File your Taxes for Free!
  • Get your maximum refund*
  • 100% accurate calculations guaranteed*

TurboTax Federal Free Edition - File Taxes Online

Don't let filing your taxes get you down! We'll help make it as easy as possible. With e-file and direct deposit, there's no faster way to get your refund!

Approved TurboTax Affiliate Site. TurboTax and TurboTax Online, among others, are registered trademarks and/or service marks of Intuit Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.


© 2012 - 2018 All rights reserved.

This is an Approved TurboTax Affiliate site. TurboTax and TurboTax Online, among other are registered trademarks and/or service marks of Intuit, Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.
When discussing "Free e-file", note that state e-file is an additional fee. E-file fees do not apply to New York state returns. Prices are subject to change without notice. E-file and get your refund faster
*If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
*Maximum Refund Guarantee - or Your Money Back: If you get a larger refund or smaller tax due from another tax preparation method, we'll refund the applicable TurboTax federal and/or state purchase price paid. TurboTax Federal Free Edition customers are entitled to payment of $14.99 and a refund of your state purchase price paid. Claims must be submitted within sixty (60) days of your TurboTax filing date and no later than 6/15/14. E-file, Audit Defense, Professional Review, Refund Transfer and technical support fees are excluded. This guarantee cannot be combined with the TurboTax Satisfaction (Easy) Guarantee. *We're so confident your return will be done right, we guarantee it. Accurate calculations guaranteed. If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
https://turbotax.intuit.com/corp/guarantees.jsp

Tax Deductions For College Students

H & R Block 1040xHow To Amend 2012 Federal Tax ReturnCan You File Your 2011 Taxes To 2013 Filing2011 Tax CalculatorE File State Taxes Free OnlineAmended 1040ezHow To File Student TaxesAmendment 1040xFile My 2012 TaxesFillable 1040ez 2012State Of Illinois Tax Filing OnlineFiling My 2012 TaxesWhere Do I Send My 2012 Tax ReturnOnline 1040xIrs Efile 2011Irs E File Extension1040ez Free FileWww Gov Freefile2010 1040 Tax Form1040ez FormsTax Form 1040 20122012 Income Tax FormFile State And Federal Taxes For FreeFile Amended 2012 Tax ReturnI Need Tax Instruction Booklet For 1040ezFree State FileFree Tax FormFile 2010 Tax Return Turbotax1040ez 2011 FormFree Tax Filing For UnemployedFiling Back Tax ReturnsHow To File Taxes For FreeFiling TaxesFederal Tax Form 20122011 Federal Tax Form 1040ez1040 EsH&r Block Tax EstimatorMilitary Hr BlockPrintable 1040ez PdfDownload 1040x

Tax Deductions For College Students

Tax deductions for college students 5. Tax deductions for college students   How To Get Tax Help Table of Contents Low Income Taxpayer Clinics Whether it's help with a tax issue, preparing your tax return or a need for a free publication or form, get the help you need the way you want it: online, use a smart phone, call or walk in to an IRS office or volunteer site near you. Tax deductions for college students Free help with your tax return. Tax deductions for college students   You can get free help preparing your return nationwide from IRS-certified volunteers. Tax deductions for college students The Volunteer Income Tax Assistance (VITA) program helps low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers. Tax deductions for college students The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. Tax deductions for college students Most VITA and TCE sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. Tax deductions for college students In addition, some VITA and TCE sites provide taxpayers the opportunity to prepare their own return with help from an IRS-certified volunteer. Tax deductions for college students To find the nearest VITA or TCE site, you can use the VITA Locator Tool on IRS. Tax deductions for college students gov, download the IRS2Go app, or call 1-800-906-9887. Tax deductions for college students   As part of the TCE program, AARP offers the Tax-Aide counseling program. Tax deductions for college students To find the nearest AARP Tax-Aide site, visit AARP's website at www. Tax deductions for college students aarp. Tax deductions for college students org/money/taxaide or call 1-888-227-7669. Tax deductions for college students For more information on these programs, go to IRS. Tax deductions for college students gov and enter “VITA” in the search box. Tax deductions for college students Internet. Tax deductions for college students    IRS. Tax deductions for college students gov and IRS2Go are ready when you are —24 hours a day, 7 days a week. Tax deductions for college students Download the free IRS2Go app from the iTunes app store or from Google Play. Tax deductions for college students Use it to check your refund status, order transcripts of your tax returns or tax account, watch the IRS YouTube channel, get IRS news as soon as it's released to the public, subscribe to filing season updates or daily tax tips, and follow the IRS Twitter news feed, @IRSnews, to get the latest federal tax news, including information about tax law changes and important IRS programs. Tax deductions for college students Check the status of your 2013 refund with the Where's My Refund? application on IRS. Tax deductions for college students gov or download the IRS2Go app and select the Refund Status option. Tax deductions for college students The IRS issues more than 9 out of 10 refunds in less than 21 days. Tax deductions for college students Using these applications, you can start checking on the status of your return within 24 hours after we receive your e-filed return or 4 weeks after you mail a paper return. Tax deductions for college students You will also be given a personalized refund date as soon as the IRS processes your tax return and approves your refund. Tax deductions for college students The IRS updates Where's My Refund? every 24 hours, usually overnight, so you only need to check once a day. Tax deductions for college students Use the Interactive Tax Assistant (ITA) to research your tax questions. Tax deductions for college students No need to wait on the phone or stand in line. Tax deductions for college students The ITA is available 24 hours a day, 7 days a week, and provides you with a variety of tax information related to general filing topics, deductions, credits, and income. Tax deductions for college students When you reach the response screen, you can print the entire interview and the final response for your records. Tax deductions for college students New subject areas are added on a regular basis. Tax deductions for college students  Answers not provided through ITA may be found in Tax Trails, one of the Tax Topics on IRS. Tax deductions for college students gov which contain general individual and business tax information or by searching the IRS Tax Map, which includes an international subject index. Tax deductions for college students You can use the IRS Tax Map, to search publications and instructions by topic or keyword. Tax deductions for college students The IRS Tax Map integrates forms and publications into one research tool and provides single-point access to tax law information by subject. Tax deductions for college students When the user searches the IRS Tax Map, they will be provided with links to related content in existing IRS publications, forms and instructions, questions and answers, and Tax Topics. Tax deductions for college students Coming this filing season, you can immediately view and print for free all 5 types of individual federal tax transcripts (tax returns, tax account, record of account, wage and income statement, and certification of non-filing) using Get Transcript. Tax deductions for college students You can also ask the IRS to mail a return or an account transcript to you. Tax deductions for college students Only the mail option is available by choosing the Tax Records option on the IRS2Go app by selecting Mail Transcript on IRS. Tax deductions for college students gov or by calling 1-800-908-9946. Tax deductions for college students Tax return and tax account transcripts are generally available for the current year and the past three years. Tax deductions for college students Determine if you are eligible for the EITC and estimate the amount of the credit with the Earned Income Tax Credit (EITC) Assistant. Tax deductions for college students Visit Understanding Your IRS Notice or Letter to get answers to questions about a notice or letter you received from the IRS. Tax deductions for college students If you received the First Time Homebuyer Credit, you can use the First Time Homebuyer Credit Account Look-up tool for information on your repayments and account balance. Tax deductions for college students Check the status of your amended return using Where's My Amended Return? Go to IRS. Tax deductions for college students gov and enter Where's My Amended Return? in the search box. Tax deductions for college students You can generally expect your amended return to be processed up to 12 weeks from the date we receive it. Tax deductions for college students It can take up to 3 weeks from the date you mailed it to show up in our system. Tax deductions for college students Make a payment using one of several safe and convenient electronic payment options available on IRS. Tax deductions for college students gov. Tax deductions for college students Select the Payment tab on the front page of IRS. Tax deductions for college students gov for more information. Tax deductions for college students Determine if you are eligible and apply for an online payment agreement, if you owe more tax than you can pay today. Tax deductions for college students Figure your income tax withholding with the IRS Withholding Calculator on IRS. Tax deductions for college students gov. Tax deductions for college students Use it if you've had too much or too little withheld, your personal situation has changed, you're starting a new job or you just want to see if you're having the right amount withheld. Tax deductions for college students Determine if you might be subject to the Alternative Minimum Tax by using the Alternative Minimum Tax Assistant on IRS. Tax deductions for college students gov. Tax deductions for college students Request an Electronic Filing PIN by going to IRS. Tax deductions for college students gov and entering Electronic Filing PIN in the search box. Tax deductions for college students Download forms, instructions and publications, including accessible versions for people with disabilities. Tax deductions for college students Locate the nearest Taxpayer Assistance Center (TAC) using the Office Locator tool on IRS. Tax deductions for college students gov, or choose the Contact Us option on the IRS2Go app and search Local Offices. Tax deductions for college students An employee can answer questions about your tax account or help you set up a payment plan. Tax deductions for college students Before you visit, check the Office Locator on IRS. Tax deductions for college students gov, or Local Offices under Contact Us on IRS2Go to confirm the address, phone number, days and hours of operation, and the services provided. Tax deductions for college students If you have a special need, such as a disability, you can request an appointment. Tax deductions for college students Call the local number listed in the Office Locator, or look in the phone book under United States Government, Internal Revenue Service. Tax deductions for college students Apply for an Employer Identification Number (EIN). Tax deductions for college students Go to IRS. Tax deductions for college students gov and enter Apply for an EIN in the search box. Tax deductions for college students Read the Internal Revenue Code, regulations, or other official guidance. Tax deductions for college students Read Internal Revenue Bulletins. Tax deductions for college students Sign up to receive local and national tax news and more by email. Tax deductions for college students Just click on “subscriptions” above the search box on IRS. Tax deductions for college students gov and choose from a variety of options. Tax deductions for college students Phone. Tax deductions for college students    You can call the IRS, or you can carry it in your pocket with the IRS2Go app on your smart phone or tablet. Tax deductions for college students Download the free IRS2Go app from the iTunes app store or from Google Play. Tax deductions for college students Call to locate the nearest volunteer help site, 1-800-906-9887 or you can use the VITA Locator Tool on IRS. Tax deductions for college students gov, or download the IRS2Go app. Tax deductions for college students Low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers can get free help with their tax return from the nationwide Volunteer Income Tax Assistance (VITA) program. Tax deductions for college students The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. Tax deductions for college students Most VITA and TCE sites offer free electronic filing. Tax deductions for college students Some VITA and TCE sites provide IRS-certified volunteers who can help prepare your tax return. Tax deductions for college students Through the TCE program, AARP offers the Tax-Aide counseling program; call 1-888-227-7669 to find the nearest Tax-Aide location. Tax deductions for college students Call the automated Where's My Refund? information hotline to check the status of your 2013 refund 24 hours a day, 7 days a week at 1-800-829-1954. Tax deductions for college students If you e-file, you can start checking on the status of your return within 24 hours after the IRS receives your tax return or 4 weeks after you've mailed a paper return. Tax deductions for college students The IRS issues more than 9 out of 10 refunds in less than 21 days. Tax deductions for college students Where's My Refund? will give you a personalized refund date as soon as the IRS processes your tax return and approves your refund. Tax deductions for college students Before you call this automated hotline, have your 2013 tax return handy so you can enter your social security number, your filing status, and the exact whole dollar amount of your refund. Tax deductions for college students The IRS updates Where's My Refund? every 24 hours, usually overnight, so you only need to check once a day. Tax deductions for college students Note, the above information is for our automated hotline. Tax deductions for college students Our live phone and walk-in assistors can research the status of your refund only if it's been 21 days or more since you filed electronically or more than 6 weeks since you mailed your paper return. Tax deductions for college students Call the Amended Return Hotline, 1-866-464-2050, to check the status of your amended return. Tax deductions for college students You can generally expect your amended return to be processed up to 12 weeks from the date we receive it. Tax deductions for college students It can take up to 3 weeks from the date you mailed it to show up in our system. Tax deductions for college students Call 1-800-TAX-FORM (1-800-829-3676) to order current-year forms, instructions, publications, and prior-year forms and instructions (limited to 5 years). Tax deductions for college students You should receive your order within 10 business days. Tax deductions for college students Call TeleTax, 1-800-829-4477, to listen to pre-recorded messages covering general and business tax information. Tax deductions for college students If, between January and April 15, you still have questions about the Form 1040, 1040A, or 1040EZ (like filing requirements, dependents, credits, Schedule D, pensions and IRAs or self-employment taxes), call 1-800-829-1040. Tax deductions for college students Call using TTY/TDD equipment, 1-800-829-4059 to ask tax questions or order forms and publications. Tax deductions for college students The TTY/TDD telephone number is for people who are deaf, hard of hearing, or have a speech disability. Tax deductions for college students These individuals can also contact the IRS through relay services such as the Federal Relay Service. Tax deductions for college students Walk-in. Tax deductions for college students   You can find a selection of forms, publications and services — in-person. Tax deductions for college students Products. Tax deductions for college students You can walk in to some post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. Tax deductions for college students Some IRS offices, libraries, and city and county government offices have a collection of products available to photocopy from reproducible proofs. Tax deductions for college students Services. Tax deductions for college students You can walk in to your local TAC for face-to-face tax help. Tax deductions for college students An employee can answer questions about your tax account or help you set up a payment plan. Tax deductions for college students Before visiting, use the Office Locator tool on IRS. Tax deductions for college students gov, or choose the Contact Us option on the IRS2Go app and search Local Offices for days and hours of operation, and services provided. Tax deductions for college students Mail. Tax deductions for college students   You can send your order for forms, instructions, and publications to the address below. Tax deductions for college students You should receive a response within 10 business days after your request is received. Tax deductions for college students Internal Revenue Service 1201 N. Tax deductions for college students Mitsubishi Motorway Bloomington, IL 61705-6613    The Taxpayer Advocate Service Is Here to Help You. Tax deductions for college students The Taxpayer Advocate Service (TAS) is your voice at the IRS. Tax deductions for college students Our job is to ensure that every taxpayer is treated fairly and that you know and understand your rights. Tax deductions for college students   What can TAS do for you? We can offer you free help with IRS problems that you can't resolve on your own. Tax deductions for college students We know this process can be confusing, but the worst thing you can do is nothing at all! TAS can help if you can't resolve your tax problem and: Your problem is causing financial difficulties for you, your family, or your business. Tax deductions for college students You face (or your business is facing) an immediate threat of adverse action. Tax deductions for college students You've tried repeatedly to contact the IRS but no one has responded, or the IRS hasn't responded by the date promised. Tax deductions for college students   If you qualify for our help, you'll be assigned to one advocate who'll be with you at every turn and will do everything possible to resolve your problem. Tax deductions for college students Here's why we can help: TAS is an independent organization within the IRS. Tax deductions for college students Our advocates know how to work with the IRS. Tax deductions for college students Our services are free and tailored to meet your needs. Tax deductions for college students We have offices in every state, the District of Columbia, and Puerto Rico. Tax deductions for college students   How can you reach us? If you think TAS can help you, call your local advocate, whose number is in your local directory and at Taxpayer Advocate, or call us toll-free at 1-877-777-4778. Tax deductions for college students   How else does TAS help taxpayers?  TAS also works to resolve large-scale, systemic problems that affect many taxpayers. Tax deductions for college students If you know of one of these broad issues, please report it to us through our Systemic Advocacy Management System. Tax deductions for college students Low Income Taxpayer Clinics Low Income Taxpayer Clinics (LITCs) serve individuals whose income is below a certain level and need to resolve tax problems such as audits, appeals and tax collection disputes. Tax deductions for college students Some clinics can provide information about taxpayer rights and responsibilities in different languages for individuals who speak English as a second language. Tax deductions for college students Visit Taxpayer Advocate or see IRS Publication 4134, Low Income Taxpayer Clinic List. Tax deductions for college students Prev  Up  Next   Home   More Online Publications
Español

Travel and Maps for Sale

Buy maps and make travel plans with the U.S. Government.

The Tax Deductions For College Students

Tax deductions for college students 7. Tax deductions for college students   Depreciation, Depletion, and Amortization Table of Contents What's New for 2013 Introduction Topics - This chapter discusses: Useful Items - You may want to see: Overview of DepreciationWhat Property Can Be Depreciated? What Property Cannot Be Depreciated? When Does Depreciation Begin and End? Can You Use MACRS To Depreciate Your Property? What Is the Basis of Your Depreciable Property? How Do You Treat Repairs and Improvements? Do You Have To File Form 4562? How Do You Correct Depreciation Deductions? Section 179 Expense DeductionWhat Property Qualifies? What Property Does Not Qualify? How Much Can You Deduct? How Do You Elect the Deduction? When Must You Recapture the Deduction? Claiming the Special Depreciation AllowanceWhat is Qualified Property? How Can You Elect Not To Claim the Allowance? When Must You Recapture an Allowance Figuring Depreciation Under MACRSWhich Depreciation System (GDS or ADS) Applies? Which Property Class Applies Under GDS? What Is the Placed-in-Service Date? What Is the Basis for Depreciation? Which Recovery Period Applies? Which Convention Applies? Which Depreciation Method Applies? How Is the Depreciation Deduction Figured? How Do You Use General Asset Accounts? When Do You Recapture MACRS Depreciation? Additional Rules for Listed PropertyWhat Is Listed Property? What Is the Business-Use Requirement? Do the Passenger Automobile Limits Apply? Depletion Who Can Claim Depletion? Figuring Depletion AmortizationBusiness Start-Up Costs Reforestation Costs Section 197 Intangibles What's New for 2013 Increased section 179 expense deduction dollar limits. Tax deductions for college students  The maximum amount you can elect to deduct for most section 179 property you placed in service in 2013 is $500,000. Tax deductions for college students This limit is reduced by the amount by which the cost of the property placed in service during the tax year exceeds $2 million. Tax deductions for college students See Dollar Limits under Section 179 Expense Deduction , later. Tax deductions for college students Extension of special depreciation allowance for certain qualified property acquired after December 31, 2007. Tax deductions for college students . Tax deductions for college students  You may be able to take a 50% special depreciation allowance for certain qualified property acquired after December 31, 2007, and placed in service before January 1, 2014. Tax deductions for college students See Claiming the Special Depreciation Allowance , later. Tax deductions for college students Expiration of the 3- year recovery period for certain race horses. Tax deductions for college students  The 3-year recovery period for race horses two years old or younger will expire for such horses placed in service after December 31, 2013. Tax deductions for college students Introduction If you buy or make improvements to farm property such as machinery, equipment, livestock, or a structure with a useful life of more than a year, you generally cannot deduct its entire cost in one year. Tax deductions for college students Instead, you must spread the cost over the time you use the property and deduct part of it each year. Tax deductions for college students For most types of property, this is called depreciation. Tax deductions for college students This chapter gives information on depreciation methods that generally apply to property placed in service after 1986. Tax deductions for college students For information on depreciating pre-1987 property, see Publication 534, Depreciating Property Placed in Service Before 1987. Tax deductions for college students Topics - This chapter discusses: Overview of depreciation Section 179 expense deduction Special depreciation allowance Modified Accelerated Cost Recovery System (MACRS) Listed property Basic information on cost depletion (including timber depletion) and percentage depletion Amortization of the costs of going into business, reforestation costs, the costs of pollution control facilities, and the costs of section 197 intangibles Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 534 Depreciating Property Placed in Service Before 1987 535 Business Expenses 544 Sales and Other Dispositions of Assets 551 Basis of Assets 946 How To Depreciate Property Form (and Instructions) T (Timber), Forest Activities Schedule 3115 Application for Change in Accounting Method 4562 Depreciation and Amortization 4797 Sales of Business Property See chapter 16 for information about getting publications and forms. Tax deductions for college students It is important to keep good records for property you depreciate. Tax deductions for college students Do not file these records with your return. Tax deductions for college students Instead, you should keep them as part of the permanent records of the depreciated property. Tax deductions for college students They will help you verify the accuracy of the depreciation of assets placed in service in the current and previous tax years. Tax deductions for college students For general information on recordkeeping, see Publication 583, Starting a Business and Keeping Records. Tax deductions for college students For specific information on keeping records for section 179 property and listed property, see Publication 946, How To Depreciate Property. Tax deductions for college students Overview of Depreciation This overview discusses basic information on the following. Tax deductions for college students What property can be depreciated. Tax deductions for college students What property cannot be depreciated. Tax deductions for college students When depreciation begins and ends. Tax deductions for college students Whether MACRS can be used to figure depreciation. Tax deductions for college students What is the basis of your depreciable property. Tax deductions for college students How to treat repairs and improvements. Tax deductions for college students When you must file Form 4562. Tax deductions for college students How you can correct depreciation claimed incorrectly. Tax deductions for college students What Property Can Be Depreciated? You can depreciate most types of tangible property (except land), such as buildings, machinery, equipment, vehicles, certain livestock, and furniture. Tax deductions for college students You can also depreciate certain intangible property, such as copyrights, patents, and computer software. Tax deductions for college students To be depreciable, the property must meet all the following requirements. Tax deductions for college students It must be property you own. Tax deductions for college students It must be used in your business or income-producing activity. Tax deductions for college students It must have a determinable useful life. Tax deductions for college students It must have a useful life that extends substantially beyond the year you place it in service. Tax deductions for college students Property You Own To claim depreciation, you usually must be the owner of the property. Tax deductions for college students You are considered as owning property even if it is subject to a debt. Tax deductions for college students Leased property. Tax deductions for college students   You can depreciate leased property only if you retain the incidents of ownership in the property. Tax deductions for college students This means you bear the burden of exhaustion of the capital investment in the property. Tax deductions for college students Therefore, if you lease property from someone to use in your trade or business or for the production of income, you generally cannot depreciate its cost because you do not retain the incidents of ownership. Tax deductions for college students You can, however, depreciate any capital improvements you make to the leased property. Tax deductions for college students See Additions and Improvements under Which Recovery Period Applies in chapter 4 of Publication 946. Tax deductions for college students   If you lease property to someone, you generally can depreciate its cost even if the lessee (the person leasing from you) has agreed to preserve, replace, renew, and maintain the property. Tax deductions for college students However, you cannot depreciate the cost of the property if the lease provides that the lessee is to maintain the property and return to you the same property or its equivalent in value at the expiration of the lease in as good condition and value as when leased. Tax deductions for college students Life tenant. Tax deductions for college students   Generally, if you hold business or investment property as a life tenant, you can depreciate it as if you were the absolute owner of the property. Tax deductions for college students See Certain term interests in property , later, for an exception. Tax deductions for college students Property Used in Your Business or Income-Producing Activity To claim depreciation on property, you must use it in your business or income-producing activity. Tax deductions for college students If you use property to produce income (investment use), the income must be taxable. Tax deductions for college students You cannot depreciate property that you use solely for personal activities. Tax deductions for college students However, if you use property for business or investment purposes and for personal purposes, you can deduct depreciation based only on the percentage of business or investment use. Tax deductions for college students Example 1. Tax deductions for college students   If you use your car for farm business, you can deduct depreciation based on its percentage of use in farming. Tax deductions for college students If you also use it for investment purposes, you can depreciate it based on its percentage of investment use. Tax deductions for college students Example 2. Tax deductions for college students   If you use part of your home for business, you may be able to deduct depreciation on that part based on its business use. Tax deductions for college students For more information, see Business Use of Your Home in chapter 4. Tax deductions for college students Inventory. Tax deductions for college students   You can never depreciate inventory because it is not held for use in your business. Tax deductions for college students Inventory is any property you hold primarily for sale to customers in the ordinary course of your business. Tax deductions for college students Livestock. Tax deductions for college students   Livestock purchased for draft, breeding, or dairy purposes can be depreciated only if they are not kept in an inventory account. Tax deductions for college students Livestock you raise usually has no depreciable basis because the costs of raising them are deducted and not added to their basis. Tax deductions for college students However, see Immature livestock under When Does Depreciation Begin and End , later, for a special rule. Tax deductions for college students Property Having a Determinable Useful Life To be depreciable, your property must have a determinable useful life. Tax deductions for college students This means it must be something that wears out, decays, gets used up, becomes obsolete, or loses its value from natural causes. Tax deductions for college students Irrigation systems and water wells. Tax deductions for college students   Irrigation systems and wells used in a trade or business can be depreciated if their useful life can be determined. Tax deductions for college students You can depreciate irrigation systems and wells composed of masonry, concrete, tile, metal, or wood. Tax deductions for college students In addition, you can depreciate costs for moving dirt to construct irrigation systems and water wells composed of these materials. Tax deductions for college students However, land preparation costs for center pivot irrigation systems are not depreciable. Tax deductions for college students Dams, ponds, and terraces. Tax deductions for college students   In general, you cannot depreciate earthen dams, ponds, and terraces unless the structures have a determinable useful life. Tax deductions for college students What Property Cannot Be Depreciated? Certain property cannot be depreciated, even if the requirements explained earlier are met. Tax deductions for college students This includes the following. Tax deductions for college students Land. Tax deductions for college students You can never depreciate the cost of land because land does not wear out, become obsolete, or get used up. Tax deductions for college students The cost of land generally includes the cost of clearing, grading, planting, and landscaping. Tax deductions for college students Although you cannot depreciate land, you can depreciate certain costs incurred in preparing land for business use. Tax deductions for college students See chapter 1 of Publication 946. Tax deductions for college students Property placed in service and disposed of in the same year. Tax deductions for college students Determining when property is placed in service is explained later. Tax deductions for college students Equipment used to build capital improvements. Tax deductions for college students You must add otherwise allowable depreciation on the equipment during the period of construction to the basis of your improvements. Tax deductions for college students Intangible property such as section 197 intangibles. Tax deductions for college students This property does not have a determinable useful life and generally cannot be depreciated. Tax deductions for college students However, see Amortization , later. Tax deductions for college students Special rules apply to computer software (discussed below). Tax deductions for college students Certain term interests (discussed below). Tax deductions for college students Computer software. Tax deductions for college students   Computer software is generally not a section 197 intangible even if acquired in connection with the acquisition of a business, if it meets all of the following tests. Tax deductions for college students It is readily available for purchase by the general public. Tax deductions for college students It is subject to a nonexclusive license. Tax deductions for college students It has not been substantially modified. Tax deductions for college students   If the software meets the tests above, it can be depreciated and may qualify for the section 179 expense deduction and the special depreciation allowance (if applicable), discussed later. Tax deductions for college students Certain term interests in property. Tax deductions for college students   You cannot depreciate a term interest in property created or acquired after July 27, 1989, for any period during which the remainder interest is held, directly or indirectly, by a person related to you. Tax deductions for college students This rule does not apply to the holder of a term interest in property acquired by gift, bequest, or inheritance. Tax deductions for college students For more information, see chapter 1 of Publication 946. Tax deductions for college students When Does Depreciation Begin and End? You begin to depreciate your property when you place it in service for use in your trade or business or for the production of income. Tax deductions for college students You stop depreciating property either when you have fully recovered your cost or other basis or when you retire it from service, whichever happens first. Tax deductions for college students Placed in Service Property is placed in service when it is ready and available for a specific use, whether in a business activity, an income-producing activity, a tax-exempt activity, or a personal activity. Tax deductions for college students Even if you are not using the property, it is in service when it is ready and available for its specific use. Tax deductions for college students Example. Tax deductions for college students You bought a planter for use in your farm business. Tax deductions for college students The planter was delivered in December 2012 after harvest was over. Tax deductions for college students You begin to depreciate the planter for 2012 because it was ready and available for its specific use in 2012, even though it will not be used until the spring of 2013. Tax deductions for college students If your planter comes unassembled in December 2012 and is put together in February 2013, it is not placed in service until 2013. Tax deductions for college students You begin to depreciate it in 2013. Tax deductions for college students If your planter was delivered and assembled in February 2013 but not used until April 2013, it is placed in service in February 2013, because this is when the planter was ready for its specified use. Tax deductions for college students You begin to depreciate it in 2013. Tax deductions for college students Fruit or nut trees and vines. Tax deductions for college students   If you acquire an orchard, grove, or vineyard before the trees or vines have reached the income-producing stage, and they have a preproductive period of more than 2 years, you must capitalize the preproductive-period costs under the uniform capitalization rules (unless you elect not to use these rules). Tax deductions for college students See chapter 6 for information about the uniform capitalization rules. Tax deductions for college students Your depreciation begins when the trees and vines reach the income-producing stage (that is, when they bear fruit, nuts, or grapes in quantities sufficient to commercially warrant harvesting). Tax deductions for college students Immature livestock. Tax deductions for college students   Depreciation for livestock begins when the livestock reaches the age of maturity. Tax deductions for college students If you bought immature livestock for drafting purposes, depreciation begins when they can be worked. Tax deductions for college students If you bought immature livestock for dairy purposes, depreciation begins when they can be milked. Tax deductions for college students If you bought immature livestock for breeding purposes, depreciation begins when they can be bred. Tax deductions for college students Your basis for depreciation is your initial cost for the immature livestock. Tax deductions for college students Idle Property Continue to claim a deduction for depreciation on property used in your business or for the production of income even if it is temporarily idle. Tax deductions for college students For example, if you stop using a machine because there is a temporary lack of a market for a product made with that machine, continue to deduct depreciation on the machine. Tax deductions for college students Cost or Other Basis Fully Recovered You stop depreciating property when you have fully recovered your cost or other basis. Tax deductions for college students This happens when your section 179 and allowed or allowable depreciation deductions equal your cost or investment in the property. Tax deductions for college students Retired From Service You stop depreciating property when you retire it from service, even if you have not fully recovered its cost or other basis. Tax deductions for college students You retire property from service when you permanently withdraw it from use in a trade or business or from use in the production of income because of any of the following events. Tax deductions for college students You sell or exchange the property. Tax deductions for college students You convert the property to personal use. Tax deductions for college students You abandon the property. Tax deductions for college students You transfer the property to a supplies or scrap account. Tax deductions for college students The property is destroyed. Tax deductions for college students For information on abandonment of property, see chapter 8. Tax deductions for college students For information on destroyed property, see chapter 11 and Publication 547, Casualties, Disasters, and Thefts. Tax deductions for college students Can You Use MACRS To Depreciate Your Property? You must use the Modified Accelerated Cost Recovery System (MACRS) to depreciate most business and investment property placed in service after 1986. Tax deductions for college students MACRS is explained later under Figuring Depreciation Under MACRS . Tax deductions for college students You cannot use MACRS to depreciate the following property. Tax deductions for college students Property you placed in service before 1987. Tax deductions for college students Use the methods discussed in Publication 534. Tax deductions for college students Certain property owned or used in 1986. Tax deductions for college students See chapter 1 of Publication 946. Tax deductions for college students Intangible property. Tax deductions for college students Films, video tapes, and recordings. Tax deductions for college students Certain corporate or partnership property acquired in a nontaxable transfer. Tax deductions for college students Property you elected to exclude from MACRS. Tax deductions for college students For more information, see chapter 1 of Publication 946. Tax deductions for college students What Is the Basis of Your Depreciable Property? To figure your depreciation deduction, you must determine the basis of your property. Tax deductions for college students To determine basis, you need to know the cost or other basis of your property. Tax deductions for college students Cost or other basis. Tax deductions for college students   The basis of property you buy is usually its cost plus amounts you paid for items such as sales tax, freight charges, and installation and testing fees. Tax deductions for college students The cost includes the amount you pay in cash, debt obligations, other property, or services. Tax deductions for college students   There are times when you cannot use cost as basis. Tax deductions for college students In these situations, the fair market value (FMV) or the adjusted basis of the property may be used. Tax deductions for college students Adjusted basis. Tax deductions for college students   To find your property's basis for depreciation, you may have to make certain adjustments (increases and decreases) to the basis of the property for events occurring between the time you acquired the property and the time you placed it in service. Tax deductions for college students Basis adjustment for depreciation allowed or allowable. Tax deductions for college students   After you place your property in service, you must reduce the basis of the property by the depreciation allowed or allowable, whichever is greater. Tax deductions for college students Depreciation allowed is depreciation you actually deducted (from which you received a tax benefit). Tax deductions for college students Depreciation allowable is depreciation you are entitled to deduct. Tax deductions for college students   If you do not claim depreciation you are entitled to deduct, you must still reduce the basis of the property by the full amount of depreciation allowable. Tax deductions for college students   If you deduct more depreciation than you should, you must reduce your basis by any amount deducted from which you received a tax benefit (the depreciation allowed). Tax deductions for college students   For more information, see chapter 6. Tax deductions for college students How Do You Treat Repairs and Improvements? You generally deduct the cost of repairing business property in the same way as any other business expense. Tax deductions for college students However, if a repair or replacement increases the value of your property, makes it more useful, or lengthens its life, you must treat it as an improvement and depreciate it. Tax deductions for college students Treat improvements as separate depreciable property. Tax deductions for college students See chapter 1 of Publication 946 for more information. Tax deductions for college students Example. Tax deductions for college students You repair a small section on a corner of the roof of a barn that you rent to others. Tax deductions for college students You deduct the cost of the repair as a business expense. Tax deductions for college students However, if you replace the entire roof, the new roof is considered to be an improvement because it increases the value and lengthens the life for the property. Tax deductions for college students You depreciate the cost of the new roof. Tax deductions for college students Improvements to rented property. Tax deductions for college students   You can depreciate permanent improvements you make to business property you rent from someone else. Tax deductions for college students Do You Have To File Form 4562? Use Form 4562 to claim your deduction for depreciation and amortization. Tax deductions for college students You must complete and attach Form 4562 to your tax return if you are claiming any of the following. Tax deductions for college students A section 179 expense deduction for the current year or a section 179 carryover from a prior year. Tax deductions for college students Depreciation for property placed in service during the current year. Tax deductions for college students Depreciation on any vehicle or other listed property, regardless of when it was placed in service. Tax deductions for college students Amortization of costs that began in the current year. Tax deductions for college students For more information, see the Instructions for Form 4562. Tax deductions for college students How Do You Correct Depreciation Deductions? If you deducted an incorrect amount of depreciation in any year, you may be able to make a correction by filing an amended return for that year. Tax deductions for college students You can file an amended return to correct the amount of depreciation claimed for any property in any of the following situations. Tax deductions for college students You claimed the incorrect amount because of a mathematical error made in any year. Tax deductions for college students You claimed the incorrect amount because of a posting error made in any year, for example, omitting an asset from the depreciation schedule. Tax deductions for college students You have not adopted a method of accounting for the property placed in service by you in tax years ending after December 29, 2003. Tax deductions for college students You claimed the incorrect amount on property placed in service by you in tax years ending before December 30, 2003. Tax deductions for college students Note. Tax deductions for college students You have adopted a method of accounting if you used the same incorrect method of depreciation for two or more consecutively filed returns. Tax deductions for college students If you are not allowed to make the correction on an amended return, you may be able to change your accounting method to claim the correct amount of depreciation. Tax deductions for college students See the Instructions for Form 3115. Tax deductions for college students Section 179 Expense Deduction You can elect to recover all or part of the cost of certain qualifying property, up to a limit, by deducting it in the year you place the property in service. Tax deductions for college students This is the section 179 expense deduction. Tax deductions for college students You can elect the section 179 expense deduction instead of recovering the cost by taking depreciation deductions. Tax deductions for college students This part of the chapter explains the rules for the section 179 expense deduction. Tax deductions for college students It explains what property qualifies for the deduction, what property does not qualify for the deduction, the limits that may apply, how to elect the deduction, and when you may have to recapture the deduction. Tax deductions for college students For more information, see chapter 2 of Publication 946. Tax deductions for college students What Property Qualifies? To qualify for the section 179 expense deduction, your property must meet all the following requirements. Tax deductions for college students It must be eligible property. Tax deductions for college students It must be acquired for business use. Tax deductions for college students It must have been acquired by purchase. Tax deductions for college students Eligible Property To qualify for the section 179 expense deduction, your property must be one of the following types of depreciable property. Tax deductions for college students Tangible personal property. Tax deductions for college students Qualified real property. Tax deductions for college students (Special rules apply to qualified real property that you elect to treat as qualified section 179 real property. Tax deductions for college students For more information, see chapter 2 of Publication 946 and section 179(f) of the Internal Revenue Code. Tax deductions for college students ) Other tangible property (except buildings and their structural components) used as: An integral part of manufacturing, production, or extraction or of furnishing transportation, communications, electricity, gas, water, or sewage disposal services; A research facility used in connection with any of the activities in (a) above; or A facility used in connection with any of the activities in (a) for the bulk storage of fungible commodities. Tax deductions for college students Single purpose agricultural (livestock) or horticultural structures. Tax deductions for college students Storage facilities (except buildings and their structural components) used in connection with distributing petroleum or any primary product of petroleum. Tax deductions for college students Off-the-shelf computer software that is readily available for purchase by the general public, is subject to a nonexclusive lease, and has not been substantially modified. Tax deductions for college students Tangible personal property. Tax deductions for college students   Tangible personal property is any tangible property that is not real property. Tax deductions for college students It includes the following property. Tax deductions for college students Machinery and equipment. Tax deductions for college students Property contained in or attached to a building (other than structural components), such as milk tanks, automatic feeders, barn cleaners, and office equipment. Tax deductions for college students Gasoline storage tanks and pumps at retail service stations. Tax deductions for college students Livestock, including horses, cattle, hogs, sheep, goats, and mink and other fur-bearing animals. Tax deductions for college students Facility used for the bulk storage of fungible commodities. Tax deductions for college students   A facility used for the bulk storage of fungible commodities is qualifying property for purposes of the section 179 expense deduction if it is used in connection with any of the activities listed earlier in item (3)(a). Tax deductions for college students Bulk storage means the storage of a commodity in a large mass before it is used. Tax deductions for college students Grain bins. Tax deductions for college students   A grain bin is an example of a storage facility that is qualifying section 179 property. Tax deductions for college students It is a facility used in connection with the production of grain or livestock for the bulk storage of fungible commodities. Tax deductions for college students Single purpose agricultural or horticultural structures. Tax deductions for college students   A single purpose agricultural (livestock) or horticultural structure is qualifying property for purposes of the section 179 expense deduction. Tax deductions for college students Agricultural structure. Tax deductions for college students   A single purpose agricultural (livestock) structure is any building or enclosure specifically designed, constructed, and used for both the following reasons. Tax deductions for college students To house, raise, and feed a particular type of livestock and its produce. Tax deductions for college students To house the equipment, including any replacements, needed to house, raise, or feed the livestock. Tax deductions for college students For this purpose, livestock includes poultry. Tax deductions for college students   Single purpose structures are qualifying property if used, for example, to breed chickens or hogs, produce milk from dairy cattle, or produce feeder cattle or pigs, broiler chickens, or eggs. Tax deductions for college students The facility must include, as an integral part of the structure or enclosure, equipment necessary to house, raise, and feed the livestock. Tax deductions for college students Horticultural structure. Tax deductions for college students   A single purpose horticultural structure is either of the following. Tax deductions for college students A greenhouse specifically designed, constructed, and used for the commercial production of plants. Tax deductions for college students A structure specifically designed, constructed, and used for the commercial production of mushrooms. Tax deductions for college students Use of structure. Tax deductions for college students   A structure must be used only for the purpose that qualified it. Tax deductions for college students For example, a hog barn will not be qualifying property if you use it to house poultry. Tax deductions for college students Similarly, using part of your greenhouse to sell plants will make the greenhouse nonqualifying property. Tax deductions for college students   If a structure includes work space, the work space can be used only for the following activities. Tax deductions for college students Stocking, caring for, or collecting livestock or plants or their produce. Tax deductions for college students Maintaining the enclosure or structure. Tax deductions for college students Maintaining or replacing the equipment or stock enclosed or housed in the structure. Tax deductions for college students Property Acquired by Purchase To qualify for the section 179 expense deduction, your property must have been acquired by purchase. Tax deductions for college students For example, property acquired by gift or inheritance does not qualify. Tax deductions for college students Property acquired from a related person (that is, your spouse, ancestors, or lineal descendants) is not considered acquired by purchase. Tax deductions for college students Example. Tax deductions for college students Ken is a farmer. Tax deductions for college students He purchased two tractors, one from his brother and one from his father. Tax deductions for college students He placed both tractors in service in the same year he bought them. Tax deductions for college students The tractor purchased from his father does not qualify for the section 179 expense deduction because he is a related person (as defined above). Tax deductions for college students The tractor purchased from his brother does qualify for the deduction because Ken is not a related person (as defined above). Tax deductions for college students What Property Does Not Qualify? Land and improvements. Tax deductions for college students   Land and land improvements, do not qualify as section 179 property. Tax deductions for college students Land improvements include nonagricultural fences, swimming pools, paved parking areas, wharves, docks, bridges, and fences. Tax deductions for college students However, agricultural fences do qualify as section 179 property. Tax deductions for college students Similarly, field drainage tile also qualifies as section 179 property. Tax deductions for college students Excepted property. Tax deductions for college students   Even if the requirements explained in the preceding discussions are met, farmers cannot elect the section 179 expense deduction for the following property. Tax deductions for college students Certain property you lease to others (if you are a noncorporate lessor). Tax deductions for college students Certain property used predominantly to furnish lodging or in connection with the furnishing of lodging. Tax deductions for college students Property used by a tax-exempt organization (other than a tax-exempt farmers' cooperative) unless the property is used mainly in a taxable unrelated trade or business. Tax deductions for college students Property used by governmental units or foreign persons or entities (except property used under a lease with a term of less than 6 months). Tax deductions for college students How Much Can You Deduct? Your section 179 expense deduction is generally the cost of the qualifying property. Tax deductions for college students However, the total amount you can elect to deduct under section 179 is subject to a dollar limit and a business income limit. Tax deductions for college students These limits apply to each taxpayer, not to each business. Tax deductions for college students However, see Married individuals under Dollar Limits , later. Tax deductions for college students See also the special rules for applying the limits for partnerships and S corporations under Partnerships and S Corporations , later. Tax deductions for college students If you deduct only part of the cost of qualifying property as a section 179 expense deduction, you can generally depreciate the cost you do not deduct. Tax deductions for college students Use Part I of Form 4562 to figure your section 179 expense deduction. Tax deductions for college students Partial business use. Tax deductions for college students   When you use property for business and nonbusiness purposes, you can elect the section 179 expense deduction only if you use it more than 50% for business in the year you place it in service. Tax deductions for college students If you used the property more than 50% for business, multiply the cost of the property by the percentage of business use. Tax deductions for college students Use the resulting business cost to figure your section 179 expense deduction. Tax deductions for college students Trade-in of other property. Tax deductions for college students   If you buy qualifying property with cash and a trade-in, its cost for purposes of the section 179 expense deduction includes only the cash you paid. Tax deductions for college students For example, if you buy (for cash and a trade-in) a new tractor for use in your business, your cost for the section 179 expense deduction is the cash you paid. Tax deductions for college students It does not include the adjusted basis of the old tractor you trade for the new tractor. Tax deductions for college students Example. Tax deductions for college students J-Bar Farms traded two cultivators having a total adjusted basis of $6,800 for a new cultivator costing $13,200. Tax deductions for college students They received an $8,000 trade-in allowance for the old cultivators and paid $5,200 cash for the new cultivator. Tax deductions for college students J-Bar also traded a used pickup truck with an adjusted basis of $8,000 for a new pickup truck costing $35,000. Tax deductions for college students They received a $5,000 trade-in allowance and paid $30,000 cash for the new pickup truck. Tax deductions for college students Only the cash paid by J-Bar qualifies for the section 179 expense deduction. Tax deductions for college students J-Bar's business costs that qualify for a section 179 expense deduction are $35,200 ($5,200 + $30,000). Tax deductions for college students Dollar Limits The total amount you can elect to deduct under section 179 for most property placed in service in 2013 is $500,000. Tax deductions for college students If you acquire and place in service more than one item of qualifying property during the year, you can allocate the section 179 expense deduction among the items in any way, as long as the total deduction is not more than $500,000. Tax deductions for college students Qualified real property that you elect to treat as section 179 property is limited to $250,000 of the maximum section 179 deduction of $500,000 for 2013. Tax deductions for college students You do not have to claim the full $500,000. Tax deductions for college students For specific information on the section 179 dollar limits, see chapter 2 of Publication 946. Tax deductions for college students Reduced dollar limit for cost exceeding $2 million. Tax deductions for college students   If the cost of your qualifying section 179 property placed in service in 2013 is over $2 million, you must reduce the dollar limit (but not below zero) by the amount of cost over $2 million. Tax deductions for college students If the cost of your section 179 property placed in service during 2013 is $2,500,000 or more, you cannot take a section 179 expense deduction and you cannot carry over the cost that is more than $2,500,000. Tax deductions for college students Example. Tax deductions for college students This year, James Smith placed in service machinery costing $2,050,000. Tax deductions for college students Because this cost is $50,000 more than $2 million, he must reduce his dollar limit to $450,000 ($500,000 − $50,000). Tax deductions for college students Limits for sport utility vehicles. Tax deductions for college students   The total amount you can elect to deduct for certain sport utility vehicles and certain other vehicles placed in service in 2013 is $25,000. Tax deductions for college students This rule applies to any 4-wheeled vehicle primarily designed or used to carry passengers over public streets, roads, and highways that is rated at more than 6,000 pounds gross vehicle weight and not more than 14,000 pounds gross vehicle weight. Tax deductions for college students   For more information, see chapter 2 of Publication 946. Tax deductions for college students Limits for passenger automobiles. Tax deductions for college students   For a passenger automobile that is placed in service in 2013, the total section 179 and depreciation deduction is limited. Tax deductions for college students See Do the Passenger Automobile Limits Apply , later. Tax deductions for college students Married individuals. Tax deductions for college students   If you are married, how you figure your section 179 expense deduction depends on whether you file jointly or separately. Tax deductions for college students If you file a joint return, you and your spouse are treated as one taxpayer in determining any reduction to the dollar limit, regardless of which of you purchased the property or placed it in service. Tax deductions for college students If you and your spouse file separate returns, you are treated as one taxpayer for the dollar limit, including the reduction for costs over $2 million. Tax deductions for college students You must allocate the dollar limit (after any reduction) equally between you, unless you both elect a different allocation. Tax deductions for college students If the percentages elected by each of you do not total 100%, 50% will be allocated to each of you. Tax deductions for college students Joint return after separate returns. Tax deductions for college students   If you and your spouse elect to amend your separate returns by filing a joint return after the due date for filing your return, the dollar limit on the joint return is the lesser of the following amounts. Tax deductions for college students The dollar limit (after reduction for any cost of section 179 property over $2 million). Tax deductions for college students The total cost of section 179 property you and your spouse elected to expense on your separate returns. Tax deductions for college students Business Income Limit The total cost you can deduct each year after you apply the dollar limit is limited to the taxable income from the active conduct of any trade or business during the year. Tax deductions for college students Generally, you are considered to actively conduct a trade or business if you meaningfully participate in the management or operations of the trade or business. Tax deductions for college students Any cost not deductible in one year under section 179 because of this limit can be carried to the next year. Tax deductions for college students See Carryover of disallowed deduction , later. Tax deductions for college students Taxable income. Tax deductions for college students   In general, figure taxable income for this purpose by totaling the net income and losses from all trades and businesses you actively conducted during the year. Tax deductions for college students In addition to net income or loss from a sole proprietorship, partnership, or S corporation, net income or loss derived from a trade or business also includes the following items. Tax deductions for college students Section 1231 gains (or losses) as discussed in chapter 9. Tax deductions for college students Interest from working capital of your trade or business. Tax deductions for college students Wages, salaries, tips, or other pay earned by you (or your spouse if you file a joint return) as an employee of any employer. Tax deductions for college students   In addition, figure taxable income without regard to any of the following. Tax deductions for college students The section 179 expense deduction. Tax deductions for college students The self-employment tax deduction. Tax deductions for college students Any net operating loss carryback or carryforward. Tax deductions for college students Any unreimbursed employee business expenses. Tax deductions for college students Two different taxable income limits. Tax deductions for college students   In addition to the business income limit for your section 179 expense deduction, you may have a taxable income limit for some other deduction (for example, charitable contributions). Tax deductions for college students You may have to figure the limit for this other deduction taking into account the section 179 expense deduction. Tax deductions for college students If so, complete the following steps. Tax deductions for college students Step Action 1 Figure taxable income without the section 179 expense deduction or the other deduction. Tax deductions for college students 2 Figure a hypothetical section 179 expense deduction using the taxable income figured in Step 1. Tax deductions for college students 3 Subtract the hypothetical section 179 expense deduction figured in Step 2 from the taxable income figured in Step 1. Tax deductions for college students 4 Figure a hypothetical amount for the other deduction using the amount figured in Step 3 as taxable income. Tax deductions for college students 5 Subtract the hypothetical other deduction figured in Step 4 from the taxable income figured in  Step 1. Tax deductions for college students 6 Figure your actual section 179 expense deduction using the taxable income figured in Step 5. Tax deductions for college students 7 Subtract your actual section 179 expense deduction figured in Step 6 from the taxable income figured in Step 1. Tax deductions for college students 8 Figure your actual other deduction using the taxable income figured in Step 7. Tax deductions for college students Example. Tax deductions for college students On February 1, 2013, the XYZ farm corporation purchased and placed in service qualifying section 179 property that cost $500,000. Tax deductions for college students It elects to expense the entire $500,000 cost under section 179. Tax deductions for college students In June, the corporation gave a charitable contribution of $10,000. Tax deductions for college students A corporation's limit on charitable contributions is figured after subtracting any section 179 expense deduction. Tax deductions for college students The business income limit for the section 179 expense deduction is figured after subtracting any allowable charitable contributions. Tax deductions for college students XYZ's taxable income figured without the section 179 expense deduction or the deduction for charitable contributions is $520,000. Tax deductions for college students XYZ figures its section 179 expense deduction and its deduction for charitable contributions as follows. Tax deductions for college students Step 1. Tax deductions for college students Taxable income figured without either deduction is $520,000. Tax deductions for college students Step 2. Tax deductions for college students Using $520,000 as taxable income, XYZ's hypothetical section 179 expense deduction is $500,000. Tax deductions for college students Step 3. Tax deductions for college students $20,000 ($520,000 − $500,000). Tax deductions for college students Step 4. Tax deductions for college students Using $20,000 (from Step 3) as taxable income, XYZ's hypothetical charitable contribution (limited to 10% of taxable income) is $2,000. Tax deductions for college students Step 5. Tax deductions for college students $518,000 ($520,000 − $2,000). Tax deductions for college students Step 6. Tax deductions for college students Using $518,000 (from Step 5) as taxable income, XYZ figures the actual section 179 expense deduction. Tax deductions for college students Because the taxable income is at least $500,000, XYZ can take a $500,000 section 179 expense deduction. Tax deductions for college students Step 7. Tax deductions for college students $20,000 ($520,000 − $500,000). Tax deductions for college students Step 8. Tax deductions for college students Using $20,000 (from Step 7) as taxable income, XYZ's actual charitable contribution (limited to 10% of taxable income) is $2,000. Tax deductions for college students Carryover of disallowed deduction. Tax deductions for college students   You can carry over for an unlimited number of years the cost of any section 179 property you elected to expense but were unable to because of the business income limit. Tax deductions for college students   The amount you carry over is used in determining your section 179 expense deduction in the next year. Tax deductions for college students However, it is subject to the limits in that year. Tax deductions for college students If you place more than one property in service in a year, you can select the properties for which all or a part of the cost will be carried forward. Tax deductions for college students Your selections must be shown in your books and records. Tax deductions for college students Example. Tax deductions for college students Last year, Joyce Jones placed in service a machine that cost $8,000 and elected to deduct all $8,000 under section 179. Tax deductions for college students The taxable income from her business (determined without regard to both a section 179 expense deduction for the cost of the machine and the self-employment tax deduction) was $6,000. Tax deductions for college students Her section 179 expense deduction was limited to $6,000. Tax deductions for college students The $2,000 cost that was not allowed as a section 179 expense deduction (because of the business income limit) is carried to this year. Tax deductions for college students This year, Joyce placed another machine in service that cost $9,000. Tax deductions for college students Her taxable income from business (determined without regard to both a section 179 expense deduction for the cost of the machine and the self-employment tax deduction) is $10,000. Tax deductions for college students Joyce can deduct the full cost of the machine ($9,000) but only $1,000 of the carryover from last year because of the business income limit. Tax deductions for college students She can carry over the balance of $1,000 to next year. Tax deductions for college students Partnerships and S Corporations The section 179 expense deduction limits apply both to the partnership or S corporation and to each partner or shareholder. Tax deductions for college students The partnership or S corporation determines its section 179 expense deduction subject to the limits. Tax deductions for college students It then allocates the deduction among its partners or shareholders. Tax deductions for college students If you are a partner in a partnership or shareholder of an S corporation, you add the amount allocated from the partnership or S corporation to any section 179 costs not related to the partnership or S corporation and then apply the dollar limit to this total. Tax deductions for college students To determine any reduction in the dollar limit for costs over $560,000, you do not include any of the cost of section 179 property placed in service by the partnership or S corporation. Tax deductions for college students After you apply the dollar limit, you apply the business income limit to any remaining section 179 costs. Tax deductions for college students For more information, see chapter 2 of Publication 946. Tax deductions for college students Example. Tax deductions for college students In 2013, Partnership P placed in service section 179 property with a total cost of $2,160,000. Tax deductions for college students P must reduce its dollar limit by $160,000 ($2,160,000 − $2,000,000). Tax deductions for college students Its maximum section 179 expense deduction is $340,000 ($500,000 − $160,000), and it elects to expense that amount. Tax deductions for college students Because P's taxable income from the active conduct of all its trades or businesses for the year was $400,000, it can deduct the full $340,000. Tax deductions for college students P allocates $100,000 of its section 179 expense deduction and $110,000 of its taxable income to John, one of its partners. Tax deductions for college students John also conducts a business as a sole proprietor and in 2013, placed in service in that business, section 179 property costing $28,000. Tax deductions for college students John's taxable income from that business was $10,000. Tax deductions for college students In addition to the $100,000 allocated from P, he elects to expense the $28,000 of his sole proprietorship's section 179 costs. Tax deductions for college students However, John's deduction is limited to his business taxable income of $120,000 ($110,000 from P plus $10,000 from his sole proprietorship). Tax deductions for college students He carries over $8,000 ($128,000 − $120,000) of the elected section 179 costs to 2014. Tax deductions for college students How Do You Elect the Deduction? You elect to take the section 179 expense deduction by completing Part I of Form 4562. Tax deductions for college students If you elect the deduction for listed property, complete Part V of  Form 4562 before completing Part I. Tax deductions for college students   File Form 4562 with either of the following: Your original tax return (whether or not you filed it timely), or An amended return filed within the time prescribed by law. Tax deductions for college students An election made on an amended return must specify the item of section 179 property to which the election applies and the part of the cost of each such item to be taken into account. Tax deductions for college students The amended return must also include any resulting adjustments to taxable income. Tax deductions for college students Revoking an election. Tax deductions for college students   An election (or any specification made in the election) to take a section 179 expense deduction for 2013 can be revoked without IRS approval by filing an amended return. Tax deductions for college students The amended return must be filed within the time prescribed by law. Tax deductions for college students The amended return must also include any resulting adjustments to taxable income (for example, allowable depreciation in that tax year for the item of section 179 property for which the election pertains. Tax deductions for college students ) Once made, the revocation is irrevocable. Tax deductions for college students When Must You Recapture the Deduction? You may have to recapture the section 179 expense deduction if, in any year during the property's recovery period, the percentage of business use drops to 50% or less. Tax deductions for college students In the year the business use drops to 50% or less, you include the recapture amount as ordinary income. Tax deductions for college students You also increase the basis of the property by the recapture amount. Tax deductions for college students Recovery periods for property are discussed later. Tax deductions for college students If you sell, exchange, or otherwise dispose of the property, do not figure the recapture amount under the rules explained in this discussion. Tax deductions for college students Instead, use the rules for recapturing depreciation explained in  chapter 9 under Section 1245 Property. Tax deductions for college students   If the property is listed property, do not figure the recapture amount under the rules explained in this discussion when the percentage of business use drops to 50% or less. Tax deductions for college students Instead, use the rules for recapturing depreciation explained in chapter 5 of Publication 946 under Recapture of Excess Depreciation. Tax deductions for college students Figuring the recapture amount. Tax deductions for college students   To figure the amount to recapture, take the following steps. Tax deductions for college students Figure the allowable depreciation for the section 179 expense deduction you claimed. Tax deductions for college students Begin with the year you placed the property in service and include the year of recapture. Tax deductions for college students Subtract the depreciation figured in (1) from the section 179 expense deduction you actually claimed. Tax deductions for college students The result is the amount you must recapture. Tax deductions for college students Example. Tax deductions for college students In January 2011, Paul Lamb, a calendar year taxpayer, bought and placed in service section 179 property costing $10,000. Tax deductions for college students The property is not listed property. Tax deductions for college students He elected a $5,000 section 179 expense deduction for the property and also elected not to claim a special depreciation allowance. Tax deductions for college students He used the property only for business in 2011 and 2012. Tax deductions for college students During 2013, he used the property 40% for business and 60% for personal use. Tax deductions for college students He figures his recapture amount as follows. Tax deductions for college students Section 179 expense deduction claimed (2011) $5,000 Minus: Allowable depreciation (instead of section 179 expense deduction):   2011 $1,250   2012 1,875   2013 ($1,250 × 40% (business)) 500 3,625 2013 — Recapture amount $1,375     Paul must include $1,375 in income for 2013. Tax deductions for college students Where to report recapture. Tax deductions for college students   Report any recapture of the section 179 expense deduction as ordinary income in Part IV of Form 4797 and include it in income on Schedule F (Form 1040). Tax deductions for college students Recapture for qualified section 179 GO Zone property. Tax deductions for college students   If any qualified section 179 GO Zone property ceases to be used in the GO Zone in a later year, you must recapture the benefit of the increased section 179 expense deduction as “other income. Tax deductions for college students ” Claiming the Special Depreciation Allowance For qualified property (defined below) placed in service in 2013, you can take an additional 50% special depreciation allowance. Tax deductions for college students The allowance is an additional deduction you can take after any section 179 expense deduction and before you figure regular depreciation under MACRS. Tax deductions for college students Figure the special depreciation allowance by multiplying the depreciable basis of the qualified property by 50%. Tax deductions for college students What is Qualified Property? For farmers, qualified property generally is certain qualified property acquired after December 31, 2007, and placed in service before January 1, 2014. Tax deductions for college students Certain qualified property acquired after December 31, 2007, and placed in service before January 1, 2014. Tax deductions for college students   Certain qualified property (defined below) acquired after December 31, 2007, and before January 1, 2014, is eligible for a 50% special depreciation allowance. Tax deductions for college students   Qualified property includes the following: Tangible property depreciated under the Modified Accelerated Cost Recovery System (MACRS) with a recovery period of 20 years or less. Tax deductions for college students Water utility property. Tax deductions for college students Off-the-shelf computer software. Tax deductions for college students Qualified leasehold improvement property. Tax deductions for college students   Qualified property must also meet all of the following tests: You must have acquired qualified property by purchase after December 31, 2007. Tax deductions for college students If a binding contract to acquire the property existed before January 1, 2008, the property does not qualify. Tax deductions for college students Qualified property must be placed in service after December 31, 2007 and placed in service before January 1, 2014 (before January 1, 2015 for certain property with a long production period and for certain aircraft). Tax deductions for college students The original use of the property must begin with you after December 31, 2007. Tax deductions for college students For more information, see chapter 3 of Publication 946. Tax deductions for college students How Can You Elect Not To Claim the Allowance? You can elect, for any class of property, not to deduct the special depreciation allowance for all property in such class placed in service during the tax year. Tax deductions for college students To make the election, attach a statement to your return indicating the class of property for which you are making the election. Tax deductions for college students Generally, you must make the election on a timely filed tax return (including extensions) for the year in which you place the property in service. Tax deductions for college students However, if you timely filed your return for the year without making the election, you still can make the election by filing an amended return within 6 months of the due date of the original return (not including extensions). Tax deductions for college students Attach the election statement to the amended return. Tax deductions for college students On the amended return, write “Filed pursuant to section 301. Tax deductions for college students 9100-2. Tax deductions for college students ” Once made, the election may not be revoked without IRS consent. Tax deductions for college students If you elect not to have the special depreciation allowance apply, the property may be subject to an alternative minimum tax adjustment for depreciation. Tax deductions for college students When Must You Recapture an Allowance When you dispose of property for which you claimed a special depreciation allowance, any gain on the disposition is generally recaptured (included in income) as ordinary income up to the amount of the special depreciation allowance previously allowed or allowable. Tax deductions for college students For more information, see chapter 3 of Publication 946. Tax deductions for college students Figuring Depreciation Under MACRS The Modified Accelerated Cost Recovery System (MACRS) is used to recover the basis of most business and investment property placed in service after 1986. Tax deductions for college students MACRS consists of two depreciation systems, the General Depreciation System (GDS) and the Alternative Depreciation System (ADS). Tax deductions for college students Generally, these systems provide different methods and recovery periods to use in figuring depreciation deductions. Tax deductions for college students To be sure you can use MACRS to figure depreciation for your property, see Can You Use MACRS To Depreciate Your Property, earlier. Tax deductions for college students This part explains how to determine which MACRS depreciation system applies to your property. Tax deductions for college students It also discusses the following information that you need to know before you can figure depreciation under MACRS. Tax deductions for college students Property's recovery class. Tax deductions for college students Placed-in-service date. Tax deductions for college students Basis for depreciation. Tax deductions for college students Recovery period. Tax deductions for college students Convention. Tax deductions for college students Depreciation method. Tax deductions for college students Finally, this part explains how to use this information to figure your depreciation deduction. Tax deductions for college students Which Depreciation System (GDS or ADS) Applies? Your use of either the General Depreciation System (GDS) or the Alternative Depreciation System (ADS) to depreciate property under MACRS determines what depreciation method and recovery period you use. Tax deductions for college students You generally must use GDS unless you are specifically required by law to use ADS or you elect to use ADS. Tax deductions for college students Required use of ADS. Tax deductions for college students   You must use ADS for the following property. Tax deductions for college students All property used predominantly in a farming business and placed in service in any tax year during which an election not to apply the uniform capitalization rules to certain farming costs is in effect. Tax deductions for college students Listed property used 50% or less in a qualified business use. Tax deductions for college students See Additional Rules for Listed Property , later. Tax deductions for college students Any tax-exempt use property. Tax deductions for college students Any tax-exempt bond-financed property. Tax deductions for college students Any property imported from a foreign country for which an Executive Order is in effect because the country maintains trade restrictions or engages in other discriminatory acts. Tax deductions for college students Any tangible property used predominantly outside the United States during the year. Tax deductions for college students If you are required to use ADS to depreciate your property, you cannot claim the special depreciation allowance. Tax deductions for college students Electing ADS. Tax deductions for college students   Although your property may qualify for GDS, you can elect to use ADS. Tax deductions for college students The election generally must cover all property in the same property class you placed in service during the year. Tax deductions for college students However, the election for residential rental property and nonresidential real property can be made on a property-by-property basis. Tax deductions for college students Once you make this election, you can never revoke it. Tax deductions for college students   You make the election by completing line 20 in Part III of Form 4562. Tax deductions for college students Which Property Class Applies Under GDS? The following is a list of the nine property classes under GDS. Tax deductions for college students 3-year property. Tax deductions for college students 5-year property. Tax deductions for college students 7-year property. Tax deductions for college students 10-year property. Tax deductions for college students 15-year property. Tax deductions for college students 20-year property. Tax deductions for college students 25-year property. Tax deductions for college students Residential rental property. Tax deductions for college students Nonresidential real property. Tax deductions for college students See Which Property Class Applies Under GDS in chapter 4 of Publication 946 for examples of the types of property included in each class. Tax deductions for college students What Is the Placed-in-Service Date? You begin to claim depreciation when your property is placed in service for use either in a trade or business or for the production of income. Tax deductions for college students The placed-in-service date for your property is the date the property is ready and available for a specific use. Tax deductions for college students It is therefore not necessarily the date it is first used. Tax deductions for college students If you converted property held for personal use to use in a trade or business or for the production of income, treat the property as being placed in service on the conversion date. Tax deductions for college students See Placed in Service under When Does Depreciation Begin and End , earlier, for examples illustrating when property is placed in service. Tax deductions for college students What Is the Basis for Depreciation? The basis for depreciation of MACRS property is the property's cost or other basis multiplied by the percentage of business/investment use. Tax deductions for college students Reduce that amount by any credits and deductions allocable to the property. Tax deductions for college students The following are examples of some of the credits and deductions that reduce basis. Tax deductions for college students Any deduction for section 179 property. Tax deductions for college students Any deduction for removal of barriers to the disabled and the elderly. Tax deductions for college students Any disabled access credit, enhanced oil recovery credit, and credit for employer-provided childcare facilities and services. Tax deductions for college students Any special depreciation allowance. Tax deductions for college students Basis adjustment for investment credit property under section 50(c) of the Internal Revenue Code. Tax deductions for college students For information about how to determine the cost or other basis of property, see What Is the Basis of Your Depreciable Property , earlier. Tax deductions for college students Also, see chapter 6. Tax deductions for college students For additional credits and deductions that affect basis, see section 1016 of the Internal Revenue Code. Tax deductions for college students Which Recovery Period Applies? The recovery period of property is the number of years over which you recover its cost or other basis. Tax deductions for college students It is determined based on the depreciation system (GDS or ADS) used. Tax deductions for college students See Table 7-1 for recovery periods under both GDS and ADS for some commonly used assets. Tax deductions for college students For a complete list of recovery periods, see the Table of Class Lives and Recovery Periods in Appendix B of Publication 946. Tax deductions for college students House trailers for farm laborers. Tax deductions for college students   To depreciate a house trailer you supply as housing for those who work on your farm, use one of the following recovery periods if the house trailer is mobile (it has wheels and a history of movement). Tax deductions for college students A 7-year recovery period under GDS. Tax deductions for college students A 10-year recovery period under ADS. Tax deductions for college students   However, if the house trailer is not mobile (its wheels have been removed and permanent utilities and pipes attached to it), use one of the following recovery periods. Tax deductions for college students A 20-year recovery period under GDS. Tax deductions for college students A 25-year recovery period under ADS. Tax deductions for college students Water wells. Tax deductions for college students   Water wells used to provide water for raising poultry and livestock are land improvements. Tax deductions for college students If they are depreciable, use one of the following recovery periods. Tax deductions for college students A 15-year recovery period under GDS. Tax deductions for college students A 20-year recovery period under ADS. Tax deductions for college students   The types of water wells that can be depreciated were discussed earlier in Irrigation systems and water wells under Property Having a Determinable Useful Life . Tax deductions for college students Table 7-1. Tax deductions for college students Farm Property Recovery Periods   Recovery Period in Years Assets GDS ADS Agricultural structures (single purpose) 10 15 Automobiles 5 5 Calculators and copiers 5 6 Cattle (dairy or breeding) 5 7 Communication equipment1 7 10 Computer and peripheral equipment 5 5 Drainage facilities 15 20 Farm buildings2 20 25 Farm machinery and equipment 7 10 Fences (agricultural) 7 10 Goats and sheep (breeding) 5 5 Grain bin 7 10 Hogs (breeding) 3 3 Horses (age when placed in service)     Breeding and working (12 years or less) 7 10 Breeding and working (more than 12 years) 3 10 Racing horses 3 12 Horticultural structures (single purpose) 10 15 Logging machinery and equipment3 5 6 Nonresidential real property 394 40 Office furniture, fixtures, and equipment (not calculators, copiers, or typewriters) 7 10 Paved lots 15 20 Residential rental property 27. Tax deductions for college students 5 40 Tractor units (over-the-road) 3 4 Trees or vines bearing fruit or nuts 10 20 Truck (heavy duty, unloaded weight 13,000 lbs. Tax deductions for college students or more) 5 6 Truck (actual weight less than 13,000 lbs) 5 5 Water wells 15 20 1 Not including communication equipment listed in other classes. Tax deductions for college students 2 Not including single purpose agricultural or horticultural structures. Tax deductions for college students 3 Used by logging and sawmill operators for cutting of timber. Tax deductions for college students 4 For property placed in service after May 12, 1993; for property placed in service before May 13, 1993,  the recovery period is 31. Tax deductions for college students 5 years. Tax deductions for college students Which Convention Applies? Under MACRS, averaging conventions establish when the recovery period begins and ends. Tax deductions for college students The convention you use determines the number of months for which you can claim depreciation in the year you place property in service and in the year you dispose of the property. Tax deductions for college students Use one of the following conventions. Tax deductions for college students The half-year convention. Tax deductions for college students The mid-month convention. Tax deductions for college students The mid-quarter convention. Tax deductions for college students For a detailed explanation of each convention, see Which Convention Applies in chapter 4 of Publication 946. Tax deductions for college students Also, see the Instructions for Form 4562. Tax deductions for college students Which Depreciation Method Applies? MACRS provides three depreciation methods under GDS and one depreciation method under ADS. Tax deductions for college students The 200% declining balance method over a GDS recovery period. Tax deductions for college students The 150% declining balance method over a GDS recovery period. Tax deductions for college students The straight line method over a GDS recovery period. Tax deductions for college students The straight line method over an ADS recovery period. Tax deductions for college students Depreciation Table. Tax deductions for college students   The following table lists the types of property you can depreciate under each method. Tax deductions for college students The declining balance method is abbreviated as DB and the straight line method is abbreviated as SL. Tax deductions for college students Depreciation Table System/Method   Type of Property GDS using  150% DB • All property used in a farming business (except real property)   • All 15- and 20-year property   • Nonfarm 3-, 5-, 7-, and 10-year property1 GDS using SL • Nonresidential real property   • Residential rental property   • Trees or vines bearing fruit or nuts   • All 3-, 5-, 7-, 10-, 15-, and 20-year property1 ADS using SL • Property used predomi- nantly outside the United States   • Farm property used when an election not to apply the uniform capitalization rules is in effect   • Tax-exempt property   • Tax-exempt bond-financed property   • Imported property2   • Any property for which you elect to use this method1 GDS using  200% DB • Nonfarm 3-, 5-, 7-, and 10-year property 1Elective method 2See section 168(g)(6) of the Internal Revenue  Code Property used in farming business. Tax deductions for college students   For personal property placed in service after 1988 in a farming business, you must use the 150% declining balance method over a GDS recovery period or you can elect one of the following methods. Tax deductions for college students The straight line method over a GDS recovery period. Tax deductions for college students The straight line method over an ADS recovery period. Tax deductions for college students For property placed in service before 1999, you could have elected to use the 150% declining balance method using the ADS recovery periods for certain property classes. Tax deductions for college students If you made this election, continue to use the same method and recovery period for that property. Tax deductions for college students Real property. Tax deductions for college students   You can depreciate real property using the straight line method under either GDS or ADS. Tax deductions for college students Switching to straight line. Tax deductions for college students   If you use a declining balance method, you switch to the straight line method in the year it provides an equal or greater deduction. Tax deductions for college students If you use the MACRS percentage tables, discussed later under How Is the Depreciation Deduction Figured , you do not need to determine in which year your deduction is greater using the straight line method. Tax deductions for college students The tables have the switch to the straight line method built into their rates. Tax deductions for college students Fruit or nut trees and vines. Tax deductions for college students   Depreciate trees and vines bearing fruit or nuts under GDS using the straight line method over a 10-year recovery period. Tax deductions for college students ADS required for some farmers. Tax deductions for college students   If you elect not to apply the uniform capitalization rules to any plant shown in Table 6-1 of chapter 6 and produced in your farming business, you must use ADS for all property you place in service in any year the election is in effect. Tax deductions for college students See chapter 6 for a discussion of the application of the uniform capitalization rules to farm property. Tax deductions for college students Electing a different method. Tax deductions for college students   As shown in the Depreciation Table , you can elect a different method for depreciation for certain types of property. Tax deductions for college students You must make the election by the due date of the return (including extensions) for the year you placed the property in service. Tax deductions for college students However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of your return (excluding extensions). Tax deductions for college students Attach the election to the amended return and write “Filed pursuant to section 301. Tax deductions for college students 9100-2” on the election statement. Tax deductions for college students File the amended return at the same address you filed the original return. Tax deductions for college students Once you make the election, you cannot change it. Tax deductions for college students    If you elect to use a different method for one item in a property class, you must apply the same method to all property in that class placed in service during the year of the election. Tax deductions for college students However, you can make the election on a property-by-property basis for residential rental and nonresidential real property. Tax deductions for college students Straight line election. Tax deductions for college students   Instead of using the declining balance method, you can elect to use the straight line method over the GDS recovery period. Tax deductions for college students Make the election by entering “S/L” under column (f) in Part III of Form 4562. Tax deductions for college students ADS election. Tax deductions for college students   As explained earlier under Which Depreciation System (GDS or ADS) Applies , you can elect to use ADS even though your property may come under GDS. Tax deductions for college students ADS uses the straight line method of depreciation over the ADS recovery periods, which are generally longer than the GDS recovery periods. Tax deductions for college students The ADS recovery periods for many assets used in the business of farming are listed in Table 7–1. Tax deductions for college students Additional ADS recovery periods for other classes of property may be found in the Table of Class Lives and Recovery Periods in Appendix B of Publication 946. Tax deductions for college students How Is the Depreciation Deduction Figured? To figure your depreciation deduction under MACRS, you first determine the depreciation system, property class, placed-in-service date, basis amount, recovery period, convention, and depreciation method that applies to your property. Tax deductions for college students Then you are ready to figure your depreciation deduction. Tax deductions for college students You can figure it in one of two ways. Tax deductions for college students You can use the percentage tables provided by the IRS. Tax deductions for college students You can figure your own deduction without using the tables. Tax deductions for college students Figuring your own MACRS deduction will generally result in a slightly different amount than using the tables. Tax deductions for college students Using the MACRS Percentage Tables To help you figure your deduction under MACRS, the IRS has established percentage tables that incorporate the applicable convention and depreciation method. Tax deductions for college students These percentage tables are in Appendix A of Publication 946. Tax deductions for college students Rules for using the tables. Tax deductions for college students   The following rules cover the use of the percentage tables. Tax deductions for college students You must apply the rates in the percentage tables to your property's unadjusted basis. Tax deductions for college students Unadjusted basis is the same basis amount you would use to figure gain on a sale but figured without reducing your original basis by any MACRS depreciation taken in earlier years. Tax deductions for college students You cannot use the percentage tables for a short tax year. Tax deductions for college students See chapter 4 of Publication 946 for information on how to figure the deduction for a short tax year. Tax deductions for college students You generally must continue to use them for the entire recovery period of the property. Tax deductions for college students You must stop using the tables if you adjust the basis of the property for any reason other than— Depreciation allowed or allowable, or An addition or improvement to the property, which is depreciated as a separate property. Tax deductions for college students Basis adjustment due to casualty loss. Tax deductions for college students   If you reduce the basis of your property because of a casualty, you cannot continue to use the percentage tables. Tax deductions for college students For the year of the adjustment and the remaining recovery period, you must figure the depreciation yourself using the property's adjusted basis at the end of the year. Tax deductions for college students See Figuring the Deduction Without Using the Tables in chapter 4 of Publication 946. Tax deductions for college students Figuring depreciation using the 150% DB method and half-year convention. Tax deductions for college students    Table 7-2 has the percentages for 3-, 5-, 7-, and 20-year property. Tax deductions for college students The percentages are based on the 150% declining balance method with a change to the straight line method. Tax deductions for college students This table covers only the half-year convention and the first 8 years for 20-year property. Tax deductions for college students See Appendix A in Publication 946 for complete MACRS tables, including tables for the mid-quarter and mid-month convention. Tax deductions for college students   The following examples show how to figure depreciation under MACRS using the percentages in Table 7-2 . Tax deductions for college students Example 1. Tax deductions for college students During the year, you bought an item of 7-year property for $10,000 and placed it in service. Tax deductions for college students You do not elect a section 179 expense deduction for this property. Tax deductions for college students In addition, the property is not qualified property for purposes of the special depreciation allowance. Tax deductions for college students The unadjusted basis of the property is $10,000. Tax deductions for college students You use the percentages in Table 7-2 to figure your deduction. Tax deductions for college students Since this is 7-year property, you multiply $10,000 by 10. Tax deductions for college students 71% to get this year's depreciation of $1,071. Tax deductions for college students For next year, your depreciation will be $1,913 ($10,000 × 19. Tax deductions for college students 13%). Tax deductions for college students Example 2. Tax deductions for college students You had a barn constructed on your farm at a cost of $20,000. Tax deductions for college students You placed the barn in service this year. Tax deductions for college students You elect not to claim the special depreciation allowance. Tax deductions for college students The barn is 20-year property and you use the table percentages to figure your deduction. Tax deductions for college students You figure this year's depreciation by multiplying $20,000 (unadjusted basis) by 3. Tax deductions for college students 75% to get $750. Tax deductions for college students For next year, your depreciation will be $1,443. Tax deductions for college students 80 ($20,000 × 7. Tax deductions for college students 219%). Tax deductions for college students Table 7-2. Tax deductions for college students 150% Declining Balance Method (Half-Year Convention) Year 3-Year 5-Year 7-Year 20-Year 1 25. Tax deductions for college students 0 % 15. Tax deductions for college students 00 % 10. Tax deductions for college students 71 % 3. Tax deductions for college students 750 % 2 37. Tax deductions for college students 5   25. Tax deductions for college students 50   19. Tax deductions for college students 13   7. Tax deductions for college students 219   3 25. Tax deductions for college students 0   17. Tax deductions for college students 85   15. Tax deductions for college students 03   6. Tax deductions for college students 677   4 12. Tax deductions for college students 5   16. Tax deductions for college students 66   12. Tax deductions for college students 25   6. Tax deductions for college students 177   5     16. Tax deductions for college students 66   12. Tax deductions for college students 25   5. Tax deductions for college students 713   6     8. Tax deductions for college students 33   12. Tax deductions for college students 25   5. Tax deductions for college students 285   7         12. Tax deductions for college students 25   4. Tax deductions for college students 888   8         6. Tax deductions for college students 13   4. Tax deductions for college students 522   Figuring depreciation using the straight line method and half-year convention. Tax deductions for college students   The following table has the straight line percentages for 3-, 5-, 7-, and 20-year property using the half-year convention. Tax deductions for college students The table covers only the first 8 years for 20-year property. Tax deductions for college students See Appendix A in Publication 946 for complete MACRS tables, including tables for the mid-quarter and mid-month convention. Tax deductions for college students Table 7-3. Tax deductions for college students Straight Line Method (Half-Year Convention) Year 3-Year 5-Year 7-Year 20-Year 1 16. Tax deductions for college students 67 % 10 % 7. Tax deductions for college students 14 % 2. Tax deductions for college students 5 % 2 33. Tax deductions for college students 33   20   14. Tax deductions for college students 29   5. Tax deductions for college students 0   3 33. Tax deductions for college students 33   20   14. Tax deductions for college students 29   5. Tax deductions for college students 0   4 16. Tax deductions for college students 67   20   14. Tax deductions for college students 28   5. Tax deductions for college students 0   5     20   14. Tax deductions for college students 29   5. Tax deductions for college students 0   6     10   14. Tax deductions for college students 28   5. Tax deductions for college students 0   7         14. Tax deductions for college students 29   5. Tax deductions for college students 0   8         7. Tax deductions for college students 14   5. Tax deductions for college students 0