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Free Irs Tax Preparation

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Free Irs Tax Preparation

Free irs tax preparation 6. Free irs tax preparation   Catch-Up Contributions Table of Contents The most that can be contributed to your 403(b) account is the lesser of your limit on annual additions or your limit on elective deferrals. Free irs tax preparation If you will be age 50 or older by the end of the year, you may also be able to make additional catch-up contributions. Free irs tax preparation These additional contributions cannot be made with after-tax employee contributions. Free irs tax preparation You are eligible to make catch-up contributions if: You will have reached age 50 by the end of the year, and The maximum amount of elective deferrals that can be made to your 403(b) account have been made for the plan year. Free irs tax preparation The maximum amount of catch-up contributions is the lesser of: $5,500 for 2013 and unchanged for 2014, or The excess of your compensation for the year, over the elective deferrals that are not catch-up contributions. Free irs tax preparation Figuring catch-up contributions. Free irs tax preparation   When figuring allowable catch-up contributions, combine all catch-up contributions made by your employer on your behalf to the following plans. Free irs tax preparation Qualified retirement plans. Free irs tax preparation (To determine if your plan is a qualified plan, ask your plan administrator. Free irs tax preparation ) 403(b) plans. Free irs tax preparation Simplified employee pension (SEP) plans. Free irs tax preparation SIMPLE plans. Free irs tax preparation   The total amount of the catch-up contributions on your behalf to all plans maintained by your employer cannot be more than the annual limit. Free irs tax preparation For 2013 the limit is $5,500, unchanged for 2014. Free irs tax preparation    If you are eligible for both the 15-year rule increase in elective deferrals and the age 50 catch-up, allocate amounts first under the 15-year rule and next as an age 50 catch-up. Free irs tax preparation    Catch-up contributions do not affect your MAC. Free irs tax preparation Therefore, the maximum amount that you are allowed to have contributed to your 403(b) account is your MAC plus your allowable catch-up contribution. Free irs tax preparation You can use Worksheet C in chapter 9 to figure your limit on catch-up contributions. Free irs tax preparation Prev  Up  Next   Home   More Online Publications
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LP 68 Frequently Asked Questions (FAQs)

What is the notice telling me?

We have released the Notice of Levy sent to you previously regarding the taxpayer named in the letter.

What do I have to do?

You are no longer required to turn over any money, property, or rights to property belonging to this taxpayer.

How much time do I have?

The levy release is effective immediately upon receipt by you. No other action is required on your part.

Who should I contact?

There is no need to contact us regarding the release. You may inform the taxpayer that you received the release of levy.

Page Last Reviewed or Updated: 30-Jan-2014

The Free Irs Tax Preparation

Free irs tax preparation 5. Free irs tax preparation   Additional Rules for Listed Property Table of Contents Introduction Useful Items - You may want to see: What Is Listed Property?Passenger Automobiles Other Property Used for Transportation Computers and Related Peripheral Equipment Can Employees Claim a Deduction? What Is the Business-Use Requirement?How To Allocate Use Qualified Business Use Recapture of Excess Depreciation Lessee's Inclusion Amount Do the Passenger Automobile Limits Apply?Maximum Depreciation Deduction Deductions After the Recovery Period Deductions For Passenger Automobiles Acquired in a Trade-in What Records Must Be Kept?Adequate Records How Is Listed Property Information Reported? Introduction This chapter discusses the deduction limits and other special rules that apply to certain listed property. Free irs tax preparation Listed property includes cars and other property used for transportation, property used for entertainment, and certain computers. Free irs tax preparation Deductions for listed property (other than certain leased property) are subject to the following special rules and limits. Free irs tax preparation Deduction for employees. Free irs tax preparation If your use of the property is not for your employer's convenience or is not required as a condition of your employment, you cannot deduct depreciation or rent expenses for your use of the property as an employee. Free irs tax preparation Business-use requirement. Free irs tax preparation If the property is not used predominantly (more than 50%) for qualified business use, you cannot claim the section 179 deduction or a special depreciation allowance. Free irs tax preparation In addition, you must figure any depreciation deduction under the Modified Accelerated Cost Recovery System (MACRS) using the straight line method over the ADS recovery period. Free irs tax preparation You may also have to recapture (include in income) any excess depreciation claimed in previous years. Free irs tax preparation A similar inclusion amount applies to certain leased property. Free irs tax preparation Passenger automobile limits and rules. Free irs tax preparation Annual limits apply to depreciation deductions (including section 179 deductions and any special depreciation allowance) for certain passenger automobiles. Free irs tax preparation You can continue to deduct depreciation for the unrecovered basis resulting from these limits after the end of the recovery period. Free irs tax preparation This chapter defines listed property and explains the special rules and depreciation deduction limits that apply, including the special inclusion amount rule for leased property. Free irs tax preparation It also discusses the recordkeeping rules for listed property and explains how to report information about the property on your tax return. Free irs tax preparation Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 535 Business Expenses 587 Business Use of Your Home (Including Use by Daycare Providers) Form (and Instructions) 2106 Employee Business Expenses 2106-EZ Unreimbursed Employee Business Expenses 4562 Depreciation and Amortization 4797 Sales of Business Property See chapter 6 for information about getting publications and forms. Free irs tax preparation What Is Listed Property? Listed property is any of the following. Free irs tax preparation Passenger automobiles (as defined later). Free irs tax preparation Any other property used for transportation, unless it is an excepted vehicle. Free irs tax preparation Property generally used for entertainment, recreation, or amusement (including photographic, phonographic, communication, and video-recording equipment). Free irs tax preparation Computers and related peripheral equipment, unless used only at a regular business establishment and owned or leased by the person operating the establishment. Free irs tax preparation A regular business establishment includes a portion of a dwelling unit that is used both regularly and exclusively for business as discussed in Publication 587. Free irs tax preparation Improvements to listed property. Free irs tax preparation   An improvement made to listed property that must be capitalized is treated as a new item of depreciable property. Free irs tax preparation The recovery period and method of depreciation that apply to the listed property as a whole also apply to the improvement. Free irs tax preparation For example, if you must depreciate the listed property using the straight line method, you also must depreciate the improvement using the straight line method. Free irs tax preparation Passenger Automobiles A passenger automobile is any four-wheeled vehicle made primarily for use on public streets, roads, and highways and rated at 6,000 pounds or less of unloaded gross vehicle weight (6,000 pounds or less of gross vehicle weight for trucks and vans). Free irs tax preparation It includes any part, component, or other item physically attached to the automobile at the time of purchase or usually included in the purchase price of an automobile. Free irs tax preparation The following vehicles are not considered passenger automobiles for these purposes. Free irs tax preparation An ambulance, hearse, or combination ambulance-hearse used directly in a trade or business. Free irs tax preparation A vehicle used directly in the trade or business of transporting persons or property for pay or hire. Free irs tax preparation A truck or van that is a qualified nonpersonal use vehicle. Free irs tax preparation Qualified nonpersonal use vehicles. Free irs tax preparation   Qualified nonpersonal use vehicles are vehicles that by their nature are not likely to be used more than a minimal amount for personal purposes. Free irs tax preparation They include the trucks and vans listed as excepted vehicles under Other Property Used for Transportation , next. Free irs tax preparation They also include trucks and vans that have been specially modified so that they are not likely to be used more than a minimal amount for personal purposes, such as by installation of permanent shelving and painting the vehicle to display advertising or the company's name. Free irs tax preparation For a detailed discussion of passenger automobiles, including leased passenger automobiles, see  Publication 463. Free irs tax preparation Other Property Used for Transportation Although vehicles used to transport persons or property for pay or hire and vehicles rated at more than the 6,000-pound threshold are not passenger automobiles, they are still “other property used for transportation” and are subject to the special rules for listed property. Free irs tax preparation Other property used for transportation includes trucks, buses, boats, airplanes, motorcycles, and any other vehicles used to transport persons or goods. Free irs tax preparation Excepted vehicles. Free irs tax preparation   Other property used for transportation does not include the following qualified nonpersonal use vehicles (defined earlier under Passenger Automobiles ). Free irs tax preparation Clearly marked police and fire vehicles. Free irs tax preparation Unmarked vehicles used by law enforcement officers if the use is officially authorized. Free irs tax preparation Ambulances used as such and hearses used as such. Free irs tax preparation Any vehicle with a loaded gross vehicle weight of over 14,000 pounds that is designed to carry cargo. Free irs tax preparation Bucket trucks (cherry pickers), cement mixers, dump trucks (including garbage trucks), flatbed trucks, and refrigerated trucks. Free irs tax preparation Combines, cranes and derricks, and forklifts. Free irs tax preparation Delivery trucks with seating only for the driver, or only for the driver plus a folding jump seat. Free irs tax preparation Qualified moving vans. Free irs tax preparation Qualified specialized utility repair trucks. Free irs tax preparation School buses used in transporting students and employees of schools. Free irs tax preparation Other buses with a capacity of at least 20 passengers that are used as passenger buses. Free irs tax preparation Tractors and other special purpose farm vehicles. Free irs tax preparation Clearly marked police and fire vehicle. Free irs tax preparation   A clearly marked police or fire vehicle is a vehicle that meets all the following requirements. Free irs tax preparation It is owned or leased by a governmental unit or an agency or instrumentality of a governmental unit. Free irs tax preparation It is required to be used for commuting by a police officer or fire fighter who, when not on a regular shift, is on call at all times. Free irs tax preparation It is prohibited from being used for personal use (other than commuting) outside the limit of the police officer's arrest powers or the fire fighter's obligation to respond to an emergency. Free irs tax preparation It is clearly marked with painted insignia or words that make it readily apparent that it is a police or fire vehicle. Free irs tax preparation A marking on a license plate is not a clear marking for these purposes. Free irs tax preparation Qualified moving van. Free irs tax preparation   A qualified moving van is any truck or van used by a professional moving company for moving household or business goods if the following requirements are met. Free irs tax preparation No personal use of the van is allowed other than for travel to and from a move site or for minor personal use, such as a stop for lunch on the way from one move site to another. Free irs tax preparation Personal use for travel to and from a move site happens no more than five times a month on average. Free irs tax preparation Personal use is limited to situations in which it is more convenient to the employer, because of the location of the employee's residence in relation to the location of the move site, for the van not to be returned to the employer's business location. Free irs tax preparation Qualified specialized utility repair truck. Free irs tax preparation   A truck is a qualified specialized utility repair truck if it is not a van or pickup truck and all the following apply. Free irs tax preparation The truck was specifically designed for and is used to carry heavy tools, testing equipment, or parts. Free irs tax preparation Shelves, racks, or other permanent interior construction has been installed to carry and store the tools, equipment, or parts and would make it unlikely that the truck would be used, other than minimally, for personal purposes. Free irs tax preparation The employer requires the employee to drive the truck home in order to be able to respond in emergency situations for purposes of restoring or maintaining electricity, gas, telephone, water, sewer, or steam utility services. Free irs tax preparation Computers and Related Peripheral Equipment A computer is a programmable, electronically activated device capable of accepting information, applying prescribed processes to the information, and supplying the results of those processes with or without human intervention. Free irs tax preparation It consists of a central processing unit with extensive storage, logic, arithmetic, and control capabilities. Free irs tax preparation Related peripheral equipment is any auxiliary machine which is designed to be controlled by the central processing unit of a computer. Free irs tax preparation The following are neither computers nor related peripheral equipment. Free irs tax preparation Any equipment that is an integral part of other property that is not a computer. Free irs tax preparation Typewriters, calculators, adding and accounting machines, copiers, duplicating equipment, and similar equipment. Free irs tax preparation Equipment of a kind used primarily for the user's amusement or entertainment, such as video games. Free irs tax preparation Can Employees Claim a Deduction? If you are an employee, you can claim a depreciation deduction for the use of your listed property (whether owned or rented) in performing services as an employee only if your use is a business use. Free irs tax preparation The use of your property in performing services as an employee is a business use only if both the following requirements are met. Free irs tax preparation The use is for your employer's convenience. Free irs tax preparation The use is required as a condition of your employment. Free irs tax preparation If these requirements are not met, you cannot deduct depreciation (including the section 179 deduction) or rent expenses for your use of the property as an employee. Free irs tax preparation Employer's convenience. Free irs tax preparation   Whether the use of listed property is for your employer's convenience must be determined from all the facts. Free irs tax preparation The use is for your employer's convenience if it is for a substantial business reason of the employer. Free irs tax preparation The use of listed property during your regular working hours to carry on your employer's business generally is for the employer's convenience. Free irs tax preparation Condition of employment. Free irs tax preparation   Whether the use of listed property is a condition of your employment depends on all the facts and circumstances. Free irs tax preparation The use of property must be required for you to perform your duties properly. Free irs tax preparation Your employer does not have to require explicitly that you use the property. Free irs tax preparation However, a mere statement by the employer that the use of the property is a condition of your employment is not sufficient. Free irs tax preparation Example 1. Free irs tax preparation Virginia Sycamore is employed as a courier with We Deliver, which provides local courier services. Free irs tax preparation She owns and uses a motorcycle to deliver packages to downtown offices. Free irs tax preparation We Deliver explicitly requires all delivery persons to own a car or motorcycle for use in their employment. Free irs tax preparation Virginia's use of the motorcycle is for the convenience of We Deliver and is required as a condition of employment. Free irs tax preparation Example 2. Free irs tax preparation Bill Nelson is an inspector for Uplift, a construction company with many sites in the local area. Free irs tax preparation He must travel to these sites on a regular basis. Free irs tax preparation Uplift does not furnish an automobile or explicitly require him to use his own automobile. Free irs tax preparation However, it pays him for any costs he incurs in traveling to the various sites. Free irs tax preparation The use of his own automobile or a rental automobile is for the convenience of Uplift and is required as a condition of employment. Free irs tax preparation Example 3. Free irs tax preparation Assume the same facts as in Example 2 except that Uplift furnishes a car to Bill, who chooses to use his own car and receive payment for using it. Free irs tax preparation The use of his own car is neither for the convenience of Uplift nor required as a condition of employment. Free irs tax preparation Example 4. Free irs tax preparation Marilyn Lee is a pilot for Y Company, a small charter airline. Free irs tax preparation Y requires pilots to obtain 80 hours of flight time annually in addition to flight time spent with the airline. Free irs tax preparation Pilots usually can obtain these hours by flying with the Air Force Reserve or by flying part-time with another airline. Free irs tax preparation Marilyn owns her own airplane. Free irs tax preparation The use of her airplane to obtain the required flight hours is neither for the convenience of the employer nor required as a condition of employment. Free irs tax preparation Example 5. Free irs tax preparation David Rule is employed as an engineer with Zip, an engineering contracting firm. Free irs tax preparation He occasionally takes work home at night rather than work late in the office. Free irs tax preparation He owns and uses a home computer which is virtually identical to the office model. Free irs tax preparation His use of the computer is neither for the convenience of his employer nor required as a condition of employment. Free irs tax preparation What Is the Business-Use Requirement? You can claim the section 179 deduction and a special depreciation allowance for listed property and depreciate listed property using GDS and a declining balance method if the property meets the business-use requirement. Free irs tax preparation To meet this requirement, listed property must be used predominantly (more than 50% of its total use) for qualified business use. Free irs tax preparation If this requirement is not met, the following rules apply. Free irs tax preparation Property not used predominantly for qualified business use during the year it is placed in service does not qualify for the section 179 deduction. Free irs tax preparation Property not used predominantly for qualified business use during the year it is placed in service does not qualify for a special depreciation allowance. Free irs tax preparation Any depreciation deduction under MACRS for property not used predominantly for qualified business use during any year must be figured using the straight line method over the ADS recovery period. Free irs tax preparation This rule applies each year of the recovery period. Free irs tax preparation Excess depreciation on property previously used predominantly for qualified business use must be recaptured (included in income) in the first year in which it is no longer used predominantly for qualified business use. Free irs tax preparation A lessee must add an inclusion amount to income in the first year in which the leased property is not used predominantly for qualified business use. Free irs tax preparation Being required to use the straight line method for an item of listed property not used predominantly for qualified business use is not the same as electing the straight line method. Free irs tax preparation It does not mean that you have to use the straight line method for other property in the same class as the item of listed property. Free irs tax preparation Exception for leased property. Free irs tax preparation   The business-use requirement generally does not apply to any listed property leased or held for leasing by anyone regularly engaged in the business of leasing listed property. Free irs tax preparation   You are considered regularly engaged in the business of leasing listed property only if you enter into contracts for the leasing of listed property with some frequency over a continuous period of time. Free irs tax preparation This determination is made on the basis of the facts and circumstances in each case and takes into account the nature of your business in its entirety. Free irs tax preparation Occasional or incidental leasing activity is insufficient. Free irs tax preparation For example, if you lease only one passenger automobile during a tax year, you are not regularly engaged in the business of leasing automobiles. Free irs tax preparation An employer who allows an employee to use the employer's property for personal purposes and charges the employee for the use is not regularly engaged in the business of leasing the property used by the employee. Free irs tax preparation How To Allocate Use To determine whether the business-use requirement is met, you must allocate the use of any item of listed property used for more than one purpose during the year among its various uses. Free irs tax preparation For passenger automobiles and other means of transportation, allocate the property's use on the basis of mileage. Free irs tax preparation You determine the percentage of qualified business use by dividing the number of miles you drove the vehicle for business purposes during the year by the total number of miles you drove the vehicle for all purposes (including business miles) during the year. Free irs tax preparation For other listed property, allocate the property's use on the basis of the most appropriate unit of time the property is actually used (rather than merely being available for use). Free irs tax preparation For example, you can determine the percentage of business use of a computer by dividing the number of hours you used the computer for business purposes during the year by the total number of hours you used the computer for all purposes (including business use) during the year. Free irs tax preparation Entertainment use. Free irs tax preparation   Treat the use of listed property for entertainment, recreation, or amusement purposes as a business use only to the extent you can deduct expenses (other than interest and property tax expenses) due to its use as an ordinary and necessary business expense. Free irs tax preparation Commuting use. Free irs tax preparation   The use of an automobile for commuting is not business use, regardless of whether work is performed during the trip. Free irs tax preparation For example, a business telephone call made on a car telephone while commuting to work does not change the character of the trip from commuting to business. Free irs tax preparation This is also true for a business meeting held in a car while commuting to work. Free irs tax preparation Similarly, a business call made on an otherwise personal trip does not change the character of a trip from personal to business. Free irs tax preparation The fact that an automobile is used to display material that advertises the owner's or user's trade or business does not convert an otherwise personal use into business use. Free irs tax preparation Use of your automobile by another person. Free irs tax preparation   If someone else uses your automobile, do not treat that use as business use unless one of the following conditions applies. Free irs tax preparation That use is directly connected with your business. Free irs tax preparation You properly report the value of the use as income to the other person and withhold tax on the income where required. Free irs tax preparation You are paid a fair market rent. Free irs tax preparation Treat any payment to you for the use of the automobile as a rent payment for purposes of item (3). Free irs tax preparation Employee deductions. Free irs tax preparation   If you are an employee, do not treat your use of listed property as business use unless it is for your employer's convenience and is required as a condition of your employment. Free irs tax preparation See Can Employees Claim a Deduction , earlier. Free irs tax preparation Qualified Business Use Qualified business use of listed property is any use of the property in your trade or business. Free irs tax preparation However, it does not include the following uses. Free irs tax preparation The leasing of property to any 5% owner or related person (to the extent the property is used by a 5% owner or person related to the owner or lessee of the property). Free irs tax preparation The use of property as pay for the services of a 5% owner or related person. Free irs tax preparation The use of property as pay for services of any person (other than a 5% owner or related person), unless the value of the use is included in that person's gross income and income tax is withheld on that amount where required. Free irs tax preparation Property does not stop being used predominantly for qualified business use because of a transfer at death. Free irs tax preparation Exception for leasing or compensatory use of aircraft. Free irs tax preparation   Treat the leasing of any aircraft by a 5% owner or related person, or the compensatory use of any aircraft, as a qualified business use if at least 25% of the total use of the aircraft during the year is for a qualified business use. Free irs tax preparation 5% owner. Free irs tax preparation   For a business entity that is not a corporation, a 5% owner is any person who owns more than 5% of the capital or profits interest in the business. Free irs tax preparation   For a corporation, a 5% owner is any person who owns, or is considered to own, either of the following. Free irs tax preparation More than 5% of the outstanding stock of the corporation. Free irs tax preparation Stock possessing more than 5% of the total combined voting power of all stock in the corporation. Free irs tax preparation Related persons. Free irs tax preparation   For a description of related persons, see Related persons in the discussion on property owned or used in 1986 under What Method Can You Use To Depreciate Your Property in chapter 1 . Free irs tax preparation For this purpose, however, treat as related persons only the relationships listed in items (1) through (10) of that discussion and substitute “50%” for “10%” each place it appears. Free irs tax preparation Examples. Free irs tax preparation   The following examples illustrate whether the use of business property is qualified business use. Free irs tax preparation Example 1. Free irs tax preparation John Maple is the sole proprietor of a plumbing contracting business. Free irs tax preparation John employs his brother, Richard, in the business. Free irs tax preparation As part of Richard's pay, he is allowed to use one of the company automobiles for personal use. Free irs tax preparation The company includes the value of the personal use of the automobile in Richard's gross income and properly withholds tax on it. Free irs tax preparation The use of the automobile is pay for the performance of services by a related person, so it is not a qualified business use. Free irs tax preparation Example 2. Free irs tax preparation John, in Example 1, allows unrelated employees to use company automobiles for personal purposes. Free irs tax preparation He does not include the value of the personal use of the company automobiles as part of their compensation and he does not withhold tax on the value of the use of the automobiles. Free irs tax preparation This use of company automobiles by employees is not a qualified business use. Free irs tax preparation Example 3. Free irs tax preparation James Company Inc. Free irs tax preparation owns several automobiles that its employees use for business purposes. Free irs tax preparation The employees also are allowed to take the automobiles home at night. Free irs tax preparation The fair market value of each employee's use of an automobile for any personal purpose, such as commuting to and from work, is reported as income to the employee and James Company withholds tax on it. Free irs tax preparation This use of company automobiles by employees, even for personal purposes, is a qualified business use for the company. Free irs tax preparation Investment Use The use of property to produce income in a nonbusiness activity (investment use) is not a qualified business use. Free irs tax preparation However, you can treat the investment use as business use to figure the depreciation deduction for the property in a given year. Free irs tax preparation Example 1. Free irs tax preparation Sarah Bradley uses a home computer 50% of the time to manage her investments. Free irs tax preparation She also uses the computer 40% of the time in her part-time consumer research business. Free irs tax preparation Sarah's home computer is listed property because it is not used at a regular business establishment. Free irs tax preparation She does not use the computer predominantly for qualified business use. Free irs tax preparation Therefore, she cannot elect a section 179 deduction or claim a special depreciation allowance for the computer. Free irs tax preparation She must depreciate it using the straight line method over the ADS recovery period. Free irs tax preparation Her combined business/investment use for determining her depreciation deduction is 90%. Free irs tax preparation Example 2. Free irs tax preparation If Sarah uses her computer 30% of the time to manage her investments and 60% of the time in her consumer research business, it is used predominantly for qualified business use. Free irs tax preparation She can elect a section 179 deduction and, if she does not deduct all the computer's cost, she can claim a special depreciation allowance and depreciate the computer using the 200% declining balance method over the GDS recovery period. Free irs tax preparation Her combined business/investment use for determining her depreciation deduction is 90%. Free irs tax preparation Recapture of Excess Depreciation If you used listed property more than 50% in a qualified business use in the year you placed it in service, you must recapture (include in income) excess depreciation in the first year you use it 50% or less. Free irs tax preparation You also increase the adjusted basis of your property by the same amount. Free irs tax preparation Excess depreciation is: The depreciation allowable for the property (including any section 179 deduction and special depreciation allowance claimed) for years before the first year you do not use the property predominantly for qualified business use, minus The depreciation that would have been allowable for those years if you had not used the property predominantly for qualified business use in the year you placed it in service. Free irs tax preparation To determine the amount in (2) above, you must refigure the depreciation using the straight line method and the ADS recovery period. Free irs tax preparation Example. Free irs tax preparation In June 2009, Ellen Rye purchased and placed in service a pickup truck that cost $18,000. Free irs tax preparation She used it only for qualified business use for 2009 through 2012. Free irs tax preparation Ellen claimed a section 179 deduction of $10,000 based on the purchase of the truck. Free irs tax preparation She began depreciating it using the 200% DB method over a 5-year GDS recovery period. Free irs tax preparation The pickup truck's gross vehicle weight was over 6,000 pounds, so it was not subject to the passenger automobile limits discussed later under Do the Passenger Automobile Limits Apply. Free irs tax preparation During 2013, she used the truck 50% for business and 50% for personal purposes. Free irs tax preparation She includes $4,018 excess depreciation in her gross income for 2013. Free irs tax preparation The excess depreciation is determined as follows. Free irs tax preparation Total section 179 deduction ($10,000) and depreciation claimed ($6,618) for 2009 through 2012. Free irs tax preparation (Depreciation is from Table A-1. Free irs tax preparation ) $16,618 Minus: Depreciation allowable (Table A-8):     2009 – 10% of $18,000 $1,800   2010 – 20% of $18,000 3,600   2011 – 20% of $18,000 3,600   2012 – 20% of $18,000 3,600 12,600 Excess depreciation $4,018 If Ellen's use of the truck does not change to 50% for business and 50% for personal purposes until 2015, there will be no excess depreciation. Free irs tax preparation The total depreciation allowable using Table A-8 through 2015 will be $18,000, which equals the total of the section 179 deduction and depreciation she will have claimed. Free irs tax preparation Where to figure and report recapture. Free irs tax preparation   Use Form 4797, Part IV, to figure the recapture amount. Free irs tax preparation Report the recapture amount as other income on the same form or schedule on which you took the depreciation deduction. Free irs tax preparation For example, report the recapture amount as other income on Schedule C (Form 1040) if you took the depreciation deduction on Schedule C. Free irs tax preparation If you took the depreciation deduction on Form 2106, report the recapture amount as other income on Form 1040, line 21. Free irs tax preparation Lessee's Inclusion Amount If you use leased listed property other than a passenger automobile for business/investment use, you must include an amount in your income in the first year your qualified business-use percentage is 50% or less. Free irs tax preparation Your qualified business-use percentage is the part of the property's total use that is qualified business use (defined earlier). Free irs tax preparation For the inclusion amount rules for a leased passenger automobile, see Leasing a Car in chapter 4 of Publication 463. Free irs tax preparation The inclusion amount is the sum of Amount A and Amount B, described next. Free irs tax preparation However, see the special rules for the inclusion amount, later, if your lease begins in the last 9 months of your tax year or is for less than one year. Free irs tax preparation Amount A. Free irs tax preparation   Amount A is: The fair market value of the property, multiplied by The business/investment use for the first tax year the qualified business-use percentage is 50% or less, multiplied by The applicable percentage from Table A-19 in Appendix A . Free irs tax preparation   The fair market value of the property is the value on the first day of the lease term. Free irs tax preparation If the capitalized cost of an item of listed property is specified in the lease agreement, you must treat that amount as the fair market value. Free irs tax preparation Amount B. Free irs tax preparation   Amount B is: The fair market value of the property, multiplied by The average of the business/investment use for all tax years the property was leased that precede the first tax year the qualified business-use percentage is 50% or less, multiplied by The applicable percentage from Table A–20 in Appendix A . Free irs tax preparation Maximum inclusion amount. Free irs tax preparation   The inclusion amount cannot be more than the sum of the deductible amounts of rent for the tax year in which the lessee must include the amount in gross income. Free irs tax preparation Inclusion amount worksheet. Free irs tax preparation   The following worksheet is provided to help you figure the inclusion amount for leased listed property. Free irs tax preparation Inclusion Amount Worksheet for Leased Listed Property 1. Free irs tax preparation Fair market value   2. Free irs tax preparation Business/investment use for first year business use is 50% or less   3. Free irs tax preparation Multiply line 1 by line 2. Free irs tax preparation   4. Free irs tax preparation Rate (%) from Table A-19   5. Free irs tax preparation Multiply line 3 by line 4. Free irs tax preparation This is Amount A. Free irs tax preparation   6. Free irs tax preparation Fair market value   7. Free irs tax preparation Average business/investment use for years property leased before the first year business use is 50% or less . Free irs tax preparation . Free irs tax preparation . Free irs tax preparation . Free irs tax preparation . Free irs tax preparation . Free irs tax preparation . Free irs tax preparation . Free irs tax preparation . Free irs tax preparation . Free irs tax preparation . Free irs tax preparation . Free irs tax preparation . Free irs tax preparation   8. Free irs tax preparation Multiply line 6 by line 7   9. Free irs tax preparation Rate (%) from Table A-20   10. Free irs tax preparation Multiply line 8 by line 9. Free irs tax preparation This is Amount B. Free irs tax preparation   11. Free irs tax preparation Add line 5 and line 10. Free irs tax preparation This is your inclusion amount. Free irs tax preparation Enter here and as other income on the form or schedule on which you originally took the deduction (for example, Schedule C or F (Form 1040), Form 1040, Form 1120, etc. Free irs tax preparation )         Example. Free irs tax preparation On February 1, 2011, Larry House, a calendar year taxpayer, leased and placed in service a computer with a fair market value of $3,000. Free irs tax preparation The lease is for a period of 5 years. Free irs tax preparation Larry does not use the computer at a regular business establishment, so it is listed property. Free irs tax preparation His business use of the property (all of which is qualified business use) is 80% in 2011, 60% in 2012, and 40% in 2013. Free irs tax preparation He must add an inclusion amount to gross income for 2013, the first tax year his qualified business-use percentage is 50% or less. Free irs tax preparation The computer has a 5-year recovery period under both GDS and ADS. Free irs tax preparation 2013 is the third tax year of the lease, so the applicable percentage from Table A-19 is −19. Free irs tax preparation 8%. Free irs tax preparation The applicable percentage from Table A-20 is 22. Free irs tax preparation 0%. Free irs tax preparation Larry's deductible rent for the computer for 2013 is $800. Free irs tax preparation Larry uses the Inclusion amount worksheet. Free irs tax preparation to figure the amount he must include in income for 2013. Free irs tax preparation His inclusion amount is $224, which is the sum of −$238 (Amount A) and $462 (Amount B). Free irs tax preparation Inclusion Amount Worksheet for Leased Listed Property 1. Free irs tax preparation Fair market value $3,000   2. Free irs tax preparation Business/investment use for first year business use is 50% or less 40 % 3. Free irs tax preparation Multiply line 1 by line 2. Free irs tax preparation 1,200   4. Free irs tax preparation Rate (%) from Table A-19 −19. Free irs tax preparation 8 % 5. Free irs tax preparation Multiply line 3 by line 4. Free irs tax preparation This is Amount A. Free irs tax preparation −238   6. Free irs tax preparation Fair market value 3,000   7. Free irs tax preparation Average business/investment use for years property leased before the first year business use is 50% or less 70 % 8. Free irs tax preparation Multiply line 6 by line 7 2,100   9. Free irs tax preparation Rate (%) from Table A-20 22. Free irs tax preparation 0 % 10. Free irs tax preparation Multiply line 8 by line 9. Free irs tax preparation This is Amount B. Free irs tax preparation 462   11. Free irs tax preparation Add line 5 and line 10. Free irs tax preparation This is your inclusion amount. Free irs tax preparation Enter here and as other income on the form or schedule on which you originally took the deduction (for example, Schedule C or F (Form 1040), Form 1040, Form 1120, etc. Free irs tax preparation ) $224           Lease beginning in the last 9 months of your tax year. Free irs tax preparation    The inclusion amount is subject to a special rule if all the following apply. Free irs tax preparation The lease term begins within 9 months before the close of your tax year. Free irs tax preparation You do not use the property predominantly (more than 50%) for qualified business use during that part of the tax year. Free irs tax preparation The lease term continues into your next tax year. Free irs tax preparation Under this special rule, add the inclusion amount to income in the next tax year. Free irs tax preparation Figure the inclusion amount by taking into account the average of the business/investment use for both tax years (line 2 of the Inclusion Amount Worksheet for Leased Listed Property) and the applicable percentage for the tax year the lease term begins. Free irs tax preparation Skip lines 6 through 9 of the worksheet and enter zero on line 10. Free irs tax preparation Example 1. Free irs tax preparation On August 1, 2012, Julie Rule, a calendar year taxpayer, leased and placed in service an item of listed property. Free irs tax preparation The property is 5-year property with a fair market value of $10,000. Free irs tax preparation Her property has a recovery period of 5 years under ADS. Free irs tax preparation The lease is for 5 years. Free irs tax preparation Her business use of the property was 50% in 2012 and 90% in 2013. Free irs tax preparation She paid rent of $3,600 for 2012, of which $3,240 is deductible. Free irs tax preparation She must include $147 in income in 2013. Free irs tax preparation The $147 is the sum of Amount A and Amount B. Free irs tax preparation Amount A is $147 ($10,000 × 70% × 2. Free irs tax preparation 1%), the product of the fair market value, the average business use for 2012 and 2013, and the applicable percentage for year one from Table A-19 . Free irs tax preparation Amount B is zero. Free irs tax preparation Lease for less than one year. Free irs tax preparation   A special rule for the inclusion amount applies if the lease term is less than one year and you do not use the property predominantly (more than 50%) for qualified business use. Free irs tax preparation The amount included in income is the inclusion amount (figured as described in the preceding discussions) multiplied by a fraction. Free irs tax preparation The numerator of the fraction is the number of days in the lease term and the denominator is 365 (or 366 for leap years). Free irs tax preparation   The lease term for listed property other than residential rental or nonresidential real property includes options to renew. Free irs tax preparation If you have two or more successive leases that are part of the same transaction (or a series of related transactions) for the same or substantially similar property, treat them as one lease. Free irs tax preparation Example 2. Free irs tax preparation On October 1, 2012, John Joyce, a calendar year taxpayer, leased and placed in service an item of listed property that is 3-year property. Free irs tax preparation This property had a fair market value of $15,000 and a recovery period of 5 years under ADS. Free irs tax preparation The lease term was 6 months (ending on March 31, 2013), during which he used the property 45% in business. Free irs tax preparation He must include $71 in income in 2013. Free irs tax preparation The $71 is the sum of Amount A and Amount B. Free irs tax preparation Amount A is $71 ($15,000 × 45% × 2. Free irs tax preparation 1% × 183/365), the product of the fair market value, the average business use for both years, and the applicable percentage for year one from Table A-19 , prorated for the length of the lease. Free irs tax preparation Amount B is zero. Free irs tax preparation Where to report inclusion amount. Free irs tax preparation   Report the inclusion amount figured as described in the preceding discussions as other income on the same form or schedule on which you took the deduction for your rental costs. Free irs tax preparation For example, report the inclusion amount as other income on Schedule C (Form 1040) if you took the deduction on Schedule C. Free irs tax preparation If you took the deduction for rental costs on Form 2106, report the inclusion amount as other income on Form 1040, line 21. Free irs tax preparation Do the Passenger Automobile Limits Apply? The depreciation deduction, including the section 179 deduction and special depreciation allowance, you can claim for a passenger automobile (defined earlier) each year is limited. Free irs tax preparation This section describes the maximum depreciation deduction amounts for 2013 and explains how to deduct, after the recovery period, the unrecovered basis of your property that results from applying the passenger automobile limit. Free irs tax preparation Exception for leased cars. Free irs tax preparation   The passenger automobile limits generally do not apply to passenger automobiles leased or held for leasing by anyone regularly engaged in the business of leasing passenger automobiles. Free irs tax preparation For information on when you are considered regularly engaged in the business of leasing listed property, including passenger automobiles, see Exception for leased property , earlier, under What Is the Business-Use Requirement . Free irs tax preparation Maximum Depreciation Deduction The passenger automobile limits are the maximum depreciation amounts you can deduct for a passenger automobile. Free irs tax preparation They are based on the date you placed the automobile in service. Free irs tax preparation Passenger Automobiles The maximum deduction amounts for most passenger automobiles are shown in the following table. Free irs tax preparation Maximum Depreciation Deduction for Passenger Automobiles Date       4th & Placed 1st 2nd 3rd Later In Service Year Year Year Years 2013 $11,1601 $5,100 $3,050 $1,875 2012 11,1601 5,100 3,050 1,875 2011 11,0602 4,900 2,950 1,775 2010 11,0602  4,900 2,950 1,775 2009 10,9603 4,800 2,850 1,775 2008 10,9603  4,800 2,850 1,775 2007 3,060 4,900 2,850 1,775 2006 2,960 4,800 2,850 1,775 2005 2,960 4,700 2,850 1,675 2004 10,6104 4,800 2,850 1,675 5/06/2003– 12/31/2003 10,7105 4,900 2,950 1,775 1/01/2003– 5/05/2003 7,6606 4,900 2,950 1,775 1If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,160. Free irs tax preparation 2If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,060. Free irs tax preparation 3If you elected not to claim any special depreciation allowance for the vehicle or the vehicle is not qualified property, the maximum deduction is $2,960. Free irs tax preparation 4If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $2,960. Free irs tax preparation 5If you acquired the vehicle before 5/06/03, the maximum deduction is $7,660. Free irs tax preparation If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $3,060. Free irs tax preparation 6If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $3,060. Free irs tax preparation If your business/investment use of the automobile is less than 100%, you must reduce the maximum deduction amount by multiplying the maximum amount by the percentage of business/investment use determined on an annual basis during the tax year. Free irs tax preparation If you have a short tax year, you must reduce the maximum deduction amount by multiplying the maximum amount by a fraction. Free irs tax preparation The numerator of the fraction is the number of months and partial months in the short tax year and the denominator is 12. Free irs tax preparation Example. Free irs tax preparation On April 15, 2013, Virginia Hart bought and placed in service a new car for $14,500. Free irs tax preparation She used the car only in her business. Free irs tax preparation She files her tax return based on the calendar year. Free irs tax preparation She does not elect a section 179 deduction and elected not to claim any special depreciation allowance for the car. Free irs tax preparation Under MACRS, a car is 5-year property. Free irs tax preparation Since she placed her car in service on April 15 and used it only for business, she uses the percentages in Table A-1 to figure her MACRS depreciation on the car. Free irs tax preparation Virginia multiplies the $14,500 unadjusted basis of her car by 0. Free irs tax preparation 20 to get her MACRS depreciation of $2,900 for 2013. Free irs tax preparation This $2,900 is below the maximum depreciation deduction of $3,160 for passenger automobiles placed in service in 2013. Free irs tax preparation She can deduct the full $2,900. Free irs tax preparation Electric Vehicles The maximum depreciation deductions for passenger automobiles that are produced to run primarily on electricity are higher than those for other automobiles. Free irs tax preparation The maximum deduction amounts for electric vehicles placed in service after August 5, 1997, and before January 1, 2007, are shown in the following table. Free irs tax preparation Owners of electric vehicles placed in service after December 31, 2006, should use the table of maximum deduction amounts later for electric vehicles classified as passenger automobiles or use the table of maximum deduction amounts for trucks and vans later, for electric vehicles classified as trucks and vans. Free irs tax preparation Maximum Depreciation Deduction For Electric Vehicles Date       4th & Placed 1st 2nd 3rd Later In Service Year Year Year Years 2006 $8,980 $14,400 $8,650 $5,225 2005 8,880 14,200 8,450 5,125 2004 31,8301 14,300 8,550 5,125 5/06/2003– 12/31/2003 32,0302 14,600 8,750 5,225 1/01/2003– 5/05/2003 22,8803 14,600 8,750 5,225 1If you elected not to claim any special depreciation allowance for the vehicle or the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $8,880. Free irs tax preparation 2If you acquired the vehicle before 5/06/03, the maximum deduction is $22,880. Free irs tax preparation If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $9,080. Free irs tax preparation 3 If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $9,080. Free irs tax preparation Trucks and Vans The maximum depreciation deductions for trucks and vans placed in service after 2002 are higher than those for other passenger automobiles. Free irs tax preparation The maximum deduction amounts for trucks and vans are shown in the following table. Free irs tax preparation Maximum Depreciation Deduction For Trucks and Vans Date       4th & Placed 1st 2nd 3rd Later In Service Year Year Year Years 2013 $11,3601 $5,400 $3,250 $1,975 2012 11,3601 5,300 3,150 1,875 2011 11,2602 5,200 3,150 1,875 2010 11,1603 5,100 3,050 1,875 2009 11,0604 4,900 2,950 1,775 2008 11,1605 5,100 3,050 1,875 2007 3,260 5,200 3,050 1,875 2006 3,260 5,200 3,150 1,875 2005 3,260 5,200 3,150 1,875 2004 10,9106 5,300 3,150 1,875 5/06/2003– 12/31/2003 11,0107 5,400 3,250 1,975 1/01/2003– 5/05/2003 7,9608 5,400 3,250 1,975 1 If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,360. Free irs tax preparation 2 If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,260. Free irs tax preparation 3 If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,160. Free irs tax preparation 4 If you elect not to claim any special depreciation allowance for the vehicle or the vehicle is not qualified property, the maximum deduction is $3,060. Free irs tax preparation 5If you elected not to claim any special depreciation allowance for the vehicle or the vehicle is not qualified property, the maximum deduction is $3,160. Free irs tax preparation 6If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, or the maximum deduction is $3,260. Free irs tax preparation 7 If you acquired the vehicle before 5/06/03, the maximum deduction is $7,960. Free irs tax preparation If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $3,360. Free irs tax preparation 8 If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $3,360. Free irs tax preparation Depreciation Worksheet for Passenger Automobiles You can use the following worksheet to figure your depreciation deduction using the percentage tables. Free irs tax preparation Then use the information from this worksheet to prepare Form 4562. Free irs tax preparation Depreciation Worksheet for Passenger Automobiles   Part I   1. Free irs tax preparation MACRS system (GDS or ADS)     2. Free irs tax preparation Property class     3. Free irs tax preparation Date placed in service     4. Free irs tax preparation Recovery period     5. Free irs tax preparation Method and convention     6. Free irs tax preparation Depreciation rate (from tables)     7. Free irs tax preparation Maximum depreciation deduction for this year from the appropriate table       8. Free irs tax preparation Business/investment-use percentage       9. Free irs tax preparation Multiply line 7 by line 8. Free irs tax preparation This is your adjusted maximum depreciation deduction       10. Free irs tax preparation Section 179 deduction claimed this year (not more than line 9). Free irs tax preparation Enter -0- if this is not the year you placed the car in service. Free irs tax preparation         Note. Free irs tax preparation  1) If line 10 is equal to line 9, stop here. Free irs tax preparation Your combined section 179 and depreciation deduction (including your special depreciation allowance) is limited to the amount on line 9. Free irs tax preparation  2) If line 10 is less than line 9, complete Part II. Free irs tax preparation   Part II   11. Free irs tax preparation Subtract line 10 from line 9. Free irs tax preparation This is the limit on the amount you can deduct for depreciation (including any special depreciation allowance )       12. Free irs tax preparation Cost or other basis (reduced by any alternative motor vehicle credit 1or credit for electric vehicles 2)       13. Free irs tax preparation Multiply line 12 by line 8. Free irs tax preparation This is your business/investment cost       14. Free irs tax preparation Section 179 deduction claimed in the year you placed the car in service       15. Free irs tax preparation Subtract line 14 from line 13. Free irs tax preparation This is your tentative basis for depreciation       16. Free irs tax preparation Multiply line 15 by . Free irs tax preparation 50 if the 50% special depreciation allowance applies. Free irs tax preparation This is your special depreciation allowance. Free irs tax preparation Enter -0- if this is not the year you placed the car in service, the car is not qualified property, or you elected not to claim a special depreciation allowance       Note 1) If line 16 is equal to line 11, stop here. Free irs tax preparation Your depreciation deduction (including your special depreciation allowance) is limited to the amount on line 11. Free irs tax preparation  2) If line 16 is less than line 11, complete Part III. Free irs tax preparation   Part III   17. Free irs tax preparation Subtract line 16 from 11. Free irs tax preparation This is the limit on the amount you can deduct for MACRS depreciation       18. Free irs tax preparation Subtract line 16 from line 15. Free irs tax preparation This is your basis for depreciation. Free irs tax preparation       19. Free irs tax preparation Multiply line 18 by line 6. Free irs tax preparation This is your tentative MACRS depreciation deduction. Free irs tax preparation       20. Free irs tax preparation Enter the lesser of line 17 or line 19. Free irs tax preparation This is your MACRS depreciation deduction. Free irs tax preparation     1 When figuring the amount to enter on line 12, do not reduce your cost or other basis by any section 179 deduction you claimed for your car. Free irs tax preparation 2 Reduce the basis by the lesser of $4,000 or 10% of the cost of the vehicle even if the credit is less than that amount. Free irs tax preparation             Deductions After the Recovery Period If the depreciation deductions for your automobile are reduced under the passenger automobile limits, you will have unrecovered basis in your automobile at the end of the recovery period. Free irs tax preparation If you continue to use the automobile for business, you can deduct that unrecovered basis after the recovery period ends. Free irs tax preparation You can claim a depreciation deduction in each succeeding tax year until you recover your full basis in the car. Free irs tax preparation The maximum amount you can deduct each year is determined by the date you placed the car in service and your business/investment-use percentage. Free irs tax preparation See Maximum Depreciation Deduction , earlier. Free irs tax preparation Unrecovered basis is the cost or other basis of the passenger automobile reduced by any clean-fuel vehicle deduction, electric vehicle credit, depreciation, and section 179 deductions that would have been allowable if you had used the car 100% for business and investment use and the passenger automobile limits had not applied. Free irs tax preparation You cannot claim a depreciation deduction for listed property other than passenger automobiles after the recovery period ends. Free irs tax preparation There is no unrecovered basis at the end of the recovery period because you are considered to have used this property 100% for business and investment purposes during all of the recovery period. Free irs tax preparation Example. Free irs tax preparation In May 2007, you bought and placed in service a car costing $31,500. Free irs tax preparation The car was 5-year property under GDS (MACRS). Free irs tax preparation You did not elect a section 179 deduction and elected not to claim any special depreciation allowance for the car. Free irs tax preparation You used the car exclusively for business during the recovery period (2007 through 2012). Free irs tax preparation You figured your depreciation as shown below. Free irs tax preparation Year Percentage Amount Limit   Allowed 2007 20. Free irs tax preparation 0% $6,300 $2,960   $2,960 2008 32. Free irs tax preparation 0 10,080 4,800   4,800 2009 19. Free irs tax preparation 2 6,048 2,850   2,850 2010 11. Free irs tax preparation 52 3,629 1,675   1,675 2011 11. Free irs tax preparation 52 3,629 1,675   1,675 2012 5. Free irs tax preparation 76 1,814 1,675   1,675 Total   $15,635 At the end of 2012, you had an unrecovered basis of $15,865 ($31,500 − $15,635). Free irs tax preparation If in 2013 and later years you continue to use the car 100% for business, you can deduct each year the lesser of $1,675 or your remaining unrecovered basis. Free irs tax preparation If your business use of the car had been less than 100% during any year, your depreciation deduction would have been less than the maximum amount allowable for that year. Free irs tax preparation However, in figuring your unrecovered basis in the car, you would still reduce your basis by the maximum amount allowable as if the business use had been 100%. Free irs tax preparation For example, if you had used your car 60% for business instead of 100%, your allowable depreciation deductions would have been $9,519 ($15,865 × 60%), but you still would have to reduce your basis by $15,865 to determine your unrecovered basis. Free irs tax preparation Deductions For Passenger Automobiles Acquired in a Trade-in If you acquire a passenger automobile in a trade-in, depreciate the carryover basis separately as if the trade-in did not occur. Free irs tax preparation Depreciate the part of the new automobile's basis that exceeds its carryover basis (excess basis) as if it were newly placed in service property. Free irs tax preparation This excess basis is the additional cash paid for the new automobile in the trade-in. Free irs tax preparation The depreciation figured for the two components of the basis (carryover basis and excess basis) is subject to a single passenger automobile limit. Free irs tax preparation Special rules apply in determining the passenger automobile limits. Free irs tax preparation These rules and examples are discussed in section 1. Free irs tax preparation 168(i)-6(d)(3) of the regulations. Free irs tax preparation Instead of figuring depreciation for the carryover basis and the excess basis separately, you can elect to treat the old automobile as disposed of and both of the basis components for the new automobile as if placed in service at the time of the trade-in. Free irs tax preparation For more information, including how to make this election, see Election out under Property Acquired in a Like-kind Exchange or Involuntary Conversion in chapter 4 and sections 1. Free irs tax preparation 168(i)-6(i) and 1. Free irs tax preparation 168(i)-6(j) of the regulations. Free irs tax preparation What Records Must Be Kept? You cannot take any depreciation or section 179 deduction for the use of listed property unless you can prove your business/investment use with adequate records or with sufficient evidence to support your own statements. Free irs tax preparation For listed property, you must keep records for as long as any recapture can still occur. Free irs tax preparation Recapture can occur in any tax year of the recovery period. Free irs tax preparation Adequate Records To meet the adequate records requirement, you must maintain an account book, diary, log, statement of expense, trip sheet, or similar record or other documentary evidence that, together with the receipt, is sufficient to establish each element of an expenditure or use. Free irs tax preparation You do not have to record information in an account book, diary, or similar record if the information is already shown on the receipt. Free irs tax preparation However, your records should back up your receipts in an orderly manner. Free irs tax preparation Elements of expenditure or use. Free irs tax preparation   Your records or other documentary evidence must support all the following. Free irs tax preparation The amount of each separate expenditure, such as the cost of acquiring the item, maintenance and repair costs, capital improvement costs, lease payments, and any other expenses. Free irs tax preparation The amount of each business and investment use (based on an appropriate measure, such as mileage for vehicles and time for other listed property), and the total use of the property for the tax year. Free irs tax preparation The date of the expenditure or use. Free irs tax preparation The business or investment purpose for the expenditure or use. Free irs tax preparation   Written documents of your expenditure or use are generally better evidence than oral statements alone. Free irs tax preparation You do not have to keep a daily log. Free irs tax preparation However, some type of record containing the elements of an expenditure or the business or investment use of listed property made at or near the time of the expenditure or use and backed up by other documents is preferable to a statement you prepare later. Free irs tax preparation Timeliness. Free irs tax preparation   You must record the elements of an expenditure or use at the time you have full knowledge of the elements. Free irs tax preparation An expense account statement made from an account book, diary, or similar record prepared or maintained at or near the time of the expenditure or use generally is considered a timely record if, in the regular course of business: The statement is given by an employee to the employer, or The statement is given by an independent contractor to the client or customer. Free irs tax preparation   For example, a log maintained on a weekly basis, that accounts for use during the week, will be considered a record made at or near the time of use. Free irs tax preparation Business purpose supported. Free irs tax preparation   Generally, an adequate record of business purpose must be in the form of a written statement. Free irs tax preparation However, the amount of detail necessary to establish a business purpose depends on the facts and circumstances of each case. Free irs tax preparation A written explanation of the business purpose will not be required if the purpose can be determined from the surrounding facts and circumstances. Free irs tax preparation For example, a salesperson visiting customers on an established sales route will not normally need a written explanation of the business purpose of his or her travel. Free irs tax preparation Business use supported. Free irs tax preparation   An adequate record contains enough information on each element of every business or investment use. Free irs tax preparation The amount of detail required to support the use depends on the facts and circumstances. Free irs tax preparation For example, a taxpayer who uses a truck for both business and personal purposes and whose only business use of the truck is to make customer deliveries on an established route can satisfy the requirement by recording the length of the route, including the total number of miles driven during the tax year and the date of each trip at or near the time of the trips. Free irs tax preparation   Although you generally must prepare an adequate written record, you can prepare a record of the business use of listed property in a computer memory device that uses a logging program. Free irs tax preparation Separate or combined expenditures or uses. Free irs tax preparation   Each use by you normally is considered a separate use. Free irs tax preparation However, you can combine repeated uses as a single item. Free irs tax preparation   Record each expenditure as a separate item. Free irs tax preparation Do not combine it with other expenditures. Free irs tax preparation If you choose, however, you can combine amounts you spent for the use of listed property during a tax year, such as for gasoline or automobile repairs. Free irs tax preparation If you combine these expenses, you do not need to support the business purpose of each expense. Free irs tax preparation Instead, you can divide the expenses based on the total business use of the listed property. Free irs tax preparation   You can account for uses that can be considered part of a single use, such as a round trip or uninterrupted business use, by a single record. Free irs tax preparation For example, you can account for the use of a truck to make deliveries at several locations that begin and end at the business premises and can include a stop at the business in between deliveries by a single record of miles driven. Free irs tax preparation You can account for the use of a passenger automobile by a salesperson for a business trip away from home over a period of time by a single record of miles traveled. Free irs tax preparation Minimal personal use (such as a stop for lunch between two business stops) is not an interruption of business use. Free irs tax preparation Confidential information. Free irs tax preparation   If any of the information on the elements of an expenditure or use is confidential, you do not need to include it in the account book or similar record if you record it at or near the time of the expenditure or use. Free irs tax preparation You must keep it elsewhere and make it available as support to the IRS director for your area on request. Free irs tax preparation Substantial compliance. Free irs tax preparation   If you have not fully supported a particular element of an expenditure or use, but have complied with the adequate records requirement for the expenditure or use to the satisfaction of the IRS director for your area, you can establish this element by any evidence the IRS director for your area deems adequate. Free irs tax preparation   If you fail to establish to the satisfaction of the IRS director for your area that you have substantially complied with the adequate records requirement for an element of an expenditure or use, you must establish the element as follows. Free irs tax preparation By your own oral or written statement containing detailed information as to the element. Free irs tax preparation By other evidence sufficient to establish the element. Free irs tax preparation   If the element is the cost or amount, time, place, or date of an expenditure or use, its supporting evidence must be direct evidence, such as oral testimony by witnesses or a written statement setting forth detailed information about the element or the documentary evidence. Free irs tax preparation If the element is the business purpose of an expenditure, its supporting evidence can be circumstantial evidence. Free irs tax preparation Sampling. Free irs tax preparation   You can maintain an adequate record for part of a tax year and use that record to support your business and investment use of listed property for the entire tax year if it can be shown by other evidence that the periods for which you maintain an adequate record are representative of the use throughout the year. Free irs tax preparation Example 1. Free irs tax preparation Denise Williams, a sole proprietor and calendar year taxpayer, operates an interior decorating business out of her home. Free irs tax preparation She uses her automobile for local business visits to the homes or offices of clients, for meetings with suppliers and subcontractors, and to pick up and deliver items to clients. Free irs tax preparation There is no other business use of the automobile, but she and family members also use it for personal purposes. Free irs tax preparation She maintains adequate records for the first 3 months of the year showing that 75% of the automobile use was for business. Free irs tax preparation Subcontractor invoices and paid bills show that her business continued at approximately the same rate for the rest of the year. Free irs tax preparation If there is no change in circumstances, such as the purchase of a second car for exclusive use in her business, the determination that her combined business/investment use of the automobile for the tax year is 75% rests on sufficient supporting evidence. Free irs tax preparation Example 2. Free irs tax preparation Assume the same facts as in Example 1, except that Denise maintains adequate records during the first week of every month showing that 75% of her use of the automobile is for business. Free irs tax preparation Her business invoices show that her business continued at the same rate during the later weeks of each month so that her weekly records are representative of the automobile's business use throughout the month. Free irs tax preparation The determination that her business/investment use of the automobile for the tax year is 75% rests on sufficient supporting evidence. Free irs tax preparation Example 3. Free irs tax preparation Bill Baker, a sole proprietor and calendar year taxpayer, is a salesman in a large metropolitan area for a company that manufactures household products. Free irs tax preparation For the first 3 weeks of each month, he occasionally uses his own automobile for business travel within the metropolitan area. Free irs tax preparation During these weeks, his business use of the automobile does not follow a consistent pattern. Free irs tax preparation During the fourth week of each month, he delivers all business orders taken during the previous month. Free irs tax preparation The business use of his automobile, as supported by adequate records, is 70% of its total use during that fourth week. Free irs tax preparation The determination based on the record maintained during the fourth week of the month that his business/investment use of the automobile for the tax year is 70% does not rest on sufficient supporting evidence because his use during that week is not representative of use during other periods. Free irs tax preparation Loss of records. Free irs tax preparation   When you establish that failure to produce adequate records is due to loss of the records through circumstances beyond your control, such as through fire, flood, earthquake, or other casualty, you have the right to support a deduction by reasonable reconstruction of your expenditures and use. Free irs tax preparation How Is Listed Property Information Reported? You must provide the information about your listed property requested in Part V of Form 4562, Section A, if you claim either of the following deductions. Free irs tax preparation Any deduction for a vehicle. Free irs tax preparation A depreciation deduction for any other listed property. Free irs tax preparation If you claim any deduction for a vehicle, you also must provide the information requested in Section B. Free irs tax preparation If you provide the vehicle for your employee's use, the employee must give you this information. Free irs tax preparation If you provide any vehicle for use by an employee, you must first answer the questions in Section C to see if you meet an exception to completing Section B for that vehicle. Free irs tax preparation Vehicles used by your employees. Free irs tax preparation   You do not have to complete Section B, Part V, for vehicles used by your employees who are not more-than-5% owners or related persons if you meet at least one of the following requirements. Free irs tax preparation You maintain a written policy statement that prohibits one of the following uses of the vehicles. Free irs tax preparation All personal use including commuting. Free irs tax preparation Personal use, other than commuting, by employees who are not officers, directors, or 1%-or-more owners. Free irs tax preparation You treat all use of the vehicles by your employees as personal use. Free irs tax preparation You provide more than five vehicles for use by your employees, and you keep in your records the information on their use given to you by the employees. Free irs tax preparation For demonstrator automobiles provided to full-time salespersons, you maintain a written policy statement that limits the total mileage outside the salesperson's normal working hours and prohibits use of the automobile by anyone else, for vacation trips, or to store personal possessions. Free irs tax preparation Exceptions. Free irs tax preparation   If you file Form 2106, 2106-EZ, or Schedule C-EZ (Form 1040), and you are not required to file Form 4562, report information about listed property on that form and not on Form 4562. Free irs tax preparation Also, if you file Schedule C (Form 1040) and are claiming the standard mileage rate or actual vehicle expenses (except depreciation) and you are not required to file Form 4562 for any other reason, report vehicle information in Part IV of Schedule C and not on Form 4562. Free irs tax preparation Prev  Up  Next   Home   More Online Publications