ADS If you choose, you can use the ADS method for most property. Filing form 1040ez Under ADS, you use the straight line method of depreciation. Filing form 1040ez The election of ADS for one item in a class of property generally applies to all property in that class that is placed in service during the tax year of the election. Filing form 1040ez However, the election applies on a property-by-property basis for residential rental property and nonresidential real property. Filing form 1040ez If you choose to use ADS for your residential rental property, the election must be made in the first year the property is placed in service. Filing form 1040ez Once you make this election, you can never revoke it. Filing form 1040ez For property placed in service during 2013, you make the election to use ADS by entering the depreciation on Form 4562, Part III, Section C, line 20c. Filing form 1040ez Property Classes Under GDS Each item of property that can be depreciated under MACRS is assigned to a property class, determined by its class life. Filing form 1040ez The property class generally determines the depreciation method, recovery period, and convention. Filing form 1040ez The property classes under GDS are: 3-year property, 5-year property, 7-year property, 10-year property, 15-year property, 20-year property, Nonresidential real property, and Residential rental property. Filing form 1040ez Under MACRS, property that you placed in service during 2013 in your rental activities generally falls into one of the following classes. Filing form 1040ez 5-year property. Filing form 1040ez This class includes computers and peripheral equipment, office machinery (typewriters, calculators, copiers, etc. Filing form 1040ez ), automobiles, and light trucks. Filing form 1040ez This class also includes appliances, carpeting, furniture, etc. Filing form 1040ez , used in a residential rental real estate activity. Filing form 1040ez Depreciation on automobiles, other property used for transportation, computers and related peripheral equipment, and property of a type generally used for entertainment, recreation, or amusement is limited. Filing form 1040ez See chapter 5 of Publication 946. Filing form 1040ez 7-year property. Filing form 1040ez This class includes office furniture and equipment (desks, file cabinets, etc. Filing form 1040ez ). Filing form 1040ez This class also includes any property that does not have a class life and that has not been designated by law as being in any other class. Filing form 1040ez 15-year property. Filing form 1040ez This class includes roads, fences, and shrubbery (if depreciable). Filing form 1040ez Residential rental property. Filing form 1040ez This class includes any real property that is a rental building or structure (including a mobile home) for which 80% or more of the gross rental income for the tax year is from dwelling units. Filing form 1040ez It does not include a unit in a hotel, motel, inn, or other establishment where more than half of the units are used on a transient basis. Filing form 1040ez If you live in any part of the building or structure, the gross rental income includes the fair rental value of the part you live in. Filing form 1040ez The other property classes do not generally apply to property used in rental activities. Filing form 1040ez These classes are not discussed in this publication. Filing form 1040ez See Publication 946 for more information. Filing form 1040ez Recovery Periods Under GDS The recovery period of property is the number of years over which you recover its cost or other basis. Filing form 1040ez The recovery periods are generally longer under ADS than GDS. Filing form 1040ez The recovery period of property depends on its property class. Filing form 1040ez Under GDS, the recovery period of an asset is generally the same as its property class. Filing form 1040ez Class lives and recovery periods for most assets are listed in Appendix B of Publication 946. Filing form 1040ez See Table 2-1 for recovery periods of property commonly used in residential rental activities. Filing form 1040ez Qualified Indian reservation property. Filing form 1040ez   Shorter recovery periods are provided under MACRS for qualified Indian reservation property placed in service on Indian reservations. Filing form 1040ez For more information, see chapter 4 of Publication 946. Filing form 1040ez Additions or improvements to property. Filing form 1040ez   Treat additions or improvements you make to your depreciable rental property as separate property items for depreciation purposes. Filing form 1040ez   The property class and recovery period of the addition or improvement is the one that would apply to the original property if you had placed it in service at the same time as the addition or improvement. Filing form 1040ez   The recovery period for an addition or improvement to property begins on the later of: The date the addition or improvement is placed in service, or The date the property to which the addition or improvement was made is placed in service. Filing form 1040ez Example. Filing form 1040ez You own a residential rental house that you have been renting since 1986 and depreciating under ACRS. Filing form 1040ez You built an addition onto the house and placed it in service in 2013. Filing form 1040ez You must use MACRS for the addition. Filing form 1040ez Under GDS, the addition is depreciated as residential rental property over 27. Filing form 1040ez 5 years. Filing form 1040ez Table 2-1. Filing form 1040ez MACRS Recovery Periods for Property Used in Rental Activities   MACRS Recovery Period   Type of Property General Depreciation System Alternative Depreciation System   Computers and their peripheral equipment 5 years 5 years   Office machinery, such as: Typewriters Calculators Copiers 5 years 6 years   Automobiles 5 years 5 years   Light trucks 5 years 5 years   Appliances, such as: Stoves Refrigerators 5 years 9 years   Carpets 5 years 9 years   Furniture used in rental property 5 years 9 years   Office furniture and equipment, such as: Desks Files 7 years 10 years   Any property that does not have a class life and that has not been designated by law as being in any other class 7 years 12 years   Roads 15 years 20 years   Shrubbery 15 years 20 years   Fences 15 years 20 years   Residential rental property (buildings or structures) and structural components such as furnaces, waterpipes, venting, etc. Filing form 1040ez 27. Filing form 1040ez 5 years 40 years   Additions and improvements, such as a new roof The same recovery period as that of the property to which the addition or improvement is made, determined as if the property were placed in service at the same time as the addition or improvement. Filing form 1040ez   Conventions A convention is a method established under MACRS to set the beginning and end of the recovery period. Filing form 1040ez The convention you use determines the number of months for which you can claim depreciation in the year you place property in service and in the year you dispose of the property. Filing form 1040ez Mid-month convention. Filing form 1040ez    A mid-month convention is used for all residential rental property and nonresidential real property. Filing form 1040ez Under this convention, you treat all property placed in service, or disposed of, during any month as placed in service, or disposed of, at the midpoint of that month. Filing form 1040ez Mid-quarter convention. Filing form 1040ez   A mid-quarter convention must be used if the mid-month convention does not apply and the total depreciable basis of MACRS property placed in service in the last 3 months of a tax year (excluding nonresidential real property, residential rental property, and property placed in service and disposed of in the same year) is more than 40% of the total basis of all such property you place in service during the year. Filing form 1040ez   Under this convention, you treat all property placed in service, or disposed of, during any quarter of a tax year as placed in service, or disposed of, at the midpoint of the quarter. Filing form 1040ez Example. Filing form 1040ez During the tax year, Tom Martin purchased the following items to use in his rental property. Filing form 1040ez He elects not to claim the special depreciation allowance discussed earlier. Filing form 1040ez A dishwasher for $400 that he placed in service in January. Filing form 1040ez Used furniture for $100 that he placed in service in September. Filing form 1040ez A refrigerator for $800 that he placed in service in October. Filing form 1040ez Tom uses the calendar year as his tax year. Filing form 1040ez The total basis of all property placed in service that year is $1,300. Filing form 1040ez The $800 basis of the refrigerator placed in service during the last 3 months of his tax year exceeds $520 (40% × $1,300). Filing form 1040ez Tom must use the mid-quarter convention instead of the half-year convention for all three items. Filing form 1040ez Half-year convention. Filing form 1040ez    The half-year convention is used if neither the mid-quarter convention nor the mid-month convention applies. Filing form 1040ez Under this convention, you treat all property placed in service, or disposed of, during a tax year as placed in service, or disposed of, at the midpoint of that tax year. Filing form 1040ez   If this convention applies, you deduct a half year of depreciation for the first year and the last year that you depreciate the property. Filing form 1040ez You deduct a full year of depreciation for any other year during the recovery period. Filing form 1040ez Figuring Your Depreciation Deduction You can figure your MACRS depreciation deduction in one of two ways. Filing form 1040ez The deduction is substantially the same both ways. Filing form 1040ez You can either: Actually compute the deduction using the depreciation method and convention that apply over the recovery period of the property, or Use the percentage from the MACRS percentage tables. Filing form 1040ez In this publication we will use the percentage tables. Filing form 1040ez For instructions on how to compute the deduction, see chapter 4 of Publication 946. Filing form 1040ez Residential rental property. Filing form 1040ez   You must use the straight line method and a mid-month convention for residential rental property. Filing form 1040ez In the first year that you claim depreciation for residential rental property, you can claim depreciation only for the number of months the property is in use, and you must use the mid-month convention (explained under Conventions , earlier). Filing form 1040ez 5-, 7-, or 15-year property. Filing form 1040ez   For property in the 5- or 7-year class, use the 200% declining balance method and a half-year convention. Filing form 1040ez However, in limited cases you must use the mid-quarter convention, if it applies. Filing form 1040ez For property in the 15-year class, use the 150% declining balance method and a half-year convention. Filing form 1040ez   You can also choose to use the 150% declining balance method for property in the 5- or 7-year class. Filing form 1040ez The choice to use the 150% method for one item in a class of property applies to all property in that class that is placed in service during the tax year of the election. Filing form 1040ez You make this election on Form 4562. Filing form 1040ez In Part III, column (f), enter “150 DB. Filing form 1040ez ” Once you make this election, you cannot change to another method. Filing form 1040ez   If you use either the 200% or 150% declining balance method, you figure your deduction using the straight line method in the first tax year that the straight line method gives you an equal or larger deduction. Filing form 1040ez   You can also choose to use the straight line method with a half-year or mid-quarter convention for 5-, 7-, or 15-year property. Filing form 1040ez The choice to use the straight line method for one item in a class of property applies to all property in that class that is placed in service during the tax year of the election. Filing form 1040ez You elect the straight line method on Form 4562. Filing form 1040ez In Part III, column (f), enter “S/L. Filing form 1040ez ” Once you make this election, you cannot change to another method. Filing form 1040ez MACRS Percentage Tables You can use the percentages in Table 2-2, earlier, to compute annual depreciation under MACRS. Filing form 1040ez The tables show the percentages for the first few years or until the change to the straight line method is made. Filing form 1040ez See Appendix A of Publication 946 for complete tables. Filing form 1040ez The percentages in Tables 2-2a, 2-2b, and 2-2c make the change from declining balance to straight line in the year that straight line will give a larger deduction. Filing form 1040ez If you elect to use the straight line method for 5-, 7-, or 15-year property, or the 150% declining balance method for 5- or 7-year property, use the tables in Appendix A of Publication 946. Filing form 1040ez How to use the percentage tables. Filing form 1040ez   You must apply the table rates to your property's unadjusted basis (defined below) each year of the recovery period. Filing form 1040ez   Once you begin using a percentage table to figure depreciation, you must continue to use it for the entire recovery period unless there is an adjustment to the basis of your property for a reason other than: Depreciation allowed or allowable, or An addition or improvement that is depreciated as a separate item of property. Filing form 1040ez   If there is an adjustment for any reason other than (1) or (2), for example, because of a deductible casualty loss, you can no longer use the table. Filing form 1040ez For the year of the adjustment and for the remaining recovery period, figure depreciation using the property's adjusted basis at the end of the year and the appropriate depreciation method, as explained earlier under Figuring Your Depreciation Deduction . Filing form 1040ez See Figuring the Deduction Without Using the Tables in Publication 946, chapter 4. Filing form 1040ez Unadjusted basis. Filing form 1040ez   This is the same basis you would use to figure gain on a sale (see Basis of Depreciable Property , earlier), but without reducing your original basis by any MACRS depreciation taken in earlier years. Filing form 1040ez   However, you do reduce your original basis by other amounts claimed on the property, including: Any amortization, Any section 179 deduction, and Any special depreciation allowance. Filing form 1040ez For more information, see chapter 4 of Publication 946. Filing form 1040ez Please click here for the text description of the image. Filing form 1040ez Table 2-2 Tables 2-2a, 2-2b, and 2-2c. Filing form 1040ez   The percentages in these tables take into account the half-year and mid-quarter conventions. Filing form 1040ez Use Table 2-2a for 5-year property, Table 2-2b for 7-year property, and Table 2-2c for 15-year property. Filing form 1040ez Use the percentage in the second column (half-year convention) unless you are required to use the mid-quarter convention (explained earlier). Filing form 1040ez If you must use the mid-quarter convention, use the column that corresponds to the calendar year quarter in which you placed the property in service. Filing form 1040ez Example 1. Filing form 1040ez You purchased a stove and refrigerator and placed them in service in June. Filing form 1040ez Your basis in the stove is $600 and your basis in the refrigerator is $1,000. Filing form 1040ez Both are 5-year property. Filing form 1040ez Using the half-year convention column in Table 2-2a, the depreciation percentage for Year 1 is 20%. Filing form 1040ez For that year your depreciation deduction is $120 ($600 × . Filing form 1040ez 20) for the stove and $200 ($1,000 × . Filing form 1040ez 20) for the refrigerator. Filing form 1040ez For Year 2, the depreciation percentage is 32%. Filing form 1040ez That year's depreciation deduction will be $192 ($600 × . Filing form 1040ez 32) for the stove and $320 ($1,000 × . Filing form 1040ez 32) for the refrigerator. Filing form 1040ez Example 2. Filing form 1040ez Assume the same facts as in Example 1, except you buy the refrigerator in October instead of June. Filing form 1040ez Since the refrigerator was placed in service in the last 3 months of the tax year, and its basis ($1,000) is more than 40% of the total basis of all property placed in service during the year ($1,600 × . Filing form 1040ez 40 = $640), you are required to use the mid-quarter convention to figure depreciation on both the stove and refrigerator. Filing form 1040ez Because you placed the refrigerator in service in October, you use the fourth quarter column of Table 2-2a and find the depreciation percentage for Year 1 is 5%. Filing form 1040ez Your depreciation deduction for the refrigerator is $50 ($1,000 x . Filing form 1040ez 05). Filing form 1040ez Because you placed the stove in service in June, you use the second quarter column of Table 2-2a and find the depreciation percentage for Year 1 is 25%. Filing form 1040ez For that year, your depreciation deduction for the stove is $150 ($600 x . Filing form 1040ez 25). Filing form 1040ez Table 2-2d. Filing form 1040ez    Use this table when you are using the GDS 27. Filing form 1040ez 5 year option for residential rental property. Filing form 1040ez Find the row for the month that you placed the property in service. Filing form 1040ez Use the percentages listed for that month to figure your depreciation deduction. Filing form 1040ez The mid-month convention is taken into account in the percentages shown in the table. Filing form 1040ez Continue to use the same row (month) under the column for the appropriate year. Filing form 1040ez Example. Filing form 1040ez You purchased a single family rental house for $185,000 and placed it in service on February 8. Filing form 1040ez The sales contract showed that the building cost $160,000 and the land cost $25,000. Filing form 1040ez Your basis for depreciation is its original cost, $160,000. Filing form 1040ez This is the first year of service for your residential rental property and you decide to use GDS which has a recovery period of 27. Filing form 1040ez 5 years. Filing form 1040ez Using Table 2-2d, you find that the percentage for property placed in service in February of Year 1 is 3. Filing form 1040ez 182%. Filing form 1040ez That year's depreciation deduction is $5,091 ($160,000 x . Filing form 1040ez 03182). Filing form 1040ez Figuring MACRS Depreciation Under ADS Table 2–1, earlier, shows the ADS recovery periods for property used in rental activities. Filing form 1040ez See Appendix B in Publication 946 for other property. Filing form 1040ez If your property is not listed in Appendix B, it is considered to have no class life. Filing form 1040ez Under ADS, personal property with no class life is depreciated using a recovery period of 12 years. Filing form 1040ez Use the mid-month convention for residential rental property and nonresidential real property. Filing form 1040ez For all other property, use the half-year or mid-quarter convention, as appropriate. Filing form 1040ez See Publication 946 for ADS depreciation tables. Filing form 1040ez Claiming the Correct Amount of Depreciation You should claim the correct amount of depreciation each tax year. Filing form 1040ez If you did not claim all the depreciation you were entitled to deduct, you must still reduce your basis in the property by the full amount of depreciation that you could have deducted. Filing form 1040ez For more information, see Depreciation under Decreases to Basis in Publication 551. Filing form 1040ez If you deducted an incorrect amount of depreciation for property in any year, you may be able to make a correction by filing Form 1040X, Amended U. Filing form 1040ez S. Filing form 1040ez Individual Income Tax Return. Filing form 1040ez If you are not allowed to make the correction on an amended return, you can change your accounting method to claim the correct amount of depreciation. Filing form 1040ez Filing an amended return. Filing form 1040ez   You can file an amended return to correct the amount of depreciation claimed for any property in any of the following situations. Filing form 1040ez You claimed the incorrect amount because of a mathematical error made in any year. Filing form 1040ez You claimed the incorrect amount because of a posting error made in any year. Filing form 1040ez You have not adopted a method of accounting for property placed in service by you in tax years ending after December 29, 2003. Filing form 1040ez You claimed the incorrect amount on property placed in service by you in tax years ending before December 30, 2003. Filing form 1040ez   Generally, you adopt a method of accounting for depreciation by using a permissible method of determining depreciation when you file your first tax return for the property used in your rental activity. Filing form 1040ez This also occurs when you use the same impermissible method of determining depreciation (for example, using the wrong MACRS recovery period) in two or more consecutively filed tax returns. Filing form 1040ez   If an amended return is allowed, you must file it by the later of the following dates. Filing form 1040ez 3 years from the date you filed your original return for the year in which you did not deduct the correct amount. Filing form 1040ez A return filed before an unextended due date is considered filed on that due date. Filing form 1040ez 2 years from the time you paid your tax for that year. Filing form 1040ez Changing your accounting method. Filing form 1040ez   To change your accounting method, you generally must file Form 3115, Application for Change in Accounting Method, to get the consent of the IRS. Filing form 1040ez In some instances, that consent is automatic. Filing form 1040ez For more information, see Changing Your Accounting Method in Publication 946,  chapter 1. Filing form 1040ez Prev  Up  Next   Home   More Online Publications