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Turbo Tax 2011 Download

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Turbo Tax 2011 Download

Turbo tax 2011 download 2. Turbo tax 2011 download   Depreciation of Rental Property Table of Contents The BasicsWhat Rental Property Can Be Depreciated? When Does Depreciation Begin and End? Depreciation Methods Basis of Depreciable Property Claiming the Special Depreciation Allowance MACRS DepreciationDepreciation Systems Property Classes Under GDS Recovery Periods Under GDS Conventions Figuring Your Depreciation Deduction Figuring MACRS Depreciation Under ADS Claiming the Correct Amount of Depreciation You recover the cost of income producing property through yearly tax deductions. Turbo tax 2011 download You do this by depreciating the property; that is, by deducting some of the cost each year on your tax return. Turbo tax 2011 download Three factors determine how much depreciation you can deduct each year: (1) your basis in the property, (2) the recovery period for the property, and (3) the depreciation method used. Turbo tax 2011 download You cannot simply deduct your mortgage or principal payments, or the cost of furniture, fixtures and equipment, as an expense. Turbo tax 2011 download You can deduct depreciation only on the part of your property used for rental purposes. Turbo tax 2011 download Depreciation reduces your basis for figuring gain or loss on a later sale or exchange. Turbo tax 2011 download You may have to use Form 4562 to figure and report your depreciation. Turbo tax 2011 download See Which Forms To Use in chapter 3. Turbo tax 2011 download Also see Publication 946. Turbo tax 2011 download Section 179 deduction. Turbo tax 2011 download   The section 179 deduction is a means of recovering part or all of the cost of certain qualifying property in the year you place the property in service. Turbo tax 2011 download This deduction is not allowed for property used in connection with residential rental property. Turbo tax 2011 download See chapter 2 of Publication 946. Turbo tax 2011 download Alternative minimum tax (AMT). Turbo tax 2011 download   If you use accelerated depreciation, you may be subject to the AMT. Turbo tax 2011 download Accelerated depreciation allows you to deduct more depreciation earlier in the recovery period than you could deduct using a straight line method (same deduction each year). Turbo tax 2011 download   The prescribed depreciation methods for rental real estate are not accelerated, so the depreciation deduction is not adjusted for the AMT. Turbo tax 2011 download However, accelerated methods are generally used for other property connected with rental activities (for example, appliances and wall-to-wall carpeting). Turbo tax 2011 download   To find out if you are subject to the AMT, see the Instructions for Form 6251. Turbo tax 2011 download The Basics The following section discusses the information you will need to have about the rental property and the decisions to be made before figuring your depreciation deduction. Turbo tax 2011 download What Rental Property Can Be Depreciated? You can depreciate your property if it meets all the following requirements. Turbo tax 2011 download You own the property. Turbo tax 2011 download You use the property in your business or income-producing activity (such as rental property). Turbo tax 2011 download The property has a determinable useful life. Turbo tax 2011 download The property is expected to last more than one year. Turbo tax 2011 download Property you own. Turbo tax 2011 download   To claim depreciation, you usually must be the owner of the property. Turbo tax 2011 download You are considered as owning property even if it is subject to a debt. Turbo tax 2011 download Rented property. Turbo tax 2011 download   Generally, if you pay rent for property, you cannot depreciate that property. Turbo tax 2011 download Usually, only the owner can depreciate it. Turbo tax 2011 download However, if you make permanent improvements to leased property, you may be able to depreciate the improvements. Turbo tax 2011 download See Additions or improvements to property , later in this chapter, under Recovery Periods Under GDS. Turbo tax 2011 download Cooperative apartments. Turbo tax 2011 download   If you are a tenant-stockholder in a cooperative housing corporation and rent your cooperative apartment to others, you can deduct depreciation on your stock in the corporation. Turbo tax 2011 download See chapter 4, Special Situations. Turbo tax 2011 download Property having a determinable useful life. Turbo tax 2011 download   To be depreciable, your property must have a determinable useful life. Turbo tax 2011 download This means that it must be something that wears out, decays, gets used up, becomes obsolete, or loses its value from natural causes. Turbo tax 2011 download What Rental Property Cannot Be Depreciated? Certain property cannot be depreciated. Turbo tax 2011 download This includes land and certain excepted property. Turbo tax 2011 download Land. Turbo tax 2011 download   You cannot depreciate the cost of land because land generally does not wear out, become obsolete, or get used up. Turbo tax 2011 download But if it does, the loss is accounted for upon disposition. Turbo tax 2011 download The costs of clearing, grading, planting, and landscaping are usually all part of the cost of land and cannot be depreciated. Turbo tax 2011 download   Although you cannot depreciate land, you can depreciate certain land preparation costs, such as landscaping costs, incurred in preparing land for business use. Turbo tax 2011 download These costs must be so closely associated with other depreciable property that you can determine a life for them along with the life of the associated property. Turbo tax 2011 download Example. Turbo tax 2011 download You built a new house to use as a rental and paid for grading, clearing, seeding, and planting bushes and trees. Turbo tax 2011 download Some of the bushes and trees were planted right next to the house, while others were planted around the outer border of the lot. Turbo tax 2011 download If you replace the house, you would have to destroy the bushes and trees right next to it. Turbo tax 2011 download These bushes and trees are closely associated with the house, so they have a determinable useful life. Turbo tax 2011 download Therefore, you can depreciate them. Turbo tax 2011 download Add your other land preparation costs to the basis of your land because they have no determinable life and you cannot depreciate them. Turbo tax 2011 download Excepted property. Turbo tax 2011 download   Even if the property meets all the requirements listed earlier under What Rental Property Can Be Depreciated , you cannot depreciate the following property. Turbo tax 2011 download Property placed in service and disposed of (or taken out of business use) in the same year. Turbo tax 2011 download Equipment used to build capital improvements. Turbo tax 2011 download You must add otherwise allowable depreciation on the equipment during the period of construction to the basis of your improvements. Turbo tax 2011 download For more information, see chapter 1 of Publication 946. Turbo tax 2011 download When Does Depreciation Begin and End? You begin to depreciate your rental property when you place it in service for the production of income. Turbo tax 2011 download You stop depreciating it either when you have fully recovered your cost or other basis, or when you retire it from service, whichever happens first. Turbo tax 2011 download Placed in Service You place property in service in a rental activity when it is ready and available for a specific use in that activity. Turbo tax 2011 download Even if you are not using the property, it is in service when it is ready and available for its specific use. Turbo tax 2011 download Example 1. Turbo tax 2011 download On November 22 of last year, you purchased a dishwasher for your rental property. Turbo tax 2011 download The appliance was delivered on December 7, but was not installed and ready for use until January 3 of this year. Turbo tax 2011 download Because the dishwasher was not ready for use last year, it is not considered placed in service until this year. Turbo tax 2011 download If the appliance had been installed and ready for use when it was delivered in December of last year, it would have been considered placed in service in December, even if it was not actually used until this year. Turbo tax 2011 download Example 2. Turbo tax 2011 download On April 6, you purchased a house to use as residential rental property. Turbo tax 2011 download You made extensive repairs to the house and had it ready for rent on July 5. Turbo tax 2011 download You began to advertise the house for rent in July and actually rented it beginning September 1. Turbo tax 2011 download The house is considered placed in service in July when it was ready and available for rent. Turbo tax 2011 download You can begin to depreciate the house in July. Turbo tax 2011 download Example 3. Turbo tax 2011 download You moved from your home in July. Turbo tax 2011 download During August and September you made several repairs to the house. Turbo tax 2011 download On October 1, you listed the property for rent with a real estate company, which rented it on December 1. Turbo tax 2011 download The property is considered placed in service on October 1, the date when it was available for rent. Turbo tax 2011 download Conversion to business use. Turbo tax 2011 download   If you place property in service in a personal activity, you cannot claim depreciation. Turbo tax 2011 download However, if you change the property's use to business or the production of income, you can begin to depreciate it at the time of the change. Turbo tax 2011 download You place the property in service for business or income-producing use on the date of the change. Turbo tax 2011 download Example. Turbo tax 2011 download You bought a house and used it as your personal home several years before you converted it to rental property. Turbo tax 2011 download Although its specific use was personal and no depreciation was allowable, you placed the home in service when you began using it as your home. Turbo tax 2011 download You can begin to claim depreciation in the year you converted it to rental property because at that time its use changed to the production of income. Turbo tax 2011 download Idle Property Continue to claim a deduction for depreciation on property used in your rental activity even if it is temporarily idle (not in use). Turbo tax 2011 download For example, if you must make repairs after a tenant moves out, you still depreciate the rental property during the time it is not available for rent. Turbo tax 2011 download Cost or Other Basis Fully Recovered You must stop depreciating property when the total of your yearly depreciation deductions equals your cost or other basis of your property. Turbo tax 2011 download For this purpose, your yearly depreciation deductions include any depreciation that you were allowed to claim, even if you did not claim it. Turbo tax 2011 download See Basis of Depreciable Property , later. Turbo tax 2011 download 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. Turbo tax 2011 download 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. Turbo tax 2011 download You sell or exchange the property. Turbo tax 2011 download You convert the property to personal use. Turbo tax 2011 download You abandon the property. Turbo tax 2011 download The property is destroyed. Turbo tax 2011 download Depreciation Methods Generally, you must use the Modified Accelerated Cost Recovery System (MACRS) to depreciate residential rental property placed in service after 1986. Turbo tax 2011 download If you placed rental property in service before 1987, you are using one of the following methods. Turbo tax 2011 download ACRS (Accelerated Cost Recovery System) for property placed in service after 1980 but before 1987. Turbo tax 2011 download Straight line or declining balance method over the useful life of property placed in service before 1981. Turbo tax 2011 download See MACRS Depreciation , later, for more information. Turbo tax 2011 download Rental property placed in service before 2013. Turbo tax 2011 download   Continue to use the same method of figuring depreciation that you used in the past. Turbo tax 2011 download Use of real property changed. Turbo tax 2011 download   Generally, you must use MACRS to depreciate real property that you acquired for personal use before 1987 and changed to business or income-producing use after 1986. Turbo tax 2011 download This includes your residence that you changed to rental use. Turbo tax 2011 download See Property Owned or Used in 1986 in Publication 946, chapter 1, for those situations in which MACRS is not allowed. Turbo tax 2011 download Improvements made after 1986. Turbo tax 2011 download   Treat an improvement made after 1986 to property you placed in service before 1987 as separate depreciable property. Turbo tax 2011 download As a result, you can depreciate that improvement as separate property under MACRS if it is the type of property that otherwise qualifies for MACRS depreciation. Turbo tax 2011 download For more information about improvements, see Additions or improvements to property , later in this chapter under Recovery Periods Under GDS. Turbo tax 2011 download This publication discusses MACRS depreciation only. Turbo tax 2011 download If you need information about depreciating property placed in service before 1987, see Publication 534. Turbo tax 2011 download Basis of Depreciable Property The basis of property used in a rental activity is generally its adjusted basis when you place it in service in that activity. Turbo tax 2011 download This is its cost or other basis when you acquired it, adjusted for certain items occurring before you place it in service in the rental activity. Turbo tax 2011 download If you depreciate your property under MACRS, you may also have to reduce your basis by certain deductions and credits with respect to the property. Turbo tax 2011 download Basis and adjusted basis are explained in the following discussions. Turbo tax 2011 download If you used the property for personal purposes before changing it to rental use, its basis for depreciation is the lesser of its adjusted basis or its fair market value when you change it to rental use. Turbo tax 2011 download See Basis of Property Changed to Rental Use in chapter 4. Turbo tax 2011 download Cost Basis The basis of property you buy is usually its cost. Turbo tax 2011 download The cost is the amount you pay for it in cash, in debt obligation, in other property, or in services. Turbo tax 2011 download Your cost also includes amounts you pay for: Sales tax charged on the purchase (but see Exception next), Freight charges to obtain the property, and Installation and testing charges. Turbo tax 2011 download Exception. Turbo tax 2011 download   If you deducted state and local general sales taxes as an itemized deduction on Schedule A (Form 1040), do not include those sales taxes as part of your cost basis. Turbo tax 2011 download Such taxes were deductible before 1987 and after 2003. Turbo tax 2011 download Loans with low or no interest. Turbo tax 2011 download   If you buy property on any time-payment plan that charges little or no interest, the basis of your property is your stated purchase price, less the amount considered to be unstated interest. Turbo tax 2011 download See Unstated Interest and Original Issue Discount (OID) in Publication 537, Installment Sales. Turbo tax 2011 download Real property. Turbo tax 2011 download   If you buy real property, such as a building and land, certain fees and other expenses you pay are part of your cost basis in the property. Turbo tax 2011 download Real estate taxes. Turbo tax 2011 download   If you buy real property and agree to pay real estate taxes on it that were owed by the seller and the seller does not reimburse you, the taxes you pay are treated as part of your basis in the property. Turbo tax 2011 download You cannot deduct them as taxes paid. Turbo tax 2011 download   If you reimburse the seller for real estate taxes the seller paid for you, you can usually deduct that amount. Turbo tax 2011 download Do not include that amount in your basis in the property. Turbo tax 2011 download Settlement fees and other costs. Turbo tax 2011 download   The following settlement fees and closing costs for buying the property are part of your basis in the property. Turbo tax 2011 download Abstract fees. Turbo tax 2011 download Charges for installing utility services. Turbo tax 2011 download Legal fees. Turbo tax 2011 download Recording fees. Turbo tax 2011 download Surveys. Turbo tax 2011 download Transfer taxes. Turbo tax 2011 download Title insurance. Turbo tax 2011 download Any amounts the seller owes that you agree to pay, such as back taxes or interest, recording or mortgage fees, charges for improvements or repairs, and sales commissions. Turbo tax 2011 download   The following are settlement fees and closing costs you cannot include in your basis in the property. Turbo tax 2011 download Fire insurance premiums. Turbo tax 2011 download Rent or other charges relating to occupancy of the property before closing. Turbo tax 2011 download Charges connected with getting or refinancing a loan, such as: Points (discount points, loan origination fees), Mortgage insurance premiums, Loan assumption fees, Cost of a credit report, and Fees for an appraisal required by a lender. Turbo tax 2011 download   Also, do not include amounts placed in escrow for the future payment of items such as taxes and insurance. Turbo tax 2011 download Assumption of a mortgage. Turbo tax 2011 download   If you buy property and become liable for an existing mortgage on the property, your basis is the amount you pay for the property plus the amount remaining to be paid on the mortgage. Turbo tax 2011 download Example. Turbo tax 2011 download You buy a building for $60,000 cash and assume a mortgage of $240,000 on it. Turbo tax 2011 download Your basis is $300,000. Turbo tax 2011 download Separating cost of land and buildings. Turbo tax 2011 download   If you buy buildings and your cost includes the cost of the land on which they stand, you must divide the cost between the land and the buildings to figure the basis for depreciation of the buildings. Turbo tax 2011 download The part of the cost that you allocate to each asset is the ratio of the fair market value of that asset to the fair market value of the whole property at the time you buy it. Turbo tax 2011 download   If you are not certain of the fair market values of the land and the buildings, you can divide the cost between them based on their assessed values for real estate tax purposes. Turbo tax 2011 download Example. Turbo tax 2011 download You buy a house and land for $200,000. Turbo tax 2011 download The purchase contract does not specify how much of the purchase price is for the house and how much is for the land. Turbo tax 2011 download The latest real estate tax assessment on the property was based on an assessed value of $160,000, of which $136,000 was for the house and $24,000 was for the land. Turbo tax 2011 download You can allocate 85% ($136,000 ÷ $160,000) of the purchase price to the house and 15% ($24,000 ÷ $160,000) of the purchase price to the land. Turbo tax 2011 download Your basis in the house is $170,000 (85% of $200,000) and your basis in the land is $30,000 (15% of $200,000). Turbo tax 2011 download Basis Other Than Cost You cannot use cost as a basis for property that you received: In return for services you performed; In an exchange for other property; As a gift; From your spouse, or from your former spouse as the result of a divorce; or As an inheritance. Turbo tax 2011 download If you received property in one of these ways, see Publication 551 for information on how to figure your basis. Turbo tax 2011 download Adjusted Basis To figure 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 for business or the production of income. Turbo tax 2011 download The result of these adjustments to the basis is the adjusted basis. Turbo tax 2011 download Increases to basis. Turbo tax 2011 download   You must increase the basis of any property by the cost of all items properly added to a capital account. Turbo tax 2011 download These include the following. Turbo tax 2011 download The cost of any additions or improvements made before placing your property into service as a rental that have a useful life of more than 1 year. Turbo tax 2011 download Amounts spent after a casualty to restore the damaged property. Turbo tax 2011 download The cost of extending utility service lines to the property. Turbo tax 2011 download Legal fees, such as the cost of defending and perfecting title, or settling zoning issues. Turbo tax 2011 download Additions or improvements. Turbo tax 2011 download   Add to the basis of your property the amount an addition or improvement actually cost you, including any amount you borrowed to make the addition or improvement. Turbo tax 2011 download This includes all direct costs, such as material and labor, but does not include your own labor. Turbo tax 2011 download It also includes all expenses related to the addition or improvement. Turbo tax 2011 download   For example, if you had an architect draw up plans for remodeling your property, the architect's fee is a part of the cost of the remodeling. Turbo tax 2011 download Or, if you had your lot surveyed to put up a fence, the cost of the survey is a part of the cost of the fence. Turbo tax 2011 download   Keep separate accounts for depreciable additions or improvements made after you place the property in service in your rental activity. Turbo tax 2011 download For information on depreciating additions or improvements, see Additions or improvements to property , later in this chapter, under Recovery Periods Under GDS. Turbo tax 2011 download    The cost of landscaping improvements is usually treated as an addition to the basis of the land, which is not depreciable. Turbo tax 2011 download However, see What Rental Property Cannot Be Depreciated, earlier. Turbo tax 2011 download Assessments for local improvements. Turbo tax 2011 download   Assessments for items which tend to increase the value of property, such as streets and sidewalks, must be added to the basis of the property. Turbo tax 2011 download For example, if your city installs curbing on the street in front of your house, and assesses you and your neighbors for its cost, you must add the assessment to the basis of your property. Turbo tax 2011 download Also add the cost of legal fees paid to obtain a decrease in an assessment levied against property to pay for local improvements. Turbo tax 2011 download You cannot deduct these items as taxes or depreciate them. Turbo tax 2011 download    However, you can deduct as taxes, charges or assessments for maintenance, repairs, or interest charges related to the improvements. Turbo tax 2011 download Do not add them to your basis in the property. Turbo tax 2011 download Deducting vs. Turbo tax 2011 download capitalizing costs. Turbo tax 2011 download   Do not add to your basis costs you can deduct as current expenses. Turbo tax 2011 download However, there are certain costs you can choose either to deduct or to capitalize. Turbo tax 2011 download If you capitalize these costs, include them in your basis. Turbo tax 2011 download If you deduct them, do not include them in your basis. Turbo tax 2011 download   The costs you may choose to deduct or capitalize include carrying charges, such as interest and taxes, that you must pay to own property. Turbo tax 2011 download   For more information about deducting or capitalizing costs and how to make the election, see Carrying Charges in Publication 535, chapter 7. Turbo tax 2011 download Decreases to basis. Turbo tax 2011 download   You must decrease the basis of your property by any items that represent a return of your cost. Turbo tax 2011 download These include the following. Turbo tax 2011 download Insurance or other payment you receive as the result of a casualty or theft loss. Turbo tax 2011 download Casualty loss not covered by insurance for which you took a deduction. Turbo tax 2011 download Amount(s) you receive for granting an easement. Turbo tax 2011 download Residential energy credits you were allowed before 1986, or after 2005, if you added the cost of the energy items to the basis of your home. Turbo tax 2011 download Exclusion from income of subsidies for energy conservation measures. Turbo tax 2011 download Special depreciation allowance claimed on qualified property. Turbo tax 2011 download Depreciation you deducted, or could have deducted, on your tax returns under the method of depreciation you chose. Turbo tax 2011 download If you did not deduct enough or deducted too much in any year, see Depreciation under Decreases to Basis in Publication 551. Turbo tax 2011 download   If your rental property was previously used as your main home, you must also decrease the basis by the following. Turbo tax 2011 download Gain you postponed from the sale of your main home before May 7, 1997, if the replacement home was converted to your rental property. Turbo tax 2011 download District of Columbia first-time homebuyer credit allowed on the purchase of your main home after August 4, 1997 and before January 1, 2012. Turbo tax 2011 download Amount of qualified principal residence indebtedness discharged on or after January 1, 2007. Turbo tax 2011 download Claiming the Special Depreciation Allowance For 2013, your residential rental property may qualify for a special depreciation allowance. Turbo tax 2011 download This allowance is figured before you figure your regular depreciation deduction. Turbo tax 2011 download See Publication 946, chapter 3, for details. Turbo tax 2011 download Also see the Instructions for Form 4562, Line 14. Turbo tax 2011 download If you qualify for, but choose not to take, a special depreciation allowance, you must attach a statement to your return. Turbo tax 2011 download The details of this election are in Publication 946, chapter 3, and the Instructions for Form 4562, Line 14. Turbo tax 2011 download MACRS Depreciation Most business and investment property placed in service after 1986 is depreciated using MACRS. Turbo tax 2011 download This section explains how to determine which MACRS depreciation system applies to your property. Turbo tax 2011 download It also discusses other information you need to know before you can figure depreciation under MACRS. Turbo tax 2011 download This information includes the property's: Recovery class, Applicable recovery period, Convention, Placed-in-service date, Basis for depreciation, and Depreciation method. Turbo tax 2011 download Depreciation Systems MACRS consists of two systems that determine how you depreciate your property—the General Depreciation System (GDS) and the Alternative Depreciation System (ADS). Turbo tax 2011 download You must use GDS unless you are specifically required by law to use ADS or you elect to use ADS. Turbo tax 2011 download Excluded Property You cannot use MACRS for certain personal property (such as furniture or appliances) placed in service in your rental property in 2013 if it had been previously placed in service before 1987 when MACRS became effective. Turbo tax 2011 download In most cases, personal property is excluded from MACRS if you (or a person related to you) owned or used it in 1986 or if your tenant is a person (or someone related to the person) who owned or used it in 1986. Turbo tax 2011 download However, the property is not excluded if your 2013 deduction under MACRS (using a half-year convention) is less than the deduction you would have under ACRS. Turbo tax 2011 download For more information, see What Method Can You Use To Depreciate Your Property? in Publication 946, chapter 1. Turbo tax 2011 download Electing ADS If you choose, you can use the ADS method for most property. Turbo tax 2011 download Under ADS, you use the straight line method of depreciation. Turbo tax 2011 download The election of ADS for one item in a class of property generally applies to all property in that class that is placed in service during the tax year of the election. Turbo tax 2011 download However, the election applies on a property-by-property basis for residential rental property and nonresidential real property. Turbo tax 2011 download If you choose to use ADS for your residential rental property, the election must be made in the first year the property is placed in service. Turbo tax 2011 download Once you make this election, you can never revoke it. Turbo tax 2011 download For property placed in service during 2013, you make the election to use ADS by entering the depreciation on Form 4562, Part III, Section C, line 20c. Turbo tax 2011 download Property Classes Under GDS Each item of property that can be depreciated under MACRS is assigned to a property class, determined by its class life. Turbo tax 2011 download The property class generally determines the depreciation method, recovery period, and convention. Turbo tax 2011 download The property classes under GDS are: 3-year property, 5-year property, 7-year property, 10-year property, 15-year property, 20-year property, Nonresidential real property, and Residential rental property. Turbo tax 2011 download Under MACRS, property that you placed in service during 2013 in your rental activities generally falls into one of the following classes. Turbo tax 2011 download 5-year property. Turbo tax 2011 download This class includes computers and peripheral equipment, office machinery (typewriters, calculators, copiers, etc. Turbo tax 2011 download ), automobiles, and light trucks. Turbo tax 2011 download This class also includes appliances, carpeting, furniture, etc. Turbo tax 2011 download , used in a residential rental real estate activity. Turbo tax 2011 download Depreciation on automobiles, other property used for transportation, computers and related peripheral equipment, and property of a type generally used for entertainment, recreation, or amusement is limited. Turbo tax 2011 download See chapter 5 of Publication 946. Turbo tax 2011 download 7-year property. Turbo tax 2011 download This class includes office furniture and equipment (desks, file cabinets, etc. Turbo tax 2011 download ). Turbo tax 2011 download This class also includes any property that does not have a class life and that has not been designated by law as being in any other class. Turbo tax 2011 download 15-year property. Turbo tax 2011 download This class includes roads, fences, and shrubbery (if depreciable). Turbo tax 2011 download Residential rental property. Turbo tax 2011 download This class includes any real property that is a rental building or structure (including a mobile home) for which 80% or more of the gross rental income for the tax year is from dwelling units. Turbo tax 2011 download It does not include a unit in a hotel, motel, inn, or other establishment where more than half of the units are used on a transient basis. Turbo tax 2011 download If you live in any part of the building or structure, the gross rental income includes the fair rental value of the part you live in. Turbo tax 2011 download The other property classes do not generally apply to property used in rental activities. Turbo tax 2011 download These classes are not discussed in this publication. Turbo tax 2011 download See Publication 946 for more information. Turbo tax 2011 download Recovery Periods Under GDS The recovery period of property is the number of years over which you recover its cost or other basis. Turbo tax 2011 download The recovery periods are generally longer under ADS than GDS. Turbo tax 2011 download The recovery period of property depends on its property class. Turbo tax 2011 download Under GDS, the recovery period of an asset is generally the same as its property class. Turbo tax 2011 download Class lives and recovery periods for most assets are listed in Appendix B of Publication 946. Turbo tax 2011 download See Table 2-1 for recovery periods of property commonly used in residential rental activities. Turbo tax 2011 download Qualified Indian reservation property. Turbo tax 2011 download   Shorter recovery periods are provided under MACRS for qualified Indian reservation property placed in service on Indian reservations. Turbo tax 2011 download For more information, see chapter 4 of Publication 946. Turbo tax 2011 download Additions or improvements to property. Turbo tax 2011 download   Treat additions or improvements you make to your depreciable rental property as separate property items for depreciation purposes. Turbo tax 2011 download   The property class and recovery period of the addition or improvement is the one that would apply to the original property if you had placed it in service at the same time as the addition or improvement. Turbo tax 2011 download   The recovery period for an addition or improvement to property begins on the later of: The date the addition or improvement is placed in service, or The date the property to which the addition or improvement was made is placed in service. Turbo tax 2011 download Example. Turbo tax 2011 download You own a residential rental house that you have been renting since 1986 and depreciating under ACRS. Turbo tax 2011 download You built an addition onto the house and placed it in service in 2013. Turbo tax 2011 download You must use MACRS for the addition. Turbo tax 2011 download Under GDS, the addition is depreciated as residential rental property over 27. Turbo tax 2011 download 5 years. Turbo tax 2011 download Table 2-1. Turbo tax 2011 download MACRS Recovery Periods for Property Used in Rental Activities   MACRS Recovery Period   Type of Property General Depreciation System Alternative Depreciation System   Computers and their peripheral equipment 5 years 5 years   Office machinery, such as: Typewriters Calculators Copiers 5 years 6 years   Automobiles 5 years 5 years   Light trucks 5 years 5 years   Appliances, such as: Stoves Refrigerators 5 years 9 years   Carpets 5 years 9 years   Furniture used in rental property 5 years 9 years   Office furniture and equipment, such as: Desks Files 7 years 10 years   Any property that does not have a class life and that has not been designated by law as being in any other class 7 years 12 years   Roads 15 years 20 years   Shrubbery 15 years 20 years   Fences 15 years 20 years   Residential rental property (buildings or structures) and structural components such as furnaces, waterpipes, venting, etc. Turbo tax 2011 download 27. Turbo tax 2011 download 5 years 40 years   Additions and improvements, such as a new roof The same recovery period as that of the property to which the addition or improvement is made, determined as if the property were placed in service at the same time as the addition or improvement. Turbo tax 2011 download   Conventions A convention is a method established under MACRS to set the beginning and end of the recovery period. Turbo tax 2011 download 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. Turbo tax 2011 download Mid-month convention. Turbo tax 2011 download    A mid-month convention is used for all residential rental property and nonresidential real property. Turbo tax 2011 download Under this convention, you treat all property placed in service, or disposed of, during any month as placed in service, or disposed of, at the midpoint of that month. Turbo tax 2011 download Mid-quarter convention. Turbo tax 2011 download   A mid-quarter convention must be used if the mid-month convention does not apply and the total depreciable basis of MACRS property placed in service in the last 3 months of a tax year (excluding nonresidential real property, residential rental property, and property placed in service and disposed of in the same year) is more than 40% of the total basis of all such property you place in service during the year. Turbo tax 2011 download   Under this convention, you treat all property placed in service, or disposed of, during any quarter of a tax year as placed in service, or disposed of, at the midpoint of the quarter. Turbo tax 2011 download Example. Turbo tax 2011 download During the tax year, Tom Martin purchased the following items to use in his rental property. Turbo tax 2011 download He elects not to claim the special depreciation allowance discussed earlier. Turbo tax 2011 download A dishwasher for $400 that he placed in service in January. Turbo tax 2011 download Used furniture for $100 that he placed in service in September. Turbo tax 2011 download A refrigerator for $800 that he placed in service in October. Turbo tax 2011 download Tom uses the calendar year as his tax year. Turbo tax 2011 download The total basis of all property placed in service that year is $1,300. Turbo tax 2011 download The $800 basis of the refrigerator placed in service during the last 3 months of his tax year exceeds $520 (40% × $1,300). Turbo tax 2011 download Tom must use the mid-quarter convention instead of the half-year convention for all three items. Turbo tax 2011 download Half-year convention. Turbo tax 2011 download    The half-year convention is used if neither the mid-quarter convention nor the mid-month convention applies. Turbo tax 2011 download Under this convention, you treat all property placed in service, or disposed of, during a tax year as placed in service, or disposed of, at the midpoint of that tax year. Turbo tax 2011 download   If this convention applies, you deduct a half year of depreciation for the first year and the last year that you depreciate the property. Turbo tax 2011 download You deduct a full year of depreciation for any other year during the recovery period. Turbo tax 2011 download Figuring Your Depreciation Deduction You can figure your MACRS depreciation deduction in one of two ways. Turbo tax 2011 download The deduction is substantially the same both ways. Turbo tax 2011 download You can either: Actually compute the deduction using the depreciation method and convention that apply over the recovery period of the property, or Use the percentage from the MACRS percentage tables. Turbo tax 2011 download In this publication we will use the percentage tables. Turbo tax 2011 download For instructions on how to compute the deduction, see chapter 4 of Publication 946. Turbo tax 2011 download Residential rental property. Turbo tax 2011 download   You must use the straight line method and a mid-month convention for residential rental property. Turbo tax 2011 download In the first year that you claim depreciation for residential rental property, you can claim depreciation only for the number of months the property is in use, and you must use the mid-month convention (explained under Conventions , earlier). Turbo tax 2011 download 5-, 7-, or 15-year property. Turbo tax 2011 download   For property in the 5- or 7-year class, use the 200% declining balance method and a half-year convention. Turbo tax 2011 download However, in limited cases you must use the mid-quarter convention, if it applies. Turbo tax 2011 download For property in the 15-year class, use the 150% declining balance method and a half-year convention. Turbo tax 2011 download   You can also choose to use the 150% declining balance method for property in the 5- or 7-year class. Turbo tax 2011 download The choice to use the 150% method for one item in a class of property applies to all property in that class that is placed in service during the tax year of the election. Turbo tax 2011 download You make this election on Form 4562. Turbo tax 2011 download In Part III, column (f), enter “150 DB. Turbo tax 2011 download ” Once you make this election, you cannot change to another method. Turbo tax 2011 download   If you use either the 200% or 150% declining balance method, you figure your deduction using the straight line method in the first tax year that the straight line method gives you an equal or larger deduction. Turbo tax 2011 download   You can also choose to use the straight line method with a half-year or mid-quarter convention for 5-, 7-, or 15-year property. Turbo tax 2011 download The choice to use the straight line method for one item in a class of property applies to all property in that class that is placed in service during the tax year of the election. Turbo tax 2011 download You elect the straight line method on Form 4562. Turbo tax 2011 download In Part III, column (f), enter “S/L. Turbo tax 2011 download ” Once you make this election, you cannot change to another method. Turbo tax 2011 download MACRS Percentage Tables You can use the percentages in Table 2-2, earlier, to compute annual depreciation under MACRS. Turbo tax 2011 download The tables show the percentages for the first few years or until the change to the straight line method is made. Turbo tax 2011 download See Appendix A of Publication 946 for complete tables. Turbo tax 2011 download The percentages in Tables 2-2a, 2-2b, and 2-2c make the change from declining balance to straight line in the year that straight line will give a larger deduction. Turbo tax 2011 download If you elect to use the straight line method for 5-, 7-, or 15-year property, or the 150% declining balance method for 5- or 7-year property, use the tables in Appendix A of Publication 946. Turbo tax 2011 download How to use the percentage tables. Turbo tax 2011 download   You must apply the table rates to your property's unadjusted basis (defined below) each year of the recovery period. Turbo tax 2011 download   Once you begin using a percentage table to figure depreciation, you must continue to use it for the entire recovery period unless there is an adjustment to the basis of your property for a reason other than: Depreciation allowed or allowable, or An addition or improvement that is depreciated as a separate item of property. Turbo tax 2011 download   If there is an adjustment for any reason other than (1) or (2), for example, because of a deductible casualty loss, you can no longer use the table. Turbo tax 2011 download For the year of the adjustment and for the remaining recovery period, figure depreciation using the property's adjusted basis at the end of the year and the appropriate depreciation method, as explained earlier under Figuring Your Depreciation Deduction . Turbo tax 2011 download See Figuring the Deduction Without Using the Tables in Publication 946, chapter 4. Turbo tax 2011 download Unadjusted basis. Turbo tax 2011 download   This is the same basis you would use to figure gain on a sale (see Basis of Depreciable Property , earlier), but without reducing your original basis by any MACRS depreciation taken in earlier years. Turbo tax 2011 download   However, you do reduce your original basis by other amounts claimed on the property, including: Any amortization, Any section 179 deduction, and Any special depreciation allowance. Turbo tax 2011 download For more information, see chapter 4 of Publication 946. Turbo tax 2011 download Please click here for the text description of the image. Turbo tax 2011 download Table 2-2 Tables 2-2a, 2-2b, and 2-2c. Turbo tax 2011 download   The percentages in these tables take into account the half-year and mid-quarter conventions. Turbo tax 2011 download Use Table 2-2a for 5-year property, Table 2-2b for 7-year property, and Table 2-2c for 15-year property. Turbo tax 2011 download Use the percentage in the second column (half-year convention) unless you are required to use the mid-quarter convention (explained earlier). Turbo tax 2011 download If you must use the mid-quarter convention, use the column that corresponds to the calendar year quarter in which you placed the property in service. Turbo tax 2011 download Example 1. Turbo tax 2011 download You purchased a stove and refrigerator and placed them in service in June. Turbo tax 2011 download Your basis in the stove is $600 and your basis in the refrigerator is $1,000. Turbo tax 2011 download Both are 5-year property. Turbo tax 2011 download Using the half-year convention column in Table 2-2a, the depreciation percentage for Year 1 is 20%. Turbo tax 2011 download For that year your depreciation deduction is $120 ($600 × . Turbo tax 2011 download 20) for the stove and $200 ($1,000 × . Turbo tax 2011 download 20) for the refrigerator. Turbo tax 2011 download For Year 2, the depreciation percentage is 32%. Turbo tax 2011 download That year's depreciation deduction will be $192 ($600 × . Turbo tax 2011 download 32) for the stove and $320 ($1,000 × . Turbo tax 2011 download 32) for the refrigerator. Turbo tax 2011 download Example 2. Turbo tax 2011 download Assume the same facts as in Example 1, except you buy the refrigerator in October instead of June. Turbo tax 2011 download Since the refrigerator was placed in service in the last 3 months of the tax year, and its basis ($1,000) is more than 40% of the total basis of all property placed in service during the year ($1,600 × . Turbo tax 2011 download 40 = $640), you are required to use the mid-quarter convention to figure depreciation on both the stove and refrigerator. Turbo tax 2011 download Because you placed the refrigerator in service in October, you use the fourth quarter column of Table 2-2a and find the depreciation percentage for Year 1 is 5%. Turbo tax 2011 download Your depreciation deduction for the refrigerator is $50 ($1,000 x . Turbo tax 2011 download 05). Turbo tax 2011 download Because you placed the stove in service in June, you use the second quarter column of Table 2-2a and find the depreciation percentage for Year 1 is 25%. Turbo tax 2011 download For that year, your depreciation deduction for the stove is $150 ($600 x . Turbo tax 2011 download 25). Turbo tax 2011 download Table 2-2d. Turbo tax 2011 download    Use this table when you are using the GDS 27. Turbo tax 2011 download 5 year option for residential rental property. Turbo tax 2011 download Find the row for the month that you placed the property in service. Turbo tax 2011 download Use the percentages listed for that month to figure your depreciation deduction. Turbo tax 2011 download The mid-month convention is taken into account in the percentages shown in the table. Turbo tax 2011 download Continue to use the same row (month) under the column for the appropriate year. Turbo tax 2011 download Example. Turbo tax 2011 download You purchased a single family rental house for $185,000 and placed it in service on February 8. Turbo tax 2011 download The sales contract showed that the building cost $160,000 and the land cost $25,000. Turbo tax 2011 download Your basis for depreciation is its original cost, $160,000. Turbo tax 2011 download This is the first year of service for your residential rental property and you decide to use GDS which has a recovery period of 27. Turbo tax 2011 download 5 years. Turbo tax 2011 download Using Table 2-2d, you find that the percentage for property placed in service in February of Year 1 is 3. Turbo tax 2011 download 182%. Turbo tax 2011 download That year's depreciation deduction is $5,091 ($160,000 x . Turbo tax 2011 download 03182). Turbo tax 2011 download Figuring MACRS Depreciation Under ADS Table 2–1, earlier, shows the ADS recovery periods for property used in rental activities. Turbo tax 2011 download See Appendix B in Publication 946 for other property. Turbo tax 2011 download If your property is not listed in Appendix B, it is considered to have no class life. Turbo tax 2011 download Under ADS, personal property with no class life is depreciated using a recovery period of 12 years. Turbo tax 2011 download Use the mid-month convention for residential rental property and nonresidential real property. Turbo tax 2011 download For all other property, use the half-year or mid-quarter convention, as appropriate. Turbo tax 2011 download See Publication 946 for ADS depreciation tables. Turbo tax 2011 download Claiming the Correct Amount of Depreciation You should claim the correct amount of depreciation each tax year. Turbo tax 2011 download If you did not claim all the depreciation you were entitled to deduct, you must still reduce your basis in the property by the full amount of depreciation that you could have deducted. Turbo tax 2011 download For more information, see Depreciation under Decreases to Basis in Publication 551. Turbo tax 2011 download If you deducted an incorrect amount of depreciation for property in any year, you may be able to make a correction by filing Form 1040X, Amended U. Turbo tax 2011 download S. Turbo tax 2011 download Individual Income Tax Return. Turbo tax 2011 download If you are not allowed to make the correction on an amended return, you can change your accounting method to claim the correct amount of depreciation. Turbo tax 2011 download Filing an amended return. Turbo tax 2011 download   You can file an amended return to correct the amount of depreciation claimed for any property in any of the following situations. Turbo tax 2011 download You claimed the incorrect amount because of a mathematical error made in any year. Turbo tax 2011 download You claimed the incorrect amount because of a posting error made in any year. Turbo tax 2011 download You have not adopted a method of accounting for property placed in service by you in tax years ending after December 29, 2003. Turbo tax 2011 download You claimed the incorrect amount on property placed in service by you in tax years ending before December 30, 2003. Turbo tax 2011 download   Generally, you adopt a method of accounting for depreciation by using a permissible method of determining depreciation when you file your first tax return for the property used in your rental activity. Turbo tax 2011 download This also occurs when you use the same impermissible method of determining depreciation (for example, using the wrong MACRS recovery period) in two or more consecutively filed tax returns. Turbo tax 2011 download   If an amended return is allowed, you must file it by the later of the following dates. Turbo tax 2011 download 3 years from the date you filed your original return for the year in which you did not deduct the correct amount. Turbo tax 2011 download A return filed before an unextended due date is considered filed on that due date. Turbo tax 2011 download 2 years from the time you paid your tax for that year. Turbo tax 2011 download Changing your accounting method. Turbo tax 2011 download   To change your accounting method, you generally must file Form 3115, Application for Change in Accounting Method, to get the consent of the IRS. Turbo tax 2011 download In some instances, that consent is automatic. Turbo tax 2011 download For more information, see Changing Your Accounting Method in Publication 946,  chapter 1. Turbo tax 2011 download Prev  Up  Next   Home   More Online Publications
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Understanding Your CP211D Notice

We denied your request to extend the time to file your Exempt Organization Return for an additional three months because your Form 8868, Application for Extension of Time To File an Exempt Organization Return, Part II, Line 7 didn’t explain the need for additional time OR establish reasons that prevented you from filing by the extended due date.


What you need to do

  • File your required Exempt Organization Return immediately to limit any late filing penalties. If your Exempt Organization Return is filed after the due date of the return (including any extensions), the return is considered late and subject to late filing penalties.
  • We encourage you to use electronic filing – the fastest and easiest way to file.

You may want to

  • Visit www.irs.gov/Charities-&-Non-Profits to learn about approved e-File providers, what types of returns can be filed electronically, and whether you are required to file electronically.

Answers to Common Questions

Q. Where can I go for more information about tax-exempt organizations?

A. For more information on Employee Benefit Plans, see Tax Information for Charities & Other Non-Profits.

Q. Can I get help over the phone?

A. If you have questions and/or need help, you can call 1-877-829-5500. Personal assistance is available Monday through Friday, 7:00 a.m. to 7:00 p.m. CT.


Tips for next year

Be sure to sign and mail your Form 8868 with a reason you need an extension on or before the due date of your return.

Page Last Reviewed or Updated: 24-Jan-2014

Printable samples of this notice (PDF)

 

 

How to get help

  • Call the 1-800 number listed on the top right corner of your notice.
  • Authorize someone (e.g., accountant) to contact the IRS on your behalf using Form 2848.
  • See if you qualify for help from a Low Income Taxpayer Clinic.
     

The Turbo Tax 2011 Download

Turbo tax 2011 download Publication 555 - Additional Material Prev  Up  Next   Home   More Online Publications