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Free State And Federal E File

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Free State And Federal E File

Free state and federal e file Internal Revenue Bulletin:  2009-17  April 27, 2009  Rev. Free state and federal e file Proc. Free state and federal e file 2009-24 Table of Contents SECTION 1. Free state and federal e file PURPOSE SECTION 2. Free state and federal e file BACKGROUND SECTION 3. Free state and federal e file SCOPE SECTION 4. Free state and federal e file APPLICATION. Free state and federal e file 01 In General. Free state and federal e file . Free state and federal e file 02 Limitations on Depreciation Deductions for Certain Automobiles. Free state and federal e file . Free state and federal e file 03 Inclusions in Income of Lessees of Passenger Automobiles. Free state and federal e file SECTION 5. Free state and federal e file EFFECTIVE DATE SECTION 6. Free state and federal e file DRAFTING INFORMATION SECTION 1. Free state and federal e file PURPOSE . Free state and federal e file 01 This revenue procedure provides: (1) limitations on depreciation deductions for owners of passenger automobiles first placed in service by the taxpayer during calendar year 2009, including a separate table of limitations on depreciation deductions for trucks and vans; and (2) the amounts to be included in income by lessees of passenger automobiles first leased by the taxpayer during calendar year 2009, including a separate table of inclusion amounts for lessees of trucks and vans. Free state and federal e file . Free state and federal e file 02 The tables detailing these depreciation limitations and lessee inclusion amounts reflect the automobile price inflation adjustments required by § 280F(d)(7) of the Internal Revenue Code. Free state and federal e file SECTION 2. Free state and federal e file BACKGROUND . Free state and federal e file 01 For owners of passenger automobiles, § 280F(a) imposes dollar limitations on the depreciation deduction for the year that the passenger automobile is placed in service by the taxpayer and each succeeding year. Free state and federal e file Section 280F(d)(7) requires the amounts allowable as depreciation deductions to be increased by a price inflation adjustment amount for passenger automobiles placed in service after 1988. Free state and federal e file The method of calculating this price inflation amount for trucks and vans placed in service in or after calendar year 2003 uses a different CPI “automobile component” (the “new trucks” component) than that used in the price inflation amount calculation for other passenger automobiles (the “new cars” component), resulting in somewhat higher depreciation deductions for trucks and vans. Free state and federal e file This change reflects the higher rate of price inflation that trucks and vans have been subject to since 1988. Free state and federal e file . Free state and federal e file 02 Section 168(k)(1)(A) provides a 50 percent additional first year depreciation deduction for certain new property acquired by a taxpayer after December 31, 2007, and before January 1, 2010, if no written binding contract for the acquisition of the property existed before January 1, 2008. Free state and federal e file Section 168(k)(2)(F)(i) increases the first year depreciation allowed under § 280F(a)(1)(A) by $8,000 for passenger automobiles to which the 50 percent additional first year depreciation deduction applies. Free state and federal e file . Free state and federal e file 03 Section 168(k)(2)(D)(i) provides that the 50 percent additional first year depreciation deduction does not apply to any property required to be depreciated under the alternative depreciation system of § 168(g), including property described in § 280F(b)(1). Free state and federal e file Section 168(k)(2)(D)(iii) permits a taxpayer to elect to not claim the 50 percent additional first year depreciation deduction for any class of property. Free state and federal e file Section 168(k)(4) permits a corporation to elect to not claim the 50 percent additional first year depreciation deduction for all eligible qualified property (that is extension property or that is not extension property, as applicable) and instead to increase the business credit limitation under § 38(c) or the alternative minimum tax credit limitation under § 53(c). Free state and federal e file Accordingly, this revenue procedure provides tables for passenger automobiles for which the 50 percent additional depreciation deduction applies and tables for passenger automobiles for which the 50 percent additional first year depreciation deduction does not apply, including passenger automobiles in a class of property for which the taxpayer “elects out” of the 50 percent additional first year depreciation deduction or passenger automobiles that are eligible qualified property to which the § 168(k)(4) election applies. Free state and federal e file . Free state and federal e file 04 For leased passenger automobiles, § 280F(c) requires a reduction in the deduction allowed to the lessee of the passenger automobile. Free state and federal e file The reduction must be substantially equivalent to the limitations on the depreciation deductions imposed on owners of passenger automobiles. Free state and federal e file Under § 1. Free state and federal e file 280F-7(a) of the Income Tax Regulations, this reduction requires a lessee to include in gross income an inclusion amount determined by applying a formula to the amount obtained from a table. Free state and federal e file One table applies to lessees of trucks and vans and another table applies to all other passenger automobiles. Free state and federal e file Each table shows inclusion amounts for a range of fair market values for each taxable year after the passenger automobile is first leased. Free state and federal e file SECTION 3. Free state and federal e file SCOPE . Free state and federal e file 01 The limitations on depreciation deductions in section 4. Free state and federal e file 02(2) of this revenue procedure apply to passenger automobiles (other than leased passenger automobiles) that are placed in service by the taxpayer in calendar year 2009, and continue to apply for each taxable year that the passenger automobile remains in service. Free state and federal e file . Free state and federal e file 02 The tables in section 4. Free state and federal e file 03 of this revenue procedure apply to leased passenger automobiles for which the lease term begins during calendar year 2009. Free state and federal e file Lessees of these passenger automobiles must use these tables to determine the inclusion amount for each taxable year during which the passenger automobile is leased. Free state and federal e file See Rev. Free state and federal e file Proc. Free state and federal e file 2002-14, 2002-1 C. Free state and federal e file B. Free state and federal e file 450, for passenger automobiles first leased before January 1, 2003, Rev. Free state and federal e file Proc. Free state and federal e file 2003-75, 2003-2 C. Free state and federal e file B. Free state and federal e file 1018, for passenger automobiles first leased during calendar year 2003, Rev. Free state and federal e file Proc. Free state and federal e file 2004-20, 2004-1 C. Free state and federal e file B. Free state and federal e file 642, for passenger automobiles first leased during calendar year 2004, Rev. Free state and federal e file Proc. Free state and federal e file 2005-13, 2005-1 C. Free state and federal e file B. Free state and federal e file 759, for passenger automobiles first leased during calendar year 2005, Rev. Free state and federal e file Proc. Free state and federal e file 2006-18, 2006-1 C. Free state and federal e file B. Free state and federal e file 645, for passenger automobiles first leased during calendar year 2006, Rev. Free state and federal e file Proc. Free state and federal e file 2007-30, 2007-1 C. Free state and federal e file B. Free state and federal e file 1104, for passenger automobiles first leased during calendar year 2007, and Rev. Free state and federal e file Proc. Free state and federal e file 2008-22, 2008-12 I. Free state and federal e file R. Free state and federal e file B. Free state and federal e file 658, for passenger automobiles first leased during calendar year 2008. Free state and federal e file SECTION 4. Free state and federal e file APPLICATION . Free state and federal e file 01 In General. Free state and federal e file (1) Limitations on depreciation deductions for certain automobiles. Free state and federal e file The limitations on depreciation deductions for passenger automobiles placed in service by the taxpayer for the first time during calendar year 2009 are in Tables 1 through 4 in section 4. Free state and federal e file 02(2) of this revenue procedure. Free state and federal e file (2) Inclusions in income of lessees of passenger automobiles. Free state and federal e file A taxpayer first leasing a passenger automobile during calendar year 2009 must determine the inclusion amount that is added to gross income using Tables 5 and 6 in section 4. Free state and federal e file 03 of this revenue procedure. Free state and federal e file In addition, the taxpayer must follow the procedures of § 1. Free state and federal e file 280F-7(a). Free state and federal e file . Free state and federal e file 02 Limitations on Depreciation Deductions for Certain Automobiles. Free state and federal e file (1) Amount of the inflation adjustment. Free state and federal e file (a) Passenger automobiles (other than trucks or vans). Free state and federal e file Under § 280F(d)(7)(B)(i), the automobile price inflation adjustment for any calendar year is the percentage (if any) by which the CPI automobile component for October of the preceding calendar year exceeds the CPI automobile component for October 1987. Free state and federal e file The term “CPI automobile component” is defined in § 280F(d)(7)(B)(ii) as the “automobile component” of the Consumer Price Index for all Urban Consumers published by the Department of Labor. Free state and federal e file The new car component of the CPI was 115. Free state and federal e file 2 for October 1987 and 134. Free state and federal e file 837 for October 2008. Free state and federal e file The October 2008 index exceeded the October 1987 index by 19. Free state and federal e file 637. Free state and federal e file The Internal Revenue Service has, therefore, determined that the automobile price inflation adjustment for 2009 for passenger automobiles (other than trucks and vans) is 17. Free state and federal e file 05 percent (19. Free state and federal e file 637/115. Free state and federal e file 2 x 100%). Free state and federal e file This adjustment is applicable to all passenger automobiles (other than trucks and vans) that are first placed in service in calendar year 2009. Free state and federal e file The dollar limitations in § 280F(a) therefore must be multiplied by a factor of 0. Free state and federal e file 1705, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations applicable to passenger automobiles (other than trucks and vans) for calendar year 2009. Free state and federal e file (b) Trucks and vans. Free state and federal e file To determine the dollar limitations applicable to trucks and vans first placed in service during calendar year 2009, the new truck component of the CPI is used instead of the new car component. Free state and federal e file The new truck component of the CPI was 112. Free state and federal e file 4 for October 1987 and 133. Free state and federal e file 640 for October 2008. Free state and federal e file The October 2008 index exceeded the October 1987 index by 21. Free state and federal e file 24. Free state and federal e file The Service has, therefore, determined that the automobile price inflation adjustment for 2009 for trucks and vans is 18. Free state and federal e file 90 percent (21. Free state and federal e file 24/112. Free state and federal e file 4 x 100%). Free state and federal e file This adjustment is applicable to all trucks and vans that are first placed in service in calendar year 2009. Free state and federal e file The dollar limitations in § 280F(a) therefore must be multiplied by a factor of 0. Free state and federal e file 1890, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations applicable to trucks and vans. Free state and federal e file (2) Amount of the limitation. Free state and federal e file For passenger automobiles placed in service by the taxpayer in calendar year 2009, Tables 1 through 4 contain the dollar amount of the depreciation limitation for each taxable year. Free state and federal e file Use Table 1 for a passenger automobile (other than a truck or van) placed in service by the taxpayer in calendar year 2009, for which the 50 percent additional first year depreciation deduction does not apply, including a passenger automobile (other than a truck or van) in a class of property for which the taxpayer elects out of the 50 percent additional first year depreciation deduction or a passenger automobile that is eligible qualified property to which the § 168(k)(4) election applies. Free state and federal e file Use Table 2 for a passenger automobile (other than a truck or van) placed in service by the taxpayer in calendar year 2009, for which the 50 percent additional first year depreciation deduction applies. Free state and federal e file Use Table 3 for a truck or van placed in service by the taxpayer in calendar year 2009, for which the 50 percent additional first year depreciation deduction does not apply, including a truck or van in a class of property for which the taxpayer elects out of the 50 percent additional first year depreciation deduction or a truck or van that is eligible qualified property to which the § 168(k)(4) election applies. Free state and federal e file Use Table 4 for a truck or van placed in service by the taxpayer in calendar year 2009, for which the 50 percent additional first year depreciation deduction applies. Free state and federal e file REV. Free state and federal e file PROC. Free state and federal e file 2009-24 TABLE 1 DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) PLACED IN SERVICE BY THE TAXPAYER IN CALENDAR YEAR 2009, FOR WHICH THE 50 PERCENT ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION DOES NOT APPLY Tax Year Amount 1st Tax Year $2,960 2nd Tax Year $4,800 3rd Tax Year $2,850 Each Succeeding Year $1,775 REV. Free state and federal e file PROC. Free state and federal e file 2009-24 TABLE 2 DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) PLACED IN SERVICE BY THE TAXPAYER IN CALENDAR YEAR 2009, FOR WHICH THE 50 PERCENT ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION APPLIES Tax Year Amount 1st Tax Year $10,960 2nd Tax Year $4,800 3rd Tax Year $2,850 Each Succeeding Year $1,775 REV. Free state and federal e file PROC. Free state and federal e file 2009-24 TABLE 3 DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE BY THE TAXPAYER IN CALENDAR YEAR 2009, FOR WHICH THE 50 PERCENT ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION DOES NOT APPLY Tax Year Amount 1st Tax Year $3,060 2nd Tax Year $4,900 3rd Tax Year $2,950 Each Succeeding Year $1,775 REV. Free state and federal e file PROC. Free state and federal e file 2009-24 TABLE 4 DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE BY THE TAXPAYER IN CALENDAR YEAR 2009, FOR WHICH THE 50 PERCENT ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION APPLIES Tax Year Amount 1st Tax Year $11,060 2nd Tax Year $4,900 3rd Tax Year $2,950 Each Succeeding Year $1,775 . Free state and federal e file 03 Inclusions in Income of Lessees of Passenger Automobiles. Free state and federal e file The inclusion amounts for passenger automobiles first leased in calendar year 2009 are calculated under the procedures described in § 1. Free state and federal e file 280F-7(a). Free state and federal e file Lessees of passenger automobiles other than trucks and vans should use Table 5 of this revenue procedure in applying these procedures, while lessees of trucks and vans should use Table 6 of this revenue procedure. Free state and federal e file REV. Free state and federal e file PROC. Free state and federal e file 2009-24 TABLE 5 DOLLAR AMOUNTS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2009 Fair Market Value of Passenger Automobile Tax Year During Lease Over Not Over 1st 2nd 3rd 4th 5th & Later $18,500 $19,000 9 19 28 34 38 19,000 19,500 10 21 32 38 43 19,500 20,000 11 24 36 42 48 20,000 20,500 12 27 39 46 54 20,500 21,000 13 29 43 51 58 21,000 21,500 15 31 47 55 64 21,500 22,000 16 34 50 60 68 22,000 23,000 17 38 56 66 76 23,000 24,000 20 42 64 75 86 24,000 25,000 22 47 71 84 96 25,000 26,000 24 52 78 93 107 26,000 27,000 26 58 85 101 117 27,000 28,000 29 62 93 110 127 28,000 29,000 31 67 100 119 138 29,000 30,000 33 72 108 128 147 30,000 31,000 35 77 115 137 157 31,000 32,000 38 82 122 146 167 32,000 33,000 40 87 129 155 178 33,000 34,000 42 92 137 163 188 34,000 35,000 44 97 144 172 199 35,000 36,000 47 102 151 181 208 36,000 37,000 49 107 159 189 219 37,000 38,000 51 112 166 199 228 38,000 39,000 53 117 173 208 239 39,000 40,000 56 122 180 216 250 40,000 41,000 58 127 188 225 259 41,000 42,000 60 132 195 234 269 42,000 43,000 62 137 203 242 280 43,000 44,000 65 141 210 252 290 44,000 45,000 67 146 218 260 300 45,000 46,000 69 151 225 269 311 46,000 47,000 71 157 232 278 320 47,000 48,000 74 161 240 286 331 48,000 49,000 76 166 247 296 340 49,000 50,000 78 171 255 304 351 50,000 51,000 80 176 262 313 361 51,000 52,000 83 181 269 322 371 52,000 53,000 85 186 276 331 381 53,000 54,000 87 191 284 339 392 54,000 55,000 89 196 291 349 401 55,000 56,000 92 201 298 357 412 56,000 57,000 94 206 306 365 423 57,000 58,000 96 211 313 375 432 58,000 59,000 98 216 320 384 442 59,000 60,000 101 221 327 393 452 60,000 62,000 104 228 339 406 467 62,000 64,000 109 238 353 424 488 64,000 66,000 113 248 368 441 509 66,000 68,000 118 258 382 459 529 68,000 70,000 122 268 397 476 550 70,000 72,000 127 277 413 493 570 72,000 74,000 131 288 427 511 590 74,000 76,000 136 297 442 529 610 76,000 78,000 140 307 457 546 631 78,000 80,000 145 317 471 564 651 80,000 85,000 152 335 497 595 686 85,000 90,000 164 359 534 639 737 90,000 95,000 175 384 570 683 789 95,000 100,000 186 409 607 727 839 100,000 110,000 203 446 662 793 916 110,000 120,000 226 495 736 881 1,018 120,000 130,000 248 545 809 970 1,119 130,000 140,000 271 594 883 1,058 1,220 140,000 150,000 293 644 956 1,146 1,322 150,000 160,000 316 693 1,030 1,234 1,424 160,000 170,000 338 743 1,103 1,322 1,526 170,000 180,000 361 792 1,177 1,410 1,628 180,000 190,000 383 842 1,250 1,498 1,730 190,000 200,000 406 891 1,324 1,586 1,831 200,000 210,000 428 941 1,397 1,675 1,932 210,000 220,000 451 990 1,471 1,762 2,035 220,000 230,000 473 1,040 1,544 1,851 2,136 230,000 240,000 496 1,089 1,618 1,939 2,238 240,000 And up 518 1,139 1,691 2,027 2,340 REV. Free state and federal e file PROC. Free state and federal e file 2009-24 TABLE 6 DOLLAR AMOUNTS FOR TRUCKS AND VANS WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2009 Fair Market Value of Electric Automobile Tax Year During Lease Over Not Over 1st 2nd 3rd 4th 5th and Later $18,500 $19,000 8 17 25 30 35 19,000 19,500 9 19 29 35 40 19,500 20,000 10 22 33 38 45 20,000 20,500 11 25 36 43 50 20,500 21,000 12 27 40 48 55 21,000 21,500 13 30 43 52 60 21,500 22,000 15 32 47 56 66 22,000 23,000 16 36 52 64 72 23,000 24,000 18 41 60 72 83 24,000 25,000 21 45 68 81 93 25,000 26,000 23 50 75 90 103 26,000 27,000 25 56 82 98 114 27,000 28,000 27 61 89 107 124 28,000 29,000 30 65 97 116 134 29,000 30,000 32 70 104 125 144 30,000 31,000 34 75 112 134 154 31,000 32,000 36 80 119 143 164 32,000 33,000 39 85 126 151 175 33,000 34,000 41 90 134 160 184 34,000 35,000 43 95 141 169 195 35,000 36,000 45 100 148 178 205 36,000 37,000 48 105 155 187 215 37,000 38,000 50 110 163 195 226 38,000 39,000 52 115 170 204 236 39,000 40,000 55 120 177 213 246 40,000 41,000 57 125 185 221 256 41,000 42,000 59 130 192 231 266 42,000 43,000 61 135 199 240 276 43,000 44,000 64 139 207 249 286 44,000 45,000 66 144 215 257 296 45,000 46,000 68 149 222 266 307 46,000 47,000 70 155 229 274 317 47,000 48,000 73 159 237 283 327 48,000 49,000 75 164 244 292 338 49,000 50,000 77 169 251 301 348 50,000 51,000 79 174 259 310 357 51,000 52,000 82 179 266 318 368 52,000 53,000 84 184 273 328 378 53,000 54,000 86 189 281 336 388 54,000 55,000 88 194 288 345 399 55,000 56,000 91 199 295 354 408 56,000 57,000 93 204 302 363 419 57,000 58,000 95 209 310 371 429 58,000 59,000 97 214 317 381 439 59,000 60,000 100 219 324 389 450 60,000 62,000 103 226 336 402 465 62,000 64,000 107 236 351 420 485 64,000 66,000 112 246 365 438 505 66,000 68,000 116 256 380 455 526 68,000 70,000 121 266 394 473 546 70,000 72,000 125 276 409 491 566 72,000 74,000 130 286 423 509 586 74,000 76,000 134 296 438 526 607 76,000 78,000 139 305 454 543 627 78,000 80,000 143 316 467 561 648 80,000 85,000 151 333 493 592 684 85,000 90,000 163 357 531 635 735 90,000 95,000 174 382 567 680 785 95,000 100,000 185 407 604 724 836 100,000 110,000 202 444 659 790 912 110,000 120,000 225 493 733 878 1,014 120,000 130,000 247 543 806 966 1,116 130,000 140,000 270 592 880 1,054 1,218 140,000 150,000 292 642 953 1,143 1,319 150,000 160,000 315 691 1,027 1,230 1,421 160,000 170,000 337 741 1,100 1,319 1,522 170,000 180,000 360 790 1,174 1,407 1,624 180,000 190,000 382 840 1,247 1,495 1,726 190,000 200,000 405 889 1,321 1,583 1,828 200,000 210,000 427 939 1,394 1,671 1,930 210,000 220,000 450 988 1,468 1,759 2,031 220,000 230,000 472 1,038 1,541 1,847 2,134 230,000 240,000 495 1,087 1,615 1,935 2,235 240,000 and up 517 1,137 1,688 2,024 2,336 SECTION 5. Free state and federal e file EFFECTIVE DATE This revenue procedure applies to passenger automobiles (other than leased passenger automobiles) that are first placed in service by a taxpayer during calendar year 2009, and to leased passenger automobiles that are first leased by a taxpayer during calendar year 2009. Free state and federal e file SECTION 6. Free state and federal e file DRAFTING INFORMATION The principal author of this revenue procedure is Bernard P. Free state and federal e file Harvey of the Office of Associate Chief Counsel (Income Tax & Accounting). Free state and federal e file For further information regarding this revenue procedure, contact Mr. Free state and federal e file Harvey at (202) 622-4930 (not a toll-free call). Free state and federal e file Prev  Up  Next   Home   More Internal Revenue Bulletins
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The Free State And Federal E File

Free state and federal e file 2. Free state and federal e file   Electing the Section 179 Deduction Table of Contents Introduction Useful Items - You may want to see: What Property Qualifies?Eligible Property Property Acquired for Business Use Property Acquired by Purchase What Property Does Not Qualify?Land and Improvements Excepted Property How Much Can You Deduct?Dollar Limits Business Income Limit Partnerships and Partners S Corporations Other Corporations How Do You Elect the Deduction? When Must You Recapture the Deduction? Introduction You can elect to recover all or part of the cost of certain qualifying property, up to a limit, by deducting it in the year you place the property in service. Free state and federal e file This is the section 179 deduction. Free state and federal e file You can elect the section 179 deduction instead of recovering the cost by taking depreciation deductions. Free state and federal e file Estates and trusts cannot elect the section 179 deduction. Free state and federal e file This chapter explains what property does and does not qualify for the section 179 deduction, what limits apply to the deduction (including special rules for partnerships and corporations), and how to elect it. Free state and federal e file It also explains when and how to recapture the deduction. Free state and federal e file Useful Items - You may want to see: Publication 537 Installment Sales 544 Sales and Other Dispositions of Assets 954 Tax Incentives for Distressed Communities Form (and Instructions) 4562 Depreciation and Amortization 4797 Sales of Business Property See chapter 6 for information about getting publications and forms. Free state and federal e file What Property Qualifies? To qualify for the section 179 deduction, your property must meet all the following requirements. Free state and federal e file It must be eligible property. Free state and federal e file It must be acquired for business use. Free state and federal e file It must have been acquired by purchase. Free state and federal e file It must not be property described later under What Property Does Not Qualify . Free state and federal e file The following discussions provide information about these requirements and exceptions. Free state and federal e file Eligible Property To qualify for the section 179 deduction, your property must be one of the following types of depreciable property. Free state and federal e file Tangible personal property. Free state and federal e file Other tangible property (except buildings and their structural components) used as: An integral part of manufacturing, production, or extraction or of furnishing transportation, communications, electricity, gas, water, or sewage disposal services, A research facility used in connection with any of the activities in (a) above, or A facility used in connection with any of the activities in (a) for the bulk storage of fungible commodities. Free state and federal e file Single purpose agricultural (livestock) or horticultural structures. Free state and federal e file See chapter 7 of Publication 225 for definitions and information regarding the use requirements that apply to these structures. Free state and federal e file Storage facilities (except buildings and their structural components) used in connection with distributing petroleum or any primary product of petroleum. Free state and federal e file Off-the-shelf computer software. Free state and federal e file Qualified real property (described below). Free state and federal e file Tangible personal property. Free state and federal e file   Tangible personal property is any tangible property that is not real property. Free state and federal e file It includes the following property. Free state and federal e file Machinery and equipment. Free state and federal e file Property contained in or attached to a building (other than structural components), such as refrigerators, grocery store counters, office equipment, printing presses, testing equipment, and signs. Free state and federal e file Gasoline storage tanks and pumps at retail service stations. Free state and federal e file Livestock, including horses, cattle, hogs, sheep, goats, and mink and other furbearing animals. Free state and federal e file   The treatment of property as tangible personal property for the section 179 deduction is not controlled by its treatment under local law. Free state and federal e file For example, property may not be tangible personal property for the deduction even if treated so under local law, and some property (such as fixtures) may be tangible personal property for the deduction even if treated as real property under local law. Free state and federal e file Off-the-shelf computer software. Free state and federal e file   Off-the-shelf computer software placed in service during the tax year is qualifying property for purposes of the section 179 deduction. Free state and federal e file This is computer software that is readily available for purchase by the general public, is subject to a nonexclusive license, and has not been substantially modified. Free state and federal e file It includes any program designed to cause a computer to perform a desired function. Free state and federal e file However, a database or similar item is not considered computer software unless it is in the public domain and is incidental to the operation of otherwise qualifying software. Free state and federal e file Qualified real property. Free state and federal e file   You can elect to treat certain qualified real property you placed in service as section 179 property for tax years beginning in 2013. Free state and federal e file If this election is made, the term “section 179 property” will include any qualified real property that is: Qualified leasehold improvement property, Qualified restaurant property, or Qualified retail improvement property. Free state and federal e file The maximum section 179 expense deduction that can be elected for qualified section 179 real property is $250,000 of the maximum section 179 deduction of $500,000 in 2013. Free state and federal e file For more information, see Special rules for qualified section 179 real property, later. Free state and federal e file Also, see Election for certain qualified section 179 real property, later, for information on how to make this election. Free state and federal e file Qualified leasehold improvement property. Free state and federal e file   Generally, this is any improvement to an interior part of a building (placed in service before January 1, 2014) that is nonresidential real property, provided all of the requirements discussed in chapter 3 under Qualified leasehold improvement property are met. Free state and federal e file   In addition, an improvement made by the lessor does not qualify as qualified leasehold improvement property to any subsequent owner unless it is acquired from the original lessor by reason of the lessor’s death or in any of the following types of transactions. Free state and federal e file A transaction to which section 381(a) applies, A mere change in the form of conducting the trade or business so long as the property is retained in the trade or business as qualified leasehold improvement property and the taxpayer retains a substantial interest in the trade or business, A like-kind exchange, involuntary conversion, or re-acquisition of real property to the extent that the basis in the property represents the carryover basis, or Certain nonrecognition transactions to the extent that your basis in the property is determined by reference to the transferor’s or distributor’s basis in the property. Free state and federal e file Examples include the following. Free state and federal e file A complete liquidation of a subsidiary. Free state and federal e file A transfer to a corporation controlled by the transferor. Free state and federal e file An exchange of property by a corporation solely for stock or securities in another corporation in a reorganization. Free state and federal e file Qualified restaurant property. Free state and federal e file   Qualified restaurant property is any section 1250 property that is a building or an improvement to a building placed in service after December 31, 2008, and before January 1, 2014. Free state and federal e file Also, more than 50% of the building’s square footage must be devoted to preparation of meals and seating for on-premise consumption of prepared meals. Free state and federal e file Qualified retail improvement property. Free state and federal e file   Generally, this is any improvement (placed in service after December 31, 2008, and before January 1, 2014) to an interior portion of nonresidential real property if it meets the following requirements. Free state and federal e file The portion is open to the general public and is used in the retail trade or business of selling tangible property to the general public. Free state and federal e file The improvement is placed in service more than 3 years after the date the building was first placed in service. Free state and federal e file The expenses are not for the enlargement of the building, any elevator or escalator, any structural components benefiting a common area, or the internal structural framework of the building. Free state and federal e file In addition, an improvement made by the lessor does not qualify as qualified retail improvement property to any subsequent owner unless it is acquired from the original lessor by reason of the lessor’s death or in any of the following types of transactions. Free state and federal e file A transaction to which section 381(a) applies, A mere change in the form of conducting the trade or business so long as the property is retained in the trade or business as qualified leasehold improvement property and the taxpayer retains a substantial interest in the trade or business, A like-kind exchange, involuntary conversion, or re-acquisition of real property to the extent that the basis in the property represents the carryover basis, or Certain nonrecognition transactions to the extent that your basis in the property is determined by reference to the transferor’s or distributor’s basis in the property. Free state and federal e file Examples include the following. Free state and federal e file A complete liquidation of a subsidiary. Free state and federal e file A transfer to a corporation controlled by the transferor. Free state and federal e file An exchange of property by a corporation solely for stock or securities in another corporation in a reorganization. Free state and federal e file Property Acquired for Business Use To qualify for the section 179 deduction, your property must have been acquired for use in your trade or business. Free state and federal e file Property you acquire only for the production of income, such as investment property, rental property (if renting property is not your trade or business), and property that produces royalties, does not qualify. Free state and federal e file Partial business use. Free state and federal e file   When you use property for both business and nonbusiness purposes, you can elect the section 179 deduction only if you use the property more than 50% for business in the year you place it in service. Free state and federal e file If you use the property more than 50% for business, multiply the cost of the property by the percentage of business use. Free state and federal e file Use the resulting business cost to figure your section 179 deduction. Free state and federal e file Example. Free state and federal e file May Oak bought and placed in service an item of section 179 property costing $11,000. Free state and federal e file She used the property 80% for her business and 20% for personal purposes. Free state and federal e file The business part of the cost of the property is $8,800 (80% × $11,000). Free state and federal e file Property Acquired by Purchase To qualify for the section 179 deduction, your property must have been acquired by purchase. Free state and federal e file For example, property acquired by gift or inheritance does not qualify. Free state and federal e file Property is not considered acquired by purchase in the following situations. Free state and federal e file It is acquired by one component member of a controlled group from another component member of the same group. Free state and federal e file Its basis is determined either— In whole or in part by its adjusted basis in the hands of the person from whom it was acquired, or Under the stepped-up basis rules for property acquired from a decedent. Free state and federal e file It is acquired from a related person. Free state and federal e file Related persons. Free state and federal e file   Related persons are described under Related persons earlier. Free state and federal e file However, to determine whether property qualifies for the section 179 deduction, treat as an individual's family only his or her spouse, ancestors, and lineal descendants and substitute "50%" for "10%" each place it appears. Free state and federal e file Example. Free state and federal e file Ken Larch is a tailor. Free state and federal e file He bought two industrial sewing machines from his father. Free state and federal e file He placed both machines in service in the same year he bought them. Free state and federal e file They do not qualify as section 179 property because Ken and his father are related persons. Free state and federal e file He cannot claim a section 179 deduction for the cost of these machines. Free state and federal e file What Property Does Not Qualify? Certain property does not qualify for the section 179 deduction. Free state and federal e file This includes the following. Free state and federal e file Land and Improvements Land and land improvements do not qualify as section 179 property. Free state and federal e file Land improvements include swimming pools, paved parking areas, wharves, docks, bridges, and fences. Free state and federal e file Excepted Property Even if the requirements explained earlier under What Property Qualifies are met, you cannot elect the section 179 deduction for the following property. Free state and federal e file Certain property you lease to others (if you are a noncorporate lessor). Free state and federal e file Certain property used predominantly to furnish lodging or in connection with the furnishing of lodging. Free state and federal e file Air conditioning or heating units. Free state and federal e file Property used predominantly outside the United States, except property described in section 168(g)(4) of the Internal Revenue Code. Free state and federal e file Property used by certain tax-exempt organizations, except property used in connection with the production of income subject to the tax on unrelated trade or business income. Free state and federal e file Property used by governmental units or foreign persons or entities, except property used under a lease with a term of less than 6 months. Free state and federal e file Leased property. Free state and federal e file   Generally, you cannot claim a section 179 deduction based on the cost of property you lease to someone else. Free state and federal e file This rule does not apply to corporations. Free state and federal e file However, you can claim a section 179 deduction for the cost of the following property. Free state and federal e file Property you manufacture or produce and lease to others. Free state and federal e file Property you purchase and lease to others if both the following tests are met. Free state and federal e file The term of the lease (including options to renew) is less than 50% of the property's class life. Free state and federal e file For the first 12 months after the property is transferred to the lessee, the total business deductions you are allowed on the property (other than rents and reimbursed amounts) are more than 15% of the rental income from the property. Free state and federal e file Property used for lodging. Free state and federal e file   Generally, you cannot claim a section 179 deduction for property used predominantly to furnish lodging or in connection with the furnishing of lodging. Free state and federal e file However, this does not apply to the following types of property. Free state and federal e file Nonlodging commercial facilities that are available to those not using the lodging facilities on the same basis as they are available to those using the lodging facilities. Free state and federal e file Property used by a hotel or motel in connection with the trade or business of furnishing lodging where the predominant portion of the accommodations is used by transients. Free state and federal e file Any certified historic structure to the extent its basis is due to qualified rehabilitation expenditures. Free state and federal e file Any energy property. Free state and federal e file Energy property. Free state and federal e file   Energy property is property that meets the following requirements. Free state and federal e file It is one of the following types of property. Free state and federal e file Equipment that uses solar energy to generate electricity, to heat or cool a structure, to provide hot water for use in a structure, or to provide solar process heat, except for equipment used to generate energy to heat a swimming pool. Free state and federal e file Equipment placed in service after December 31, 2005, and before January 1, 2017, that uses solar energy to illuminate the inside of a structure using fiber-optic distributed sunlight. Free state and federal e file Equipment used to produce, distribute, or use energy derived from a geothermal deposit. Free state and federal e file For electricity generated by geothermal power, this includes equipment up to (but not including) the electrical transmission stage. Free state and federal e file Qualified fuel cell property or qualified microturbine property placed in service after December 31, 2005, and before January 1, 2017. Free state and federal e file The construction, reconstruction, or erection of the property must be completed by you. Free state and federal e file For property you acquire, the original use of the property must begin with you. Free state and federal e file The property must meet the performance and quality standards, if any, prescribed by Income Tax Regulations in effect at the time you get the property. Free state and federal e file   For periods before February 14, 2008, energy property does not include any property that is public utility property as defined by section 46(f)(5) of the Internal Revenue Code (as in effect on November 4, 1990). Free state and federal e file How Much Can You Deduct? Your section 179 deduction is generally the cost of the qualifying property. Free state and federal e file However, the total amount you can elect to deduct under section 179 is subject to a dollar limit and a business income limit. Free state and federal e file These limits apply to each taxpayer, not to each business. Free state and federal e file However, see Married Individuals under Dollar Limits , later. Free state and federal e file For a passenger automobile, the total section 179 deduction and depreciation deduction are limited. Free state and federal e file See Do the Passenger Automobile Limits Apply in chapter 5 . Free state and federal e file If you deduct only part of the cost of qualifying property as a section 179 deduction, you can generally depreciate the cost you do not deduct. Free state and federal e file Trade-in of other property. Free state and federal e file   If you buy qualifying property with cash and a trade-in, its cost for purposes of the section 179 deduction includes only the cash you paid. Free state and federal e file Example. Free state and federal e file Silver Leaf, a retail bakery, traded two ovens having a total adjusted basis of $680 for a new oven costing $1,320. Free state and federal e file They received an $800 trade-in allowance for the old ovens and paid $520 in cash for the new oven. Free state and federal e file The bakery also traded a used van with an adjusted basis of $4,500 for a new van costing $9,000. Free state and federal e file They received a $4,800 trade-in allowance on the used van and paid $4,200 in cash for the new van. Free state and federal e file Only the portion of the new property's basis paid by cash qualifies for the section 179 deduction. Free state and federal e file Therefore, Silver Leaf's qualifying costs for the section 179 deduction are $4,720 ($520 + $4,200). Free state and federal e file Dollar Limits The total amount you can elect to deduct under section 179 for most property placed in service in 2013 generally cannot be more than $500,000. Free state and federal e file If you acquire and place in service more than one item of qualifying property during the year, you can allocate the section 179 deduction among the items in any way, as long as the total deduction is not more than $500,000. Free state and federal e file You do not have to claim the full $500,000. Free state and federal e file Qualified real property (described earlier) that you elected to treat as section 179 real property is limited to $250,000 of the maximum deduction of $500,000 for 2013. Free state and federal e file The amount you can elect to deduct is not affected if you place qualifying property in service in a short tax year or if you place qualifying property in service for only a part of a 12-month tax year. Free state and federal e file After you apply the dollar limit to determine a tentative deduction, you must apply the business income limit (described later) to determine your actual section 179 deduction. Free state and federal e file Example. Free state and federal e file In 2013, you bought and placed in service $500,000 in machinery and a $25,000 circular saw for your business. Free state and federal e file You elect to deduct $475,000 for the machinery and the entire $25,000 for the saw, a total of $500,000. Free state and federal e file This is the maximum amount you can deduct. Free state and federal e file Your $25,000 deduction for the saw completely recovered its cost. Free state and federal e file Your basis for depreciation is zero. Free state and federal e file The basis for depreciation of your machinery is $25,000. Free state and federal e file You figure this by subtracting your $475,000 section 179 deduction for the machinery from the $500,000 cost of the machinery. Free state and federal e file Situations affecting dollar limit. Free state and federal e file   Under certain circumstances, the general dollar limits on the section 179 deduction may be reduced or increased or there may be additional dollar limits. Free state and federal e file The general dollar limit is affected by any of the following situations. Free state and federal e file The cost of your section 179 property placed in service exceeds $2,000,000. Free state and federal e file Your business is an enterprise zone business. Free state and federal e file You placed in service a sport utility or certain other vehicles. Free state and federal e file You are married filing a joint or separate return. Free state and federal e file Costs exceeding $2,000,000 If the cost of your qualifying section 179 property placed in service in a year is more than $2,000,000, you generally must reduce the dollar limit (but not below zero) by the amount of cost over $2,000,000. Free state and federal e file If the cost of your section 179 property placed in service during 2013 is $2,500,000 or more, you cannot take a section 179 deduction. Free state and federal e file Example. Free state and federal e file In 2013, Jane Ash placed in service machinery costing $2,100,000. Free state and federal e file This cost is $100,000 more than $2,000,000, so she must reduce her dollar limit to $400,000 ($500,000 − $100,000). Free state and federal e file Enterprise Zone Businesses An increased section 179 deduction is available to enterprise zone businesses for qualified zone property placed in service during the tax year, in an empowerment zone. Free state and federal e file For more information including the definitions of “enterprise zone business” and “qualified zone property,” see sections 1397A, 1397C, and 1397D of the Internal Revenue Code. Free state and federal e file The dollar limit on the section 179 deduction is increased by the smaller of: $35,000, or The cost of section 179 property that is also qualified zone property placed in service before January 1, 2014 (including such property placed in service by your spouse, even if you are filing a separate return). Free state and federal e file Note. Free state and federal e file   You take into account only 50% (instead of 100%) of the cost of qualified zone property placed in service in a year when figuring the reduced dollar limit for costs exceeding $2,000,000 (explained earlier). Free state and federal e file Sport Utility and Certain Other Vehicles You cannot elect to expense more than $25,000 of the cost of any heavy sport utility vehicle (SUV) and certain other vehicles placed in service during the tax year. Free state and federal e file This rule applies to any 4-wheeled vehicle primarily designed or used to carry passengers over public streets, roads, or highways, that is rated at more than 6,000 pounds gross vehicle weight and not more than 14,000 pounds gross vehicle weight. Free state and federal e file However, the $25,000 limit does not apply to any vehicle: Designed to seat more than nine passengers behind the driver's seat, Equipped with a cargo area (either open or enclosed by a cap) of at least six feet in interior length that is not readily accessible from the passenger compartment, or That has an integral enclosure fully enclosing the driver compartment and load carrying device, does not have seating rearward of the driver's seat, and has no body section protruding more than 30 inches ahead of the leading edge of the windshield. Free state and federal e file Married Individuals If you are married, how you figure your section 179 deduction depends on whether you file jointly or separately. Free state and federal e file If you file a joint return, you and your spouse are treated as one taxpayer in determining any reduction to the dollar limit, regardless of which of you purchased the property or placed it in service. Free state and federal e file If you and your spouse file separate returns, you are treated as one taxpayer for the dollar limit, including the reduction for costs over $2,000,000. Free state and federal e file You must allocate the dollar limit (after any reduction) between you equally, unless you both elect a different allocation. Free state and federal e file If the percentages elected by each of you do not total 100%, 50% will be allocated to each of you. Free state and federal e file Example. Free state and federal e file Jack Elm is married. Free state and federal e file He and his wife file separate returns. Free state and federal e file Jack bought and placed in service $2,000,000 of qualified farm machinery in 2013. Free state and federal e file His wife has her own business, and she bought and placed in service $30,000 of qualified business equipment. Free state and federal e file Their combined dollar limit is $470,000. Free state and federal e file This is because they must figure the limit as if they were one taxpayer. Free state and federal e file They reduce the $500,000 dollar limit by the $30,000 excess of their costs over $2,000,000. Free state and federal e file They elect to allocate the $470,000 dollar limit as follows. Free state and federal e file $446,500 ($470,000 x 95%) to Mr. Free state and federal e file Elm's machinery. Free state and federal e file $23,500 ($470,000 x 5%) to Mrs. Free state and federal e file Elm's equipment. Free state and federal e file If they did not make an election to allocate their costs in this way, they would have to allocate $235,000 ($470,000 × 50%) to each of them. Free state and federal e file Joint return after filing separate returns. Free state and federal e file   If you and your spouse elect to amend your separate returns by filing a joint return after the due date for filing your return, the dollar limit on the joint return is the lesser of the following amounts. Free state and federal e file The dollar limit (after reduction for any cost of section 179 property over $2,000,000). Free state and federal e file The total cost of section 179 property you and your spouse elected to expense on your separate returns. Free state and federal e file Example. Free state and federal e file The facts are the same as in the previous example except that Jack elected to deduct $30,000 of the cost of section 179 property on his separate return and his wife elected to deduct $2,000. Free state and federal e file After the due date of their returns, they file a joint return. Free state and federal e file Their dollar limit for the section 179 deduction is $32,000. Free state and federal e file This is the lesser of the following amounts. Free state and federal e file $470,000—The dollar limit less the cost of section 179 property over $2,000,000. Free state and federal e file $32,000—The total they elected to expense on their separate returns. Free state and federal e file Business Income Limit The total cost you can deduct each year after you apply the dollar limit is limited to the taxable income from the active conduct of any trade or business during the year. Free state and federal e file Generally, you are considered to actively conduct a trade or business if you meaningfully participate in the management or operations of the trade or business. Free state and federal e file Any cost not deductible in one year under section 179 because of this limit can be carried to the next year. Free state and federal e file Special rules apply to a 2013 deduction of qualified section 179 real property that is disallowed because of the business income limit. Free state and federal e file See Special rules for qualified section 179 property under Carryover of disallowed deduction, later. Free state and federal e file Taxable income. Free state and federal e file   In general, figure taxable income for this purpose by totaling the net income and losses from all trades and businesses you actively conducted during the year. Free state and federal e file Net income or loss from a trade or business includes the following items. Free state and federal e file Section 1231 gains (or losses). Free state and federal e file Interest from working capital of your trade or business. Free state and federal e file Wages, salaries, tips, or other pay earned as an employee. Free state and federal e file For information about section 1231 gains and losses, see chapter 3 in Publication 544. Free state and federal e file   In addition, figure taxable income without regard to any of the following. Free state and federal e file The section 179 deduction. Free state and federal e file The self-employment tax deduction. Free state and federal e file Any net operating loss carryback or carryforward. Free state and federal e file Any unreimbursed employee business expenses. Free state and federal e file Two different taxable income limits. Free state and federal e file   In addition to the business income limit for your section 179 deduction, you may have a taxable income limit for some other deduction. Free state and federal e file You may have to figure the limit for this other deduction taking into account the section 179 deduction. Free state and federal e file If so, complete the following steps. Free state and federal e file Step Action 1 Figure taxable income without the section 179 deduction or the other deduction. Free state and federal e file 2 Figure a hypothetical section 179 deduction using the taxable income figured in Step 1. Free state and federal e file 3 Subtract the hypothetical section 179 deduction figured in Step 2 from the taxable income figured in Step 1. Free state and federal e file 4 Figure a hypothetical amount for the other deduction using the amount figured in Step 3 as taxable income. Free state and federal e file 5 Subtract the hypothetical other deduction figured in Step 4 from the taxable income figured in Step 1. Free state and federal e file 6 Figure your actual section 179 deduction using the taxable income figured in Step 5. Free state and federal e file 7 Subtract your actual section 179 deduction figured in Step 6 from the taxable income figured in Step 1. Free state and federal e file 8 Figure your actual other deduction using the taxable income figured in Step 7. Free state and federal e file Example. Free state and federal e file On February 1, 2013, the XYZ corporation purchased and placed in service qualifying section 179 property that cost $500,000. Free state and federal e file It elects to expense the entire $500,000 cost under section 179. Free state and federal e file In June, the corporation gave a charitable contribution of $10,000. Free state and federal e file A corporation's limit on charitable contributions is figured after subtracting any section 179 deduction. Free state and federal e file The business income limit for the section 179 deduction is figured after subtracting any allowable charitable contributions. Free state and federal e file XYZ's taxable income figured without the section 179 deduction or the deduction for charitable contributions is $520,000. Free state and federal e file XYZ figures its section 179 deduction and its deduction for charitable contributions as follows. Free state and federal e file Step 1– Taxable income figured without either deduction is $520,000. Free state and federal e file Step 2– Using $520,000 as taxable income, XYZ's hypothetical section 179 deduction is $500,000. Free state and federal e file Step 3– $20,000 ($520,000 − $500,000). Free state and federal e file Step 4– Using $20,000 (from Step 3) as taxable income, XYZ's hypothetical charitable contribution (limited to 10% of taxable income) is $2,000. Free state and federal e file Step 5– $518,000 ($520,000 − $2,000). Free state and federal e file Step 6– Using $518,000 (from Step 5) as taxable income, XYZ figures the actual section 179 deduction. Free state and federal e file Because the taxable income is at least $500,000, XYZ can take a $500,000 section 179 deduction. Free state and federal e file Step 7– $20,000 ($520,000 − $500,000). Free state and federal e file Step 8– Using $20,000 (from Step 7) as taxable income, XYZ's actual charitable contribution (limited to 10% of taxable income) is $2,000. Free state and federal e file Carryover of disallowed deduction. Free state and federal e file   You can carry over for an unlimited number of years the cost of any section 179 property you elected to expense but were unable to because of the business income limit. Free state and federal e file This disallowed deduction amount is shown on line 13 of Form 4562. Free state and federal e file You use the amount you carry over to determine your section 179 deduction in the next year. Free state and federal e file Enter that amount on line 10 of your Form 4562 for the next year. Free state and federal e file   If you place more than one property in service in a year, you can select the properties for which all or a part of the costs will be carried forward. Free state and federal e file Your selections must be shown in your books and records. Free state and federal e file For this purpose, treat section 179 costs allocated from a partnership or an S corporation as one item of section 179 property. Free state and federal e file If you do not make a selection, the total carryover will be allocated equally among the properties you elected to expense for the year. Free state and federal e file   If costs from more than one year are carried forward to a subsequent year in which only part of the total carryover can be deducted, you must deduct the costs being carried forward from the earliest year first. Free state and federal e file Special rules for qualified section 179 real property. Free state and federal e file   You can carry over to 2013 a 2012 deduction attributable to qualified section 179 real property that you elected to expense but were unable to take because of the business income limitation. Free state and federal e file Any such 2012 carryover amounts that are not deducted in 2013, plus any 2013 disallowed section 179 expense deductions attributable to qualified real property, are not carried over to 2014. Free state and federal e file Instead these amounts are treated as property placed in service on the first day of 2013 for purposes of computing depreciation (including the special depreciation allowance, if applicable). Free state and federal e file See section 179(f) of the Internal Revenue Code and Notice 2013-59 for more information. Free state and federal e file If there is a sale or other disposition of your property (including a transfer at death) before you can use the full amount of any outstanding carryover of your disallowed section 179 deduction, neither you nor the new owner can deduct any of the unused amount. Free state and federal e file Instead, you must add it back to the property's basis. Free state and federal e file Partnerships and Partners The section 179 deduction limits apply both to the partnership and to each partner. Free state and federal e file The partnership determines its section 179 deduction subject to the limits. Free state and federal e file It then allocates the deduction among its partners. Free state and federal e file Each partner adds the amount allocated from partnerships (shown on Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc. Free state and federal e file ) to his or her nonpartnership section 179 costs and then applies the dollar limit to this total. Free state and federal e file To determine any reduction in the dollar limit for costs over $2,000,000, the partner does not include any of the cost of section 179 property placed in service by the partnership. Free state and federal e file After the dollar limit (reduced for any nonpartnership section 179 costs over $2,000,000) is applied, any remaining cost of the partnership and nonpartnership section 179 property is subject to the business income limit. Free state and federal e file Partnership's taxable income. Free state and federal e file   For purposes of the business income limit, figure the partnership's taxable income by adding together the net income and losses from all trades or businesses actively conducted by the partnership during the year. Free state and federal e file See the Instructions for Form 1065 for information on how to figure partnership net income (or loss). Free state and federal e file However, figure taxable income without regard to credits, tax-exempt income, the section 179 deduction, and guaranteed payments under section 707(c) of the Internal Revenue Code. Free state and federal e file Partner's share of partnership's taxable income. Free state and federal e file   For purposes of the business income limit, the taxable income of a partner engaged in the active conduct of one or more of a partnership's trades or businesses includes his or her allocable share of taxable income derived from the partnership's active conduct of any trade or business. Free state and federal e file Example. Free state and federal e file In 2013, Beech Partnership placed in service section 179 property with a total cost of $2,025,000. Free state and federal e file The partnership must reduce its dollar limit by $25,000 ($2,025,000 − $2,000,000). Free state and federal e file Its maximum section 179 deduction is $475,000 ($500,000 − $25,000), and it elects to expense that amount. Free state and federal e file The partnership's taxable income from the active conduct of all its trades or businesses for the year was $600,000, so it can deduct the full $475,000. Free state and federal e file It allocates $40,000 of its section 179 deduction and $50,000 of its taxable income to Dean, one of its partners. Free state and federal e file In addition to being a partner in Beech Partnership, Dean is also a partner in the Cedar Partnership, which allocated to him a $30,000 section 179 deduction and $35,000 of its taxable income from the active conduct of its business. Free state and federal e file He also conducts a business as a sole proprietor and, in 2013, placed in service in that business qualifying section 179 property costing $55,000. Free state and federal e file He had a net loss of $5,000 from that business for the year. Free state and federal e file Dean does not have to include section 179 partnership costs to figure any reduction in his dollar limit, so his total section 179 costs for the year are not more than $2,000,000 and his dollar limit is not reduced. Free state and federal e file His maximum section 179 deduction is $500,000. Free state and federal e file He elects to expense all of the $70,000 in section 179 deductions allocated from the partnerships ($40,000 from Beech Partnership plus $30,000 from Cedar Partnership), plus $55,000 of his sole proprietorship's section 179 costs, and notes that information in his books and records. Free state and federal e file However, his deduction is limited to his business taxable income of $80,000 ($50,000 from Beech Partnership, plus $35,000 from Cedar Partnership minus $5,000 loss from his sole proprietorship). Free state and federal e file He carries over $45,000 ($125,000 − $80,000) of the elected section 179 costs to 2014. Free state and federal e file He allocates the carryover amount to the cost of section 179 property placed in service in his sole proprietorship, and notes that allocation in his books and records. Free state and federal e file Different tax years. Free state and federal e file   For purposes of the business income limit, if the partner's tax year and that of the partnership differ, the partner's share of the partnership's taxable income for a tax year is generally the partner's distributive share for the partnership tax year that ends with or within the partner's tax year. Free state and federal e file Example. Free state and federal e file John and James Oak are equal partners in Oak Partnership. Free state and federal e file Oak Partnership uses a tax year ending January 31. Free state and federal e file John and James both use a tax year ending December 31. Free state and federal e file For its tax year ending January 31, 2013, Oak Partnership's taxable income from the active conduct of its business is $80,000, of which $70,000 was earned during 2012. Free state and federal e file John and James each include $40,000 (each partner's entire share) of partnership taxable income in computing their business income limit for the 2013 tax year. Free state and federal e file Adjustment of partner's basis in partnership. Free state and federal e file   A partner must reduce the basis of his or her partnership interest by the total amount of section 179 expenses allocated from the partnership even if the partner cannot currently deduct the total amount. Free state and federal e file If the partner disposes of his or her partnership interest, the partner's basis for determining gain or loss is increased by any outstanding carryover of disallowed section 179 expenses allocated from the partnership. Free state and federal e file Adjustment of partnership's basis in section 179 property. Free state and federal e file   The basis of a partnership's section 179 property must be reduced by the section 179 deduction elected by the partnership. Free state and federal e file This reduction of basis must be made even if a partner cannot deduct all or part of the section 179 deduction allocated to that partner by the partnership because of the limits. Free state and federal e file S Corporations Generally, the rules that apply to a partnership and its partners also apply to an S corporation and its shareholders. Free state and federal e file The deduction limits apply to an S corporation and to each shareholder. Free state and federal e file The S corporation allocates its deduction to the shareholders who then take their section 179 deduction subject to the limits. Free state and federal e file Figuring taxable income for an S corporation. Free state and federal e file   To figure taxable income (or loss) from the active conduct by an S corporation of any trade or business, you total the net income and losses from all trades or businesses actively conducted by the S corporation during the year. Free state and federal e file   To figure the net income (or loss) from a trade or business actively conducted by an S corporation, you take into account the items from that trade or business that are passed through to the shareholders and used in determining each shareholder's tax liability. Free state and federal e file However, you do not take into account any credits, tax-exempt income, the section 179 deduction, and deductions for compensation paid to shareholder-employees. Free state and federal e file For purposes of determining the total amount of S corporation items, treat deductions and losses as negative income. Free state and federal e file In figuring the taxable income of an S corporation, disregard any limits on the amount of an S corporation item that must be taken into account when figuring a shareholder's taxable income. Free state and federal e file Other Corporations A corporation's taxable income from its active conduct of any trade or business is its taxable income figured with the following changes. Free state and federal e file It is figured before deducting the section 179 deduction, any net operating loss deduction, and special deductions (as reported on the corporation's income tax return). Free state and federal e file It is adjusted for items of income or deduction included in the amount figured in 1, above, not derived from a trade or business actively conducted by the corporation during the tax year. Free state and federal e file How Do You Elect the Deduction? You elect to take the section 179 deduction by completing Part I of Form 4562. Free state and federal e file If you elect the deduction for listed property (described in chapter 5), complete Part V of Form 4562 before completing Part I. Free state and federal e file For property placed in service in 2013, file Form 4562 with either of the following. Free state and federal e file Your original 2013 tax return, whether or not you file it timely. Free state and federal e file An amended return for 2013 filed within the time prescribed by law. Free state and federal e file An election made on an amended return must specify the item of section 179 property to which the election applies and the part of the cost of each such item to be taken into account. Free state and federal e file The amended return must also include any resulting adjustments to taxable income. Free state and federal e file You must keep records that show the specific identification of each piece of qualifying section 179 property. Free state and federal e file These records must show how you acquired the property, the person you acquired it from, and when you placed it in service. Free state and federal e file Election for certain qualified section 179 real property. Free state and federal e file   You can elect to expense certain qualified real property that you placed in service as section 179 property for tax years beginning in 2013. Free state and federal e file If you elect to treat this property as section 179 property, you must elect the application of the special rules for qualified real property described in section 179(f) of the Internal Revenue Code. Free state and federal e file   To make the election, attach a statement indicating you are “electing the application of section 179(f) of the Internal Revenue Code” with either of the following. Free state and federal e file Your original 2013 tax return, whether or not you file it timely. Free state and federal e file An amended return for 2013 filed within the time prescribed by law. Free state and federal e file The amended return must also include any adjustments to taxable income. Free state and federal e file   The statement should indicate your election to expense certain qualified real property under section 179(f) on your return. Free state and federal e file It must specify one or more of the three types of qualified property (described under Qualified real property ) to which the election applies, the cost of each such type, and the portion of the cost of each such property to be taken into account. Free state and federal e file Also, report this on line 6 of Form 4562. Free state and federal e file    The maximum section 179 expense deduction that can be taken for qualified section 179 real property is limited to $250,000. Free state and federal e file Revoking an election. Free state and federal e file   An election (or any specification made in the election) to take a section 179 deduction for 2013 can be revoked without IRS approval by filing an amended return. Free state and federal e file The amended return must be filed within the time prescribed by law. Free state and federal e file The amended return must also include any resulting adjustments to taxable income. Free state and federal e file Once made, the revocation is irrevocable. Free state and federal e file When Must You Recapture the Deduction? You may have to recapture the section 179 deduction if, in any year during the property's recovery period, the percentage of business use drops to 50% or less. Free state and federal e file In the year the business use drops to 50% or less, you include the recapture amount as ordinary income in Part IV of Form 4797. Free state and federal e file You also increase the basis of the property by the recapture amount. Free state and federal e file Recovery periods for property are discussed under Which Recovery Period Applies in chapter 4 . Free state and federal e file If you sell, exchange, or otherwise dispose of the property, do not figure the recapture amount under the rules explained in this discussion. Free state and federal e file Instead, use the rules for recapturing depreciation explained in chapter 3 of Publication 544 under Section 1245 Property. Free state and federal e file For qualified real property (described earlier), see Notice 2013-59 for determining the portion of the gain that is attributable to section 1245 property upon the sale or other disposition of qualified real property. Free state and federal e file If the property is listed property (described in chapter 5 ), do not figure the recapture amount under the rules explained in this discussion when the percentage of business use drops to 50% or less. Free state and federal e file Instead, use the rules for recapturing excess depreciation in chapter 5 under What Is the Business-Use Requirement. Free state and federal e file Figuring the recapture amount. Free state and federal e file   To figure the amount to recapture, take the following steps. Free state and federal e file Figure the depreciation that would have been allowable on the section 179 deduction you claimed. Free state and federal e file Begin with the year you placed the property in service and include the year of recapture. Free state and federal e file Subtract the depreciation figured in (1) from the section 179 deduction you claimed. Free state and federal e file The result is the amount you must recapture. Free state and federal e file Example. Free state and federal e file In January 2011, Paul Lamb, a calendar year taxpayer, bought and placed in service section 179 property costing $10,000. Free state and federal e file The property is not listed property. Free state and federal e file The property is 3-year property. Free state and federal e file He elected a $5,000 section 179 deduction for the property and also elected not to claim a special depreciation allowance. Free state and federal e file He used the property only for business in 2011 and 2012. Free state and federal e file In 2013, he used the property 40% for business and 60% for personal use. Free state and federal e file He figures his recapture amount as follows. Free state and federal e file Section 179 deduction claimed (2011) $5,000. Free state and federal e file 00 Minus: Allowable depreciation using Table A-1 (instead of section 179 deduction):   2011 $1,666. Free state and federal e file 50   2012 2,222. Free state and federal e file 50   2013 ($740. Free state and federal e file 50 × 40% (business)) 296. Free state and federal e file 20 4,185. Free state and federal e file 20 2013 — Recapture amount $ 814. Free state and federal e file 80 Paul must include $814. Free state and federal e file 80 in income for 2013. Free state and federal e file If any qualified zone property placed in service during the year ceases to be used in an empowerment zone by an enterprise zone business in a later year, the benefit of the increased section 179 deduction must be reported as other income on your return. Free state and federal e file Prev  Up  Next   Home   More Online Publications