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Filing Late Taxes For 2012

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Filing Late Taxes For 2012

Filing late taxes for 2012 Publication 587 - Main Content Table of Contents Qualifying for a DeductionExclusive Use Regular Use Trade or Business Use Principal Place of Business Place To Meet Patients, Clients, or Customers Separate Structure Figuring the DeductionUsing Actual Expenses Using the Simplified Method Daycare Facility Standard meal and snack rates. Filing late taxes for 2012 Sale or Exchange of Your HomeGain on Sale Depreciation Basis Adjustment Reporting the Sale More Information Business Furniture and EquipmentListed Property Property Bought for Business Use Personal Property Converted to Business Use Recordkeeping Where To DeductSelf-Employed Persons Employees Partners How To Get Tax HelpLow Income Taxpayer Clinics Worksheet To Figure the Deduction for Business Use of Your HomeInstructions for the Worksheet Worksheets To Figure the Deduction for Business Use of Your Home (Simplified Method) Instructions for the Simplified Method Worksheet Instructions for the Daycare Facility Worksheet Instructions for the Area Adjustment Worksheet Qualifying for a Deduction Generally, you cannot deduct items related to your home, such as mortgage interest, real estate taxes, utilities, maintenance, rent, depreciation, or property insurance, as business expenses. Filing late taxes for 2012 However, you may be able to deduct expenses related to the business use of part of your home if you meet specific requirements. Filing late taxes for 2012 Even then, the deductible amount of these types of expenses may be limited. Filing late taxes for 2012 Use this section and Figure A, later, to decide if you can deduct expenses for the business use of your home. Filing late taxes for 2012 To qualify to deduct expenses for business use of your home, you must use part of your home: Exclusively and regularly as your principal place of business (defined later), Exclusively and regularly as a place where you meet or deal with patients, clients, or customers in the normal course of your trade or business, In the case of a separate structure which is not attached to your home, in connection with your trade or business, On a regular basis for certain storage use (see Storage of inventory or product samples , later), For rental use (see Publication 527), or As a daycare facility (see Daycare Facility , later). Filing late taxes for 2012 Additional tests for employee use. Filing late taxes for 2012   If you are an employee and you use a part of your home for business, you may qualify for a deduction for its business use. Filing late taxes for 2012 You must meet the tests discussed earlier plus: Your business use must be for the convenience of your employer, and You must not rent any part of your home to your employer and use the rented portion to perform services as an employee for that employer. Filing late taxes for 2012 If the use of the home office is merely appropriate and helpful, you cannot deduct expenses for the business use of your home. Filing late taxes for 2012 Exclusive Use To qualify under the exclusive use test, you must use a specific area of your home only for your trade or business. Filing late taxes for 2012 The area used for business can be a room or other separately identifiable space. Filing late taxes for 2012 The space does not need to be marked off by a permanent partition. Filing late taxes for 2012 You do not meet the requirements of the exclusive use test if you use the area in question both for business and for personal purposes. Filing late taxes for 2012 Example. Filing late taxes for 2012 You are an attorney and use a den in your home to write legal briefs and prepare clients' tax returns. Filing late taxes for 2012 Your family also uses the den for recreation. Filing late taxes for 2012 The den is not used exclusively in your trade or business, so you cannot claim a deduction for the business use of the den. Filing late taxes for 2012 Exceptions to Exclusive Use You do not have to meet the exclusive use test if either of the following applies. Filing late taxes for 2012 You use part of your home for the storage of inventory or product samples (discussed next). Filing late taxes for 2012 You use part of your home as a daycare facility, discussed later under Daycare Facility . Filing late taxes for 2012 Note. Filing late taxes for 2012 With the exception of these two uses, any portion of the home used for business purposes must meet the exclusive use test. Filing late taxes for 2012 Storage of inventory or product samples. Filing late taxes for 2012    If you use part of your home for storage of inventory or product samples, you can deduct expenses for the business use of your home without meeting the exclusive use test. Filing late taxes for 2012 However, you must meet all the following tests. Filing late taxes for 2012 You sell products at wholesale or retail as your trade or business. Filing late taxes for 2012 You keep the inventory or product samples in your home for use in your trade or business. Filing late taxes for 2012 Your home is the only fixed location of your trade or business. Filing late taxes for 2012 You use the storage space on a regular basis. Filing late taxes for 2012 The space you use is a separately identifiable space suitable for storage. Filing late taxes for 2012 Example. Filing late taxes for 2012 Your home is the only fixed location of your business of selling mechanics' tools at retail. Filing late taxes for 2012 You regularly use half of your basement for storage of inventory and product samples. Filing late taxes for 2012 You sometimes use the area for personal purposes. Filing late taxes for 2012 The expenses for the storage space are deductible even though you do not use this part of your basement exclusively for business. Filing late taxes for 2012 Regular Use To qualify under the regular use test, you must use a specific area of your home for business on a regular basis. Filing late taxes for 2012 Incidental or occasional business use is not regular use. Filing late taxes for 2012 You must consider all facts and circumstances in determining whether your use is on a regular basis. Filing late taxes for 2012 Trade or Business Use To qualify under the trade-or-business-use test, you must use part of your home in connection with a trade or business. Filing late taxes for 2012 If you use your home for a profit-seeking activity that is not a trade or business, you cannot take a deduction for its business use. Filing late taxes for 2012 Example. Filing late taxes for 2012 You use part of your home exclusively and regularly to read financial periodicals and reports, clip bond coupons, and carry out similar activities related to your own investments. Filing late taxes for 2012 You do not make investments as a broker or dealer. Filing late taxes for 2012 So, your activities are not part of a trade or business and you cannot take a deduction for the business use of your home. Filing late taxes for 2012 Principal Place of Business You can have more than one business location, including your home, for a single trade or business. Filing late taxes for 2012 To qualify to deduct the expenses for the business use of your home under the principal place of business test, your home must be your principal place of business for that trade or business. Filing late taxes for 2012 To determine whether your home is your principal place of business, you must consider: The relative importance of the activities performed at each place where you conduct business, and The amount of time spent at each place where you conduct business. Filing late taxes for 2012 Your home office will qualify as your principal place of business if you meet the following requirements. Filing late taxes for 2012 You use it exclusively and regularly for administrative or management activities of your trade or business. Filing late taxes for 2012 You have no other fixed location where you conduct substantial administrative or management activities of your trade or business. Filing late taxes for 2012 If, after considering your business locations, your home cannot be identified as your principal place of business, you cannot deduct home office expenses. Filing late taxes for 2012 However, see the later discussions under Place To Meet Patients, Clients, or Customers and Separate Structure for other ways to qualify to deduct home office expenses. Filing late taxes for 2012 Administrative or management activities. Filing late taxes for 2012   There are many activities that are administrative or managerial in nature. Filing late taxes for 2012 The following are a few examples. Filing late taxes for 2012 Billing customers, clients, or patients. Filing late taxes for 2012 Keeping books and records. Filing late taxes for 2012 Ordering supplies. Filing late taxes for 2012 Setting up appointments. Filing late taxes for 2012 Forwarding orders or writing reports. Filing late taxes for 2012 Administrative or management activities performed at other locations. Filing late taxes for 2012   The following activities performed by you or others will not disqualify your home office from being your principal place of business. Filing late taxes for 2012 You have others conduct your administrative or management activities at locations other than your home. Filing late taxes for 2012 (For example, another company does your billing from its place of business. Filing late taxes for 2012 ) You conduct administrative or management activities at places that are not fixed locations of your business, such as in a car or a hotel room. Filing late taxes for 2012 You occasionally conduct minimal administrative or management activities at a fixed location outside your home. Filing late taxes for 2012 You conduct substantial nonadministrative or nonmanagement business activities at a fixed location outside your home. Filing late taxes for 2012 (For example, you meet with or provide services to customers, clients, or patients at a fixed location of the business outside your home. Filing late taxes for 2012 ) You have suitable space to conduct administrative or management activities outside your home, but choose to use your home office for those activities instead. Filing late taxes for 2012 Please click here for the text description of the image. Filing late taxes for 2012 Can you deduct business use of the home expenses? Example 1. Filing late taxes for 2012 John is a self-employed plumber. Filing late taxes for 2012 Most of John's time is spent at customers' homes and offices installing and repairing plumbing. Filing late taxes for 2012 He has a small office in his home that he uses exclusively and regularly for the administrative or management activities of his business, such as phoning customers, ordering supplies, and keeping his books. Filing late taxes for 2012 John writes up estimates and records of work completed at his customers' premises. Filing late taxes for 2012 He does not conduct any substantial administrative or management activities at any fixed location other than his home office. Filing late taxes for 2012 John does not do his own billing. Filing late taxes for 2012 He uses a local bookkeeping service to bill his customers. Filing late taxes for 2012 John's home office qualifies as his principal place of business for deducting expenses for its use. Filing late taxes for 2012 He uses the home office for the administrative or managerial activities of his plumbing business and he has no other fixed location where he conducts these administrative or managerial activities. Filing late taxes for 2012 His choice to have his billing done by another company does not disqualify his home office from being his principal place of business. Filing late taxes for 2012 He meets all the qualifications, including principal place of business, so he can deduct expenses (subject to certain limitations, explained later) for the business use of his home. Filing late taxes for 2012 Example 2. Filing late taxes for 2012 Pamela is a self-employed sales representative for several different product lines. Filing late taxes for 2012 She has an office in her home that she uses exclusively and regularly to set up appointments and write up orders and other reports for the companies whose products she sells. Filing late taxes for 2012 She occasionally writes up orders and sets up appointments from her hotel room when she is away on business overnight. Filing late taxes for 2012 Pamela's business is selling products to customers at various locations throughout her territory. Filing late taxes for 2012 To make these sales, she regularly visits customers to explain the available products and take orders. Filing late taxes for 2012 Pamela's home office qualifies as her principal place of business for deducting expenses for its use. Filing late taxes for 2012 She conducts administrative or management activities there and she has no other fixed location where she conducts substantial administrative or management activities. Filing late taxes for 2012 The fact that she conducts some administrative or management activities in her hotel room (not a fixed location) does not disqualify her home office from being her principal place of business. Filing late taxes for 2012 She meets all the qualifications, including principal place of business, so she can deduct expenses (subject to certain limitations, explained later) for the business use of her home. Filing late taxes for 2012 Example 3. Filing late taxes for 2012 Paul is a self-employed anesthesiologist. Filing late taxes for 2012 He spends the majority of his time administering anesthesia and postoperative care in three local hospitals. Filing late taxes for 2012 One of the hospitals provides him with a small shared office where he could conduct administrative or management activities. Filing late taxes for 2012 Paul very rarely uses the office the hospital provides. Filing late taxes for 2012 He uses a room in his home that he has converted to an office. Filing late taxes for 2012 He uses this room exclusively and regularly to conduct all the following activities. Filing late taxes for 2012 Contacting patients, surgeons, and hospitals regarding scheduling. Filing late taxes for 2012 Preparing for treatments and presentations. Filing late taxes for 2012 Maintaining billing records and patient logs. Filing late taxes for 2012 Satisfying continuing medical education requirements. Filing late taxes for 2012 Reading medical journals and books. Filing late taxes for 2012 Paul's home office qualifies as his principal place of business for deducting expenses for its use. Filing late taxes for 2012 He conducts administrative or management activities for his business as an anesthesiologist there and he has no other fixed location where he conducts substantial administrative or management activities for this business. Filing late taxes for 2012 His choice to use his home office instead of the one provided by the hospital does not disqualify his home office from being his principal place of business. Filing late taxes for 2012 His performance of substantial nonadministrative or nonmanagement activities at fixed locations outside his home also does not disqualify his home office from being his principal place of business. Filing late taxes for 2012 He meets all the qualifications, including principal place of business, so he can deduct expenses (subject to certain limitations, explained later) for the business use of his home. Filing late taxes for 2012 Example 4. Filing late taxes for 2012 Kathleen is employed as a teacher. Filing late taxes for 2012 She is required to teach and meet with students at the school and to grade papers and tests. Filing late taxes for 2012 The school provides her with a small office where she can work on her lesson plans, grade papers and tests, and meet with parents and students. Filing late taxes for 2012 The school does not require her to work at home. Filing late taxes for 2012 Kathleen prefers to use the office she has set up in her home and does not use the one provided by the school. Filing late taxes for 2012 She uses this home office exclusively and regularly for the administrative duties of her teaching job. Filing late taxes for 2012 Kathleen must meet the convenience-of-the-employer test, even if her home qualifies as her principal place of business for deducting expenses for its use. Filing late taxes for 2012 Her employer provides her with an office and does not require her to work at home, so she does not meet the convenience-of-the-employer test and cannot claim a deduction for the business use of her home. Filing late taxes for 2012 More Than One Trade or Business The same home office can be the principal place of business for two or more separate business activities. Filing late taxes for 2012 Whether your home office is the principal place of business for more than one business activity must be determined separately for each of your trade or business activities. Filing late taxes for 2012 You must use the home office exclusively and regularly for one or more of the following purposes. Filing late taxes for 2012 As the principal place of business for one or more of your trades or businesses. Filing late taxes for 2012 As a place to meet or deal with patients, clients, or customers in the normal course of one or more of your trades or businesses. Filing late taxes for 2012 If your home office is a separate structure, in connection with one or more of your trades or businesses. Filing late taxes for 2012 You can use your home office for more than one business activity, but you cannot use it for any nonbusiness (i. Filing late taxes for 2012 e. Filing late taxes for 2012 , personal) activities. Filing late taxes for 2012 If you are an employee, any use of the home office in connection with your employment must be for the convenience of your employer. Filing late taxes for 2012 See Rental to employer , later, if you rent part of your home to your employer. Filing late taxes for 2012 Example. Filing late taxes for 2012 Tracy White is employed as a teacher. Filing late taxes for 2012 Her principal place of work is the school, which provides her office space to do her school work. Filing late taxes for 2012 She also has a mail order jewelry business. Filing late taxes for 2012 All her work in the jewelry business is done in her home office and the office is used exclusively for that business. Filing late taxes for 2012 If she meets all the other tests, she can deduct expenses for the business use of her home for the jewelry business. Filing late taxes for 2012 If Tracy also uses the office for work related to her teaching, she must meet the exclusive use test for both businesses to qualify for the deduction. Filing late taxes for 2012 As an employee, Tracy must also meet the convenience-of-the-employer test to qualify for the deduction. Filing late taxes for 2012 She does not meet this test for her work as a teacher, so she cannot claim a deduction for the business use of her home for either activity. Filing late taxes for 2012 Place To Meet Patients, Clients, or Customers If you meet or deal with patients, clients, or customers in your home in the normal course of your business, even though you also carry on business at another location, you can deduct your expenses for the part of your home used exclusively and regularly for business if you meet both the following tests. Filing late taxes for 2012 You physically meet with patients, clients, or customers on your premises. Filing late taxes for 2012 Their use of your home is substantial and integral to the conduct of your business. Filing late taxes for 2012 Doctors, dentists, attorneys, and other professionals who maintain offices in their homes generally will meet this requirement. Filing late taxes for 2012 Using your home for occasional meetings and telephone calls will not qualify you to deduct expenses for the business use of your home. Filing late taxes for 2012 The part of your home you use exclusively and regularly to meet patients, clients, or customers does not have to be your principal place of business. Filing late taxes for 2012 Example. Filing late taxes for 2012 June Quill, a self-employed attorney, works 3 days a week in her city office. Filing late taxes for 2012 She works 2 days a week in her home office used only for business. Filing late taxes for 2012 She regularly meets clients there. Filing late taxes for 2012 Her home office qualifies for a business deduction because she meets clients there in the normal course of her business. Filing late taxes for 2012 Separate Structure You can deduct expenses for a separate free-standing structure, such as a studio, workshop, garage, or barn, if you use it exclusively and regularly for your business. Filing late taxes for 2012 The structure does not have to be your principal place of business or a place where you meet patients, clients, or customers. Filing late taxes for 2012 Example. Filing late taxes for 2012 John Berry operates a floral shop in town. Filing late taxes for 2012 He grows the plants for his shop in a greenhouse behind his home. Filing late taxes for 2012 He uses the greenhouse exclusively and regularly in his business, so he can deduct the expenses for its use, subject to certain limitations, explained later. Filing late taxes for 2012 Figuring the Deduction After you determine that you meet the tests under Qualifying for a Deduction , you can begin to figure how much you can deduct. Filing late taxes for 2012 When figuring the amount you can deduct for the business use of your home, you will use either your actual expenses or a simplified method. Filing late taxes for 2012 Electing to use the simplified method. Filing late taxes for 2012   The simplified method is an alternative to the calculation, allocation, and substantiation of actual expenses. Filing late taxes for 2012 You choose whether or not to figure your deduction using the simplified method each taxable year. Filing late taxes for 2012 See Using the Simplified Method , later. Filing late taxes for 2012 Rental to employer. Filing late taxes for 2012   If you rent part of your home to your employer and you use the rented part in performing services for your employer as an employee, your deduction for the business use of your home is limited. Filing late taxes for 2012 You can deduct mortgage interest, qualified mortgage insurance premiums, real estate taxes, and personal casualty losses for the rented part, subject to any limitations. Filing late taxes for 2012 However, you cannot deduct otherwise allowable trade or business expenses, business casualty losses, or depreciation related to the use of your home (or use the simplified method as an alternative to deducting these actual expenses) in performing services for your employer. Filing late taxes for 2012 Using Actual Expenses If you do not or cannot elect to use the simplified method for a home, you will figure your deduction for that home using your actual expenses. Filing late taxes for 2012 You will also need to figure the percentage of your home used for business and the limit on the deduction. Filing late taxes for 2012 If you are an employee or a partner, or you use your home in your farming business and you file Schedule F (Form 1040), you can use the Worksheet To Figure the Deduction for Business Use of Your Home, near the end of this publication, to help you figure your deduction. Filing late taxes for 2012 If you use your home in a trade or business and you file Schedule C (Form 1040), you will use Form 8829 to figure your deduction. Filing late taxes for 2012 Part-year use. Filing late taxes for 2012   You cannot deduct expenses for the business use of your home incurred during any part of the year you did not use your home for business purposes. Filing late taxes for 2012 For example, if you begin using part of your home for business on July 1, and you meet all the tests from that date until the end of the year, consider only your expenses for the last half of the year in figuring your allowable deduction. Filing late taxes for 2012 Expenses related to tax-exempt income. Filing late taxes for 2012   Generally, you cannot deduct expenses that are related to tax-exempt allowances. Filing late taxes for 2012 However, if you receive a tax-exempt parsonage allowance or a tax-exempt military allowance, your expenses for mortgage interest and real estate taxes are deductible under the normal rules. Filing late taxes for 2012 No deduction is allowed for other expenses related to the tax-exempt allowance. Filing late taxes for 2012   If your housing is provided free of charge and the value of the housing is tax exempt, you cannot deduct the rental value of any portion of the housing. Filing late taxes for 2012 Actual Expenses You must divide the expenses of operating your home between personal and business use. Filing late taxes for 2012 The part of a home operating expense you can use to figure your deduction depends on both of the following. Filing late taxes for 2012 Whether the expense is direct, indirect, or unrelated. Filing late taxes for 2012 The percentage of your home used for business. Filing late taxes for 2012 Table 1, next, describes the types of expenses you may have and the extent to which they are deductible. Filing late taxes for 2012 Table 1. Filing late taxes for 2012 Types of Expenses  Expense  Description  Deductibility Direct Expenses only for  the business part  of your home. Filing late taxes for 2012 Deductible in full. Filing late taxes for 2012 *   Examples:  Painting or repairs  only in the area  used for business. Filing late taxes for 2012 Exception: May be only partially  deductible in a daycare facility. Filing late taxes for 2012 See Daycare Facility , later. Filing late taxes for 2012 Indirect Expenses for  keeping up and running your  entire home. Filing late taxes for 2012 Deductible based on the percentage of your home used for business. Filing late taxes for 2012 *   Examples:  Insurance, utilities, and  general repairs. Filing late taxes for 2012   Unrelated Expenses only for  the parts of your  home not used  for business. Filing late taxes for 2012 Not deductible. Filing late taxes for 2012   Examples:  Lawn care or painting  a room not used  for business. Filing late taxes for 2012   *Subject to the deduction limit, discussed later. Filing late taxes for 2012 Form 8829 and the Worksheet To Figure the Deduction for Business Use of Your Home have separate columns for direct and indirect expenses. Filing late taxes for 2012 Certain expenses are deductible whether or not you use your home for business. Filing late taxes for 2012 If you qualify to deduct business use of the home expenses, use the business percentage of these expenses to figure your total business use of the home deduction. Filing late taxes for 2012 These expenses include the following. Filing late taxes for 2012 Real estate taxes. Filing late taxes for 2012 Qualified mortgage insurance premiums. Filing late taxes for 2012 Deductible mortgage interest. Filing late taxes for 2012 Casualty losses. Filing late taxes for 2012 Other expenses are deductible only if you use your home for business. Filing late taxes for 2012 You can use the business percentage of these expenses to figure your total business use of the home deduction. Filing late taxes for 2012 These expenses generally include (but are not limited to) the following. Filing late taxes for 2012 Depreciation (covered under Depreciating Your Home , later). Filing late taxes for 2012 Insurance. Filing late taxes for 2012 Rent paid for the use of property you do not own but use in your trade or business. Filing late taxes for 2012 Repairs. Filing late taxes for 2012 Security system. Filing late taxes for 2012 Utilities and services. Filing late taxes for 2012 Real estate taxes. Filing late taxes for 2012   To figure the business part of your real estate taxes, multiply the real estate taxes paid by the percentage of your home used for business. Filing late taxes for 2012   For more information on the deduction for real estate taxes, see Publication 530, Tax Information for Homeowners. Filing late taxes for 2012 Deductible mortgage interest. Filing late taxes for 2012   To figure the business part of your deductible mortgage interest, multiply this interest by the percentage of your home used for business. Filing late taxes for 2012 You can include interest on a second mortgage in this computation. Filing late taxes for 2012 If your total mortgage debt is more than $1,000,000 or your home equity debt is more than $100,000, your deduction may be limited. Filing late taxes for 2012 For more information on what interest is deductible, see Publication 936, Home Mortgage Interest Deduction. Filing late taxes for 2012 Qualified mortgage insurance premiums. Filing late taxes for 2012   To figure the business part of your qualified mortgage insurance premiums, multiply the premiums by the percentage of your home used for business. Filing late taxes for 2012 You can include premiums for insurance on a second mortgage in this computation. Filing late taxes for 2012 If your adjusted gross income is more than $100,000 ($50,000 if your filing status is married filing separately), your deduction may be limited. Filing late taxes for 2012 For more information, see Publication 936, and Line 13 in the Instructions for Schedule A (Form 1040). Filing late taxes for 2012 Casualty losses. Filing late taxes for 2012    If you have a casualty loss on your home that you use for business, treat the casualty loss as a direct expense, an indirect expense, or an unrelated expense, depending on the property affected. Filing late taxes for 2012 A direct expense is the loss on the portion of the property you use only in your business. Filing late taxes for 2012 Use the entire loss to figure the business use of the home deduction. Filing late taxes for 2012 An indirect expense is the loss on property you use for both business and personal purposes. Filing late taxes for 2012 Use only the business portion to figure the deduction. Filing late taxes for 2012 An unrelated expense is the loss on property you do not use in your business. Filing late taxes for 2012 Do not use any of the loss to figure the deduction. Filing late taxes for 2012 Example. Filing late taxes for 2012 You meet the rules to take a deduction for an office in your home that is 10% of the total area of your house. Filing late taxes for 2012 A storm damages your roof. Filing late taxes for 2012 This is an indirect expense as the roof is part of the whole house and is considered to be used both for business and personal purposes. Filing late taxes for 2012 You would complete Form 4684, Casualties and Thefts, to report your loss. Filing late taxes for 2012 You complete both section A (Personal Use Property) and section B (Business and Income-Producing Property) as your home is used both for business and personal purposes. Filing late taxes for 2012 Since you use 90% of your home for personal purposes, use 90% of the cost or adjusted basis of your home, insurance or other reimbursement, and fair market value, both before and after the storm, to figure the amounts to enter on lines 2, 3, 5, and 6 of Form 4684. Filing late taxes for 2012 Since you use 10% of your home for business purposes, use 10% of the cost or adjusted basis of your home, insurance or other reimbursement, and fair market value, both before and after the storm, to figure the amounts to enter on lines 20, 21, 23, and 24 of Form 4684. Filing late taxes for 2012 Forms and worksheets to use. Filing late taxes for 2012   If you are filing Schedule C (Form 1040), get Form 8829 and follow the instructions for casualty losses. Filing late taxes for 2012 If you are an employee or a partner, or you file Schedule F (Form 1040), use the Worksheet To Figure the Deduction for Business Use of Your Home, near the end of this publication. Filing late taxes for 2012 You will also need to get Form 4684. Filing late taxes for 2012 More information. Filing late taxes for 2012   For more information on casualty losses, see Publication 547, Casualties, Disasters, and Thefts. Filing late taxes for 2012 Insurance. Filing late taxes for 2012   You can deduct the cost of insurance that covers the business part of your home. Filing late taxes for 2012 However, if your insurance premium gives you coverage for a period that extends past the end of your tax year, you can deduct only the business percentage of the part of the premium that gives you coverage for your tax year. Filing late taxes for 2012 You can deduct the business percentage of the part that applies to the following year in that year. Filing late taxes for 2012 Rent. Filing late taxes for 2012   If you rent the home you occupy and meet the requirements for business use of the home, you can deduct part of the rent you pay. Filing late taxes for 2012 To figure your deduction, multiply your rent payments by the percentage of your home used for business. Filing late taxes for 2012   If you own your home, you cannot deduct the fair rental value of your home. Filing late taxes for 2012 However, see Depreciating Your Home , later. Filing late taxes for 2012 Repairs. Filing late taxes for 2012   The cost of repairs that relate to your business, including labor (other than your own labor), is a deductible expense. Filing late taxes for 2012 For example, a furnace repair benefits the entire home. Filing late taxes for 2012 If you use 10% of your home for business, you can deduct 10% of the cost of the furnace repair. Filing late taxes for 2012   Repairs keep your home in good working order over its useful life. Filing late taxes for 2012 Examples of common repairs are patching walls and floors, painting, wallpapering, repairing roofs and gutters, and mending leaks. Filing late taxes for 2012 However, repairs are sometimes treated as a permanent improvement and are not deductible. Filing late taxes for 2012 See Permanent improvements , later, under Depreciating Your Home. Filing late taxes for 2012 Security system. Filing late taxes for 2012   If you install a security system that protects all the doors and windows in your home, you can deduct the business part of the expenses you incur to maintain and monitor the system. Filing late taxes for 2012 You also can take a depreciation deduction for the part of the cost of the security system relating to the business use of your home. Filing late taxes for 2012 Utilities and services. Filing late taxes for 2012   Expenses for utilities and services, such as electricity, gas, trash removal, and cleaning services, are primarily personal expenses. Filing late taxes for 2012 However, if you use part of your home for business, you can deduct the business part of these expenses. Filing late taxes for 2012 Generally, the business percentage for utilities is the same as the percentage of your home used for business. Filing late taxes for 2012 Telephone. Filing late taxes for 2012   The basic local telephone service charge, including taxes, for the first telephone line into your home (i. Filing late taxes for 2012 e. Filing late taxes for 2012 , landline) is a nondeductible personal expense. Filing late taxes for 2012 However, charges for business long-distance phone calls on that line, as well as the cost of a second line into your home used exclusively for business, are deductible business expenses. Filing late taxes for 2012 Do not include these expenses as a cost of using your home for business. Filing late taxes for 2012 Deduct these charges separately on the appropriate form or schedule. Filing late taxes for 2012 For example, if you file Schedule C (Form 1040), deduct these expenses on line 25, Utilities (instead of line 30, Expenses for business use of your home). Filing late taxes for 2012 Depreciating Your Home If you own your home and qualify to deduct expenses for its business use, you can claim a deduction for depreciation. Filing late taxes for 2012 Depreciation is an allowance for the wear and tear on the part of your home used for business. Filing late taxes for 2012 You cannot depreciate the cost or value of the land. Filing late taxes for 2012 You recover its cost when you sell or otherwise dispose of the property. Filing late taxes for 2012 Before you figure your depreciation deduction, you need to know the following information. Filing late taxes for 2012 The month and year you started using your home for business. Filing late taxes for 2012 The adjusted basis and fair market value of your home (excluding land) at the time you began using it for business. Filing late taxes for 2012 The cost of any improvements before and after you began using the property for business. Filing late taxes for 2012 The percentage of your home used for business. Filing late taxes for 2012 See Business Percentage , later. Filing late taxes for 2012 Adjusted basis defined. Filing late taxes for 2012   The adjusted basis of your home is generally its cost, plus the cost of any permanent improvements you made to it, minus any casualty losses or depreciation deducted in earlier tax years. Filing late taxes for 2012 For a discussion of adjusted basis, see Publication 551. Filing late taxes for 2012 Permanent improvements. Filing late taxes for 2012   A permanent improvement increases the value of property, adds to its life, or gives it a new or different use. Filing late taxes for 2012 Examples of improvements are replacing electric wiring or plumbing, adding a new roof or addition, paneling, or remodeling. Filing late taxes for 2012    You must carefully distinguish between repairs and improvements. Filing late taxes for 2012 See Repairs , earlier, under Actual Expenses. Filing late taxes for 2012 You also must keep accurate records of these expenses. Filing late taxes for 2012 These records will help you decide whether an expense is a deductible or a capital (added to the basis) expense. Filing late taxes for 2012 However, if you make repairs as part of an extensive remodeling or restoration of your home, the entire job is an improvement. Filing late taxes for 2012 Example. Filing late taxes for 2012 You buy an older home and fix up two rooms as a beauty salon. Filing late taxes for 2012 You patch the plaster on the ceilings and walls, paint, repair the floor, install an outside door, and install new wiring, plumbing, and other equipment. Filing late taxes for 2012 Normally, the patching, painting, and floor work are repairs and the other expenses are permanent improvements. Filing late taxes for 2012 However, because the work gives your property a new use, the entire remodeling job is a permanent improvement and its cost is added to the basis of the property. Filing late taxes for 2012 You cannot deduct any portion of it as a repair expense. Filing late taxes for 2012 Adjusting for depreciation deducted in earlier years. Filing late taxes for 2012   Decrease the basis of your property by the depreciation you deducted, or could have deducted, on your tax returns under the method of depreciation you properly selected. Filing late taxes for 2012 If you deducted less depreciation than you could have under the method you selected, decrease the basis by the amount you could have deducted under that method. Filing late taxes for 2012 If you did not deduct any depreciation, decrease the basis by the amount you could have deducted. Filing late taxes for 2012   If you deducted more depreciation than you should have, decrease your basis by the amount you should have deducted, plus the part of the excess depreciation you deducted that actually decreased your tax liability for any year. Filing late taxes for 2012   If you deducted the incorrect amount of depreciation, see Publication 946. Filing late taxes for 2012 Fair market value defined. Filing late taxes for 2012   The fair market value of your home is the price at which the property would change hands between a buyer and a seller, neither having to buy or sell, and both having reasonable knowledge of all necessary facts. Filing late taxes for 2012 Sales of similar property, on or about the date you begin using your home for business, may be helpful in determining the property's fair market value. Filing late taxes for 2012 Figuring the depreciation deduction for the current year. Filing late taxes for 2012   If you began using your home for business before 2013, continue to use the same depreciation method you used in past tax years. Filing late taxes for 2012   If you began using your home for business for the first time in 2013, depreciate the business part as nonresidential real property under the modified accelerated cost recovery system (MACRS). Filing late taxes for 2012 Under MACRS, nonresidential real property is depreciated using the straight line method over 39 years. Filing late taxes for 2012 For more information on MACRS and other methods of depreciation, see Publication 946. Filing late taxes for 2012   To figure the depreciation deduction, you must first figure the part of the cost of your home that can be depreciated (depreciable basis). Filing late taxes for 2012 The depreciable basis is figured by multiplying the percentage of your home used for business by the smaller of the following. Filing late taxes for 2012 The adjusted basis of your home (excluding land) on the date you began using your home for business. Filing late taxes for 2012 The fair market value of your home (excluding land) on the date you began using your home for business. Filing late taxes for 2012 Depreciation table. Filing late taxes for 2012   If 2013 was the first year you used your home for business, you can figure your 2013 depreciation for the business part of your home by using the appropriate percentage from the following table. Filing late taxes for 2012 Table 2. Filing late taxes for 2012 MACRS Percentage Table for 39-Year Nonresidential Real Property Month First Used for Business Percentage To Use 1 2. Filing late taxes for 2012 461% 2 2. Filing late taxes for 2012 247% 3 2. Filing late taxes for 2012 033% 4 1. Filing late taxes for 2012 819% 5 1. Filing late taxes for 2012 605% 6 1. Filing late taxes for 2012 391% 7 1. Filing late taxes for 2012 177% 8 0. Filing late taxes for 2012 963% 9 0. Filing late taxes for 2012 749% 10 0. Filing late taxes for 2012 535% 11 0. Filing late taxes for 2012 321% 12 0. Filing late taxes for 2012 107%   Multiply the depreciable basis of the business part of your home by the percentage from the table for the first month you use your home for business. Filing late taxes for 2012 See Publication 946 for the percentages for the remaining tax years of the recovery period. Filing late taxes for 2012 Example. Filing late taxes for 2012 In May, George Miller began to use one room in his home exclusively and regularly to meet clients. Filing late taxes for 2012 This room is 8% of the square footage of his home. Filing late taxes for 2012 He bought the home in 2003 for $125,000. Filing late taxes for 2012 He determined from his property tax records that his adjusted basis in the house (exclusive of land) is $115,000. Filing late taxes for 2012 In May, the house had a fair market value of $165,000. Filing late taxes for 2012 He multiplies his adjusted basis of $115,000 (which is less than the fair market value) by 8%. Filing late taxes for 2012 The result is $9,200, his depreciable basis for the business part of the house. Filing late taxes for 2012 George files his return based on the calendar year. Filing late taxes for 2012 May is the 5th month of his tax year. Filing late taxes for 2012 He multiplies his depreciable basis of $9,200 by 1. Filing late taxes for 2012 605% (. Filing late taxes for 2012 01605), the percentage from the table for the 5th month. Filing late taxes for 2012 His depreciation deduction is $147. Filing late taxes for 2012 66. Filing late taxes for 2012 Depreciating permanent improvements. Filing late taxes for 2012   Add the costs of permanent improvements made before you began using your home for business to the basis of your property. Filing late taxes for 2012 Depreciate these costs as part of the cost of your home as explained earlier. Filing late taxes for 2012 The costs of improvements made after you begin using your home for business (that affect the business part of your home, such as a new roof) are depreciated separately. Filing late taxes for 2012 Multiply the cost of the improvement by the business-use percentage and depreciate the result over the recovery period that would apply to your home if you began using it for business at the same time as the improvement. Filing late taxes for 2012 For improvements made this year, the recovery period is 39 years. Filing late taxes for 2012 For the percentage to use for the first year, see Table 2, earlier. Filing late taxes for 2012 For more information on recovery periods, see Publication 946. Filing late taxes for 2012 Business Percentage To find the business percentage, compare the size of the part of your home that you use for business to your whole house. Filing late taxes for 2012 Use the resulting percentage to figure the business part of the expenses for operating your entire home. Filing late taxes for 2012 You can use any reasonable method to determine the business percentage. Filing late taxes for 2012 The following are two commonly used methods for figuring the percentage. Filing late taxes for 2012 Divide the area (length multiplied by the width) used for business by the total area of your home. Filing late taxes for 2012 If the rooms in your home are all about the same size, you can divide the number of rooms used for business by the total number of rooms in your home. Filing late taxes for 2012 Example 1. Filing late taxes for 2012 Your office is 240 square feet (12 feet × 20 feet). Filing late taxes for 2012 Your home is 1,200 square feet. Filing late taxes for 2012 Your office is 20% (240 ÷ 1,200) of the total area of your home. Filing late taxes for 2012 Your business percentage is 20%. Filing late taxes for 2012 Example 2. Filing late taxes for 2012 You use one room in your home for business. Filing late taxes for 2012 Your home has 10 rooms, all about equal size. Filing late taxes for 2012 Your office is 10% (1 ÷ 10) of the total area of your home. Filing late taxes for 2012 Your business percentage is 10%. Filing late taxes for 2012 Use lines 1-7 of Form 8829, or lines 1-3 on the Worksheet To Figure the Deduction for Business Use of Your Home (near the end of this publication) to figure your business percentage. Filing late taxes for 2012 Deduction Limit If your gross income from the business use of your home equals or exceeds your total business expenses (including depreciation), you can deduct all your business expenses related to the use of your home. Filing late taxes for 2012 If your gross income from the business use of your home is less than your total business expenses, your deduction for certain expenses for the business use of your home is limited. Filing late taxes for 2012 Your deduction of otherwise nondeductible expenses, such as insurance, utilities, and depreciation of your home (with depreciation of your home taken last), that are allocable to the business, is limited to the gross income from the business use of your home minus the sum of the following. Filing late taxes for 2012 The business part of expenses you could deduct even if you did not use your home for business (such as mortgage interest, real estate taxes, and casualty and theft losses that are allowable as itemized deductions on Schedule A (Form 1040)). Filing late taxes for 2012 These expenses are discussed in detail under Actual Expenses , earlier. Filing late taxes for 2012 The business expenses that relate to the business activity in the home (for example, business phone, supplies, and depreciation on equipment), but not to the use of the home itself. Filing late taxes for 2012 If you are self-employed, do not include in (2) above your deduction for one-half of your self-employment tax. Filing late taxes for 2012 Carryover of unallowed expenses. Filing late taxes for 2012   If your deductions are greater than the current year's limit, you can carry over the excess to the next year in which you use actual expenses. Filing late taxes for 2012 They are subject to the deduction limit for that year, whether or not you live in the same home during that year. Filing late taxes for 2012 Figuring the deduction limit and carryover. Filing late taxes for 2012   If you are an employee or a partner, or you file Schedule F (Form 1040), use the Worksheet To Figure the Deduction for Business Use of Your Home, near the end of this publication. Filing late taxes for 2012 If you file Schedule C (Form 1040), figure your deduction limit and carryover on Form 8829. Filing late taxes for 2012 Example. Filing late taxes for 2012 You meet the requirements for deducting expenses for the business use of your home. Filing late taxes for 2012 You use 20% of your home for business. Filing late taxes for 2012 In 2013, your business expenses and the expenses for the business use of your home are deducted from your gross income in the following order. Filing late taxes for 2012    Gross income from business $6,000 Minus:   Deductible mortgage interest and real estate taxes (20%) 3,000 Business expenses not related to the use of your home (100%) (business phone, supplies, and depreciation on equipment) 2,000 Deduction limit $1,000 Minus other expenses allocable to business use of home:   Maintenance, insurance, and utilities (20%) 800 Depreciation allowed (20% = $1,600 allowable, but subject to balance of deduction limit) 200 Other expenses up to the deduction limit $1,000 Depreciation carryover to 2014 ($1,600 − $200) (subject to deduction limit in 2014) $1,400   You can deduct all of the business part of your deductible mortgage interest and real estate taxes ($3,000). Filing late taxes for 2012 You also can deduct all of your business expenses not related to the use of your home ($2,000). Filing late taxes for 2012 Additionally, you can deduct all of the business part of your expenses for maintenance, insurance, and utilities, because the total ($800) is less than the $1,000 deduction limit. Filing late taxes for 2012 Your deduction for depreciation for the business use of your home is limited to $200 ($1,000 minus $800) because of the deduction limit. Filing late taxes for 2012 You can carry over the $1,400 balance and add it to your depreciation for 2014, subject to your deduction limit in 2014. Filing late taxes for 2012 More than one place of business. Filing late taxes for 2012   If part of the gross income from your trade or business is from the business use of part of your home and part is from a place other than your home, you must determine the part of your gross income from the business use of your home before you figure the deduction limit. Filing late taxes for 2012 In making this determination, consider the time you spend at each location, the business investment in each location, and any other relevant facts and circumstances. Filing late taxes for 2012 If your home office qualifies as your principal place of business, you can deduct your daily transportation costs between your home and another work location in the same trade or business. Filing late taxes for 2012 For more information on transportation costs, see Publication 463, Travel, Entertainment, Gift, and Car Expenses. Filing late taxes for 2012 Using the Simplified Method The simplified method is an alternative to the calculation, allocation, and substantiation of actual expenses. Filing late taxes for 2012 In most cases, you will figure your deduction by multiplying $5, the prescribed rate, by the area of your home used for a qualified business use. Filing late taxes for 2012 The area you use to figure your deduction is limited to 300 square feet. Filing late taxes for 2012 See Simplified Amount , later, for information about figuring the amount of the deduction. Filing late taxes for 2012 For more information about the simplified method, see Revenue Procedure 2013-13, 2013-06 I. Filing late taxes for 2012 R. Filing late taxes for 2012 B. Filing late taxes for 2012 478, available at www. Filing late taxes for 2012 irs. Filing late taxes for 2012 gov/irb/2013-06_IRB/ar09. Filing late taxes for 2012 html. Filing late taxes for 2012 Actual expenses and depreciation of your home. Filing late taxes for 2012   If you elect to use the simplified method, you cannot deduct any actual expenses for the business except for business expenses that are not related to the use of the home. Filing late taxes for 2012 You also cannot deduct any depreciation (including any additional first-year depreciation) or section 179 expense for the portion of the home that is used for a qualified business use. Filing late taxes for 2012 The depreciation deduction allowable for that portion of the home is deemed to be zero for a year you use the simplified method. Filing late taxes for 2012 If you figure your deduction for business use of the home using actual expenses in a subsequent year, you will have to use the appropriate optional depreciation table for MACRS to figure your depreciation. Filing late taxes for 2012 More information. Filing late taxes for 2012   For more information about claiming depreciation in a subsequent year, see Revenue Procedure 2013-13, 2013-06 I. Filing late taxes for 2012 R. Filing late taxes for 2012 B. Filing late taxes for 2012 478, available at www. Filing late taxes for 2012 irs. Filing late taxes for 2012 gov/irb/2013-06_IRB/ar09. Filing late taxes for 2012 html. Filing late taxes for 2012 See Publication 946 for the optional depreciation tables Although you cannot deduct any depreciation or section 179 expense for the portion of your home used for a qualified business use, you may still claim depreciation or the section 179 expense deduction on other assets used in the business (for example, furniture and equipment). Filing late taxes for 2012 Expenses deductible without regard to business use. Filing late taxes for 2012   When using the simplified method, treat as personal expenses those business expenses related to the use of the home that are deductible without regard to whether there is a qualified business use of the home. Filing late taxes for 2012 These expenses include mortgage interest, real estate taxes, and casualty losses, subject to any limitations. Filing late taxes for 2012 See Where To Deduct , later. Filing late taxes for 2012 If you also rent part of your home, you must still allocate these expenses between rental use and personal use (for this purpose, personal use includes business use reported using the simplified method). Filing late taxes for 2012 No deduction of carryover of actual expenses. Filing late taxes for 2012   If you used actual expenses to figure your deduction for business use of the home in a prior year and your deduction was limited, you cannot deduct the disallowed amount carried over from the prior year during a year you figure your deduction using the simplified method. Filing late taxes for 2012 Instead, you will continue to carry over the disallowed amount to the next year that you use actual expenses to figure your deduction. Filing late taxes for 2012 Electing the Simplified Method You choose whether or not to figure your deduction using the simplified method each taxable year. Filing late taxes for 2012 Make the election for a home by using the simplified method to figure the deduction for the qualified business use of that home on a timely filed, original federal income tax return. Filing late taxes for 2012 An election for a taxable year, once made, is irrevocable. Filing late taxes for 2012 A change from using the simplified method in one year to actual expenses in a succeeding taxable year, or vice-versa, is not a change in method of accounting and does not require the consent of the Commissioner. Filing late taxes for 2012 Shared use. Filing late taxes for 2012   If you share your home with someone else who also uses the home in a business that qualifies for this deduction, each of you make your own election. Filing late taxes for 2012 More than one qualified business use. Filing late taxes for 2012   If you conduct more than one business that qualifies for this deduction in your home, your election to use the simplified method applies to all your qualified business uses of that home. Filing late taxes for 2012 More than one home. Filing late taxes for 2012   If you used more than one home during the year (for example, you moved during the year), you can elect to use the simplified method for only one of the homes. Filing late taxes for 2012 You must figure the deduction for any other home using actual expenses. Filing late taxes for 2012 Simplified Amount Your deduction for the qualified business use of a home is the sum of each amount you figure for a separate qualified business use of your home. Filing late taxes for 2012 To figure your deduction for the business use of a home using the simplified method, you will need to know the following information for each qualified business use of the home. Filing late taxes for 2012 The allowable area of your home used in conducting the business. Filing late taxes for 2012 If you did not conduct the business for the entire year in the home or the area changed during the year, you will need to know the allowable area you used and the number of days you conducted the business for each month. Filing late taxes for 2012 The gross income from the business use of your home. Filing late taxes for 2012 The amount of the business expenses that are not related to the use of your home. Filing late taxes for 2012 If the qualified business use is for a daycare facility that uses space in your home on a regular (but not exclusive) basis, you will also need to know the percentage of time that part of your home is used for daycare. Filing late taxes for 2012 To figure the amount you can deduct for qualified business use of your home using the simplified method, follow these 3 steps. Filing late taxes for 2012 Multiply the allowable area by $5 (or less than $5 if the qualified business use is for a daycare that uses space in your home on a regular, but not exclusive, basis). Filing late taxes for 2012 See Allowable area and Space used regularly for daycare , later. Filing late taxes for 2012 Subtract the expenses from the business that are not related to the use of the home from the gross income related to the business use of the home. Filing late taxes for 2012 If these expenses are greater than the gross income from the business use of the home, then you cannot take a deduction for this business use of the home. Filing late taxes for 2012 See Gross income limitation , later. Filing late taxes for 2012 Take the smaller of the amounts from (1) and (2). Filing late taxes for 2012 This is the amount you can deduct for this qualified business use of your home using the simplified method. Filing late taxes for 2012 If you are an employee or a partner, or you use your home in your farming business and file Schedule F (Form 1040), you can use the Simplified Method Worksheet, near the end of this publication, to help you figure your deduction. Filing late taxes for 2012 If you use your home in a trade or business and you file Schedule C (Form 1040), you will use the Simplified Method Worksheet in your Instructions for Schedule C to figure your deduction. Filing late taxes for 2012 Allowable area. Filing late taxes for 2012   In most cases, the allowable area is the smaller of the actual area (in square feet) of your home used in conducting the business and 300 square feet. Filing late taxes for 2012 Your allowable area may be smaller if you conducted the business as a qualified joint venture with your spouse, the area used by the business was shared with another qualified business use, you used the home for the business for only part of the year, or the area used by the business changed during the year. Filing late taxes for 2012 You can use the Area Adjustment Worksheet (for simplified method), near the end of this publication, to help you figure your allowable area for a qualified business use. Filing late taxes for 2012 Area used by a qualified joint venture. Filing late taxes for 2012   If the qualified business use of the home is also a qualified joint venture, you and your spouse will figure the deduction for the business use separately. Filing late taxes for 2012 Split the actual area used in conducting business between you and your spouse in the same manner you split your other tax attributes. Filing late taxes for 2012 Then, each spouse will figure the allowable area separately. Filing late taxes for 2012 For more information about qualified joint ventures, see Qualified Joint Venture in the Instructions for Schedule C. Filing late taxes for 2012 Shared use. Filing late taxes for 2012   If you share your home with someone else who uses the home to conduct business that also qualifies for this deduction, you may not include the same square feet to figure your deduction as the other person. Filing late taxes for 2012 You must allocate the shared space between you and the other person in a reasonable manner. Filing late taxes for 2012 Example. Filing late taxes for 2012 Kristin and Lindsey are roommates. Filing late taxes for 2012 Kristin uses 300 square feet of their home for a qualified business use. Filing late taxes for 2012 Lindsey uses 200 square feet of their home for a separate qualified business use. Filing late taxes for 2012 The qualified business uses share 100 square feet. Filing late taxes for 2012 In addition to the portion that they do not share, Kristin and Lindsey can both claim 50 of the 100 square feet or divide the 100 square feet between them in any reasonable manner. Filing late taxes for 2012 If divided evenly, Kristin could claim 250 square feet using the simplified method and Lindsey could claim 150 square feet. Filing late taxes for 2012 More than one qualified business use. Filing late taxes for 2012   If you conduct more than one business qualifying for the deduction, you are limited to a maximum of 300 square feet for all of the businesses. Filing late taxes for 2012 Allocate the actual square footage used (up to the maximum of 300 square feet) among your qualified business uses in a reasonable manner. Filing late taxes for 2012 However, do not allocate more square feet to a qualified business use than you actually use for that business. Filing late taxes for 2012 Rental use. Filing late taxes for 2012   The simplified method does not apply to rental use. Filing late taxes for 2012 A rental use that qualifies for the deduction must be figured using actual expenses. Filing late taxes for 2012 If the rental use and a qualified business use share the same area, you will have to allocate the actual area used between the two uses. Filing late taxes for 2012 You cannot use the same area to figure a deduction for the qualified business use as you are using to figure the deduction for the rental use. Filing late taxes for 2012 Part-year use or area changes. Filing late taxes for 2012   If your qualified business use was for a portion of the taxable year (for example, a seasonal business or a business that begins during the taxable year) or you changed the square footage of your qualified business use, your deduction is limited to the average monthly allowable square footage. Filing late taxes for 2012 You calculate the average monthly allowable square footage by adding the amount of allowable square feet you used in each month and dividing the sum by 12. Filing late taxes for 2012 When determining the average monthly allowable square footage, you cannot take more than 300 square feet into account for any one month. Filing late taxes for 2012 Additionally, if your qualified business use was less than 15 days in a month, you must use -0- for that month. Filing late taxes for 2012 Example 1. Filing late taxes for 2012 Andy files his federal income tax return on a calendar year basis. Filing late taxes for 2012 On July 20, he began using 420 square feet of his home for a qualified business use. Filing late taxes for 2012 He continued to use the 420 square feet until the end of the year. Filing late taxes for 2012 His average monthly allowable square footage is 125 square feet, which is figured using 300 square feet for each month August through December divided by the number of months in the taxable year ((0 + 0 + 0 + 0 + 0 + 0 + 0 + 300 + 300 + 300 + 300 + 300)/12). Filing late taxes for 2012 Example 2. Filing late taxes for 2012 Amy files her federal income tax return on a calendar year basis. Filing late taxes for 2012 On April 20, she began using 100 square feet of her home for a qualified business use. Filing late taxes for 2012 On August 5, she expanded the area of her qualified use to 330 square feet. Filing late taxes for 2012 Amy continued to use the 330 square feet until the end of the year. Filing late taxes for 2012 Her average monthly allowable square footage is 150 square feet, which is figured using 100 square feet for May through July and 300 square feet for August through December divided by the number of months in the taxable year ((0 + 0 + 0 + 0 + 100 + 100 +100 + 300 + 300 + 300 + 300 + 300)/12). Filing late taxes for 2012 Gross income limitation. Filing late taxes for 2012   Your deduction for business use of the home is limited to an amount equal to the gross income derived from the qualified business use of the home reduced by the business deductions that are unrelated to the use of your home. Filing late taxes for 2012 If the business deductions that are unrelated to the use of your home are greater than the gross income derived from the qualified business use of your home, then you cannot take a deduction for this qualified business use of your home. Filing late taxes for 2012 Business expenses not related to use of the home. Filing late taxes for 2012   These expenses relate to the business activity in the home, but not to the use of the home itself. Filing late taxes for 2012 You can still deduct business expenses that are unrelated to the use of the home. Filing late taxes for 2012 See Where To Deduct , later. Filing late taxes for 2012 Examples of business expenses that are unrelated to the use of the home are advertising, wages, supplies, dues, and depreciation for equipment. Filing late taxes for 2012 Space used regularly for daycare. Filing late taxes for 2012   If you do not use the area of your home exclusively for daycare, you must reduce the prescribed rate (maximum $5 per square foot) before figuring your deduction. Filing late taxes for 2012 The reduced rate will equal the prescribed rate times a fraction. Filing late taxes for 2012 The numerator of the fraction is the number of hours that the space was used during the year for daycare and the denominator is the total number of hours during the year that the space was available for all uses. Filing late taxes for 2012 You can use the Daycare Facility Worksheet (for simplified method), near the end of this publication, to help you figure the reduced rate. Filing late taxes for 2012    If you used at least 300 square feet for daycare regularly and exclusively during the year, then you do not need to reduce the prescribed rate or complete the Daycare Facility Worksheet. Filing late taxes for 2012 Daycare Facility If you use space in your home on a regular basis for providing daycare, you may be able to claim a deduction for that part of your home even if you use the same space for nonbusiness purposes. Filing late taxes for 2012 To qualify for this exception to the exclusive use rule, you must meet both of the following requirements. Filing late taxes for 2012 You must be in the trade or business of providing daycare for children, persons age 65 or older, or persons who are physically or mentally unable to care for themselves. Filing late taxes for 2012 You must have applied for, been granted, or be exempt from having, a license, certification, registration, or approval as a daycare center or as a family or group daycare home under state law. Filing late taxes for 2012 You do not meet this requirement if your application was rejected or your license or other authorization was revoked. Filing late taxes for 2012 Figuring the deduction. Filing late taxes for 2012   If you elect to use the simplified method for your home, figure your deduction as described earlier in Using the Simplified Method under Figuring the Deduction. Filing late taxes for 2012    If you are figuring your deduction using actual expenses and you regularly use part of your home for daycare, figure what part is used for daycare, as explained in Business Percentage , earlier, under Figuring the Deduction. Filing late taxes for 2012 If you also use that part exclusively for daycare, deduct all the allocable expenses, subject to the deduction limit, as explained earlier. Filing late taxes for 2012   If the use of part of your home as a daycare facility is regular, but not exclusive, you must figure the percentage of time that part of your home is used for daycare. Filing late taxes for 2012 A room that is available for use throughout each business day and that you regularly use in your business is considered to be used for daycare throughout each business day. Filing late taxes for 2012 You do not have to keep records to show the specific hours the area was used for business. Filing late taxes for 2012 You can use the area occasionally for personal reasons. Filing late taxes for 2012 However, a room you use only occasionally for business does not qualify for the deduction. Filing late taxes for 2012 To find the percentage of time you actually use your home for business, compare the total time used for business to the total time that part of your home can be used for all purposes. Filing late taxes for 2012 You can compare the hours of business use in a week with the number of hours in a week (168). Filing late taxes for 2012 Or you can compare the hours of business use for the year with the number of hours in the year (8,760 in 2013). Filing late taxes for 2012 If you started or stopped using your home for daycare in 2013, you must prorate the number of hours based on the number of days the home was available for daycare. Filing late taxes for 2012 Example 1. Filing late taxes for 2012 Mary Lake used her basement to operate a daycare business for children. Filing late taxes for 2012 She figures the business percentage of the basement as follows. Filing late taxes for 2012 Square footage of the basement Square footage of her home = 1,600 3,200 = 50%           She used the basement for daycare an average of 12 hours a day, 5 days a week, for 50 weeks a year. Filing late taxes for 2012 During the other 12 hours a day, the family could use the basement. Filing late taxes for 2012 She figures the percentage of time the basement was used for daycare as follows. Filing late taxes for 2012 Number of hours used for daycare (12 x 5 x 50) Total number of hours in the year (24 x 365) = 3,000 8,760 = 34. Filing late taxes for 2012 25%           Mary can deduct 34. Filing late taxes for 2012 25% of any direct expenses for the basement. Filing late taxes for 2012 However, because her indirect expenses are for the entire house, she can deduct only 17. Filing late taxes for 2012 13% of the indirect expenses. Filing late taxes for 2012 She figures the percentage for her indirect expenses as follows. Filing late taxes for 2012 Business percentage of the basement 50% Multiplied by: Percentage of time used for daycare × 34. Filing late taxes for 2012 25% Percentage for indirect expenses 17. Filing late taxes for 2012 13% Mary completes Form 8829, Part I, figuring the percentage of her home used for business, including the percentage of time the basement was used. Filing late taxes for 2012 In Part II, Mary figures her deductible expenses. Filing late taxes for 2012 She uses the following information to complete Part II. Filing late taxes for 2012 Gross income from her daycare business $50,000 Expenses not related to the business use of the home $25,000 Tentative profit $25,000 Rent $8,400 Utilities $850 Painting the basement $500 Mary enters her tentative profit, $25,000, on line 8. Filing late taxes for 2012 (This figure is the same as the amount on line 29 of her Schedule C (Form 1040). Filing late taxes for 2012 ) The expenses she paid for rent and utilities relate to her entire home. Filing late taxes for 2012 Therefore, she enters the amount paid for rent on line 18, column (b), and the amount paid for utilities on line 20, column (b). Filing late taxes for 2012 She shows the total of these expenses on line 22, column (b). Filing late taxes for 2012 For line 23, she multiplies the amount on line 22, column (b) by the percentage on line 7 and enters the result, $1,585. Filing late taxes for 2012 Mary paid $500 to have the basement painted. Filing late taxes for 2012 The painting is a direct expense. Filing late taxes for 2012 However, because she did not use the basement exclusively for daycare, she must multiply $500 by the percentage of time the basement was used for daycare (34. Filing late taxes for 2012 25% – line 6). Filing late taxes for 2012 She enters $171 (34. Filing late taxes for 2012 25% × $500) on line 19, column (a). Filing late taxes for 2012 She adds line 22, column (a), and line 23 and enters $1,756 ($171 + $1,585) on line 25. Filing late taxes for 2012 This is less than her deduction limit (line 15), so she can deduct the entire amount. Filing late taxes for 2012 She follows the instructions to complete the rest of Part II and enters $1,756 on lines 33 and 35. Filing late taxes for 2012 She then carries the $1,756 to line 30 of her Schedule C (Form 1040). Filing late taxes for 2012 Example 2. Filing late taxes for 2012 Assume the same facts as in Example 1 except that Mary also has another room that was available each business day for children to take naps in. Filing late taxes for 2012 Although she did not keep a record of the number of hours the room was actually used for naps, it was used for part of each business day. Filing late taxes for 2012 Since the room was available for business use during regular operating hours each business day and was used regularly in the business, it is considered used for daycare throughout each business day. Filing late taxes for 2012 The basement and room are 60% of the total area of her home. Filing late taxes for 2012 In figuring her expenses, 34. Filing late taxes for 2012 25% of any direct expenses for the basement and room are deductible. Filing late taxes for 2012 In addition, 20. Filing late taxes for 2012 55% (34. Filing late taxes for 2012 25% × 60%) of her indirect expenses are deductible. Filing late taxes for 2012 Example 3. Filing late taxes for 2012 Assume the same facts as in Example 1 except that Mary stopped using her home for a daycare facility on June 24, 2013. Filing late taxes for 2012 She used the basement for daycare an average of 12 hours a day, 5 days a week, but for only 25 weeks of the year. Filing late taxes for 2012 During the other 12 hours a day, the family could still use the basement. Filing late taxes for 2012 She figures the percentage of time the basement was used for business as follows. Filing late taxes for 2012 Number of hours used for daycare (12 x 5 x 25) Total number of hours during period used (24 x 175) = 1,500 4,200 = 35. Filing late taxes for 2012 71%           Mary can deduct 35. Filing late taxes for 2012 71% of any direct expenses for the basement. Filing late taxes for 2012 However, because her indirect expenses are for the entire house, she can deduct only 17. Filing late taxes for 2012 86% of the indirect expenses. Filing late taxes for 2012 She figures the percentage for her indirect expenses as follows. Filing late taxes for 2012 Business percentage of the basement 50% Multiplied by: Percentage of time used for daycare × 35. Filing late taxes for 2012 71% Percentage for indirect expenses 17. Filing late taxes for 2012 86% Meals. Filing late taxes for 2012   If you provide food for your daycare recipients, do not include the expense as a cost of using your home for business. Filing late taxes for 2012 Claim it as a separate deduction on your Schedule C (Form 1040). Filing late taxes for 2012 You can never deduct the cost of food consumed by you or your family. Filing late taxes for 2012 You can deduct as a business expense 100% of the actual cost of food consumed by your daycare recipients (see Standard meal and snack rates , later, for an optional method for eligible children) and generally only 50% of the cost of food consumed by your employees. Filing late taxes for 2012 However, you can deduct 100% of the cost of food consumed by your employees if its value can be excluded from their wages as a de minimis fringe benefit. Filing late taxes for 2012 For more information on meals that meet these requirements, see Meals in chapter 2 of Publication 15-B, Employer's Tax Guide to Fringe Benefits. Filing late taxes for 2012   If you deduct the actual cost of food for your daycare business, keep a separate record (with receipts) of your family's food costs. Filing late taxes for 2012   Reimbursements you receive from a sponsor under the Child and Adult Care Food Program of the Department of Agriculture are taxable only to the extent they exceed your expenses for food for eligible children. Filing late taxes for 2012 If your reimbursements are more than your expenses for food, show the difference as income in Part I of Schedule C (Form 1040). Filing late taxes for 2012 If your food expenses are greater than the reimbursements, show the difference as an expense in Part V of Schedule C (Form 1040). Filing late taxes for 2012 Do not include payments or expenses for your own children if they are eligible for the program. Filing late taxes for 2012 Follow this procedure even if you receive a Form 1099-MISC, Miscellaneous Income, reporting a payment from the sponsor. Filing late taxes for 2012 Standard meal and snack rates. Filing late taxes for 2012   If you qualify as a family daycare provider, you can use the standard meal and snack rates, instead of actual costs, to compute the deductible cost of meals and snacks provided to eligible children. Filing late taxes for 2012 For these purposes: A family daycare provider is a person engaged in the business of providing family daycare. Filing late taxes for 2012 Family daycare is childcare provided to eligible children in the home of the family daycare provider. Filing late taxes for 2012 The care must be non-medical, not involve a transfer of legal custody, and generally last less than 24 hours each day. Filing late taxes for 2012 Eligible children are minor children receiving family daycare in the home of the family daycare provider. Filing late taxes for 2012 Eligible children do not include children who are full-time or part-time residents in the home where the childcare is provided or children whose parents or guardians are residents of the same home. Filing late taxes for 2012 Eligible children do not include children who receive daycare services for personal reasons of the provider. Filing late taxes for 2012 For example, if a provider provides daycare services for a relative as a favor to that relative, that child is not an eligible child. Filing late taxes for 2012   You can compute the deductible cost of each meal and snack you actually purchased and served to an eligible child during the time period you provided family daycare using the standard meal and snack rates shown in Table 3, later. Filing late taxes for 2012 You can use the standard meal and snack rates for a maximum of one breakfast, one lunch, one dinner, and three snacks per eligible child per day. Filing late taxes for 2012 If you receive reimbursement for a particular meal or snack, you can deduct only the portion of the applicable standard meal or snack rate that is more than the amount of the reimbursement. Filing late taxes for 2012   You can use either the standard meal and snack rates or actual costs to calculate the deductible cost of food provided to eligible children in the family daycare for any particular tax year. Filing late taxes for 2012 If you choose to use the standard meal and snack rates for a particular tax year, you must use the rates for all your deductible food costs for eligible children during that tax year. Filing late taxes for 2012 However, if you use the standard meal and snack rates in any tax year, you can use actual costs to compute the deductible cost of food in any other tax year. Filing late taxes for 2012   If you use the standard meal and snack rates, you must maintain records to substantiate the computation of the total amount deducted for the cost of food provided to eligible children. Filing late taxes for 2012 The records kept should include the name of each child, dates and hours of attendance in the daycare, and the type and quantity of meals and snacks served. Filing late taxes for 2012 This information can be recorded in a log similar to the one shown in Exhibit A, near the end of this publication. Filing late taxes for 2012   The standard meal and snack rates include beverages, but do not include non-food supplies used for food preparation, service, or storage, such as containers, paper products, or utensils. Filing late taxes for 2012 These expenses can be claimed as a separate deduction on your Schedule C (Form 1040). Filing late taxes for 2012     Table 3. Filing late taxes for 2012 Standard Meal and Snack Rates1 Location of Family Daycare Provider Breakfast Lunch Dinner Snack States other than Alaska an
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The Filing Late Taxes For 2012

Filing late taxes for 2012 Publication 534 - Introductory Material Table of Contents Important Change for 1995 Introduction How To Use This Publication Important Change for 1995 Major changes to Publications 534 and 946. Filing late taxes for 2012  This publication, as well as Publication 946,How To Depreciate Property, has been changed. Filing late taxes for 2012 Publication 534 has been shortened. Filing late taxes for 2012 It no longer contains general information on MACRS and the section 179 deduction. Filing late taxes for 2012 It contains a discussion of the accelerated cost recovery system (ACRS), the ACRS Percentage Tables, a discussion of other methods of depreciation, and a limited discussion of listed property. Filing late taxes for 2012 We expanded Publication 946 by adding material taken from Publication 534. Filing late taxes for 2012 We added more detail to the discussions of the section 179 deduction, the modified accelerated cost recovery system (MACRS), and listed property. Filing late taxes for 2012 We replaced the partialMACRS Percentage Tables with the complete ones from Publication 534. Filing late taxes for 2012 We also added the Table of Class Lives and Recovery Periods from Publication 534. Filing late taxes for 2012 We made these changes to eliminate most of the duplication that existed in the two publications. Filing late taxes for 2012 This will save money and make it easier for you to decide which publication you need. Filing late taxes for 2012 Use this publication to figure depreciation on property you placed in service before 1987; use Publication 946 to figure depreciation on property you placed in service after 1986. Filing late taxes for 2012 Introduction The law allows you to recover your cost in business or income-producing property through yearly tax deductions. Filing late taxes for 2012 You do this by depreciating your property, that is, by deducting some of your cost on your tax return each year. Filing late taxes for 2012 You can depreciate both tangible property, such as a car, building, or machinery, and certain intangible property, such as a copyright or a patent. Filing late taxes for 2012 The amount you can deduct depends on: How much the property cost, When you began using it, How long it will take to recover your cost, and Which of several depreciation methods you use. Filing late taxes for 2012 Depreciation defined. Filing late taxes for 2012   Depreciation is a loss in the value of property over the time the property is being used. Filing late taxes for 2012 Events that can cause property to depreciate include wear and tear, age, deterioration, and obsolescence. Filing late taxes for 2012 You can get back your cost of certain property, such as equipment you use in your business or property used for the production of income by taking deductions for depreciation. Filing late taxes for 2012 Black's Law Dictionary Amortization. Filing late taxes for 2012   Amortization is similar to depreciation. Filing late taxes for 2012 Using amortization, you can recover your cost or basis in certain property proportionately over a specific number of years or months. Filing late taxes for 2012 Examples of costs you can amortize are the costs of starting a business, reforestation, and pollution control facilities. Filing late taxes for 2012 You can find information on amortization inchapter 12 of Publication 535, Business Expenses. Filing late taxes for 2012 Alternative minimum tax. Filing late taxes for 2012   If you use accelerated depreciation for real property, or personal property that is leased to others, you may be liable for the alternative minimum tax. Filing late taxes for 2012 Accelerated depreciation is any method, that allows recovery at a faster rate in the earlier years than the straight line method. Filing late taxes for 2012 For more information, you may wish to see the following: Form 6251, Alternative Minimum Tax-Individuals, and Publication 542, Tax Information on Corporations. Filing late taxes for 2012 Ordering publications and forms. Filing late taxes for 2012   To order free publications and forms, 1-800-TAX-FORM (1-800-829-3676). Filing late taxes for 2012 You can also write to the IRS Forms Distribution Center nearest you. Filing late taxes for 2012 Check your income tax package for the address. Filing late taxes for 2012   If you have access to a personal computer and a modem, you can also get many forms and publications electronically. Filing late taxes for 2012 See How To Get Forms and Publications in your income tax package for details. Filing late taxes for 2012 Telephone help. Filing late taxes for 2012   You can call the IRS with your tax question Monday through Friday during regular business hours. Filing late taxes for 2012 Check your telephone book for the local number or you can call1-800-829-1040. Filing late taxes for 2012 Telephone help for hearing-impaired persons. Filing late taxes for 2012   If you have access to TDD equipment, you can call 1-800-829-4059 with your tax question or to order forms and publications. Filing late taxes for 2012 See your tax package for the hours of operation. Filing late taxes for 2012 How To Use This Publication This publication describes the kinds of property that can be depreciated and the methods used to figure depreciation on property placed in service before 1987. Filing late taxes for 2012 It is divided into three chapters and contains an appendix. Filing late taxes for 2012 Chapter 1 explains the rules for depreciating property under the Accelerated Cost Recovery System (ACRS). Filing late taxes for 2012 Chapter 2 explains the rules for depreciating property first used before 1981. Filing late taxes for 2012 Chapter 3 explains the rules for listed property. Filing late taxes for 2012 Also this chapter defines listed property. Filing late taxes for 2012 The appendix contains the ACRS Percentage Tables. Filing late taxes for 2012 Prev  Up  Next   Home   More Online Publications