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How Do I File My 2010 Taxes For Free

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How Do I File My 2010 Taxes For Free

How do i file my 2010 taxes for free 2. How do i file my 2010 taxes for free   Possession Source Income Table of Contents Types of IncomeCompensation for Labor or Personal Services Investment Income Sales or Other Dispositions of Property Scholarships, Fellowships, Grants, Prizes, and Awards Effectively Connected Income In order to determine where to file your return and which form(s) you need to complete, you must determine the source of each item of income you received during the tax year. How do i file my 2010 taxes for free Income you received from sources within, or that was effectively connected with the conduct of a trade or business within, the relevant possession must be identified separately from U. How do i file my 2010 taxes for free S. How do i file my 2010 taxes for free or foreign source income. How do i file my 2010 taxes for free This chapter discusses the rules for determining if the source of your income is from: American Samoa, The Commonwealth of the Northern Mariana Islands (CNMI), The Commonwealth of Puerto Rico (Puerto Rico), Guam, or The U. How do i file my 2010 taxes for free S. How do i file my 2010 taxes for free Virgin Islands (USVI). How do i file my 2010 taxes for free Generally, the same rules that apply for determining U. How do i file my 2010 taxes for free S. How do i file my 2010 taxes for free source income also apply for determining possession source income. How do i file my 2010 taxes for free However, there are some important exceptions to these rules. How do i file my 2010 taxes for free Both the general rules and the exceptions are discussed in this chapter. How do i file my 2010 taxes for free U. How do i file my 2010 taxes for free S. How do i file my 2010 taxes for free income rule. How do i file my 2010 taxes for free   This rule states that income is not possession source income if, under the rules of Internal Revenue Code sections 861–865, it is treated as income: From sources within the United States, or Effectively connected with the conduct of a trade or business within the United States. How do i file my 2010 taxes for free Table 2-1 shows the general rules for determining whether income is from sources within the United States. How do i file my 2010 taxes for free Table 2-1. How do i file my 2010 taxes for free General Rules for Determining U. How do i file my 2010 taxes for free S. How do i file my 2010 taxes for free Source of Income Item of Income Factor Determining Source Salaries, wages, and other compensation for labor or personal services Where labor or services performed Pensions Contributions: Where services were performed that earned the pension Investment earnings: Where pension trust is located Interest Residence of payer Dividends Where corporation created or organized Rents Location of property Royalties:   Natural resources Location of property Patents, copyrights, etc. How do i file my 2010 taxes for free Where property is used Sale of business inventory—purchased Where sold Sale of business inventory—produced Allocation if produced and sold in different locations Sale of real property Location of property Sale of personal property Seller's tax home (but see Special Rules for Gains From Dispositions of Certain Property , later, for exceptions) Sale of natural resources Allocation based on fair market value of product at export terminal. How do i file my 2010 taxes for free For more information, see Regulations section 1. How do i file my 2010 taxes for free 863-1(b). How do i file my 2010 taxes for free Types of Income This section looks at the most common types of income received by individuals, and the rules for determining the source of the income. How do i file my 2010 taxes for free Generally, the same rules shown in Table 2-1 are used to determine if you have possession source income. How do i file my 2010 taxes for free Compensation for Labor or Personal Services Income from labor or personal services includes wages, salaries, commissions, fees, per diem allowances, employee allowances and bonuses, and fringe benefits. How do i file my 2010 taxes for free It also includes income earned by sole proprietors and general partners from providing personal services in the course of their trade or business. How do i file my 2010 taxes for free Services performed wholly within a relevant possession. How do i file my 2010 taxes for free   Generally, all pay you receive for services performed in a relevant possession is considered to be from sources within that possession. How do i file my 2010 taxes for free However, there is an exception for income earned as a member of the U. How do i file my 2010 taxes for free S. How do i file my 2010 taxes for free Armed Forces or a civilian spouse. How do i file my 2010 taxes for free U. How do i file my 2010 taxes for free S. How do i file my 2010 taxes for free Armed Forces. How do i file my 2010 taxes for free   If you are a bona fide resident of a relevant possession, your military service pay will be sourced in that possession even if you perform the services in the United States or another possession. How do i file my 2010 taxes for free However, if you are not a bona fide resident of a possession, your military service pay will be income from the  United States even if you perform services in a possession. How do i file my 2010 taxes for free Civilian spouse of active duty member of the U. How do i file my 2010 taxes for free S. How do i file my 2010 taxes for free Armed Forces. How do i file my 2010 taxes for free   If you are a bona fide resident of a U. How do i file my 2010 taxes for free S. How do i file my 2010 taxes for free possession and choose to keep that possession as your tax residence under MSRRA when relocating with your servicemember spouse under military orders, the source of income for your labor or personal services is considered to be that possession. How do i file my 2010 taxes for free Likewise, if your tax residence is in one of the 50 states or the District of Columbia before relocating and you choose to keep it as your tax residence, the source of income for services performed in any of the U. How do i file my 2010 taxes for free S. How do i file my 2010 taxes for free possessions is considered to be the United States and, specifically, your state of residence or the District of Columbia. How do i file my 2010 taxes for free Services performed partly inside and partly outside a relevant possession. How do i file my 2010 taxes for free   If you are an employee and receive compensation for labor or personal services performed both inside and outside the relevant possession, special rules apply in determining the source of the compensation. How do i file my 2010 taxes for free Compensation (other than certain fringe benefits) is sourced on a time basis. How do i file my 2010 taxes for free Certain fringe benefits (such as housing and education) are sourced on a geographical basis. How do i file my 2010 taxes for free   Or, you may be permitted to use an alternative basis to determine the source of compensation. How do i file my 2010 taxes for free See Alternative basis , later. How do i file my 2010 taxes for free   If you are self-employed, determine the source of your income for labor or personal services from self-employment on the basis that most correctly reflects the proper source of that income under the facts and circumstances of your particular case. How do i file my 2010 taxes for free In many cases, the facts and circumstances will call for an apportionment on a time basis as explained next. How do i file my 2010 taxes for free Time basis. How do i file my 2010 taxes for free   Use a time basis to figure your compensation for labor or personal services from the relevant possession (other than the fringe benefits discussed later). How do i file my 2010 taxes for free Do this by multiplying your total compensation (other than the fringe benefits discussed later) by the following fraction:   Number of days you performed  services in the relevant  possession during the year     Total number of days you  performed services during the year           You can use a unit of time less than a day in the above fraction, if appropriate. How do i file my 2010 taxes for free The time period for which the income is made does not have to be a year. How do i file my 2010 taxes for free Instead, you can use another distinct, separate, and continuous time period if you can establish to the satisfaction of the IRS that this other period is more appropriate. How do i file my 2010 taxes for free Example. How do i file my 2010 taxes for free In 2013, you worked in your employer's office in the United States for 60 days and in the Puerto Rico office for 180 days, earning a total of $80,000 for the year. How do i file my 2010 taxes for free Your Puerto Rico source income is $60,000, figured as follows. How do i file my 2010 taxes for free       180 days 240 days × $80,000 = $60,000                 Multi-year compensation. How do i file my 2010 taxes for free   The source of multi-year compensation is generally determined on a time basis over the period to which the compensation is attributable. How do i file my 2010 taxes for free Multi-year compensation is compensation that is included in your income in 1 tax year but is attributable to a period that includes 2 or more tax years. How do i file my 2010 taxes for free You determine the period to which the income is attributable based on the facts and circumstances of your case. How do i file my 2010 taxes for free For more information on multi-year compensation, see Treasury Decision (T. How do i file my 2010 taxes for free D. How do i file my 2010 taxes for free ) 9212 and Regulations section 1. How do i file my 2010 taxes for free 861-4, 2005-35 I. How do i file my 2010 taxes for free R. How do i file my 2010 taxes for free B. How do i file my 2010 taxes for free 429, available at www. How do i file my 2010 taxes for free irs. How do i file my 2010 taxes for free gov/irb/2005-35_IRB/ar14. How do i file my 2010 taxes for free html. How do i file my 2010 taxes for free Certain fringe benefits sourced on a geographical basis. How do i file my 2010 taxes for free   If you received any of the following fringe benefits as compensation for labor or services performed as an employee partly inside and partly outside a relevant possession, you must source that income on a geographical basis. How do i file my 2010 taxes for free Housing. How do i file my 2010 taxes for free Education. How do i file my 2010 taxes for free Local transportation. How do i file my 2010 taxes for free Tax reimbursement. How do i file my 2010 taxes for free Hazardous or hardship duty pay. How do i file my 2010 taxes for free Moving expense reimbursement. How do i file my 2010 taxes for free For information on determining the source of the fringe benefits listed above, see Regulations section 1. How do i file my 2010 taxes for free 861-4. How do i file my 2010 taxes for free Alternative basis. How do i file my 2010 taxes for free   You can determine the source of your compensation under an alternative basis if you establish to the satisfaction of the IRS that, under the facts and circumstances of your case, the alternative basis more properly determines the source of your income than the time or geographical basis. How do i file my 2010 taxes for free If you use an alternative basis, you must keep (and have available for inspection) records to document why the alternative basis more properly determines the source of your income. How do i file my 2010 taxes for free De minimis exception. How do i file my 2010 taxes for free   There is an exception to the rule for determining the source of income earned in a possession. How do i file my 2010 taxes for free Generally, you will not have income from a possession if during a tax year you: Are a U. How do i file my 2010 taxes for free S. How do i file my 2010 taxes for free citizen or resident, Are not a bona fide resident of that possession, Are not employed by or under contract with an individual, partnership, or corporation that is engaged in a trade or business in that possession, Temporarily perform services in that possession for 90 days or less, and Earned $3,000 or less from such services. How do i file my 2010 taxes for free This exception began with income earned during your 2008 tax year. How do i file my 2010 taxes for free Pensions. How do i file my 2010 taxes for free   Generally, pension income has two components: contributions to the pension plan and the earnings accrued from investing those contributions. How do i file my 2010 taxes for free The contribution portion is sourced according to where services were performed that earned the pension. How do i file my 2010 taxes for free The investment earnings portion is sourced according to the location of the pension trust. How do i file my 2010 taxes for free Example. How do i file my 2010 taxes for free You are a U. How do i file my 2010 taxes for free S. How do i file my 2010 taxes for free citizen who worked in Puerto Rico for a U. How do i file my 2010 taxes for free S. How do i file my 2010 taxes for free company. How do i file my 2010 taxes for free All services were performed in Puerto Rico. How do i file my 2010 taxes for free Upon retirement you remained in Puerto Rico and began receiving your pension from the U. How do i file my 2010 taxes for free S. How do i file my 2010 taxes for free pension trust of your employer. How do i file my 2010 taxes for free Distributions from the U. How do i file my 2010 taxes for free S. How do i file my 2010 taxes for free pension trust must be allocated between (1) contributions, which are Puerto Rico source income, and (2) investment earnings, which are U. How do i file my 2010 taxes for free S. How do i file my 2010 taxes for free source income. How do i file my 2010 taxes for free Investment Income This category includes such income as interest, dividends, rents, and royalties. How do i file my 2010 taxes for free Interest income. How do i file my 2010 taxes for free   The source of interest income is generally determined by the residence of the payer. How do i file my 2010 taxes for free Interest paid by corporations created or organized in a relevant possession (possession corporation) or by individuals who are bona fide residents of a relevant possession is considered income from sources within that possession. How do i file my 2010 taxes for free   However, there is an exception to this rule if you are a bona fide resident of a relevant possession, receive interest from a corporation created or organized in that possession, and are a shareholder of that corporation who owns, directly or indirectly, at least 10% of the total voting stock of the corporation. How do i file my 2010 taxes for free See Regulations section 1. How do i file my 2010 taxes for free 937-2(i) for more information. How do i file my 2010 taxes for free Dividends. How do i file my 2010 taxes for free   Generally, dividends paid by a corporation created or organized in a relevant possession will be considered income from sources within that possession. How do i file my 2010 taxes for free There are additional rules for bona fide residents of a relevant possession who receive dividend income from possession corporations, and who own, directly or indirectly, at least 10% of the voting stock of the corporation. How do i file my 2010 taxes for free For more information, see Regulations section 1. How do i file my 2010 taxes for free 937-2(g). How do i file my 2010 taxes for free Rental income. How do i file my 2010 taxes for free   Rents from property located in a relevant possession are treated as income from sources within that possession. How do i file my 2010 taxes for free Royalties. How do i file my 2010 taxes for free   Royalties from natural resources located in a relevant possession are considered income from sources within that possession. How do i file my 2010 taxes for free   Also considered possession source income are royalties received for the use of, or for the privilege of using, in a relevant possession, patents, copyrights, secret processes and formulas, goodwill, trademarks, trade brands, franchises, and other like property. How do i file my 2010 taxes for free Sales or Other Dispositions of Property The source rules for sales or other dispositions of property are varied. How do i file my 2010 taxes for free The most common situations are discussed below. How do i file my 2010 taxes for free Real property. How do i file my 2010 taxes for free   Real property includes land and buildings, and generally anything built on, growing on, or attached to land. How do i file my 2010 taxes for free The location of the property generally determines the source of income from the sale. How do i file my 2010 taxes for free For example, if you are a bona fide resident of Guam and sell your home that is located in Guam, the gain on the sale is sourced in Guam. How do i file my 2010 taxes for free If, however, the home you sold was located in the United States, the gain is U. How do i file my 2010 taxes for free S. How do i file my 2010 taxes for free source income. How do i file my 2010 taxes for free Personal property. How do i file my 2010 taxes for free   The term “personal property” refers to property (such as machinery, equipment, or furniture) that is not real property. How do i file my 2010 taxes for free Generally, gain (or loss) from the sale or other disposition is sourced according to the seller's tax home. How do i file my 2010 taxes for free If personal property is sold by a bona fide resident of a relevant possession, the gain (or loss) from the sale is treated as sourced within that possession. How do i file my 2010 taxes for free   This rule does not apply to the sale of inventory, intangible property, depreciable personal property, or property sold through a foreign office or fixed place of business. How do i file my 2010 taxes for free The rules applying to sales of inventory are discussed below. How do i file my 2010 taxes for free For information on sales of the other types of property mentioned, see Internal Revenue Code section 865. How do i file my 2010 taxes for free Inventory. How do i file my 2010 taxes for free   Your inventory is personal property that is stock in trade or that is held primarily for sale to customers in the ordinary course of your trade or business. How do i file my 2010 taxes for free The source of income from the sale of inventory depends on whether the inventory was purchased or produced. How do i file my 2010 taxes for free Purchased. How do i file my 2010 taxes for free   Income from the sale of inventory that you purchased is sourced where you sell the property. How do i file my 2010 taxes for free Generally, this is where title to the property passes to the buyer. How do i file my 2010 taxes for free Produced. How do i file my 2010 taxes for free   Income from the sale of inventory that you produced in a relevant possession and sold outside that possession (or vice versa) is sourced based on an allocation. How do i file my 2010 taxes for free For information on making the allocation, see Regulations section 1. How do i file my 2010 taxes for free 863-3(f). How do i file my 2010 taxes for free Special Rules for Gains From Dispositions of Certain Property There are special rules for gains from dispositions of certain investment property (for example, stocks, bonds, debt instruments, diamonds, and gold) owned by a U. How do i file my 2010 taxes for free S. How do i file my 2010 taxes for free citizen or resident alien prior to becoming a bona fide resident of a possession. How do i file my 2010 taxes for free You are subject to these special rules if you meet both of the following conditions. How do i file my 2010 taxes for free For the tax year for which the source of the gain must be determined, you are a bona fide resident of the relevant possession. How do i file my 2010 taxes for free For any of the 10 years preceding that year, you were a citizen or resident alien of the United States (other than a bona fide resident of the relevant possession). How do i file my 2010 taxes for free If you meet these conditions, gains from the disposition of this property will not be treated as income from sources within the relevant possession for purposes of the Internal Revenue Code. How do i file my 2010 taxes for free Accordingly, bona fide residents of American Samoa and Puerto Rico, for example, may not exclude the gain on their U. How do i file my 2010 taxes for free S. How do i file my 2010 taxes for free tax return. How do i file my 2010 taxes for free (See chapter 3 for additional filing information. How do i file my 2010 taxes for free ) With respect to the CNMI, Guam, and the USVI, the gain from the disposition of this property will not meet the requirements for certain tax rules that may allow bona fide residents of those possessions to reduce or obtain a rebate of taxes on income from sources within the relevant possessions. How do i file my 2010 taxes for free These rules apply to dispositions after April 11, 2005. How do i file my 2010 taxes for free For details, see Regulations section 1. How do i file my 2010 taxes for free 937-2(f)(1) and Examples 1 and 2 of section 1. How do i file my 2010 taxes for free 937-2(k). How do i file my 2010 taxes for free Example 1. How do i file my 2010 taxes for free In 2007, Cheryl Jones, a U. How do i file my 2010 taxes for free S. How do i file my 2010 taxes for free citizen, lived in the United States and paid $1,000 for 100 shares of stock in the Rose Corporation, a U. How do i file my 2010 taxes for free S. How do i file my 2010 taxes for free corporation listed on the New York Stock Exchange. How do i file my 2010 taxes for free On March 1, 2010, she moved to Puerto Rico and changed her tax home to Puerto Rico on the same date. How do i file my 2010 taxes for free Cheryl satisfied the presence test in 2010 and, under the year-of-move exception, she was considered a bona fide resident of Puerto Rico for the rest of 2010. How do i file my 2010 taxes for free On March 1, 2010, the closing value of Cheryl's stock in the Rose Corporation was $2,000. How do i file my 2010 taxes for free On January 5, 2013, while still a bona fide resident of Puerto Rico, Cheryl sold all her Rose Corporation stock for $7,000. How do i file my 2010 taxes for free Under the earlier rules, none of Cheryl's $6,000 gain will be treated as income from sources within Puerto Rico. How do i file my 2010 taxes for free The source rules discussed in the preceding paragraphs supplement, and may apply in conjunction with, an existing special rule. How do i file my 2010 taxes for free This existing special rule applies if you are a U. How do i file my 2010 taxes for free S. How do i file my 2010 taxes for free citizen or resident alien who becomes a bona fide resident of American Samoa, the CNMI, or Guam, and who has gain from the disposition of certain U. How do i file my 2010 taxes for free S. How do i file my 2010 taxes for free assets during the 10-year period beginning when you became a bona fide resident. How do i file my 2010 taxes for free The gain is U. How do i file my 2010 taxes for free S. How do i file my 2010 taxes for free source income that generally is subject to U. How do i file my 2010 taxes for free S. How do i file my 2010 taxes for free tax if the property is either (1) located in the United States; (2) stock issued by a U. How do i file my 2010 taxes for free S. How do i file my 2010 taxes for free corporation or a debt obligation of a U. How do i file my 2010 taxes for free S. How do i file my 2010 taxes for free person or of the United States, a state (or political subdivision), or the District of Columbia; or (3) property that has a basis in whole or in part by reference to property described in (1) or (2). How do i file my 2010 taxes for free See chapter 3 for filing information. How do i file my 2010 taxes for free Special election. How do i file my 2010 taxes for free   For dispositions after April 11, 2005, you can choose to treat the part of gain (or loss) attributable to the time you held the property while a bona fide resident of the relevant possession (the possession holding period) as gain (or loss) from sources within that possession. How do i file my 2010 taxes for free Make the election by reporting the gain attributable to the possession holding period on your income tax return for the year of disposition. How do i file my 2010 taxes for free This election overrides both of the special rules discussed earlier. How do i file my 2010 taxes for free   There are two methods for figuring the gain for the possession holding period, one for marketable securities and another for other types of investment property. How do i file my 2010 taxes for free Marketable securities. How do i file my 2010 taxes for free   Marketable securities are those actively traded on an established financial market, such as stock in a publicly held corporation. How do i file my 2010 taxes for free Under the special election, allocate the gain (or loss) by figuring the appreciation separately for your possession and U. How do i file my 2010 taxes for free S. How do i file my 2010 taxes for free holding periods. How do i file my 2010 taxes for free   Your possession holding period begins on the first day you do not have a tax home outside the relevant possession. How do i file my 2010 taxes for free The gain (or loss) attributable to the possession holding period is the difference in fair market value of the security at the close of the market on the first and last days of this holding period. How do i file my 2010 taxes for free This is your gain (or loss) that is treated as being from sources within the relevant possession. How do i file my 2010 taxes for free If you were a bona fide resident of the relevant possession for more than one continuous period, combine the gains (or losses) from each possession holding period. How do i file my 2010 taxes for free Example 2. How do i file my 2010 taxes for free Assume the same facts as in Example 1, except that Cheryl makes the special election to allocate the gain between her U. How do i file my 2010 taxes for free S. How do i file my 2010 taxes for free and possession holding periods. How do i file my 2010 taxes for free Cheryl's possession holding period began March 1, 2010, the date her tax home changed to Puerto Rico. How do i file my 2010 taxes for free Therefore, the portion of gain attributable to her possession holding period is $5,000 ($7,000 sale price – $2,000 closing value on first day of the possession holding period). How do i file my 2010 taxes for free By reporting $5,000 of her $6,000 gain as Puerto Rico source income on her 2013 Puerto Rico tax return (and the remainder as non-Puerto Rico source income), Cheryl elects to treat that amount as Puerto Rico source income. How do i file my 2010 taxes for free Other personal property. How do i file my 2010 taxes for free   For personal property other than marketable securities, use a time-based allocation. How do i file my 2010 taxes for free Figure the gain (or loss) attributable to the possession holding period by multiplying your total gain (or loss) by the following fraction. How do i file my 2010 taxes for free      Number of days in the  possession holding period     Total number of days  in your holding period         The result is your gain (or loss) that is treated as being from sources within the relevant possession. How do i file my 2010 taxes for free Example 3. How do i file my 2010 taxes for free In addition to the stock in Rose Corporation, Cheryl acquired a 5% interest in the Alder Partnership on January 1, 2009. How do i file my 2010 taxes for free On March 1, 2010, when she established bona fide residency in Puerto Rico, her partnership interest was not considered a marketable security. How do i file my 2010 taxes for free On September 16, 2013, while still a bona fide resident of Puerto Rico, Cheryl sold her interest in Alder Partnership for a $100,000 gain. How do i file my 2010 taxes for free She had owned the interest for a total of 1,720 days. How do i file my 2010 taxes for free Cheryl's possession holding period (from March 1, 2010, through September 16, 2013) is 1,296 days. How do i file my 2010 taxes for free The portion of her gain attributable to Puerto Rico is $75,349 ($100,000 x (1,296 Puerto Rico days ÷ 1,720 total days)). How do i file my 2010 taxes for free By reporting $75,349 of her $100,000 gain as Puerto Rico source income on her 2013 Puerto Rico tax return (and the remainder as non-Puerto Rico source income), Cheryl elects to treat that amount as Puerto Rico source income. How do i file my 2010 taxes for free Scholarships, Fellowships, Grants, Prizes, and Awards The source of these types of income is generally the residence of the payer, regardless of who actually disburses the funds. How do i file my 2010 taxes for free Therefore, in order to be possession source income, the payer must be a resident of the relevant possession, such as an individual who is a bona fide resident or a corporation created or organized in that possession. How do i file my 2010 taxes for free These rules do not apply to amounts paid as salary or other compensation for services. How do i file my 2010 taxes for free See Compensation for Labor or Personal Services, earlier in this chapter, for the source rules that apply. How do i file my 2010 taxes for free Effectively Connected Income In limited circumstances, some kinds of income from sources outside the relevant possession must be treated as effectively connected with a trade or business in that possession. How do i file my 2010 taxes for free These circumstances are listed below. How do i file my 2010 taxes for free You have an office or other fixed place of business in the relevant possession to which the income can be attributed. How do i file my 2010 taxes for free That office or place of business is a material factor in producing the income. How do i file my 2010 taxes for free The income is produced in the ordinary course of the trade or business carried on through that office or other fixed place of business. How do i file my 2010 taxes for free An office or other fixed place of business is a material factor if it significantly contributes to, and is an essential economic element in, the earning of the income. How do i file my 2010 taxes for free The three kinds of income from sources outside the relevant possession to which these rules apply are the following. How do i file my 2010 taxes for free Rents and royalties for the use of, or for the privilege of using, intangible personal property located outside the relevant possession or from any interest in such property. How do i file my 2010 taxes for free Included are rents or royalties for the use of, or for the privilege of using, outside the relevant possession, patents, copyrights, secret processes and formulas, goodwill, trademarks, trade brands, franchises, and similar properties if the rents or royalties are from the active conduct of a trade or business in the relevant possession. How do i file my 2010 taxes for free Dividends or interest from the active conduct of a banking, financing, or similar business in the relevant possession. How do i file my 2010 taxes for free Income, gain, or loss from the sale or exchange outside the relevant possession, through the office or other fixed place of business in the relevant possession, of: Stock in trade, Property that would be included in inventory if on hand at the end of the tax year, or Property held primarily for sale to customers in the ordinary course of business. How do i file my 2010 taxes for free Item (3) will not apply if you sold the property for use, consumption, or disposition outside the relevant possession and an office or other fixed place of business in a foreign country was a material factor in the sale. How do i file my 2010 taxes for free Example. How do i file my 2010 taxes for free Marcy Jackson is a bona fide resident of American Samoa. How do i file my 2010 taxes for free Her business, which she conducts from an office in American Samoa, is developing and selling specialized computer software. How do i file my 2010 taxes for free A software purchaser will frequently pay Marcy an additional amount to install the software on the purchaser's operating system and to ensure that the software is functioning properly. How do i file my 2010 taxes for free Marcy installs the software at the purchaser's place of business, which may be in American Samoa, in the United States, or in another country. How do i file my 2010 taxes for free The income from selling the software is effectively connected with the conduct of Marcy's business in American Samoa, even though the product's destination may be outside the possession. How do i file my 2010 taxes for free However, the compensation she receives for installing the software (personal services) outside of American Samoa is not effectively connected with the conduct of her business in the possession—the income is sourced where she performs the services. How do i file my 2010 taxes for free Prev  Up  Next   Home   More Online Publications
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Tax Relief for Victims of May 25 Flooding in Iowa

MIL-2011-07, Oct. 19, 2011

MILWAUKEE — Victims of the flooding that began on May 25, 2011 in parts of Iowa may qualify for tax relief from the Internal Revenue Service.

The President has declared the following counties a federal disaster area: Fremont, Harrison, Mills, Monona and Pottawattamie. Individuals who reside or have a business in these counties may qualify for tax relief.

The declaration permits the IRS to postpone certain deadlines for taxpayers who reside or have a business in the disaster area. For instance, certain deadlines falling on or after May 25, and on or before Aug. 1, have been postponed to Aug. 1, 2011.
In addition, the IRS is waiving the failure-to-deposit penalties for employment and excise tax deposits due on or after May 25, and on or before June 9, as long as the deposits are made by June 9, 2011.

If an affected taxpayer receives a penalty notice from the IRS, the taxpayer should call the telephone number on the notice to have the IRS abate any interest and any late filing or late payment penalties that would otherwise apply. Penalties or interest will be abated only for taxpayers who have an original or extended filing, payment or deposit due date, including an extended filing or payment due date, that falls within the postponement period.

The IRS automatically identifies taxpayers located in the covered disaster area and applies automatic filing and payment relief. But affected taxpayers who reside or have a business located outside the covered disaster area must call the IRS disaster hotline at 1-866-562-5227 to request this tax relief.

Covered Disaster Area

The counties listed above constitute a covered disaster area for purposes of Treas. Reg. § 301.7508A-1(d)(2) and are entitled to the relief detailed below.

Affected Taxpayers

Taxpayers considered to be affected taxpayers eligible for the postponement of time to file returns, pay taxes and perform other time-sensitive acts are those taxpayers listed in Treas. Reg. § 301.7508A-1(d)(1), and include individuals who live, and businesses whose principal place of business is located, in the covered disaster area. Taxpayers not in the covered disaster area, but whose records necessary to meet a deadline listed in Treas. Reg. § 301.7508A-1(c) are in the covered disaster area, are also entitled to relief. In addition, all relief workers affiliated with a recognized government or philanthropic organization assisting in the relief activities in the covered disaster area and any individual visiting the covered disaster area who was killed or injured as a result of the disaster are entitled to relief.

Grant of Relief

Under section 7508A, the IRS gives affected taxpayers until Aug. 1 to file most tax returns (including individual, corporate, and estate and trust income tax returns; partnership returns, S corporation returns, and trust returns; estate, gift, and generation-skipping transfer tax returns; and employment and certain excise tax returns), or to make tax payments, including estimated tax payments, that have either an original or extended due date occurring on or after May 25 and on or before Aug. 1.

The IRS also gives affected taxpayers until Aug. 1 to perform other time-sensitive actions described in Treas. Reg. § 301.7508A-1(c)(1) and Rev. Proc. 2007-56, 2007-34 I.R.B. 388 (Aug. 20, 2007), that are due to be performed on or after May 25 and on or before Aug. 1.

This relief also includes the filing of Form 5500 series returns, in the manner described in section 8 of Rev. Proc. 2007-56. The relief described in section 17 of Rev. Proc. 2007-56, pertaining to like-kind exchanges of property, also applies to certain taxpayers who are not otherwise affected taxpayers and may include acts required to be performed before or after the period above.

The postponement of time to file and pay does not apply to information returns in the W-2, 1098, 1099 series, or to Forms 1042-S or 8027. Penalties for failure to timely file information returns can be waived under existing procedures for reasonable cause. Likewise, the postponement does not apply to employment and excise tax deposits. The IRS, however, will abate penalties for failure to make timely employment and excise tax deposits due on or after May 25 and on or before June 9 provided the taxpayer makes these deposits by June 9.

Casualty Losses

Affected taxpayers in a federally declared disaster area have the option of claiming disaster-related casualty losses on their federal income tax return for either this year or last year. Claiming the loss on an original or amended return for last year will get the taxpayer an earlier refund, but waiting to claim the loss on this year’s return could result in a greater tax saving, depending on other income factors.

Individuals may deduct personal property losses that are not covered by insurance or other reimbursements. For details, see Form 4684 and its instructions.

Affected taxpayers claiming the disaster loss on last year’s return should put the Disaster Designation “Iowa/Flooding” at the top of the form so that the IRS can expedite the processing of the refund.

Other Relief

The IRS will waive the usual fees and expedite requests for copies of previously filed tax returns for affected taxpayers. Taxpayers should put the assigned Disaster Designation in red ink at the top of Form 4506, Request for Copy of Tax Return, or Form 4506-T, Request for Transcript of Tax Return, as appropriate, and submit it to the IRS.

Affected taxpayers who are contacted by the IRS on a collection or examination matter should explain how the disaster impacts them so that the IRS can provide appropriate consideration to their case.

Taxpayers may download forms and publications from the official IRS website, irs.gov, or order them by calling 1-800-TAX-FORM (1-800-829-3676). The IRS toll-free number for general tax questions is 1-800-829-1040.

Related Information

Page Last Reviewed or Updated: 13-Mar-2014

The How Do I File My 2010 Taxes For Free

How do i file my 2010 taxes for free Accelerated Cost Recovery System (ACRS) Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: ACRS Defined What Can and Cannot Be Depreciated Under ACRSRecovery Property Nonrecovery Property How To Figure the DeductionUnadjusted Basis Classes of Recovery Property Recovery Periods Alternate ACRS Method (Modified Straight Line Method) ACRS Deduction in Short Tax Year DispositionsEarly dispositions of ACRS property other than 15-, 18-, or 19-year real property. How do i file my 2010 taxes for free Dispositions — mass asset accounts. How do i file my 2010 taxes for free Early dispositions — 15-year real property. How do i file my 2010 taxes for free Early dispositions — 18- and 19-year real property. How do i file my 2010 taxes for free Depreciation Recapture Topics - This chapter discusses: The definition of ACRS What can and cannot be depreciated under ACRS How to figure the deduction Dispositions Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets 551 Basis of Assets 583 Starting a Business and Keeping Records Form (and Instructions) 3115 Application for Change in Accounting Method 4562 Depreciation and Amortization The Accelerated Cost Recovery System (ACRS) applies to property first used before 1987. How do i file my 2010 taxes for free It is the name given to tax rules for getting back (recovering) through depreciation deductions the cost of property used in a trade or business or to produce income. How do i file my 2010 taxes for free These rules are mandatory and generally apply to tangible property placed in service after 1980 and before 1987. How do i file my 2010 taxes for free If you placed property in service during this period, you must continue to figure your depreciation under ACRS. How do i file my 2010 taxes for free If you used listed property placed in service after June 18, 1984, less than 50% for business in 1995, see Predominant Use Test in chapter 3. How do i file my 2010 taxes for free Listed property includes cars, other means of transportation, and certain computers. How do i file my 2010 taxes for free Any additions or improvements placed in service after 1986, including any components of a building (such as plumbing, wiring, storm windows, etc. How do i file my 2010 taxes for free ), are depreciated using MACRS, discussed in chapter 3 of Publication 946. How do i file my 2010 taxes for free It does not matter that the underlying property is depreciated under ACRS or one of the other methods. How do i file my 2010 taxes for free ACRS Defined ACRS consists of accelerated depreciation methods and an alternate ACRS method that could have been elected. How do i file my 2010 taxes for free The alternate ACRS method used a recovery percentage based on a modified straight line method. How do i file my 2010 taxes for free The law prescribes fixed percentages to be uses for each class of property. How do i file my 2010 taxes for free Property depreciable under ACRS is called recovery property. How do i file my 2010 taxes for free The recovery class of property determines the recovery period. How do i file my 2010 taxes for free Generally, the class life of property places it in a 3-year, 5-year, 10-year, 15-year, 18-year, or 19-year recovery class. How do i file my 2010 taxes for free Under ACRS, the prescribed percentages are used to recover the unadjusted basis of recovery property. How do i file my 2010 taxes for free To figure a depreciation deduction, you multiply the prescribed percentage for the recovery class by the unadjusted basis of the recovery property. How do i file my 2010 taxes for free You must continue to figure your depreciation under ACRS for property placed in service after 1980 and before 1987. How do i file my 2010 taxes for free For property you placed in service after 1986, you must use MACRS, discussed in chapter 3 of Publication 946. How do i file my 2010 taxes for free What Can and Cannot Be Depreciated Under ACRS ACRS applies to most depreciable tangible property placed in service after 1980 and before 1987. How do i file my 2010 taxes for free It includes new or used and real or personal property. How do i file my 2010 taxes for free The property must be for use in a trade or business or for the production of income. How do i file my 2010 taxes for free Property you acquired before 1981 or after 1986 is not ACRS recovery property. How do i file my 2010 taxes for free For information on depreciating property acquired before 1981, see chapter 2. How do i file my 2010 taxes for free For information on depreciating property acquired after 1986, see chapter 3 of Publication 946. How do i file my 2010 taxes for free Recovery Property Recovery property under ACRS is tangible depreciable property placed in service after 1980 and before 1987. How do i file my 2010 taxes for free It generally includes new or used property that you acquired after 1980 and before 1987 for use in your trade or business or for the production of income. How do i file my 2010 taxes for free Nonrecovery Property You cannot use ACRS for property you placed in service before 1981 or after 1986. How do i file my 2010 taxes for free Nonrecovery property also includes: Intangible property, Property you elected to exclude from ACRS that is properly depreciated under a method of depreciation that is not based on a term of years, Certain public utility property, and Certain property acquired and excluded from ACRS because of the antichurning rules. How do i file my 2010 taxes for free Intangible property. How do i file my 2010 taxes for free   Intangible property is not depreciated under ACRS. How do i file my 2010 taxes for free Property depreciated under methods not expressed in a term of years. How do i file my 2010 taxes for free   Certain property depreciated under a method not expressed in a term of years is not depreciated under ACRS. How do i file my 2010 taxes for free This included any property: If you made an irrevocable election to exclude such property, and In the first year that you could have claimed depreciation, you properly used the unit-of-production method or any method of depreciation not expressed in a term of years (not including the retirement-replacement-betterment method). How do i file my 2010 taxes for free Public utility property. How do i file my 2010 taxes for free   Public utility property for which the taxpayer does not use a normalization method of accounting is excluded from ACRS and is subject to depreciation under a special rule. How do i file my 2010 taxes for free Additions or improvements to ACRS property after 1986. How do i file my 2010 taxes for free   Any additions or improvements placed in service after 1986, including any components of a building (plumbing, wiring, storm windows, etc. How do i file my 2010 taxes for free ) are depreciated using MACRS, discussed in chapter 3 of Publication 946. How do i file my 2010 taxes for free It does not matter that the underlying property is depreciated under ACRS or one of the other methods. How do i file my 2010 taxes for free How To Figure the Deduction After you determine that your property can be depreciated under ACRS, you are ready to figure your deduction. How do i file my 2010 taxes for free Because the conventions are built into the percentage table rates, you only need to know the following: The unadjusted basis of your recovery property, The classes of recovery property, The recovery periods, and Whether to use the prescribed percentages based on accelerated methods or percentages based on using the alternate ACRS method. How do i file my 2010 taxes for free Unadjusted Basis To figure your ACRS deduction, you multiply the unadjusted basis in your recovery property by its applicable percentage for the year. How do i file my 2010 taxes for free Unadjusted basis is the same amount you would use to figure gain on a sale, but it is figured without taking into account any depreciation taken in earlier years. How do i file my 2010 taxes for free However, reduce your original basis by the amount of amortization taken on the property and by any section 179 deduction claimed as discussed in chapter 2 of Publication 946. How do i file my 2010 taxes for free If you buy property, your unadjusted basis is usually its cost minus any amortized amount and minus any section 179 deduction elected. How do i file my 2010 taxes for free If you acquire property in some other way, such as by inheriting it, getting it as a gift, or building it yourself, you figure your unadjusted basis under other rules. How do i file my 2010 taxes for free See Publication 551. How do i file my 2010 taxes for free Classes of Recovery Property All recovery property under ACRS is in one of the following classes. How do i file my 2010 taxes for free The class for your property was determined when you began to depreciate it. How do i file my 2010 taxes for free 3-Year Property 3-year property includes automobiles, light-duty trucks (actual unloaded weight less than 13,000 pounds), and tractor units for use over-the-road. How do i file my 2010 taxes for free Race horses over 2 years old when placed in service are 3-year property. How do i file my 2010 taxes for free Any other horses over 12 years old when you placed them in service are also included in the 3-year property class. How do i file my 2010 taxes for free The ACRS percentages for 3-year recovery property are: Recovery Period Percentage 1st year 25% 2nd year 38% 3rd year 37% If you used the percentages above to depreciate your 3-year recovery property, your property, except for certain passenger automobiles, is fully depreciated. How do i file my 2010 taxes for free You cannot claim depreciation for this property after 1988. How do i file my 2010 taxes for free 5-Year Property 5-year property includes computers, copiers, and equipment, such as office furniture and fixtures. How do i file my 2010 taxes for free It also includes single purpose agricultural or horticultural structures and petroleum storage facilities (other than buildings and their structural components). How do i file my 2010 taxes for free The ACRS percentages for 5-year recovery property are: Recovery period Percentage 1st year 15% 2nd year 22% 3rd through 5th year 21% If you used the percentages above to depreciate your 5-year recovery property, it is fully depreciated. How do i file my 2010 taxes for free You cannot claim depreciation for this property after 1990. How do i file my 2010 taxes for free 10-Year Property 10-year property includes certain real property such as theme-park structures and certain public utility property. How do i file my 2010 taxes for free Manufactured homes (including mobile homes) and railroad tank cars are also 10-year property. How do i file my 2010 taxes for free You do not treat a building, and its structural components, as 10-year property by reason of a change in use after you placed the property in service. How do i file my 2010 taxes for free For example, a building (15-year real property) that was placed in service in 1981 and was converted to a theme-park structure in 1986 remains 15-year real property. How do i file my 2010 taxes for free The ACRS percentages for 10-year recovery property are: Recovery Period Percentage 1st year 8% 2nd year 14% 3rd year 12% 4th through 6th year 10% 7th through 10th year 9% If you used the percentages above, you cannot claim depreciation for this property after 1995. How do i file my 2010 taxes for free Example. How do i file my 2010 taxes for free On April 21, 1986, you bought and placed in service a new mobile home for $26,000 to be used as rental property. How do i file my 2010 taxes for free You paid $10,000 cash and signed a note for $16,000 giving you an unadjusted basis of $26,000. How do i file my 2010 taxes for free On June 8, 1986, you bought and placed in service a used mobile home for use as rental property at a total cost of $11,500. How do i file my 2010 taxes for free The total unadjusted basis of your 10-year recovery property placed in service in 1986 was $37,500 ($26,000 + $11,500). How do i file my 2010 taxes for free Your ACRS deduction was $3,000 (8% × $37,500). How do i file my 2010 taxes for free In 1987, your ACRS deduction was $5,250 (14% × $37,500). How do i file my 2010 taxes for free In 1988, your ACRS deduction was $4,500 (12% × $37,500). How do i file my 2010 taxes for free In 1989, 1990, and 1991, your ACRS deduction was $3,750 (10% × $37,500). How do i file my 2010 taxes for free In 1992, 1993, 1994, and 1995 your deduction for each year is $3,375 (9% × $37,500). How do i file my 2010 taxes for free 15-Year Real Property 15-year real property is real property that is recovery property placed in service before March 16, 1984. How do i file my 2010 taxes for free It includes all real property, such as buildings, other than that designated as 5-year or 10-year property. How do i file my 2010 taxes for free Unlike the 3-, 5-, or 10-year classes of property, the percentages for 15-year real property depend on when you placed the property in service during your tax year. How do i file my 2010 taxes for free You could group 15-year real property by month and year placed in service. How do i file my 2010 taxes for free In Table 1, at the end of this publication in the Appendix, find the month in your tax year that you placed the property in service in your trade or business or for the production of income. How do i file my 2010 taxes for free You use the percentages listed under that month for each year of the recovery period to determine your depreciation deduction each year. How do i file my 2010 taxes for free Example. How do i file my 2010 taxes for free On March 5, 1984, you placed an apartment building in service in your business. How do i file my 2010 taxes for free It is 15-year real property. How do i file my 2010 taxes for free After subtracting the value of the land, your unadjusted basis in the building is $250,000. How do i file my 2010 taxes for free You use the calendar year as your tax year. How do i file my 2010 taxes for free March is the third month of your tax year. How do i file my 2010 taxes for free Your ACRS deduction for 1984 was $25,000 (10% × $250,000). How do i file my 2010 taxes for free For 1985, the percentage for the third month of the second year of the recovery period is 11%. How do i file my 2010 taxes for free Your deduction was $27,500 (11% × $250,000). How do i file my 2010 taxes for free For the third, fourth, and fifth years of the recovery period (1986, 1987, and 1988), the percentages are 9%, 8%, and 7%. How do i file my 2010 taxes for free For 1989 through 1992, the percentage for the third month is 6%. How do i file my 2010 taxes for free Your deduction each year is $15,000 (6% × $250,000). How do i file my 2010 taxes for free For 1993, 1994, and 1995, the percentage for the third month is 5%. How do i file my 2010 taxes for free Your depreciation deduction is $12,500 (5% × $250,000) for 1993, 1994, and 1995. How do i file my 2010 taxes for free Low-Income Housing Low-income housing that was assigned a 15-year recovery period under ACRS includes the following types of property: Federally assisted housing projects where the mortgage is insured under section 221(d)(3) or 236 of the National Housing Act, or housing financed or assisted by direct loan or tax abatement under similar provisions of state or local laws. How do i file my 2010 taxes for free Low-income rental housing for which a depreciation deduction for rehabilitation expenditures is allowed. How do i file my 2010 taxes for free Low-income rental housing held for occupancy by families or individuals eligible to receive subsidies under section 8 of the United States Housing Act of 1937, as amended, or under the provisions of state or local laws that authorize similar subsidies for low-income families. How do i file my 2010 taxes for free Housing financed or assisted by direct loan or insured under Title V of the Housing Act of 1949. How do i file my 2010 taxes for free The ACRS percentages for low-income housing real property, like the regular 15-year real property percentages, depend on when you placed the property in service. How do i file my 2010 taxes for free Find the month in your tax year in Table 2 or 3 at the end of this publication in the Appendix that you first placed the property in service as rental housing. How do i file my 2010 taxes for free Use the percentages listed under that month for each year of the recovery period. How do i file my 2010 taxes for free Table 2 shows percentages for low-income housing placed in service before May 9, 1985. How do i file my 2010 taxes for free Table 3 shows percentages for low-income housing placed in service after May 8, 1985, and before 1987. How do i file my 2010 taxes for free Example. How do i file my 2010 taxes for free In May 1986, you acquired and placed in service a house that qualified as low-income rental housing under item 3) of the above listing. How do i file my 2010 taxes for free You use the calendar year as your tax year. How do i file my 2010 taxes for free You use Table C–3 because the property was placed in service after May 8, 1985. How do i file my 2010 taxes for free Your unadjusted basis for the property, not including the land, was $59,000. How do i file my 2010 taxes for free Your deduction for 1986 through 2001 is shown in the following table. How do i file my 2010 taxes for free Year Rate Deduction 1986 8. How do i file my 2010 taxes for free 9% $5,251 1987 12. How do i file my 2010 taxes for free 1% 7,139 1988 10. How do i file my 2010 taxes for free 5% 6,195 1989 9. How do i file my 2010 taxes for free 1% 5,369 1990 7. How do i file my 2010 taxes for free 9% 4,661 1991 6. How do i file my 2010 taxes for free 9% 4,071 1992 5. How do i file my 2010 taxes for free 9% 3,481 1993 5. How do i file my 2010 taxes for free 2% 3,068 1994 4. How do i file my 2010 taxes for free 6% 2,714 1995 4. How do i file my 2010 taxes for free 6% 2,714 1996 4. How do i file my 2010 taxes for free 6% 2,714 1997 4. How do i file my 2010 taxes for free 6% 2,714 1998 4. How do i file my 2010 taxes for free 6% 2,714 1999 4. How do i file my 2010 taxes for free 5% 2,655 2000 4. How do i file my 2010 taxes for free 5% 2,655 2001 1. How do i file my 2010 taxes for free 5% 885 18-Year Real Property 18-year real property is real property that is recovery property placed in service after March 15, 1984, and before May 9, 1985. How do i file my 2010 taxes for free It includes real property, such as buildings, other than that designated as 5-year, 10-year, 15-year real property, or low-income housing. How do i file my 2010 taxes for free The ACRS percentages for 18-year real property depend on when you placed the property in service in your trade or business or for the production of income during your tax year. How do i file my 2010 taxes for free There are also tables for 18-year real property in the Appendix. How do i file my 2010 taxes for free Table 4 shows the percentages for 18-year real property you placed in service after June 22, 1984, and before May 9, 1985. How do i file my 2010 taxes for free Table 5 is for 18-year real property placed in service after March 15, 1984, and before June 23, 1984. How do i file my 2010 taxes for free Find the month in your tax year that you placed the property in service in a trade or business or for the production of income. How do i file my 2010 taxes for free Use the percentages listed under that month for each year of the recovery period. How do i file my 2010 taxes for free Example. How do i file my 2010 taxes for free On April 28, 1985, you bought and placed in service a rental house. How do i file my 2010 taxes for free The house, not including the land, cost $95,000. How do i file my 2010 taxes for free This is your unadjusted basis for the house. How do i file my 2010 taxes for free You use the calendar year as your tax year. How do i file my 2010 taxes for free Because the house was placed in service after June 22, 1984, and before May 9, 1985, it is 18-year real property. How do i file my 2010 taxes for free You use Table 4 to figure your deduction for the house. How do i file my 2010 taxes for free April is the fourth month of your tax year. How do i file my 2010 taxes for free Your deduction for 1985 through 2003 is shown in the following table. How do i file my 2010 taxes for free Year Rate Deduction 1985 7. How do i file my 2010 taxes for free 0% $6,650 1986 9. How do i file my 2010 taxes for free 0% 8,550 1987 8. How do i file my 2010 taxes for free 0% 7,600 1988 7. How do i file my 2010 taxes for free 0% 6,650 1989 7. How do i file my 2010 taxes for free 0% 6,650 1990 6. How do i file my 2010 taxes for free 0% 5,700 1991 5. How do i file my 2010 taxes for free 0% 4,750 1992 5. How do i file my 2010 taxes for free 0% 4,750 1993 5. How do i file my 2010 taxes for free 0% 4,750 1994 5. How do i file my 2010 taxes for free 0% 4,750 1995 5. How do i file my 2010 taxes for free 0% 4,750 1996 5. How do i file my 2010 taxes for free 0% 4,750 1997 5. How do i file my 2010 taxes for free 0% 4,750 1998 4. How do i file my 2010 taxes for free 0% 3,800 1999 4. How do i file my 2010 taxes for free 0% 3,800 2000 4. How do i file my 2010 taxes for free 0% 3,800 2001 4. How do i file my 2010 taxes for free 0% 3,800 2002 4. How do i file my 2010 taxes for free 0% 3,800 2003 1. How do i file my 2010 taxes for free 0% 950 19-Year Real Property 19-year real property is real property that is recovery property placed in service after May 8, 1985, and before 1987. How do i file my 2010 taxes for free It includes all real property, other than that designated as 5-year, 10-year, 15-year, or 18-year real property, or low-income housing. How do i file my 2010 taxes for free The ACRS percentages for 19-year real property depend on when you placed the property in service in a trade or business or for the production of income during your tax year. How do i file my 2010 taxes for free Table 6 shows the percentages for 19-year real property. How do i file my 2010 taxes for free You find the month in your tax year that you placed the property in service. How do i file my 2010 taxes for free You use the percentages listed under that month for each year of the recovery period. How do i file my 2010 taxes for free Recovery Periods Each item of recovery property is assigned to a class of property. How do i file my 2010 taxes for free The classes of recovery property establish the recovery periods over which the unadjusted basis of items in a class is recovered. How do i file my 2010 taxes for free The classes of property are: 3-Year property 5-Year property 10-Year property 15-Year real property Low-income housing 18-Year real property 19-Year real property Alternate ACRS Method (Modified Straight Line Method) ACRS provides an alternate ACRS method that could be elected. How do i file my 2010 taxes for free This alternate ACRS method uses a recovery percentage based on a modified straight line method. How do i file my 2010 taxes for free This alternate ACRS method generally uses percentages other than those from the tables. How do i file my 2010 taxes for free If you elected the alternate ACRS method, you determine the recovery period by using the following schedule. How do i file my 2010 taxes for free This schedule is for other than 18- and 19-year real property and low-income housing: In the case of: You could have elected a recovery period of: 3-year property 3, 5, or 12 years 5-year property 5, 12, or 25 years 15-year real property 15, 35, or 45 years Percentages. How do i file my 2010 taxes for free   The straight-line percentages for the alternate ACRS method are: Recovery Period Percentage 5 years 20. How do i file my 2010 taxes for free 00% 10 years 10. How do i file my 2010 taxes for free 00% 12 years 8. How do i file my 2010 taxes for free 333% 15 years 6. How do i file my 2010 taxes for free 667% 25 years 4. How do i file my 2010 taxes for free 00% 35 years 2. How do i file my 2010 taxes for free 857%   You apply the percentage to the unadjusted basis(defined earlier) of the property to figure your ACRS deduction. How do i file my 2010 taxes for free There are tables for 18- and 19-year real property later in this publication in the Appendix. How do i file my 2010 taxes for free For 15-year real property, see 15-year real property, later. How do i file my 2010 taxes for free 3-, 5-, and 10-year property. How do i file my 2010 taxes for free   If you elected to use an alternate recovery percentage, you have to use the same recovery percentage for all property in that class that you placed in service in that tax year. How do i file my 2010 taxes for free This applies throughout the recovery period you selected. How do i file my 2010 taxes for free Half-year convention. How do i file my 2010 taxes for free   If you elected the alternate method, only a half-year of depreciation was deducted for the year you placed the property in service. How do i file my 2010 taxes for free This applied regardless of when in the tax year you placed the property in service. How do i file my 2010 taxes for free For each of the remaining years in the recovery period, you take a full year's deduction. How do i file my 2010 taxes for free If you hold the property for the entire recovery period, a half-year of depreciation is allowable for the year following the end of the recovery period. How do i file my 2010 taxes for free Example. How do i file my 2010 taxes for free You operate a small upholstery business. How do i file my 2010 taxes for free On March 19, 1986, you bought and placed in service a $13,000 light-duty panel truck to be used in your business and a $500 electric saw. How do i file my 2010 taxes for free You elected to use the alternate ACRS method. How do i file my 2010 taxes for free You did not elect to take a section 179 deduction. How do i file my 2010 taxes for free You decided to recover the cost of the truck, which is 3-year recovery property, over 5 years. How do i file my 2010 taxes for free The saw is 5-year property, but you decided to recover its cost over 12 years. How do i file my 2010 taxes for free For 1986, your ACRS deduction reflected the half-year convention. How do i file my 2010 taxes for free In the first year, you deducted half of the amount determined for a full year. How do i file my 2010 taxes for free Your ACRS deduction for 1986 is as follows: Light-duty truck   5 years straight line = 20% 20% ÷ $13,000 = $2,600 Half-year convention -½ of $2,600= $1,300. How do i file my 2010 taxes for free 00     Electric saw   12 years straight line = 8. How do i file my 2010 taxes for free 333% 8. How do i file my 2010 taxes for free 333% ÷ $500 = $41. How do i file my 2010 taxes for free 67 Half-year convention -½ of $41. How do i file my 2010 taxes for free 67= 20. How do i file my 2010 taxes for free 84 Total ACRS deduction for 1986 $1,320. How do i file my 2010 taxes for free 84       You take a full year of depreciation for both the truck and the saw for the years 1987 through 1990. How do i file my 2010 taxes for free Your ACRS deduction for each of those years is as follows: Light-duty truck   5 years straight line = 20% 20% ÷ $13,000 = $2,600     Electric saw     12 years straight line = 8. How do i file my 2010 taxes for free 333% 8. How do i file my 2010 taxes for free 333% ÷ $500 = $41. How do i file my 2010 taxes for free 67 Total annual ACRS deduction for 1987 through 1990 $2,641. How do i file my 2010 taxes for free 67       In 1991, you take a half-year of depreciation for the truck and a full year of depreciation for the saw. How do i file my 2010 taxes for free Your ACRS deduction for 1991 is as follows: Light-duty truck   5 years straight line = 20% 20% ÷ $13,000 = $2,600 Half-year convention -½ of $2,600= $1,300. How do i file my 2010 taxes for free 00     Electric saw   12 years straight line = 8. How do i file my 2010 taxes for free 333% 8. How do i file my 2010 taxes for free 333% ÷ $500 = $41. How do i file my 2010 taxes for free 67 Total ACRS deduction for 1991 $1,341. How do i file my 2010 taxes for free 67       The truck is fully depreciated after 1991. How do i file my 2010 taxes for free You take a full year of depreciation for the saw for the years 1992 through 1997. How do i file my 2010 taxes for free Your ACRS deduction for each of those years is as follows: Electric saw     12 years straight line = 8. How do i file my 2010 taxes for free 333% 8. How do i file my 2010 taxes for free 333% ÷ $500 = $41. How do i file my 2010 taxes for free 67 Total annual ACRS deduction for 1992 through 1997 $41. How do i file my 2010 taxes for free 67       You take a half-year of depreciation for the saw for 1998. How do i file my 2010 taxes for free Your ACRS deduction for 1998 is as follows: Electric saw   12 years straight line = 8. How do i file my 2010 taxes for free 333% 8. How do i file my 2010 taxes for free 333% ÷ $500 = $41. How do i file my 2010 taxes for free 67 Half-year convention -½ of $41. How do i file my 2010 taxes for free 67= 20. How do i file my 2010 taxes for free 84 Total ACRS deduction for 1998 $20. How do i file my 2010 taxes for free 84       The saw is fully depreciated after 1998. How do i file my 2010 taxes for free 15-year real property. How do i file my 2010 taxes for free   Under ACRS, you could also elect to use the alternate ACRS method for 15-year real property. How do i file my 2010 taxes for free The alternate ACRS method allows you to depreciate your 15-year real property using the straight line ACRS method over the alternate recovery periods of 15, 35, or 45 years. How do i file my 2010 taxes for free If you selected a 15-year recovery period, you use the percentage (6. How do i file my 2010 taxes for free 667%) from the schedule above. How do i file my 2010 taxes for free You prorate this percentage for the number of months the property was in service in the first year. How do i file my 2010 taxes for free If you selected a 35- or 45-year recovery period, you use either Table 11 or 15. How do i file my 2010 taxes for free Alternate periods for 18-year real property. How do i file my 2010 taxes for free   For 18-year real property, the alternate recovery periods are 18, 35, or 45 years. How do i file my 2010 taxes for free The percentages for 18-year real property under the alternate method are in Tables 7, 8, 10, 11, 14, and 15 in the Appendix. How do i file my 2010 taxes for free There are two tables for each alternate recovery period. How do i file my 2010 taxes for free One table shows the percentage for property placed in service after June 22, 1984. How do i file my 2010 taxes for free The other table has the percentages for property placed in service after March 15, 1984, and before June 23, 1984. How do i file my 2010 taxes for free Alternate periods for 19-year real property. How do i file my 2010 taxes for free   For 19-year real property, the alternate recovery periods are 19, 35, or 45 years. How do i file my 2010 taxes for free If you selected a 19-year recovery period, use Table 9 to determine your deduction. How do i file my 2010 taxes for free If you select a 35- or 45-year recovery period, use either Table 13 or 14. How do i file my 2010 taxes for free Example. How do i file my 2010 taxes for free You placed in service an apartment building on August 3, 1986. How do i file my 2010 taxes for free The building is 19-year real property. How do i file my 2010 taxes for free The sales contract allocated $300,000 to the building and $100,000 to the land. How do i file my 2010 taxes for free You use the calendar year as your tax year. How do i file my 2010 taxes for free You chose the alternate ACRS method over a recovery period of 35 years. How do i file my 2010 taxes for free For 1986, you figure your ACRS deduction usingTable 13. How do i file my 2010 taxes for free August is the eighth month of your tax year. How do i file my 2010 taxes for free The percentage from Table 13 for the eighth month is 1. How do i file my 2010 taxes for free 1%. How do i file my 2010 taxes for free Your deduction was $3,300 ($300,000 ÷ 1. How do i file my 2010 taxes for free 1%). How do i file my 2010 taxes for free The deduction rate from ACRS Table 13 for years 2 through 20 is 2. How do i file my 2010 taxes for free 9% so that your deduction in 1987 through 2005 is $8,700 ($300,000 ÷ 2. How do i file my 2010 taxes for free 9%). How do i file my 2010 taxes for free Alternate periods for low-income housing. How do i file my 2010 taxes for free   For low-income housing, the alternate recovery periods are 15, 35, or 45 years. How do i file my 2010 taxes for free If you selected a 15-year period for this property, use 6. How do i file my 2010 taxes for free 667% as the percentage. How do i file my 2010 taxes for free If you selected a 35- or 45-year period, use either Table 11, 12, or 15. How do i file my 2010 taxes for free Election. How do i file my 2010 taxes for free   You had to make the election to use the alternate ACRS method by the return due date (including extensions) for the tax year you placed the property in service. How do i file my 2010 taxes for free Revocation of election. How do i file my 2010 taxes for free   Your election to use an alternate ACRS method, once made, can be changed only with the consent of the Commissioner. How do i file my 2010 taxes for free The Commissioner grants consent only in extraordinary circumstances. How do i file my 2010 taxes for free Any request for a revocation will be considered a request for a ruling. How do i file my 2010 taxes for free ACRS Deduction in Short Tax Year For a tax year that is less than 12 months, the ACRS deduction is prorated on a 12-month basis. How do i file my 2010 taxes for free Figure the amount of the ACRS deduction for a short tax year as follows: First, you figure the ACRS deduction for a full year. How do i file my 2010 taxes for free You figure this by multiplying the unadjusted basis by the recovery percentage. How do i file my 2010 taxes for free You then multiply the ACRS deduction determined for a full tax year by a fraction. How do i file my 2010 taxes for free The numerator (top number) of the fraction is the number of months in the short tax year and the denominator (bottom number) is 12. How do i file my 2010 taxes for free For example, a corporation placed in service in June 1986 an item of 3-year property with an unadjusted basis of $10,000. How do i file my 2010 taxes for free The corporation files a tax return, because of a change in its accounting period, for the 6-month short tax year ending June 30, 1986. How do i file my 2010 taxes for free The full year's ACRS deduction for this item is $2,500 ($10,000 ÷ 25%), the first year percentage from the 3-year table. How do i file my 2010 taxes for free The ACRS deduction for the short tax year is $1,250 ($2,500 ÷ 6/12). How do i file my 2010 taxes for free You use the full ACRS percentages during the remaining years of the recovery period. How do i file my 2010 taxes for free For the first tax year after the recovery period, the unrecovered basis will be deductible. How do i file my 2010 taxes for free Exception. How do i file my 2010 taxes for free   For the tax year in which you placed 15-, 18-, or 19-year real property in service or in the tax year you dispose of it, you compute the ACRS deduction for the number of months that the property is in service during that tax year. How do i file my 2010 taxes for free You compute the number of months using either a full month or mid-month convention. How do i file my 2010 taxes for free This is true regardless of the number of months in the tax year and the recovery period and method used. How do i file my 2010 taxes for free Dispositions A disposition is the permanent withdrawal of property from use in your trade or business or in the production of income. How do i file my 2010 taxes for free You can make a withdrawal by sale, exchange, retirement, abandonment, or destruction. How do i file my 2010 taxes for free You generally recognize gain or loss on the disposition of an asset by sale. How do i file my 2010 taxes for free However, nonrecognition rules can allow you to postpone some gain. How do i file my 2010 taxes for free See Publication 544. How do i file my 2010 taxes for free If you physically abandon property, you can deduct as a loss the adjusted basis of the asset at the time of its abandonment. How do i file my 2010 taxes for free Your intent must be to discard the asset so that you will not use it again or retrieve it for sale, exchange, or other disposition. How do i file my 2010 taxes for free Early dispositions. How do i file my 2010 taxes for free   The disposal of an asset before the end of its specified recovery period, is referred to as an early disposition. How do i file my 2010 taxes for free When an early disposition occurs, the depreciation deduction in the year of disposition depends on the class of property involved. How do i file my 2010 taxes for free Early dispositions of ACRS property other than 15-, 18-, or 19-year real property. How do i file my 2010 taxes for free   Generally, you get no ACRS deduction for the tax year in which you dispose of or retire recovery property, except for 15-, 18-, and 19-year real property. How do i file my 2010 taxes for free This means there is no depreciation deduction under ACRS in the year you dispose of or retire any of your 3-, 5-, or 10-year recovery property. How do i file my 2010 taxes for free Dispositions — mass asset accounts. How do i file my 2010 taxes for free   The law provides a special rule to avoid the calculation of gain on the disposition of assets from mass asset accounts. How do i file my 2010 taxes for free A mass asset account includes items usually minor in value in relation to the group, numerous in quantity, impractical to separately identify, and not usually accounted for on a separate basis, but on a total dollar value. How do i file my 2010 taxes for free Examples of mass assets include minor items of office, plant, and store furniture and fixtures. How do i file my 2010 taxes for free   Under the special rule, if you elected to use a mass asset account, you recognize gain to the extent of the proceeds from the disposition of the asset. How do i file my 2010 taxes for free You leave the unadjusted basis of the property in the account until recovered in future years. How do i file my 2010 taxes for free If you did this, include the total proceeds realized from the disposition in income on the tax return for the year of disposition. How do i file my 2010 taxes for free Early dispositions — 15-year real property. How do i file my 2010 taxes for free   If you dispose of 15-year real property, you base your ACRS deduction for the year of disposition on the number of months in use. How do i file my 2010 taxes for free You use a full-month convention. How do i file my 2010 taxes for free For a disposition at any time during a particular month before the end of the recovery period, no deduction is allowed for the month of disposition. How do i file my 2010 taxes for free This applies whether you use the regular ACRS method or elected the alternate ACRS method. How do i file my 2010 taxes for free Example. How do i file my 2010 taxes for free You purchased and placed in service a rental house on March 2, 1984, for $98,000 (not including the cost of land). How do i file my 2010 taxes for free You file your return based on a calendar year. How do i file my 2010 taxes for free Your rate from Table 1 for the third month is 10%. How do i file my 2010 taxes for free Your ACRS deduction for 1984 was $9,800 ($98. How do i file my 2010 taxes for free 000 ÷ 10%). How do i file my 2010 taxes for free For 1985 through 1988, you figured your ACRS deductions using 11%, 9%, 8%, and 7% ÷ $98,000. How do i file my 2010 taxes for free For 1989 through 1992, you figured your ACRS deductions using 6% for each year. How do i file my 2010 taxes for free The deduction each year was $98,000 ÷ 6%. How do i file my 2010 taxes for free For 1993 and 1994, the ACRS deduction is ($98,000 ÷ 5%) $4,900 for each year. How do i file my 2010 taxes for free You sell the house on June 1, 1995. How do i file my 2010 taxes for free You figure your ACRS deduction for 1995 for the full year and then prorate that amount for the months of use. How do i file my 2010 taxes for free The full ACRS deduction for 1995 is $4,900 ($98,000 ÷ 5%). How do i file my 2010 taxes for free You then prorate this amount to the 5 months in 1995 during which it was rented. How do i file my 2010 taxes for free Your ACRS deduction for 1995 is $2,042 ($4,900 ÷ 5/12). How do i file my 2010 taxes for free Early dispositions — 18- and 19-year real property. How do i file my 2010 taxes for free   If you dispose of 18- or 19-year real property, you base your ACRS deduction for the year of disposition on the number of months in use. How do i file my 2010 taxes for free For 18-year property placed in service before June 23, 1984, use a full-month convention on a disposition. How do i file my 2010 taxes for free For 18-year property placed in service after June 22, 1984, and for 19-year property, determine the number of months in use by using the mid-month convention. How do i file my 2010 taxes for free Under the mid-month convention,treat real property disposed of any time during a month as disposed of in the middle of that month. How do i file my 2010 taxes for free Count the month of disposition as half a month of use. How do i file my 2010 taxes for free Example. How do i file my 2010 taxes for free You purchased and placed in service a rental house on July 2, 1984, for $100,000 (not including the cost of land). How do i file my 2010 taxes for free You file your return based on a calendar year. How do i file my 2010 taxes for free Your rate from Table 4 for the seventh month is 4%. How do i file my 2010 taxes for free You figured your ACRS deduction for 1984 was $4,000 ($100,000 ÷ 4%). How do i file my 2010 taxes for free In 1985 through 1994, your ACRS deductions were 9%, 8%, 8%, 7%, 6%, 6%, 5%, 5%, and 5% ÷ $100,000. How do i file my 2010 taxes for free You sell the house on September 24, 1995. How do i file my 2010 taxes for free Figure your ACRS deduction for 1995 for the months of use. How do i file my 2010 taxes for free The full ACRS deduction for 1995 is $5,000 ($100,000 ÷ 5%). How do i file my 2010 taxes for free Prorate this amount for the 8. How do i file my 2010 taxes for free 5 months in 1995 that you held the property. How do i file my 2010 taxes for free Under the mid-month convention, you count September as half a month. How do i file my 2010 taxes for free Your ACRS deduction for 1995 is $3,542 ($5,000 ÷ 8. How do i file my 2010 taxes for free 5/12). How do i file my 2010 taxes for free Depreciation Recapture If you dispose of property depreciated under ACRS that is section 1245 recovery property, you will generally recognize gain or loss. How do i file my 2010 taxes for free Gain recognized on a disposition is ordinary income to the extent of prior depreciation deductions taken. How do i file my 2010 taxes for free This recapture rule applies to all personal property in the 3-year, 5-year, and 10-year classes. How do i file my 2010 taxes for free You recapture gain on manufactured homes and theme park structures in the 10-year class as section 1245 property. How do i file my 2010 taxes for free Section 1245 property generally includes all personal property. How do i file my 2010 taxes for free See Section 1245 property in chapter 4 of Publication 544 for more information. How do i file my 2010 taxes for free You treat dispositions of section 1250 real property on which you have a gain as section 1245 recovery property. How do i file my 2010 taxes for free You recognize gain on this property as ordinary income to the extent of prior depreciation deductions taken. How do i file my 2010 taxes for free Section 1250 property includes most real property. How do i file my 2010 taxes for free See Section 1250 property in chapter 4 of Publication 544 for more information. How do i file my 2010 taxes for free This rule applies to all section 1250 real property except the following property: Any 15-, 18-, or 19-year real property that is residential rental property. How do i file my 2010 taxes for free Any 15-, 18-, or 19-year real property that you elected to depreciate using the alternate ACRS method. How do i file my 2010 taxes for free Any 15-, 18-, or 19-year real property that is subsidized low-income housing. How do i file my 2010 taxes for free For these recapture rules, you treat the section 179 deduction and 50% of the investment credit that reduced your basis as depreciation. How do i file my 2010 taxes for free See Publication 544 for further discussion of dispositions of section 1245 and 1250 property. How do i file my 2010 taxes for free Prev  Up  Next   Home   More Online Publications