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Tax Planning Us State Income Taxes

1040ez Tax Form And BookletFree Tax Filing 2011 H&r BlockFile State Tax Return OnlyWww State Tax ReturnFile Tax Return For 2012Example Of 1040x Amended Tax Returns For 2013Form10401040 Ez FilingFile State Taxes Free OnlineHow To File An AmendmentWhere To Mail State TaxesHow To Fill Out 1040x Step By StepElectronic State Tax FilingTurbo Tax Ez FormFederal Tax SoftwareA Software With 1040x1040ez Tax Form 2013File Tax Extension For 2011 FreeFree State And Federal Tax ReturnsTurbotax Do Taxes For 20101041xFree 1040ez1040x Form And InstructionsE-file Tax Extension FreeHow To Amend State Tax ReturnWhen Can I Amend My 2011 Tax ReturnIrs Forms 2011 Form 1040Where Can I File My 2011 Taxes Online2011 Tax Returns2011 1040ezIrs Gov FreefileFiling Back TaxesAmend Taxes Online FreeWhere Do I File 2011 TaxesHow Do You File An Amended Tax ReturnCan I Still File My 2012 TaxesTax Forms Online2011 Taxes FileFile Income Taxes OnlineFree Income Tax Help

Tax Planning Us State Income Taxes

Tax planning us state income taxes Part Three -   Quarterly Filing Information Table of Contents 12. Tax planning us state income taxes   Filing Form 720Attachments to Form 720. Tax planning us state income taxes Conditions to allowance. Tax planning us state income taxes 13. Tax planning us state income taxes   Payment of TaxesHow To Make Deposits When To Make Deposits Amount of DepositsSafe Harbor Rule 14. Tax planning us state income taxes   Penalties and Interest 15. Tax planning us state income taxes   Examination and Appeal Procedures 16. Tax planning us state income taxes   Rulings Program 17. Tax planning us state income taxes   How To Get Tax Help 18. Tax planning us state income taxes   Appendix Prev  Up  Next   Home   More Online Publications
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The Tax Planning Us State Income Taxes

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