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Tax Amendment Form 2010

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Tax Amendment Form 2010

Tax amendment form 2010 5. Tax amendment form 2010   Credits Table of Contents Credit for the Elderly or the DisabledCan You Take the Credit? Figuring the Credit Child and Dependent Care Credit Earned Income Credit (EIC)Do You Qualify for the Earned Income Credit (EIC)? Figuring the EIC This chapter briefly discusses the credit for the elderly or disabled, the child and dependent care credit, and the earned income credit. Tax amendment form 2010 You may be able to reduce your federal income tax by claiming one or more of these credits. Tax amendment form 2010 Credit for the Elderly or the Disabled This section explains who qualifies for the credit for the elderly or the disabled and how to figure this credit. Tax amendment form 2010 For more information, see Publication 524, Credit for the Elderly or the Disabled. Tax amendment form 2010 You can take the credit only if you file Form 1040 or Form 1040A. Tax amendment form 2010 You cannot take the credit if you file Form 1040EZ or Form 1040NR. Tax amendment form 2010 Can You Take the Credit? You can take the credit for the elderly or the disabled if you meet both of the following requirements. Tax amendment form 2010 You are a qualified individual. Tax amendment form 2010 Your income is not more than certain limits. Tax amendment form 2010  You can use Figure 5-A and Figure 5-B as guides to see if you are eligible for the credit. Tax amendment form 2010   Qualified Individual You are a qualified individual for this credit if you are a U. Tax amendment form 2010 S. Tax amendment form 2010 citizen or resident alien, and either of the following applies. Tax amendment form 2010 You were age 65 or older at the end of 2013. Tax amendment form 2010 You were under age 65 at the end of 2013 and all three of the following statements are true. Tax amendment form 2010 You retired on permanent and total disability (explained later). Tax amendment form 2010 You received taxable disability income for 2013. Tax amendment form 2010 On January 1, 2013, you had not reached mandatory retirement age (defined later under Disability income ). Tax amendment form 2010 Age 65. Tax amendment form 2010 You are considered to be age 65 on the day before your 65th birthday. Tax amendment form 2010 Therefore, you are considered to be age 65 at the end of 2013 if you were born before January 2, 1949. Tax amendment form 2010 Figure 5-A. Tax amendment form 2010 Are You a Qualified Individual? This image is too large to be displayed in the current screen. Tax amendment form 2010 Please click the link to view the image. Tax amendment form 2010 Figure 5-A, Are you a qualified individual? U. Tax amendment form 2010 S. Tax amendment form 2010 citizen or resident alien. Tax amendment form 2010   You must be a U. Tax amendment form 2010 S. Tax amendment form 2010 citizen or resident alien (or be treated as a resident alien) to take the credit. Tax amendment form 2010 Generally, you cannot take the credit if you were a nonresident alien at any time during the tax year. Tax amendment form 2010 Exceptions. Tax amendment form 2010   You may be able to take the credit if you are a nonresident alien who is married to a U. Tax amendment form 2010 S. Tax amendment form 2010 citizen or resident alien at the end of the tax year and you and your spouse choose to treat you as a U. Tax amendment form 2010 S. Tax amendment form 2010 resident alien. Tax amendment form 2010 If you make that choice, both you and your spouse are taxed on your worldwide income. Tax amendment form 2010   If you were a nonresident alien at the beginning of the year and a resident alien at the end of the year, and you were married to a U. Tax amendment form 2010 S. Tax amendment form 2010 citizen or resident alien at the end of the year, you may be able to choose to be treated as a U. Tax amendment form 2010 S. Tax amendment form 2010 resident alien for the entire year. Tax amendment form 2010 In that case, you may be allowed to take the credit. Tax amendment form 2010   For information on these choices, see chapter 1 of Publication 519, U. Tax amendment form 2010 S. Tax amendment form 2010 Tax Guide for Aliens. Tax amendment form 2010 Married persons. Tax amendment form 2010   Generally, if you are married at the end of the tax year, you and your spouse must file a joint return to take the credit. Tax amendment form 2010 However, if you and your spouse did not live in the same household at any time during the tax year, you can file either a joint return or separate returns and still take the credit. Tax amendment form 2010 Head of household. Tax amendment form 2010   You can file as head of household and qualify to take the credit even if your spouse lived with you during the first 6 months of the year if you meet certain tests. Tax amendment form 2010 See Publication 524 and Publication 501. Tax amendment form 2010 Under age 65. Tax amendment form 2010   If you are under age 65 at the end of 2013, you can qualify for the credit only if you are retired on permanent and total disability and have taxable disability income (discussed later under Disability income ). Tax amendment form 2010 You are considered to be under age 65 at the end of 2013 if you were born after January 1, 1949. Tax amendment form 2010 You are retired on permanent and total disability if: You were permanently and totally disabled when you retired, and You retired on disability before the end of the tax year. Tax amendment form 2010   Even if you do not retire formally, you may be considered retired on disability when you have stopped working because of your disability. Tax amendment form 2010 If you retired on disability before 1977 and were not permanently and totally disabled at the time, you can qualify for the credit if you were permanently and totally disabled on January 1, 1976, or January 1, 1977. Tax amendment form 2010 Permanent and total disability. Tax amendment form 2010   You are permanently and totally disabled if you cannot engage in any substantial gainful activity because of your physical or mental condition. Tax amendment form 2010 A physician must certify that the condition has lasted or can be expected to last continuously for 12 months or more, or that the condition can be expected to result in death. Tax amendment form 2010 See Physician's statement , later. Tax amendment form 2010 Substantial gainful activity. Tax amendment form 2010   Substantial gainful activity is the performance of significant duties over a reasonable period of time while working for pay or profit, or in work generally done for pay or profit. Tax amendment form 2010   Full-time work (or part-time work done at the employer's convenience) in a competitive work situation for at least the minimum wage conclusively shows that you are able to engage in substantial gainful activity. Tax amendment form 2010   Substantial gainful activity is not work you do to take care of yourself or your home. Tax amendment form 2010 It is not unpaid work on hobbies, institutional therapy or training, school attendance, clubs, social programs, and similar activities. Tax amendment form 2010 However, doing this kind of work may show that you are able to engage in substantial gainful activity. Tax amendment form 2010    Figure 5-B. Tax amendment form 2010 Income Limits IF your filing status is. Tax amendment form 2010 . Tax amendment form 2010 . Tax amendment form 2010 THEN even if you qualify (see Figure 5-A), you CANNOT take the credit if: Your adjusted gross income (AGI)* is equal to or more than. Tax amendment form 2010 . Tax amendment form 2010 . Tax amendment form 2010 OR the total of your nontaxable social security and other nontaxable pension(s), annuities, or disability income is equal to or more than. Tax amendment form 2010 . Tax amendment form 2010 . Tax amendment form 2010 single, head of household, or qualifying widow(er) with dependent child $17,500 $5,000 married filing jointly and only one spouse qualifies in Figure 5-A $20,000 $5,000 married filing jointly and both spouses qualify in Figure 5-A $25,000 $7,500 married filing separately and you lived apart from your spouse for all of 2013 $12,500 $3,750 *AGI is the amount on Form 1040A, line 22, or Form 1040, line 38      The fact that you have not worked for some time is not, of itself, conclusive evidence that you cannot engage in substantial gainful activity. Tax amendment form 2010 Physician's statement. Tax amendment form 2010   If you are under age 65, you must have your physician complete a statement certifying that you were permanently and totally disabled on the date you retired. Tax amendment form 2010   You do not have to file this statement with your tax return, but you must keep it for your records. Tax amendment form 2010 The Instructions for Schedule R (Form 1040A or 1040) include a statement your physician can complete and that you can keep for your records. Tax amendment form 2010 Veterans. Tax amendment form 2010   If the Department of Veterans Affairs (VA) certifies that you are permanently and totally disabled, you can substitute VA Form 21-0172, Certification of Permanent and Total Disability, for the physician's statement you are required to keep. Tax amendment form 2010 VA Form 21-0172 must be signed by a person authorized by the VA to do so. Tax amendment form 2010 You can get this form from your local VA regional office. Tax amendment form 2010 Physician's statement obtained in earlier year. Tax amendment form 2010   If you got a physician's statement in an earlier year and, due to your continued disabled condition, you were unable to engage in any substantial gainful activity during 2013, you may not need to get another physician's statement for 2013. Tax amendment form 2010 For a detailed explanation of the conditions you must meet, see the instructions for Schedule R (Form 1040A or 1040), Part II. Tax amendment form 2010 If you meet the required conditions, you must check the box on Schedule R (Form 1040A or 1040), Part II, line 2. Tax amendment form 2010   If you checked Schedule R (Form 1040A or 1040), Part I, box 4, 5, or 6, print in the space above the box in Part II, line 2, the first name(s) of the spouse(s) for whom the box is checked. Tax amendment form 2010 Disability income. Tax amendment form 2010   If you are under age 65, you must also have taxable disability income to qualify for the credit. Tax amendment form 2010   Disability income must meet the following two requirements. Tax amendment form 2010 It must be paid under your employer's accident or health plan or pension plan. Tax amendment form 2010 It must be included in your income as wages (or payments in lieu of wages) for the time you are absent from work because of permanent and total disability. Tax amendment form 2010 Payments that are not disability income. Tax amendment form 2010   Any payment you receive from a plan that does not provide for disability retirement is not disability income. Tax amendment form 2010 Any lump-sum payment for accrued annual leave that you receive when you retire on disability is a salary payment and is not disability income. Tax amendment form 2010   For purposes of the credit for the elderly or the disabled, disability income does not include amounts you receive after you reach mandatory retirement age. Tax amendment form 2010 Mandatory retirement age is the age set by your employer at which you would have had to retire had you not become disabled. Tax amendment form 2010 Figuring the Credit You can figure the credit yourself, or the IRS will figure it for you. Tax amendment form 2010 Figuring the credit yourself. Tax amendment form 2010   If you figure the credit yourself, fill out the front of Schedule R (Form 1040A or 1040). Tax amendment form 2010 Next, fill out Schedule R (Form 1040A or 1040), Part III. Tax amendment form 2010 Credit figured for you. Tax amendment form 2010   If you can take the credit and you want the IRS to figure the credit for you, see Publication 524 or the Instructions for Schedule R (Form 1040A or 1040). Tax amendment form 2010 If you want the IRS to figure your tax, see chapter 30 of Publication 17, Your Federal Income Tax. Tax amendment form 2010 Child and Dependent Care Credit You may be able to claim this credit if you pay someone to care for your dependent who is under age 13 or for your spouse or dependent who is not able to care for himself or herself. Tax amendment form 2010 The credit can be up to 35% of your expenses. Tax amendment form 2010 To qualify, you must pay these expenses so you can work or look for work. Tax amendment form 2010 If you claim this credit, you must include on your return the name and taxpayer identification number (generally the social security number) of each qualifying person for whom care is provided. Tax amendment form 2010 If the correct information is not shown, the credit may be reduced or disallowed. Tax amendment form 2010 You also must show on your return the name, address, and the taxpayer identification number of the person(s) or organization(s) that provided the care. Tax amendment form 2010 For more information, see Publication 503, Child and Dependent Care Expenses. Tax amendment form 2010 Earned Income Credit (EIC) The earned income credit (EIC) is a refundable tax credit for certain people who work and have earned income under $51,567. Tax amendment form 2010 The EIC is available to persons with or without a qualifying child. Tax amendment form 2010 Credit has no effect on certain welfare benefits. Tax amendment form 2010   Any refund you receive because of the EIC cannot be counted as income when determining whether you or anyone else is eligible for benefits or assistance, or how much you or anyone else can receive, under any federal program or under any state or local program financed in whole or in part with federal funds. Tax amendment form 2010 These programs include the following. Tax amendment form 2010 Medicaid and supplemental security income (SSI). Tax amendment form 2010 Supplemental Nutrition Assistance Program (food stamps). Tax amendment form 2010 Low-income housing. Tax amendment form 2010 Temporary Assistance for Needy Families (TANF). Tax amendment form 2010  In addition, when determining eligibility, the refund cannot be counted as a resource for at least 12 months after you receive it. Tax amendment form 2010 Check with your local benefit coordinator to find out if your refund will affect your benefits. Tax amendment form 2010 Do You Qualify for the Earned Income Credit (EIC)? Use Table 5-1 as an initial guide to the rules you must meet in order to qualify for the EIC. Tax amendment form 2010 The specific rules you must meet depend on whether you have a qualifying child. Tax amendment form 2010 If you have a qualifying child, the rules in Parts A, B, and D apply to you. Tax amendment form 2010 If you do not have a qualifying child, the rules in Parts A, C, and D apply to you. Tax amendment form 2010  If, after reading all the rules in each part that applies to you, you think you may qualify for the credit, see Publication 596, Earned Income Credit, for more details about the EIC. Tax amendment form 2010 You can also find information about the EIC in the instructions for Form 1040 (line 64a), Form 1040A (line 38a), or Form 1040EZ (line 8a). Tax amendment form 2010 The sections that follow provide additional information for some of the rules. Tax amendment form 2010 Adjusted gross income (AGI). Tax amendment form 2010   Under Rule 1, you cannot claim the EIC unless your AGI is less than the applicable limit shown in Part A of Table 5-1. Tax amendment form 2010 Your AGI is the amount on line 37 (Form 1040), line 21 (Form 1040A), or line 4 (Form 1040EZ). Tax amendment form 2010 Table 5-1. Tax amendment form 2010 Earned Income Credit (EIC) in a Nutshell First, you must meet all the rules in this column. Tax amendment form 2010 Second, you must meet all the rules in one of these columns, whichever applies. Tax amendment form 2010 Third, you must meet the rule in this column. Tax amendment form 2010 Part A. Tax amendment form 2010  Rules for Everyone Part B. Tax amendment form 2010  Rules If You Have a Qualifying Child Part C. Tax amendment form 2010  Rules If You Do Not Have a Qualifying Child Part D. Tax amendment form 2010  Figuring and Claiming the EIC 1. Tax amendment form 2010 Your adjusted gross income (AGI) must be less than: •$46,227 ($51,567 for married filing jointly) if you have three or more qualifying children, •$43,038 ($48,378 for married filing jointly) if you have two qualifying children, •$37,870 ($43,210 for married filing jointly) if you have one qualifying child, or  •$14,340 ($19,680 for married filing jointly) if you do not have a qualifying child. Tax amendment form 2010 2. Tax amendment form 2010 You must have a valid social security number. Tax amendment form 2010  3. Tax amendment form 2010 Your filing status cannot be “Married filing separately. Tax amendment form 2010 ” 4. Tax amendment form 2010 You must be a U. Tax amendment form 2010 S. Tax amendment form 2010 citizen or resident alien all year. Tax amendment form 2010  5. Tax amendment form 2010 You cannot file Form 2555 or Form 2555-EZ (relating to foreign earned income). Tax amendment form 2010  6. Tax amendment form 2010 Your investment income must be $3,300 or less. Tax amendment form 2010  7. Tax amendment form 2010 You must have earned income. Tax amendment form 2010 8. Tax amendment form 2010 Your child must meet the relationship, age, residency, and joint return tests. Tax amendment form 2010  9. Tax amendment form 2010 Your qualifying child cannot be used by more than one person to claim the EIC. Tax amendment form 2010  10. Tax amendment form 2010 You generally cannot be a qualifying child of another person. Tax amendment form 2010 11. Tax amendment form 2010 You must be at least age 25 but under age 65. Tax amendment form 2010  12. Tax amendment form 2010 You cannot be the dependent of another person. Tax amendment form 2010  13. Tax amendment form 2010 You generally cannot be a qualifying child of another person. Tax amendment form 2010  14. Tax amendment form 2010 You must have lived in the United States more than half of the year. Tax amendment form 2010 15. Tax amendment form 2010 Your earned income must be less than: •$46,227 ($51,567 for married filing jointly) if you have three or more qualifying children, •$43,038 ($48,378 for married filing jointly) if you have two qualifying children, •$37,870 ($43,210 for married filing jointly) if you have one qualifying child, or •$14,340 ($19,680 for married filing jointly) if you do not have a qualifying child. Tax amendment form 2010 Social security number. Tax amendment form 2010   Under Rule 2, you (and your spouse if you are married filing jointly) must have a valid social security number (SSN) issued by the Social Security Administration (SSA). Tax amendment form 2010 Any qualifying child listed on Schedule EIC also must have a valid SSN. Tax amendment form 2010 (See Qualifying child , later, if you have a qualifying child. Tax amendment form 2010 )   If your social security card (or your spouse's if you are married filing jointly) says “Not valid for employment” and your SSN was issued so that you (or your spouse) could get a federally funded benefit, you cannot get the EIC. Tax amendment form 2010 An example of a federally funded benefit is Medicaid. Tax amendment form 2010 Investment income. Tax amendment form 2010   Under Rule 6, you cannot claim the EIC unless your investment income is $3,300 or less. Tax amendment form 2010 If your investment income is more than $3,300, you cannot claim the credit. Tax amendment form 2010 For most people, investment income is the total of the following amounts. Tax amendment form 2010 Taxable interest (line 8a of Form 1040 or 1040A). Tax amendment form 2010 Tax-exempt interest (line 8b of Form 1040 or 1040A). Tax amendment form 2010 Dividend income (line 9a of Form 1040 or 1040A). Tax amendment form 2010 Capital gain net income (line 13 of Form 1040, if more than zero, or line 10 of Form 1040A). Tax amendment form 2010  If you file Form 1040EZ, your investment income is the total of the amount of line 2 and the amount of any tax-exempt interest you wrote to the right of the words “Form 1040EZ” on line 2. Tax amendment form 2010   For more information about investment income, see Publication 596, Earned Income Credit. Tax amendment form 2010 Earned income. Tax amendment form 2010   Under Rule 7, you must have earned income to claim the EIC. Tax amendment form 2010 Under Rule 15, you cannot claim the EIC unless your earned income is less than the applicable limit shown in Table 5-1, Part D. Tax amendment form 2010 Earned income includes all of the following types of income. Tax amendment form 2010 Wages, salaries, tips, and other taxable employee pay. Tax amendment form 2010 Employee pay is earned income only if it is taxable. Tax amendment form 2010 Nontaxable employee pay, such as certain dependent care benefits and adoption benefits, is not earned income. Tax amendment form 2010 But there is an exception for nontaxable combat pay, which you can choose to include in earned income. Tax amendment form 2010 Net earnings from self-employment. Tax amendment form 2010 Gross income received as a statutory employee. Tax amendment form 2010 Gross income defined. Tax amendment form 2010   Gross income means all income you received in the form of money, goods, property, and services that is not exempt from tax, including any income from sources outside the United States or from the sale of your main home (even if you can exclude part or all of it). Tax amendment form 2010 Do not include any social security benefits unless (a) you are married filing a separate tax return and you lived with your spouse at any time in 2013, or (b) one-half of your social security benefits plus your other gross income and any tax-exempt interest is more than $25,000 ($32,000 if married filing jointly). Tax amendment form 2010 If (a) or (b) applies, see the instructions for Form 1040, lines 20a and 20b to figure the taxable part of social security benefits you must include in gross income. Tax amendment form 2010 Self-employed persons. Tax amendment form 2010   If you are self-employed and your net earnings are $400 or more, be sure to correctly fill out Schedule SE (Form 1040), Self-Employment Tax, and pay the proper amount of self-employment tax. Tax amendment form 2010 If you do not, you may not get all the credit to which you are entitled. Tax amendment form 2010 Disability benefits. Tax amendment form 2010   If you retired on disability, taxable benefits you receive under your employer's disability retirement plan are considered earned income until you reach minimum retirement age. Tax amendment form 2010 Minimum retirement age generally is the earliest age at which you could have received a pension or annuity if you were not disabled. Tax amendment form 2010 Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension and are not considered earned income. Tax amendment form 2010   Payments you received from a disability insurance policy that you paid the premiums for are not earned income. Tax amendment form 2010 It does not matter whether you have reached minimum retirement age. Tax amendment form 2010 If this policy is through your employer, the amount may be shown in box 12 of your Form W-2 with code J. Tax amendment form 2010 Income that is not earned income. Tax amendment form 2010   Examples of items that are not earned income under Rule 7 include interest and dividends, pensions and annuities, social security and railroad retirement benefits (including disability benefits — except for payments covered under Disability benefits earlier), alimony and child support, welfare benefits, workers' compensation benefits, unemployment compensation (insurance), nontaxable foster care payments, and veterans' benefits, including VA rehabilitation payments. Tax amendment form 2010 Do not include any of these items in your earned income. Tax amendment form 2010 Workfare payments. Tax amendment form 2010   Nontaxable workfare payments are not earned income for the EIC. Tax amendment form 2010 These are cash payments certain people receive from a state or local agency that administers public assistance programs funded under the federal Temporary Assistance for Needy Families (TANF) program in return for certain work activities such as (1) work experience activities (including remodeling or repairing public housing) if sufficient private sector employment is not available, or (2) community service program activities. Tax amendment form 2010 Qualifying child. Tax amendment form 2010   Under Rule 8, your child is a qualifying child if your child meets four tests. Tax amendment form 2010 The four tests are: Relationship, Age, Residency, and Joint return. Tax amendment form 2010   The four tests are illustrated in Figure 5-C. Tax amendment form 2010 See Publication 596 for more information about each test. Tax amendment form 2010 Figure 5-C. Tax amendment form 2010 Tests for Qualifying Child A qualifying child for the EIC is a child who is your. Tax amendment form 2010 . Tax amendment form 2010 . Tax amendment form 2010 Son, daughter, stepchild, foster child,  or a descendant of any of them (for example, your grandchild) OR Brother, sister, half brother, half sister, stepbrother,  stepsister, or a descendant of any of them (for example, your  niece or nephew) was . Tax amendment form 2010 . Tax amendment form 2010 . Tax amendment form 2010 Under age 19 at the end of 2013 and younger than you (or your spouse if filing jointly) OR Under age 24 at the end of 2013, a student, and younger than you (or your spouse if filing jointly) OR Permanently and totally disabled at any time during the year, regardless of age who. Tax amendment form 2010 . Tax amendment form 2010 . Tax amendment form 2010 Is not filing a joint return for 2013  (or is filing a joint return for 2013 only as a claim for refund of income tax withheld or estimated tax paid) who. Tax amendment form 2010 . Tax amendment form 2010 . Tax amendment form 2010 Lived with you in the United States for more than half of 2013. Tax amendment form 2010  If the child did not live with you for the required time, see Publication 596 for more information. Tax amendment form 2010 Figuring the EIC To figure the amount of your credit, you have two choices. Tax amendment form 2010 Have the IRS figure the EIC for you. Tax amendment form 2010 If you want to do this, see IRS Will Figure the EIC for You in Publication 596. Tax amendment form 2010 Figure the EIC yourself. Tax amendment form 2010 If you want to do this, see How To Figure the EIC Yourself in Publication 596. Tax amendment form 2010 Prev  Up  Next   Home   More Online Publications
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The Tax Amendment Form 2010

Tax amendment form 2010 3. Tax amendment form 2010   Rent Expense Table of Contents Introduction Topics - This chapter discusses: RentConditional sales contract. Tax amendment form 2010 Leveraged leases. Tax amendment form 2010 Leveraged leases of limited-use property. Tax amendment form 2010 Taxes on Leased Property Cost of Getting a Lease Improvements by Lessee Capitalizing Rent Expenses Introduction This chapter discusses the tax treatment of rent or lease payments you make for property you use in your business but do not own. Tax amendment form 2010 It also discusses how to treat other kinds of payments you make that are related to your use of this property. Tax amendment form 2010 These include payments you make for taxes on the property. Tax amendment form 2010 Topics - This chapter discusses: The definition of rent Taxes on leased property The cost of getting a lease Improvements by the lessee Capitalizing rent expenses Rent Rent is any amount you pay for the use of property you do not own. Tax amendment form 2010 In general, you can deduct rent as an expense only if the rent is for property you use in your trade or business. Tax amendment form 2010 If you have or will receive equity in or title to the property, the rent is not deductible. Tax amendment form 2010 Unreasonable rent. Tax amendment form 2010   You cannot take a rental deduction for unreasonable rent. Tax amendment form 2010 Ordinarily, the issue of reasonableness arises only if you and the lessor are related. Tax amendment form 2010 Rent paid to a related person is reasonable if it is the same amount you would pay to a stranger for use of the same property. Tax amendment form 2010 Rent is not unreasonable just because it is figured as a percentage of gross sales. Tax amendment form 2010 For examples of related persons, see Related persons in chapter 2, Publication 544. Tax amendment form 2010 Rent on your home. Tax amendment form 2010   If you rent your home and use part of it as your place of business, you may be able to deduct the rent you pay for that part. Tax amendment form 2010 You must meet the requirements for business use of your home. Tax amendment form 2010 For more information, see Business use of your home in chapter 1. Tax amendment form 2010 Rent paid in advance. Tax amendment form 2010   Generally, rent paid in your trade or business is deductible in the year paid or accrued. Tax amendment form 2010 If you pay rent in advance, you can deduct only the amount that applies to your use of the rented property during the tax year. Tax amendment form 2010 You can deduct the rest of your payment only over the period to which it applies. Tax amendment form 2010 Example 1. Tax amendment form 2010 You are a calendar year taxpayer and you leased a building for 5 years beginning July 1. Tax amendment form 2010 Your rent is $12,000 per year. Tax amendment form 2010 You paid the first year's rent ($12,000) on June 30. Tax amendment form 2010 You can deduct only $6,000 (6/12 × $12,000) for the rent that applies to the first year. Tax amendment form 2010 Example 2. Tax amendment form 2010 You are a calendar year taxpayer. Tax amendment form 2010 Last January you leased property for 3 years for $6,000 a year. Tax amendment form 2010 You paid the full $18,000 (3 × $6,000) during the first year of the lease. Tax amendment form 2010 Each year you can deduct only $6,000, the part of the lease that applies to that year. Tax amendment form 2010 Canceling a lease. Tax amendment form 2010   You generally can deduct as rent an amount you pay to cancel a business lease. Tax amendment form 2010 Lease or purchase. Tax amendment form 2010   There may be instances in which you must determine whether your payments are for rent or for the purchase of the property. Tax amendment form 2010 You must first determine whether your agreement is a lease or a conditional sales contract. Tax amendment form 2010 Payments made under a conditional sales contract are not deductible as rent expense. Tax amendment form 2010 Conditional sales contract. Tax amendment form 2010   Whether an agreement is a conditional sales contract depends on the intent of the parties. Tax amendment form 2010 Determine intent based on the provisions of the agreement and the facts and circumstances that exist when you make the agreement. Tax amendment form 2010 No single test, or special combination of tests, always applies. Tax amendment form 2010 However, in general, an agreement may be considered a conditional sales contract rather than a lease if any of the following is true. Tax amendment form 2010 The agreement applies part of each payment toward an equity interest you will receive. Tax amendment form 2010 You get title to the property after you make a stated amount of required payments. Tax amendment form 2010 The amount you must pay to use the property for a short time is a large part of the amount you would pay to get title to the property. Tax amendment form 2010 You pay much more than the current fair rental value of the property. Tax amendment form 2010 You have an option to buy the property at a nominal price compared to the value of the property when you may exercise the option. Tax amendment form 2010 Determine this value when you make the agreement. Tax amendment form 2010 You have an option to buy the property at a nominal price compared to the total amount you have to pay under the agreement. Tax amendment form 2010 The agreement designates part of the payments as interest, or that part is easy to recognize as interest. Tax amendment form 2010 Leveraged leases. Tax amendment form 2010   Leveraged lease transactions may not be considered leases. Tax amendment form 2010 Leveraged leases generally involve three parties: a lessor, a lessee, and a lender to the lessor. Tax amendment form 2010 Usually the lease term covers a large part of the useful life of the leased property, and the lessee's payments to the lessor are enough to cover the lessor's payments to the lender. Tax amendment form 2010   If you plan to take part in what appears to be a leveraged lease, you may want to get an advance ruling. Tax amendment form 2010 Revenue Procedure 2001-28 on page 1156 of Internal Revenue Bulletin 2001-19 contains the guidelines the IRS will use to determine if a leveraged lease is a lease for federal income tax purposes. Tax amendment form 2010 Revenue Procedure 2001-29 on page 1160 of the same Internal Revenue Bulletin provides the information required to be furnished in a request for an advance ruling on a leveraged lease transaction. Tax amendment form 2010 Internal Revenue Bulletin 2001-19 is available at www. Tax amendment form 2010 irs. Tax amendment form 2010 gov/pub/irs-irbs/irb01-19. Tax amendment form 2010 pdf. Tax amendment form 2010   In general, Revenue Procedure 2001-28 provides that, for advance ruling purposes only, the IRS will consider the lessor in a leveraged lease transaction to be the owner of the property and the transaction to be a valid lease if all the factors in the revenue procedure are met, including the following. Tax amendment form 2010 The lessor must maintain a minimum unconditional “at risk” equity investment in the property (at least 20% of the cost of the property) during the entire lease term. Tax amendment form 2010 The lessee may not have a contractual right to buy the property from the lessor at less than fair market value when the right is exercised. Tax amendment form 2010 The lessee may not invest in the property, except as provided by Revenue Procedure 2001-28. Tax amendment form 2010 The lessee may not lend any money to the lessor to buy the property or guarantee the loan used by the lessor to buy the property. Tax amendment form 2010 The lessor must show that it expects to receive a profit apart from the tax deductions, allowances, credits, and other tax attributes. Tax amendment form 2010   The IRS may charge you a user fee for issuing a tax ruling. Tax amendment form 2010 For more information, see Revenue Procedure 2014-1 available at  www. Tax amendment form 2010 irs. Tax amendment form 2010 gov/irb/2014-1_IRB/ar05. Tax amendment form 2010 html. Tax amendment form 2010 Leveraged leases of limited-use property. Tax amendment form 2010   The IRS will not issue advance rulings on leveraged leases of so-called limited-use property. Tax amendment form 2010 Limited-use property is property not expected to be either useful to or usable by a lessor at the end of the lease term except for continued leasing or transfer to a lessee. Tax amendment form 2010 See Revenue Procedure 2001-28 for examples of limited-use property and property that is not limited-use property. Tax amendment form 2010 Leases over $250,000. Tax amendment form 2010   Special rules are provided for certain leases of tangible property. Tax amendment form 2010 The rules apply if the lease calls for total payments of more than $250,000 and any of the following apply. Tax amendment form 2010 Rents increase during the lease. Tax amendment form 2010 Rents decrease during the lease. Tax amendment form 2010 Rents are deferred (rent is payable after the end of the calendar year following the calendar year in which the use occurs and the rent is allocated). Tax amendment form 2010 Rents are prepaid (rent is payable before the end of the calendar year preceding the calendar year in which the use occurs and the rent is allocated). Tax amendment form 2010 These rules do not apply if your lease specifies equal amounts of rent for each month in the lease term and all rent payments are due in the calendar year to which the rent relates (or in the preceding or following calendar year). Tax amendment form 2010   Generally, if the special rules apply, you must use an accrual method of accounting (and time value of money principles) for your rental expenses, regardless of your overall method of accounting. Tax amendment form 2010 In addition, in certain cases in which the IRS has determined that a lease was designed to achieve tax avoidance, you must take rent and stated or imputed interest into account under a constant rental accrual method in which the rent is treated as accruing ratably over the entire lease term. Tax amendment form 2010 For details, see section 467 of the Internal Revenue Code. Tax amendment form 2010 Taxes on Leased Property If you lease business property, you can deduct as additional rent any taxes you have to pay to or for the lessor. Tax amendment form 2010 When you can deduct these taxes as additional rent depends on your accounting method. Tax amendment form 2010 Cash method. Tax amendment form 2010   If you use the cash method of accounting, you can deduct the taxes as additional rent only for the tax year in which you pay them. Tax amendment form 2010 Accrual method. Tax amendment form 2010   If you use an accrual method of accounting, you can deduct taxes as additional rent for the tax year in which you can determine all the following. Tax amendment form 2010 That you have a liability for taxes on the leased property. Tax amendment form 2010 How much the liability is. Tax amendment form 2010 That economic performance occurred. Tax amendment form 2010   The liability and amount of taxes are determined by state or local law and the lease agreement. Tax amendment form 2010 Economic performance occurs as you use the property. Tax amendment form 2010 Example 1. Tax amendment form 2010 Oak Corporation is a calendar year taxpayer that uses an accrual method of accounting. Tax amendment form 2010 Oak leases land for use in its business. Tax amendment form 2010 Under state law, owners of real property become liable (incur a lien on the property) for real estate taxes for the year on January 1 of that year. Tax amendment form 2010 However, they do not have to pay these taxes until July 1 of the next year (18 months later) when tax bills are issued. Tax amendment form 2010 Under the terms of the lease, Oak becomes liable for the real estate taxes in the later year when the tax bills are issued. Tax amendment form 2010 If the lease ends before the tax bill for a year is issued, Oak is not liable for the taxes for that year. Tax amendment form 2010 Oak cannot deduct the real estate taxes as rent until the tax bill is issued. Tax amendment form 2010 This is when Oak's liability under the lease becomes fixed. Tax amendment form 2010 Example 2. Tax amendment form 2010 The facts are the same as in Example 1 except that, according to the terms of the lease, Oak becomes liable for the real estate taxes when the owner of the property becomes liable for them. Tax amendment form 2010 As a result, Oak will deduct the real estate taxes as rent on its tax return for the earlier year. Tax amendment form 2010 This is the year in which Oak's liability under the lease becomes fixed. Tax amendment form 2010 Cost of Getting a Lease You may either enter into a new lease with the lessor of the property or get an existing lease from another lessee. Tax amendment form 2010 Very often when you get an existing lease from another lessee, you must pay the previous lessee money to get the lease, besides having to pay the rent on the lease. Tax amendment form 2010 If you get an existing lease on property or equipment for your business, you generally must amortize any amount you pay to get that lease over the remaining term of the lease. Tax amendment form 2010 For example, if you pay $10,000 to get a lease and there are 10 years remaining on the lease with no option to renew, you can deduct $1,000 each year. Tax amendment form 2010 The cost of getting an existing lease of tangible property is not subject to the amortization rules for section 197 intangibles discussed in chapter 8. Tax amendment form 2010 Option to renew. Tax amendment form 2010   The term of the lease for amortization includes all renewal options plus any other period for which you and the lessor reasonably expect the lease to be renewed. Tax amendment form 2010 However, this applies only if less than 75% of the cost of getting the lease is for the term remaining on the purchase date (not including any period for which you may choose to renew, extend, or continue the lease). Tax amendment form 2010 Allocate the lease cost to the original term and any option term based on the facts and circumstances. Tax amendment form 2010 In some cases, it may be appropriate to make the allocation using a present value computation. Tax amendment form 2010 For more information, see Regulations section 1. Tax amendment form 2010 178-1(b)(5). Tax amendment form 2010 Example 1. Tax amendment form 2010 You paid $10,000 to get a lease with 20 years remaining on it and two options to renew for 5 years each. Tax amendment form 2010 Of this cost, you paid $7,000 for the original lease and $3,000 for the renewal options. Tax amendment form 2010 Because $7,000 is less than 75% of the total $10,000 cost of the lease (or $7,500), you must amortize the $10,000 over 30 years. Tax amendment form 2010 That is the remaining life of your present lease plus the periods for renewal. Tax amendment form 2010 Example 2. Tax amendment form 2010 The facts are the same as in Example 1, except that you paid $8,000 for the original lease and $2,000 for the renewal options. Tax amendment form 2010 You can amortize the entire $10,000 over the 20-year remaining life of the original lease. Tax amendment form 2010 The $8,000 cost of getting the original lease was not less than 75% of the total cost of the lease (or $7,500). Tax amendment form 2010 Cost of a modification agreement. Tax amendment form 2010   You may have to pay an additional “rent” amount over part of the lease period to change certain provisions in your lease. Tax amendment form 2010 You must capitalize these payments and amortize them over the remaining period of the lease. Tax amendment form 2010 You cannot deduct the payments as additional rent, even if they are described as rent in the agreement. Tax amendment form 2010 Example. Tax amendment form 2010 You are a calendar year taxpayer and sign a 20-year lease to rent part of a building starting on January 1. Tax amendment form 2010 However, before you occupy it, you decide that you really need less space. Tax amendment form 2010 The lessor agrees to reduce your rent from $7,000 to $6,000 per year and to release the excess space from the original lease. Tax amendment form 2010 In exchange, you agree to pay an additional rent amount of $3,000, payable in 60 monthly installments of $50 each. Tax amendment form 2010   You must capitalize the $3,000 and amortize it over the 20-year term of the lease. Tax amendment form 2010 Your amortization deduction each year will be $150 ($3,000 ÷ 20). Tax amendment form 2010 You cannot deduct the $600 (12 × $50) that you will pay during each of the first 5 years as rent. Tax amendment form 2010 Commissions, bonuses, and fees. Tax amendment form 2010   Commissions, bonuses, fees, and other amounts you pay to get a lease on property you use in your business are capital costs. Tax amendment form 2010 You must amortize these costs over the term of the lease. Tax amendment form 2010 Loss on merchandise and fixtures. Tax amendment form 2010   If you sell at a loss merchandise and fixtures that you bought solely to get a lease, the loss is a cost of getting the lease. Tax amendment form 2010 You must capitalize the loss and amortize it over the remaining term of the lease. Tax amendment form 2010 Improvements by Lessee If you add buildings or make other permanent improvements to leased property, depreciate the cost of the improvements using the modified accelerated cost recovery system (MACRS). Tax amendment form 2010 Depreciate the property over its appropriate recovery period. Tax amendment form 2010 You cannot amortize the cost over the remaining term of the lease. Tax amendment form 2010 If you do not keep the improvements when you end the lease, figure your gain or loss based on your adjusted basis in the improvements at that time. Tax amendment form 2010 For more information, see the discussion of MACRS in Publication 946, How To Depreciate Property. Tax amendment form 2010 Assignment of a lease. Tax amendment form 2010   If a long-term lessee who makes permanent improvements to land later assigns all lease rights to you for money and you pay the rent required by the lease, the amount you pay for the assignment is a capital investment. Tax amendment form 2010 If the rental value of the leased land increased since the lease began, part of your capital investment is for that increase in the rental value. Tax amendment form 2010 The rest is for your investment in the permanent improvements. Tax amendment form 2010   The part that is for the increased rental value of the land is a cost of getting a lease, and you amortize it over the remaining term of the lease. Tax amendment form 2010 You can depreciate the part that is for your investment in the improvements over the recovery period of the property as discussed earlier, without regard to the lease term. Tax amendment form 2010 Capitalizing Rent Expenses Under the uniform capitalization rules, you must capitalize the direct costs and part of the indirect costs for certain production or resale activities. Tax amendment form 2010 Include these costs in the basis of property you produce or acquire for resale, rather than claiming them as a current deduction. Tax amendment form 2010 You recover the costs through depreciation, amortization, or cost of goods sold when you use, sell, or otherwise dispose of the property. Tax amendment form 2010 Indirect costs include amounts incurred for renting or leasing equipment, facilities, or land. Tax amendment form 2010 Uniform capitalization rules. Tax amendment form 2010   You may be subject to the uniform capitalization rules if you do any of the following, unless the property is produced for your use other than in a business or an activity carried on for profit. Tax amendment form 2010 Produce real property or tangible personal property. Tax amendment form 2010 For this purpose, tangible personal property includes a film, sound recording, video tape, book, or similar property. Tax amendment form 2010 Acquire property for resale. Tax amendment form 2010 However, these rules do not apply to the following property. Tax amendment form 2010 Personal property you acquire for resale if your average annual gross receipts are $10 million or less for the 3 prior tax years. Tax amendment form 2010 Property you produce if you meet either of the following conditions. Tax amendment form 2010 Your indirect costs of producing the property are $200,000 or less. Tax amendment form 2010 You use the cash method of accounting and do not account for inventories. Tax amendment form 2010 Example 1. Tax amendment form 2010 You rent construction equipment to build a storage facility. Tax amendment form 2010 If you are subject to the uniform capitalization rules, you must capitalize as part of the cost of the building the rent you paid for the equipment. Tax amendment form 2010 You recover your cost by claiming a deduction for depreciation on the building. Tax amendment form 2010 Example 2. Tax amendment form 2010 You rent space in a facility to conduct your business of manufacturing tools. Tax amendment form 2010 If you are subject to the uniform capitalization rules, you must include the rent you paid to occupy the facility in the cost of the tools you produce. Tax amendment form 2010 More information. Tax amendment form 2010   For more information on these rules, see Uniform Capitalization Rules in Publication 538 and the regulations under Internal Revenue Code section 263A. Tax amendment form 2010 Prev  Up  Next   Home   More Online Publications