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Free State Filing Taxes

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Free State Filing Taxes

Free state filing taxes Publication 505 - Introductory Material Table of Contents IntroductionNonresident aliens. Free state filing taxes Ordering forms and publications. Free state filing taxes Tax questions. Free state filing taxes What's New for 2014 Reminders Introduction The federal income tax is a pay-as-you-go tax. Free state filing taxes You must pay the tax as you earn or receive income during the year. Free state filing taxes There are two ways to pay as you go. Free state filing taxes Withholding. Free state filing taxes If you are an employee, your employer probably withholds income tax from your pay. Free state filing taxes In addition, tax may be withheld from certain other income, such as pensions, bonuses, commissions, and gambling winnings. Free state filing taxes The amount withheld is paid to the Internal Revenue Service (IRS) in your name. Free state filing taxes Estimated tax. Free state filing taxes If you do not pay your tax through withholding, or do not pay enough tax that way, you might have to pay estimated tax. Free state filing taxes People who are in business for themselves generally will have to pay their tax this way. Free state filing taxes You may have to pay estimated tax if you receive income such as dividends, interest, capital gains, rents, and royalties. Free state filing taxes Estimated tax is used to pay not only income tax, but other taxes such as self-employment tax and alternative minimum tax. Free state filing taxes This publication explains both of these methods. Free state filing taxes It also explains how to take credit on your return for the tax that was withheld and for your estimated tax payments. Free state filing taxes If you did not pay enough tax during the year, either through withholding or by making estimated tax payments, you may have to pay a penalty. Free state filing taxes Generally, the IRS can figure this penalty for you. Free state filing taxes This underpayment penalty, and the exceptions to it, are discussed in chapter 4. Free state filing taxes Nonresident aliens. Free state filing taxes    Before completing Form W-4, nonresident alien employees should see the Instructions for Form 8233, Exemption From Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual. Free state filing taxes Also see chapter 8 of Publication 519, U. Free state filing taxes S. Free state filing taxes Tax Guide for Aliens, for important information on withholding. Free state filing taxes What's new for 2013 and 2014. Free state filing taxes   See What's New for 2014 in this Introduction, and What's New for 2013 in chapter 4. Free state filing taxes Comments and suggestions. Free state filing taxes   We welcome your comments about this publication and your suggestions for future editions. Free state filing taxes   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Free state filing taxes NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Free state filing taxes Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Free state filing taxes   You can send your comments from www. Free state filing taxes irs. Free state filing taxes gov/formspubs/. Free state filing taxes Click on “More Information” and then on Give us feedback on forms and publications. Free state filing taxes   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Free state filing taxes Ordering forms and publications. Free state filing taxes   Visit www. Free state filing taxes irs. Free state filing taxes gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 business days after your request is received. Free state filing taxes Internal Revenue Service 1201 N. Free state filing taxes Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Free state filing taxes   If you have a tax question, check the information available on IRS. Free state filing taxes gov or call 1-800-829-1040. Free state filing taxes We cannot answer tax questions sent to either of the above addresses. Free state filing taxes What's New for 2014 Use your 2013 tax return as a guide in figuring your 2014 estimated tax, but be sure to consider the following. Free state filing taxes Standard mileage rates. Free state filing taxes  The 2014 rate for business use of your vehicle is 56 cents per mile. Free state filing taxes The rate for use of your vehicle to get medical care or move is 23½ cents per mile. Free state filing taxes The rate of 14 cents per mile for charitable use is unchanged. Free state filing taxes Personal exemption increased for certain taxpayers. Free state filing taxes  For 2014, the personal exemption amount is increased to $3,950 for taxpayers with adjusted gross income at or below $305,050 if married filing jointly or qualifying widow(er), $279,650 if head of household, $254,200 if single, or $152,525 if married filing separately. Free state filing taxes The personal exemption amount for taxpayers with adjusted gross income above these thresholds may be reduced. Free state filing taxes Limitation on itemized deductions. Free state filing taxes  For 2014, itemized deductions for taxpayers with adjusted gross income above $305,050 if married filing jointly or qualifying widow(er), $279,650 if head of household, $254,200 if single, and $152,525 if married filing separately may be reduced. Free state filing taxes Health care coverage. Free state filing taxes  When you file your 2014 tax return in 2015, you will need to either (1) indicate on your return that you and your family had health care coverage throughout 2014, (2) claim an exemption from the health care coverage requirement for some or all of 2014, or (3) make a payment if you do not have coverage or an exemption(s) for all 12 months of 2014. Free state filing taxes For examples on how this payment works, go to www. Free state filing taxes IRS. Free state filing taxes gov/aca and click under the “Individuals & Families” section. Free state filing taxes You may want to consider this when figuring your “Other taxes” on Line 12 of the 2014 Estimated Tax Worksheet (Worksheet 2-1). Free state filing taxes For general information on these requirements, go to www. Free state filing taxes IRS. Free state filing taxes gov/aca. Free state filing taxes Advance payments of the Premium Tax Credit. Free state filing taxes  If you buy health care insurance through the Health Insurance Marketplace, you may be eligible for advance payments of the Premium Tax Credit to help pay for your insurance coverage. Free state filing taxes Receiving too little or too much in advance will affect your refund or balance due. Free state filing taxes Promptly report changes in your income or family size to your Marketplace. Free state filing taxes You may want to consider this when figuring your estimated taxes for 2014. Free state filing taxes For more information, go to www. Free state filing taxes IRS. Free state filing taxes gov/aca and see Publication 5120 and Publication 5121. Free state filing taxes http://www. Free state filing taxes IRS. Free state filing taxes gov/pub5120 Alternative minimum tax (AMT) exemption amount increased. Free state filing taxes  The AMT exemption amount is increased to $52,800 ($82,100 if married filing jointly or qualifying widow(er); $41,050 if married filing separately). Free state filing taxes Lifetime learning credit income limits. Free state filing taxes  In order to claim a lifetime learning credit, your MAGI must be less than $54,000 ($108,000 if married filing jointly). Free state filing taxes Retirement savings contribution credit income limits increased. Free state filing taxes  In order to claim this credit for 2014, your MAGI must be less than $30,000 ($60,000 if married filing jointly; $45,000 if head of household). Free state filing taxes Adoption credit or exclusion. Free state filing taxes  The maximum adoption credit or exclusion for employer-provided adoption benefits has increased to $13,190. Free state filing taxes In order to claim either the credit or exclusion, your MAGI must be less than $237,880. Free state filing taxes Earned income credit (EIC). Free state filing taxes  You may be able to take the EIC in 2014 if: Three or more children lived with you and you earned less than $46,997 ($52,427 if married filing jointly), Two children lived with you and you earned less than $43,756 ($49,186 if married filing jointly), One child lived with you and you earned less than $38,511 ($43,941 if married filing jointly), or A child did not live with you and you earned less than $14,590 ($20,020 if married filing jointly). Free state filing taxes Also, the maximum MAGI you can have and still get the credit has increased. Free state filing taxes You may be able to take the credit if your MAGI is less than the amount in the above list that applies to you. Free state filing taxes The maximum investment income you can have and get the credit has increased to $3,350. Free state filing taxes Reminders Future developments. Free state filing taxes  The IRS has created a page on IRS. Free state filing taxes gov for information about Publication 505 at www. Free state filing taxes irs. Free state filing taxes gov/pub505. Free state filing taxes Information about any future developments affecting Publication 505 (such as legislation enacted after we release it) will be posted on that page. Free state filing taxes Social security tax. Free state filing taxes   Generally, each employer for whom you work during the tax year must withhold social security tax up to the annual limit. Free state filing taxes The annual limit is $117,000 in 2014. Free state filing taxes Photographs of missing children. Free state filing taxes  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Free state filing taxes Photographs of missing children selected by the Center may appear in this publication on pages that otherwise would be blank. Free state filing taxes You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Free state filing taxes Additional Medicare Tax. Free state filing taxes  Beginning in 2013, a 0. Free state filing taxes 9% Additional Medicare Tax applies to Medicare wages, Railroad Retirement Tax Act compensation, and self-employment income over a threshold amount based on your filing status. Free state filing taxes You may need to include this amount when figuring your estimated tax. Free state filing taxes See the instructions for line 12 of the 2014 Estimated Tax Worksheet. Free state filing taxes You may also request that your employer deduct and withhold an additional amount of income tax withholding from your wages on Form W-4, Employee's Withholding Allowance Certificate. Free state filing taxes For more information on Additional Medicare Tax, go to IRS. Free state filing taxes gov and enter “Additional Medicare Tax” in the search box. Free state filing taxes Net Investment Income Tax. Free state filing taxes  Beginning in 2013, you may be subject to Net Investment Income Tax (NIIT). Free state filing taxes NIIT is a 3. Free state filing taxes 8% tax on the lesser of net investment income or the excess of your modified adjusted gross income (MAGI) over the threshold amount. Free state filing taxes NIIT may need to be included when figuring estimated tax. Free state filing taxes See the instructions for line 12 of the 2014 Estimated Tax Worksheet. Free state filing taxes You may also request that your employer deduct and withhold an additional amount of income tax withholding from your wages on Form W-4. Free state filing taxes For more information on NIIT, go to IRS. Free state filing taxes gov and enter “Net Investment Income Tax” in the search box. Free state filing taxes Prev  Up  Next   Home   More Online Publications
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    Messages telling you to install and update security software for your computer seem to be everywhere. So you might be tempted by an offer of a 'free security scan,' especially when faced with a pop-up, an email, or an ad that claims 'malicious software' has already been found on your machine. Unfortunately, it's likely that the scary message is a come-on for a rip-off.
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The Free State Filing Taxes

Free state filing taxes 5. Free state filing taxes   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 state filing taxes Listed property includes cars and other property used for transportation, property used for entertainment, and certain computers. Free state filing taxes Deductions for listed property (other than certain leased property) are subject to the following special rules and limits. Free state filing taxes Deduction for employees. Free state filing taxes 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 state filing taxes Business-use requirement. Free state filing taxes 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 state filing taxes 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 state filing taxes You may also have to recapture (include in income) any excess depreciation claimed in previous years. Free state filing taxes A similar inclusion amount applies to certain leased property. Free state filing taxes Passenger automobile limits and rules. Free state filing taxes Annual limits apply to depreciation deductions (including section 179 deductions and any special depreciation allowance) for certain passenger automobiles. Free state filing taxes You can continue to deduct depreciation for the unrecovered basis resulting from these limits after the end of the recovery period. Free state filing taxes 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 state filing taxes It also discusses the recordkeeping rules for listed property and explains how to report information about the property on your tax return. Free state filing taxes 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 state filing taxes What Is Listed Property? Listed property is any of the following. Free state filing taxes Passenger automobiles (as defined later). Free state filing taxes Any other property used for transportation, unless it is an excepted vehicle. Free state filing taxes Property generally used for entertainment, recreation, or amusement (including photographic, phonographic, communication, and video-recording equipment). Free state filing taxes Computers and related peripheral equipment, unless used only at a regular business establishment and owned or leased by the person operating the establishment. Free state filing taxes 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 state filing taxes Improvements to listed property. Free state filing taxes   An improvement made to listed property that must be capitalized is treated as a new item of depreciable property. Free state filing taxes The recovery period and method of depreciation that apply to the listed property as a whole also apply to the improvement. Free state filing taxes 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 state filing taxes 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 state filing taxes 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 state filing taxes The following vehicles are not considered passenger automobiles for these purposes. Free state filing taxes An ambulance, hearse, or combination ambulance-hearse used directly in a trade or business. Free state filing taxes A vehicle used directly in the trade or business of transporting persons or property for pay or hire. Free state filing taxes A truck or van that is a qualified nonpersonal use vehicle. Free state filing taxes Qualified nonpersonal use vehicles. Free state filing taxes   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 state filing taxes They include the trucks and vans listed as excepted vehicles under Other Property Used for Transportation , next. Free state filing taxes 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 state filing taxes For a detailed discussion of passenger automobiles, including leased passenger automobiles, see  Publication 463. Free state filing taxes 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 state filing taxes Other property used for transportation includes trucks, buses, boats, airplanes, motorcycles, and any other vehicles used to transport persons or goods. Free state filing taxes Excepted vehicles. Free state filing taxes   Other property used for transportation does not include the following qualified nonpersonal use vehicles (defined earlier under Passenger Automobiles ). Free state filing taxes Clearly marked police and fire vehicles. Free state filing taxes Unmarked vehicles used by law enforcement officers if the use is officially authorized. Free state filing taxes Ambulances used as such and hearses used as such. Free state filing taxes Any vehicle with a loaded gross vehicle weight of over 14,000 pounds that is designed to carry cargo. Free state filing taxes Bucket trucks (cherry pickers), cement mixers, dump trucks (including garbage trucks), flatbed trucks, and refrigerated trucks. Free state filing taxes Combines, cranes and derricks, and forklifts. Free state filing taxes Delivery trucks with seating only for the driver, or only for the driver plus a folding jump seat. Free state filing taxes Qualified moving vans. Free state filing taxes Qualified specialized utility repair trucks. Free state filing taxes School buses used in transporting students and employees of schools. Free state filing taxes Other buses with a capacity of at least 20 passengers that are used as passenger buses. Free state filing taxes Tractors and other special purpose farm vehicles. Free state filing taxes Clearly marked police and fire vehicle. Free state filing taxes   A clearly marked police or fire vehicle is a vehicle that meets all the following requirements. Free state filing taxes It is owned or leased by a governmental unit or an agency or instrumentality of a governmental unit. Free state filing taxes 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 state filing taxes 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 state filing taxes It is clearly marked with painted insignia or words that make it readily apparent that it is a police or fire vehicle. Free state filing taxes A marking on a license plate is not a clear marking for these purposes. Free state filing taxes Qualified moving van. Free state filing taxes   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 state filing taxes 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 state filing taxes Personal use for travel to and from a move site happens no more than five times a month on average. Free state filing taxes 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 state filing taxes Qualified specialized utility repair truck. Free state filing taxes   A truck is a qualified specialized utility repair truck if it is not a van or pickup truck and all the following apply. Free state filing taxes The truck was specifically designed for and is used to carry heavy tools, testing equipment, or parts. Free state filing taxes 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 state filing taxes 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 state filing taxes 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 state filing taxes It consists of a central processing unit with extensive storage, logic, arithmetic, and control capabilities. Free state filing taxes Related peripheral equipment is any auxiliary machine which is designed to be controlled by the central processing unit of a computer. Free state filing taxes The following are neither computers nor related peripheral equipment. Free state filing taxes Any equipment that is an integral part of other property that is not a computer. Free state filing taxes Typewriters, calculators, adding and accounting machines, copiers, duplicating equipment, and similar equipment. Free state filing taxes Equipment of a kind used primarily for the user's amusement or entertainment, such as video games. Free state filing taxes 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 state filing taxes The use of your property in performing services as an employee is a business use only if both the following requirements are met. Free state filing taxes The use is for your employer's convenience. Free state filing taxes The use is required as a condition of your employment. Free state filing taxes 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 state filing taxes Employer's convenience. Free state filing taxes   Whether the use of listed property is for your employer's convenience must be determined from all the facts. Free state filing taxes The use is for your employer's convenience if it is for a substantial business reason of the employer. Free state filing taxes 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 state filing taxes Condition of employment. Free state filing taxes   Whether the use of listed property is a condition of your employment depends on all the facts and circumstances. Free state filing taxes The use of property must be required for you to perform your duties properly. Free state filing taxes Your employer does not have to require explicitly that you use the property. Free state filing taxes However, a mere statement by the employer that the use of the property is a condition of your employment is not sufficient. Free state filing taxes Example 1. Free state filing taxes Virginia Sycamore is employed as a courier with We Deliver, which provides local courier services. Free state filing taxes She owns and uses a motorcycle to deliver packages to downtown offices. Free state filing taxes We Deliver explicitly requires all delivery persons to own a car or motorcycle for use in their employment. Free state filing taxes Virginia's use of the motorcycle is for the convenience of We Deliver and is required as a condition of employment. Free state filing taxes Example 2. Free state filing taxes Bill Nelson is an inspector for Uplift, a construction company with many sites in the local area. Free state filing taxes He must travel to these sites on a regular basis. Free state filing taxes Uplift does not furnish an automobile or explicitly require him to use his own automobile. Free state filing taxes However, it pays him for any costs he incurs in traveling to the various sites. Free state filing taxes 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 state filing taxes Example 3. Free state filing taxes 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 state filing taxes The use of his own car is neither for the convenience of Uplift nor required as a condition of employment. Free state filing taxes Example 4. Free state filing taxes Marilyn Lee is a pilot for Y Company, a small charter airline. Free state filing taxes Y requires pilots to obtain 80 hours of flight time annually in addition to flight time spent with the airline. Free state filing taxes Pilots usually can obtain these hours by flying with the Air Force Reserve or by flying part-time with another airline. Free state filing taxes Marilyn owns her own airplane. Free state filing taxes 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 state filing taxes Example 5. Free state filing taxes David Rule is employed as an engineer with Zip, an engineering contracting firm. Free state filing taxes He occasionally takes work home at night rather than work late in the office. Free state filing taxes He owns and uses a home computer which is virtually identical to the office model. Free state filing taxes His use of the computer is neither for the convenience of his employer nor required as a condition of employment. Free state filing taxes 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 state filing taxes To meet this requirement, listed property must be used predominantly (more than 50% of its total use) for qualified business use. Free state filing taxes If this requirement is not met, the following rules apply. Free state filing taxes 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 state filing taxes 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 state filing taxes 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 state filing taxes This rule applies each year of the recovery period. Free state filing taxes 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 state filing taxes 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 state filing taxes 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 state filing taxes 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 state filing taxes Exception for leased property. Free state filing taxes   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 state filing taxes   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 state filing taxes 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 state filing taxes Occasional or incidental leasing activity is insufficient. Free state filing taxes 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 state filing taxes 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 state filing taxes 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 state filing taxes For passenger automobiles and other means of transportation, allocate the property's use on the basis of mileage. Free state filing taxes 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 state filing taxes 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 state filing taxes 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 state filing taxes Entertainment use. Free state filing taxes   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 state filing taxes Commuting use. Free state filing taxes   The use of an automobile for commuting is not business use, regardless of whether work is performed during the trip. Free state filing taxes 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 state filing taxes This is also true for a business meeting held in a car while commuting to work. Free state filing taxes Similarly, a business call made on an otherwise personal trip does not change the character of a trip from personal to business. Free state filing taxes 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 state filing taxes Use of your automobile by another person. Free state filing taxes   If someone else uses your automobile, do not treat that use as business use unless one of the following conditions applies. Free state filing taxes That use is directly connected with your business. Free state filing taxes You properly report the value of the use as income to the other person and withhold tax on the income where required. Free state filing taxes You are paid a fair market rent. Free state filing taxes Treat any payment to you for the use of the automobile as a rent payment for purposes of item (3). Free state filing taxes Employee deductions. Free state filing taxes   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 state filing taxes See Can Employees Claim a Deduction , earlier. Free state filing taxes Qualified Business Use Qualified business use of listed property is any use of the property in your trade or business. Free state filing taxes However, it does not include the following uses. Free state filing taxes 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 state filing taxes The use of property as pay for the services of a 5% owner or related person. Free state filing taxes 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 state filing taxes Property does not stop being used predominantly for qualified business use because of a transfer at death. Free state filing taxes Exception for leasing or compensatory use of aircraft. Free state filing taxes   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 state filing taxes 5% owner. Free state filing taxes   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 state filing taxes   For a corporation, a 5% owner is any person who owns, or is considered to own, either of the following. Free state filing taxes More than 5% of the outstanding stock of the corporation. Free state filing taxes Stock possessing more than 5% of the total combined voting power of all stock in the corporation. Free state filing taxes Related persons. Free state filing taxes   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 state filing taxes 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 state filing taxes Examples. Free state filing taxes   The following examples illustrate whether the use of business property is qualified business use. Free state filing taxes Example 1. Free state filing taxes John Maple is the sole proprietor of a plumbing contracting business. Free state filing taxes John employs his brother, Richard, in the business. Free state filing taxes As part of Richard's pay, he is allowed to use one of the company automobiles for personal use. Free state filing taxes The company includes the value of the personal use of the automobile in Richard's gross income and properly withholds tax on it. Free state filing taxes 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 state filing taxes Example 2. Free state filing taxes John, in Example 1, allows unrelated employees to use company automobiles for personal purposes. Free state filing taxes 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 state filing taxes This use of company automobiles by employees is not a qualified business use. Free state filing taxes Example 3. Free state filing taxes James Company Inc. Free state filing taxes owns several automobiles that its employees use for business purposes. Free state filing taxes The employees also are allowed to take the automobiles home at night. Free state filing taxes 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 state filing taxes This use of company automobiles by employees, even for personal purposes, is a qualified business use for the company. Free state filing taxes Investment Use The use of property to produce income in a nonbusiness activity (investment use) is not a qualified business use. Free state filing taxes However, you can treat the investment use as business use to figure the depreciation deduction for the property in a given year. Free state filing taxes Example 1. Free state filing taxes Sarah Bradley uses a home computer 50% of the time to manage her investments. Free state filing taxes She also uses the computer 40% of the time in her part-time consumer research business. Free state filing taxes Sarah's home computer is listed property because it is not used at a regular business establishment. Free state filing taxes She does not use the computer predominantly for qualified business use. Free state filing taxes Therefore, she cannot elect a section 179 deduction or claim a special depreciation allowance for the computer. Free state filing taxes She must depreciate it using the straight line method over the ADS recovery period. Free state filing taxes Her combined business/investment use for determining her depreciation deduction is 90%. Free state filing taxes Example 2. Free state filing taxes 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 state filing taxes 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 state filing taxes Her combined business/investment use for determining her depreciation deduction is 90%. Free state filing taxes 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 state filing taxes You also increase the adjusted basis of your property by the same amount. Free state filing taxes 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 state filing taxes To determine the amount in (2) above, you must refigure the depreciation using the straight line method and the ADS recovery period. Free state filing taxes Example. Free state filing taxes In June 2009, Ellen Rye purchased and placed in service a pickup truck that cost $18,000. Free state filing taxes She used it only for qualified business use for 2009 through 2012. Free state filing taxes Ellen claimed a section 179 deduction of $10,000 based on the purchase of the truck. Free state filing taxes She began depreciating it using the 200% DB method over a 5-year GDS recovery period. Free state filing taxes 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 state filing taxes During 2013, she used the truck 50% for business and 50% for personal purposes. Free state filing taxes She includes $4,018 excess depreciation in her gross income for 2013. Free state filing taxes The excess depreciation is determined as follows. Free state filing taxes Total section 179 deduction ($10,000) and depreciation claimed ($6,618) for 2009 through 2012. Free state filing taxes (Depreciation is from Table A-1. Free state filing taxes ) $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 state filing taxes 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 state filing taxes Where to figure and report recapture. Free state filing taxes   Use Form 4797, Part IV, to figure the recapture amount. Free state filing taxes Report the recapture amount as other income on the same form or schedule on which you took the depreciation deduction. Free state filing taxes For example, report the recapture amount as other income on Schedule C (Form 1040) if you took the depreciation deduction on Schedule C. Free state filing taxes If you took the depreciation deduction on Form 2106, report the recapture amount as other income on Form 1040, line 21. Free state filing taxes 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 state filing taxes Your qualified business-use percentage is the part of the property's total use that is qualified business use (defined earlier). Free state filing taxes For the inclusion amount rules for a leased passenger automobile, see Leasing a Car in chapter 4 of Publication 463. Free state filing taxes The inclusion amount is the sum of Amount A and Amount B, described next. Free state filing taxes 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 state filing taxes Amount A. Free state filing taxes   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 state filing taxes   The fair market value of the property is the value on the first day of the lease term. Free state filing taxes 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 state filing taxes Amount B. Free state filing taxes   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 state filing taxes Maximum inclusion amount. Free state filing taxes   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 state filing taxes Inclusion amount worksheet. Free state filing taxes   The following worksheet is provided to help you figure the inclusion amount for leased listed property. Free state filing taxes Inclusion Amount Worksheet for Leased Listed Property 1. Free state filing taxes Fair market value   2. Free state filing taxes Business/investment use for first year business use is 50% or less   3. Free state filing taxes Multiply line 1 by line 2. Free state filing taxes   4. Free state filing taxes Rate (%) from Table A-19   5. Free state filing taxes Multiply line 3 by line 4. Free state filing taxes This is Amount A. Free state filing taxes   6. Free state filing taxes Fair market value   7. Free state filing taxes Average business/investment use for years property leased before the first year business use is 50% or less . Free state filing taxes . Free state filing taxes . Free state filing taxes . Free state filing taxes . Free state filing taxes . Free state filing taxes . Free state filing taxes . Free state filing taxes . Free state filing taxes . Free state filing taxes . Free state filing taxes . Free state filing taxes . Free state filing taxes   8. Free state filing taxes Multiply line 6 by line 7   9. Free state filing taxes Rate (%) from Table A-20   10. Free state filing taxes Multiply line 8 by line 9. Free state filing taxes This is Amount B. Free state filing taxes   11. Free state filing taxes Add line 5 and line 10. Free state filing taxes This is your inclusion amount. Free state filing taxes 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 state filing taxes )         Example. Free state filing taxes 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 state filing taxes The lease is for a period of 5 years. Free state filing taxes Larry does not use the computer at a regular business establishment, so it is listed property. Free state filing taxes 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 state filing taxes 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 state filing taxes The computer has a 5-year recovery period under both GDS and ADS. Free state filing taxes 2013 is the third tax year of the lease, so the applicable percentage from Table A-19 is −19. Free state filing taxes 8%. Free state filing taxes The applicable percentage from Table A-20 is 22. Free state filing taxes 0%. Free state filing taxes Larry's deductible rent for the computer for 2013 is $800. Free state filing taxes Larry uses the Inclusion amount worksheet. Free state filing taxes to figure the amount he must include in income for 2013. Free state filing taxes His inclusion amount is $224, which is the sum of −$238 (Amount A) and $462 (Amount B). Free state filing taxes Inclusion Amount Worksheet for Leased Listed Property 1. Free state filing taxes Fair market value $3,000   2. Free state filing taxes Business/investment use for first year business use is 50% or less 40 % 3. Free state filing taxes Multiply line 1 by line 2. Free state filing taxes 1,200   4. Free state filing taxes Rate (%) from Table A-19 −19. Free state filing taxes 8 % 5. Free state filing taxes Multiply line 3 by line 4. Free state filing taxes This is Amount A. Free state filing taxes −238   6. Free state filing taxes Fair market value 3,000   7. Free state filing taxes Average business/investment use for years property leased before the first year business use is 50% or less 70 % 8. Free state filing taxes Multiply line 6 by line 7 2,100   9. Free state filing taxes Rate (%) from Table A-20 22. Free state filing taxes 0 % 10. Free state filing taxes Multiply line 8 by line 9. Free state filing taxes This is Amount B. Free state filing taxes 462   11. Free state filing taxes Add line 5 and line 10. Free state filing taxes This is your inclusion amount. Free state filing taxes 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 state filing taxes ) $224           Lease beginning in the last 9 months of your tax year. Free state filing taxes    The inclusion amount is subject to a special rule if all the following apply. Free state filing taxes The lease term begins within 9 months before the close of your tax year. Free state filing taxes You do not use the property predominantly (more than 50%) for qualified business use during that part of the tax year. Free state filing taxes The lease term continues into your next tax year. Free state filing taxes Under this special rule, add the inclusion amount to income in the next tax year. Free state filing taxes 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 state filing taxes Skip lines 6 through 9 of the worksheet and enter zero on line 10. Free state filing taxes Example 1. Free state filing taxes On August 1, 2012, Julie Rule, a calendar year taxpayer, leased and placed in service an item of listed property. Free state filing taxes The property is 5-year property with a fair market value of $10,000. Free state filing taxes Her property has a recovery period of 5 years under ADS. Free state filing taxes The lease is for 5 years. Free state filing taxes Her business use of the property was 50% in 2012 and 90% in 2013. Free state filing taxes She paid rent of $3,600 for 2012, of which $3,240 is deductible. Free state filing taxes She must include $147 in income in 2013. Free state filing taxes The $147 is the sum of Amount A and Amount B. Free state filing taxes Amount A is $147 ($10,000 × 70% × 2. Free state filing taxes 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 state filing taxes Amount B is zero. Free state filing taxes Lease for less than one year. Free state filing taxes   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 state filing taxes The amount included in income is the inclusion amount (figured as described in the preceding discussions) multiplied by a fraction. Free state filing taxes 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 state filing taxes   The lease term for listed property other than residential rental or nonresidential real property includes options to renew. Free state filing taxes 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 state filing taxes Example 2. Free state filing taxes 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 state filing taxes This property had a fair market value of $15,000 and a recovery period of 5 years under ADS. Free state filing taxes The lease term was 6 months (ending on March 31, 2013), during which he used the property 45% in business. Free state filing taxes He must include $71 in income in 2013. Free state filing taxes The $71 is the sum of Amount A and Amount B. Free state filing taxes Amount A is $71 ($15,000 × 45% × 2. Free state filing taxes 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 state filing taxes Amount B is zero. Free state filing taxes Where to report inclusion amount. Free state filing taxes   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 state filing taxes For example, report the inclusion amount as other income on Schedule C (Form 1040) if you took the deduction on Schedule C. Free state filing taxes If you took the deduction for rental costs on Form 2106, report the inclusion amount as other income on Form 1040, line 21. Free state filing taxes 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 state filing taxes 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 state filing taxes Exception for leased cars. Free state filing taxes   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 state filing taxes 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 state filing taxes Maximum Depreciation Deduction The passenger automobile limits are the maximum depreciation amounts you can deduct for a passenger automobile. Free state filing taxes They are based on the date you placed the automobile in service. Free state filing taxes Passenger Automobiles The maximum deduction amounts for most passenger automobiles are shown in the following table. Free state filing taxes 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 state filing taxes 2If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,060. Free state filing taxes 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 state filing taxes 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 state filing taxes 5If you acquired the vehicle before 5/06/03, the maximum deduction is $7,660. Free state filing taxes 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 state filing taxes 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 state filing taxes 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 state filing taxes If you have a short tax year, you must reduce the maximum deduction amount by multiplying the maximum amount by a fraction. Free state filing taxes The numerator of the fraction is the number of months and partial months in the short tax year and the denominator is 12. Free state filing taxes Example. Free state filing taxes On April 15, 2013, Virginia Hart bought and placed in service a new car for $14,500. Free state filing taxes She used the car only in her business. Free state filing taxes She files her tax return based on the calendar year. Free state filing taxes She does not elect a section 179 deduction and elected not to claim any special depreciation allowance for the car. Free state filing taxes Under MACRS, a car is 5-year property. Free state filing taxes 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 state filing taxes Virginia multiplies the $14,500 unadjusted basis of her car by 0. Free state filing taxes 20 to get her MACRS depreciation of $2,900 for 2013. Free state filing taxes This $2,900 is below the maximum depreciation deduction of $3,160 for passenger automobiles placed in service in 2013. Free state filing taxes She can deduct the full $2,900. Free state filing taxes 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 state filing taxes 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 state filing taxes 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 state filing taxes 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 state filing taxes 2If you acquired the vehicle before 5/06/03, the maximum deduction is $22,880. Free state filing taxes 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 state filing taxes 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 state filing taxes 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 state filing taxes The maximum deduction amounts for trucks and vans are shown in the following table. Free state filing taxes 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 state filing taxes 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 state filing taxes 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 state filing taxes 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 state filing taxes 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 state filing taxes 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 state filing taxes 7 If you acquired the vehicle before 5/06/03, the maximum deduction is $7,960. Free state filing taxes 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 state filing taxes 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 state filing taxes Depreciation Worksheet for Passenger Automobiles You can use the following worksheet to figure your depreciation deduction using the percentage tables. Free state filing taxes Then use the information from this worksheet to prepare Form 4562. Free state filing taxes Depreciation Worksheet for Passenger Automobiles   Part I   1. Free state filing taxes MACRS system (GDS or ADS)     2. Free state filing taxes Property class     3. Free state filing taxes Date placed in service     4. Free state filing taxes Recovery period     5. Free state filing taxes Method and convention     6. Free state filing taxes Depreciation rate (from tables)     7. Free state filing taxes Maximum depreciation deduction for this year from the appropriate table       8. Free state filing taxes Business/investment-use percentage       9. Free state filing taxes Multiply line 7 by line 8. Free state filing taxes This is your adjusted maximum depreciation deduction       10. Free state filing taxes Section 179 deduction claimed this year (not more than line 9). Free state filing taxes Enter -0- if this is not the year you placed the car in service. Free state filing taxes         Note. Free state filing taxes  1) If line 10 is equal to line 9, stop here. Free state filing taxes Your combined section 179 and depreciation deduction (including your special depreciation allowance) is limited to the amount on line 9. Free state filing taxes  2) If line 10 is less than line 9, complete Part II. Free state filing taxes   Part II   11. Free state filing taxes Subtract line 10 from line 9. Free state filing taxes This is the limit on the amount you can deduct for depreciation (including any special depreciation allowance )       12. Free state filing taxes Cost or other basis (reduced by any alternative motor vehicle credit 1or credit for electric vehicles 2)       13. Free state filing taxes Multiply line 12 by line 8. Free state filing taxes This is your business/investment cost       14. Free state filing taxes Section 179 deduction claimed in the year you placed the car in service       15. Free state filing taxes Subtract line 14 from line 13. Free state filing taxes This is your tentative basis for depreciation       16. Free state filing taxes Multiply line 15 by . Free state filing taxes 50 if the 50% special depreciation allowance applies. Free state filing taxes This is your special depreciation allowance. Free state filing taxes 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 state filing taxes Your depreciation deduction (including your special depreciation allowance) is limited to the amount on line 11. Free state filing taxes  2) If line 16 is less than line 11, complete Part III. Free state filing taxes   Part III   17. Free state filing taxes Subtract line 16 from 11. Free state filing taxes This is the limit on the amount you can deduct for MACRS depreciation       18. Free state filing taxes Subtract line 16 from line 15. Free state filing taxes This is your basis for depreciation. Free state filing taxes       19. Free state filing taxes Multiply line 18 by line 6. Free state filing taxes This is your tentative MACRS depreciation deduction. Free state filing taxes       20. Free state filing taxes Enter the lesser of line 17 or line 19. Free state filing taxes This is your MACRS depreciation deduction. Free state filing taxes     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 state filing taxes 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 state filing taxes             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 state filing taxes If you continue to use the automobile for business, you can deduct that unrecovered basis after the recovery period ends. Free state filing taxes You can claim a depreciation deduction in each succeeding tax year until you recover your full basis in the car. Free state filing taxes 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 state filing taxes See Maximum Depreciation Deduction , earlier. Free state filing taxes 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 state filing taxes You cannot claim a depreciation deduction for listed property other than passenger automobiles after the recovery period ends. Free state filing taxes 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 state filing taxes Example. Free state filing taxes In May 2007, you bought and placed in service a car costing $31,500. Free state filing taxes The car was 5-year property under GDS (MACRS). Free state filing taxes You did not elect a section 179 deduction and elected not to claim any special depreciation allowance for the car. Free state filing taxes You used the car exclusively for business during the recovery period (2007 through 2012). Free state filing taxes You figured your depreciation as shown below. Free state filing taxes Year Percentage Amount Limit   Allowed 2007 20. Free state filing taxes 0% $6,300 $2,960   $2,960 2008 32. Free state filing taxes 0 10,080 4,800   4,800 2009 19. Free state filing taxes 2 6,048 2,850   2,850 2010 11. Free state filing taxes 52 3,629 1,675   1,675 2011 11. Free state filing taxes 52 3,629 1,675   1,675 2012 5. Free state filing taxes 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 state filing taxes 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 state filing taxes 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 state filing taxes 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 state filing taxes 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 state filing taxes 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 state filing taxes 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 state filing taxes This excess basis is the additional cash paid for the new automobile in the trade-in. Free state filing taxes The depreciation figured for the two components of the basis (carryover basis and excess basis) is subject to a single passenger automobile limit. Free state filing taxes Special rules apply in determining the passenger automobile limits. Free state filing taxes These rules and examples are discussed in section 1. Free state filing taxes 168(i)-6(d)(3) of the regulations. Free state filing taxes 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 state filing taxes 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 state filing taxes 168(i)-6(i) and 1. Free state filing taxes 168(i)-6(j) of the regulations. Free state filing taxes 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 state filing taxes For listed property, you must keep records for as long as any recapture can still occur. Free state filing taxes Recapture can occur in any tax year of the recovery period. Free state filing taxes 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 state filing taxes 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 state filing taxes However, your records should back up your receipts in an orderly manner. Free state filing taxes Elements of expenditure or use. Free state filing taxes   Your records or other documentary evidence must support all the following. Free state filing taxes 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 state filing taxes 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 state filing taxes The date of the expenditure or use. Free state filing taxes The business or investment purpose for the expenditure or use. Free state filing taxes   Written documents of your expenditure or use are generally better evidence than oral statements alone. Free state filing taxes You do not have to keep a daily log. Free state filing taxes 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 state filing taxes Timeliness. Free state filing taxes   You must record the elements of an expenditure or use at the time you have full knowledge of the elements. Free state filing taxes 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 state filing taxes   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 state filing taxes Business purpose supported. Free state filing taxes   Generally, an adequate record of business purpose must be in the form of a written statement. Free state filing taxes However, the amount of detail necessary to establish a business purpose depends on the facts and circumstances of each case. Free state filing taxes A written explanation of the business purpose will not be required if the purpose can be determined from the surrounding facts and circumstances. Free state filing taxes 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 state filing taxes Business use supported. Free state filing taxes   An adequate record contains enough information on each element of every business or investment use. Free state filing taxes The amount of detail required to support the use depends on the facts and circumstances. Free state filing taxes 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 state filing taxes   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 state filing taxes Separate or combined expenditures or uses. Free state filing taxes   Each use by you normally is considered a separate use. Free state filing taxes However, you can combine repeated uses as a single item. Free state filing taxes   Record each expenditure as a separate item. Free state filing taxes Do not combine it with other expenditures. Free state filing taxes 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 state filing taxes If you combine these expenses, you do not need to support the business purpose of each expense. Free state filing taxes Instead, you can divide the expenses based on the total business use of the listed property. Free state filing taxes   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 state filing taxes 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 state filing taxes 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 state filing taxes Minimal personal use (such as a stop for lunch between two business stops) is not an interruption of business use. Free state filing taxes Confidential information. Free state filing taxes   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 state filing taxes You must keep it elsewhere and make it available as support to the IRS director for your area on request. Free state filing taxes Substantial compliance. Free state filing taxes   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 state filing taxes   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 state filing taxes By your own oral or written statement containing detailed information as to the element. Free state filing taxes By other evidence sufficient to establish the element. Free state filing taxes   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 state filing taxes If the element is the business purpose of an expenditure, its supporting evidence can be circumstantial evidence. Free state filing taxes Sampling. Free state filing taxes   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 state filing taxes Example 1. Free state filing taxes Denise Williams, a sole proprietor and calendar year taxpayer, operates an interior decorating business out of her home. Free state filing taxes 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 state filing taxes There is no other business use of the automobile, but she and family members also use it for personal purposes. Free state filing taxes She maintains adequate records for the first 3 months of the year showing that 75% of the automobile use was for business. Free state filing taxes Subcontractor invoices and paid bills show that her business continued at approximately the same rate for the rest of the year. Free state filing taxes 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 state filing taxes Example 2. Free state filing taxes 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 state filing taxes 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 state filing taxes The determination that her business/investment use of the automobile for the tax year is 75% rests on sufficient supporting evidence. Free state filing taxes Example 3. Free state filing taxes 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 state filing taxes For the first 3 weeks of each month, he occasionally uses his own automobile for business travel within the metropolitan area. Free state filing taxes During these weeks, his business use of the automobile does not follow a consistent pattern. Free state filing taxes During the fourth week of each month, he delivers all business orders taken during the previous month. Free state filing taxes The business use of his automobile, as supported by adequate records, is 70% of its total use during that fourth week. Free state filing taxes 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 state filing taxes Loss of records. Free state filing taxes   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 state filing taxes 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 state filing taxes Any deduction for a vehicle. Free state filing taxes A depreciation deduction for any other listed property. Free state filing taxes If you claim any deduction for a vehicle, you also must provide the information requested in Section B. Free state filing taxes If you provide the vehicle for your employee's use, the employee must give you this information. Free state filing taxes 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 state filing taxes Vehicles used by your employees. Free state filing taxes   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 state filing taxes You maintain a written policy statement that prohibits one of the following uses of the vehicles. Free state filing taxes All personal use including commuting. Free state filing taxes Personal use, other than commuting, by employees who are not officers, directors, or 1%-or-more owners. Free state filing taxes You treat all use of the vehicles by your employees as personal use. Free state filing taxes 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 state filing taxes 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 state filing taxes Exceptions. Free state filing taxes   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 state filing taxes 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 state filing taxes Prev  Up  Next   Home   More Online Publications