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1040 Ez Forms 2012

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1040 Ez Forms 2012

1040 ez forms 2012 8. 1040 ez forms 2012   Qualified Tuition Program (QTP) Table of Contents Introduction What Is a Qualified Tuition ProgramDesignated beneficiary. 1040 ez forms 2012 Half-time student. 1040 ez forms 2012 How Much Can You Contribute Are Distributions TaxableFiguring the Taxable Portion of a Distribution Additional Tax on Taxable Distributions Rollovers and Other TransfersRollovers Changing the Designated Beneficiary Introduction Qualified tuition programs (QTPs) are also called “529 plans. 1040 ez forms 2012 ” States may establish and maintain programs that allow you to either prepay or contribute to an account for paying a student's qualified education expenses at a postsecondary institution. 1040 ez forms 2012 Eligible educational institutions may establish and maintain programs that allow you to prepay a student's qualified education expenses. 1040 ez forms 2012 If you prepay tuition, the student (designated beneficiary) will be entitled to a waiver or a payment of qualified education expenses. 1040 ez forms 2012 You cannot deduct either payments or contributions to a QTP. 1040 ez forms 2012 For information on a specific QTP, you will need to contact the state agency or eligible educational institution that established and maintains it. 1040 ez forms 2012 What is the tax benefit of a QTP. 1040 ez forms 2012   No tax is due on a distribution from a QTP unless the amount distributed is greater than the beneficiary's adjusted qualified education expenses. 1040 ez forms 2012 See Are Distributions Taxable , later, for more information. 1040 ez forms 2012    Even if a QTP is used to finance a student's education, the student or the student's parents still may be eligible to claim the American opportunity credit or the lifetime learning credit. 1040 ez forms 2012 See Coordination With American Opportunity and Lifetime Learning Credits, later. 1040 ez forms 2012 What Is a Qualified Tuition Program A qualified tuition program is a program set up to allow you to either prepay, or contribute to an account established for paying, a student's qualified education expenses at an eligible educational institution. 1040 ez forms 2012 QTPs can be established and maintained by states (or agencies or instrumentalities of a state) and eligible educational institutions. 1040 ez forms 2012 The program must meet certain requirements. 1040 ez forms 2012 Your state government or the eligible educational institution in which you are interested can tell you whether or not they participate in a QTP. 1040 ez forms 2012 Qualified education expenses. 1040 ez forms 2012   These are expenses related to enrollment or attendance at an Eligible educational institution (defined later). 1040 ez forms 2012 As shown in the following list, to be qualified, some of the expenses must be required by the institution and some must be incurred by students who are enrolled at least half-time. 1040 ez forms 2012 See Half-time student , later. 1040 ez forms 2012 The following expenses must be required for enrollment or attendance of a Designated beneficiary (defined later) at an eligible educational institution. 1040 ez forms 2012 Tuition and fees. 1040 ez forms 2012 Books, supplies, and equipment. 1040 ez forms 2012 Expenses for special needs services needed by a special needs beneficiary must be incurred in connection with enrollment or attendance at an eligible educational institution. 1040 ez forms 2012 Expenses for room and board must be incurred by students who are enrolled at least half-time. 1040 ez forms 2012 The expense for room and board qualifies only to the extent that it is not more than the greater of the following two amounts. 1040 ez forms 2012 The allowance for room and board, as determined by the eligible educational institution, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student. 1040 ez forms 2012 The actual amount charged if the student is residing in housing owned or operated by the eligible educational institution. 1040 ez forms 2012 You will need to contact the eligible educational institution for qualified room and board costs. 1040 ez forms 2012    For tax years after 2010, the purchase of computer technology or equipment is only a qualified education expense if the computer technology or equipment is required for enrollment or attendance at an eligible institution. 1040 ez forms 2012 Designated beneficiary. 1040 ez forms 2012   The designated beneficiary is generally the student (or future student) for whom the QTP is intended to provide benefits. 1040 ez forms 2012 The designated beneficiary can be changed after participation in the QTP begins. 1040 ez forms 2012 If a state or local government or certain tax-exempt organizations purchase an interest in a QTP as part of a scholarship program, the designated beneficiary is the person who receives the interest as a scholarship. 1040 ez forms 2012 Half-time student. 1040 ez forms 2012   A student is enrolled “at least half-time” if he or she is enrolled for at least half the full-time academic workload for the course of study the student is pursuing, as determined under the standards of the school where the student is enrolled. 1040 ez forms 2012 Eligible educational institution. 1040 ez forms 2012   For purposes of a QTP, this is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U. 1040 ez forms 2012 S. 1040 ez forms 2012 Department of Education. 1040 ez forms 2012 It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. 1040 ez forms 2012 The educational institution should be able to tell you if it is an eligible educational institution. 1040 ez forms 2012   Certain educational institutions located outside the United States also participate in the U. 1040 ez forms 2012 S. 1040 ez forms 2012 Department of Education's Federal Student Aid (FSA) programs. 1040 ez forms 2012   How Much Can You Contribute Contributions to a QTP on behalf of any beneficiary cannot be more than the amount necessary to provide for the qualified education expenses of the beneficiary. 1040 ez forms 2012 There are no income restrictions on the individual contributors. 1040 ez forms 2012 You can contribute to both a QTP and a Coverdell ESA in the same year for the same designated beneficiary. 1040 ez forms 2012   Are Distributions Taxable The part of a distribution representing the amount paid or contributed to a QTP does not have to be included in income. 1040 ez forms 2012 This is a return of the investment in the plan. 1040 ez forms 2012 The designated beneficiary generally does not have to include in income any earnings distributed from a QTP if the total distribution is less than or equal to adjusted qualified education expenses (defined under Figuring the Taxable Portion of a Distribution , later). 1040 ez forms 2012 Earnings and return of investment. 1040 ez forms 2012    You will receive a Form 1099-Q, from each of the programs from which you received a QTP distribution in 2013. 1040 ez forms 2012 The amount of your gross distribution (box 1) shown on each form will be divided between your earnings (box 2) and your basis, or return of investment (box 3). 1040 ez forms 2012 Form 1099-Q should be sent to you by January 31, 2014. 1040 ez forms 2012 Figuring the Taxable Portion of a Distribution To determine if total distributions for the year are more or less than the amount of qualified education expenses, you must compare the total of all QTP distributions for the tax year to the adjusted qualified education expenses. 1040 ez forms 2012 Adjusted qualified education expenses. 1040 ez forms 2012   This amount is the total qualified education expenses reduced by any tax-free educational assistance. 1040 ez forms 2012 Tax-free educational assistance includes: The tax-free part of scholarships and fellowships (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Veterans' educational assistance (see Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Pell grants (see Pell Grants and Other Title IV Need-Based Education Grants in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Employer-provided educational assistance (see chapter 11, Employer-Provided Educational Assistance ), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. 1040 ez forms 2012 Taxable earnings. 1040 ez forms 2012   Use the following steps to figure the taxable part. 1040 ez forms 2012 Multiply the total distributed earnings shown in box 2 of Form 1099-Q by a fraction. 1040 ez forms 2012 The numerator is the adjusted qualified education expenses paid during the year and the denominator is the total amount distributed during the year. 1040 ez forms 2012 Subtract the amount figured in (1) from the total distributed earnings. 1040 ez forms 2012 The result is the amount the beneficiary must include in income. 1040 ez forms 2012 Report it on Form 1040 or Form 1040NR, line 21. 1040 ez forms 2012 Example 1. 1040 ez forms 2012 In 2007, Sara Clarke's parents opened a savings account for her with a QTP maintained by their state government. 1040 ez forms 2012 Over the years they contributed $18,000 to the account. 1040 ez forms 2012 The total balance in the account was $27,000 on the date the distribution was made. 1040 ez forms 2012 In the summer of 2013, Sara enrolled in college and had $8,300 of qualified education expenses for the rest of the year. 1040 ez forms 2012 She paid her college expenses from the following sources. 1040 ez forms 2012   Gift from parents $1,600     Partial tuition scholarship (tax-free) 3,100     QTP distribution 5,300           Before Sara can determine the taxable part of her QTP distribution, she must reduce her total qualified education expenses by any tax-free educational assistance. 1040 ez forms 2012   Total qualified education expenses $8,300     Minus: Tax-free educational assistance −3,100     Equals: Adjusted qualified  education expenses (AQEE) $5,200   Since the remaining expenses ($5,200) are less than the QTP distribution, part of the earnings will be taxable. 1040 ez forms 2012 Sara's Form 1099-Q shows that $950 of the QTP distribution is earnings. 1040 ez forms 2012 Sara figures the taxable part of the distributed earnings as follows. 1040 ez forms 2012   1. 1040 ez forms 2012 $950 (earnings) × $5,200 AQEE  $5,300 distribution           =$932 (tax-free earnings)     2. 1040 ez forms 2012 $950 (earnings)−$932 (tax-free earnings)     =$18 (taxable earnings)  Sara must include $18 in income (Form 1040, line 21) as distributed QTP earnings not used for adjusted qualified education expenses. 1040 ez forms 2012 Coordination With American Opportunity and Lifetime Learning Credits An American opportunity or lifetime learning credit (education credit) can be claimed in the same year the beneficiary takes a tax-free distribution from a QTP, as long as the same expenses are not used for both benefits. 1040 ez forms 2012 This means that after the beneficiary reduces qualified education expenses by tax-free educational assistance, he or she must further reduce them by the expenses taken into account in determining the credit. 1040 ez forms 2012 Example 2. 1040 ez forms 2012 Assume the same facts as in Example 1 , except that Sara's parents claimed an American opportunity credit of $2,500 (based on $4,000 expenses). 1040 ez forms 2012   Total qualified education expenses $8,300     Minus: Tax-free educational assistance −3,100     Minus: Expenses taken into account  in figuring American opportunity credit −4,000     Equals: Adjusted qualified  education expenses (AQEE) $1,200           The taxable part of the distribution is figured as follows. 1040 ez forms 2012   1. 1040 ez forms 2012 $950 (earnings) × $1,200 AQEE  $5,300 distribution           =$215 (tax-free earnings)     2. 1040 ez forms 2012 $950 (earnings)−$215 (tax-free earnings)     =$735 (taxable earnings)       Sara must include $735 in income (Form 1040, line 21). 1040 ez forms 2012 This represents distributed earnings not used for adjusted qualified education expenses. 1040 ez forms 2012 Coordination With Coverdell ESA Distributions If a designated beneficiary receives distributions from both a QTP and a Coverdell ESA in the same year, and the total of these distributions is more than the beneficiary's adjusted qualified higher education expenses, the expenses must be allocated between the distributions. 1040 ez forms 2012 For purposes of this allocation, disregard any qualified elementary and secondary education expenses. 1040 ez forms 2012 Example 3. 1040 ez forms 2012 Assume the same facts as in Example 2 , except that instead of receiving a $5,300 distribution from her QTP, Sara received $4,600 from that account and $700 from her Coverdell ESA. 1040 ez forms 2012 In this case, Sara must allocate her $1,200 of adjusted qualified higher education expenses (AQHEE) between the two distributions. 1040 ez forms 2012   $1,200 AQHEE × $700 ESA distribution  $5,300 total distribution = $158 AQHEE (ESA)     $1,200 AQHEE × $4,600 QTP distribution  $5,300 total distribution = $1,042 AQHEE (QTP)   Sara then figures the taxable portion of her Coverdell ESA distribution based on qualified higher education expenses of $158, and the taxable portion of her QTP distribution based on the other $1,042. 1040 ez forms 2012 Note. 1040 ez forms 2012 If you are required to allocate your expenses between Coverdell ESA and QTP distributions, and you have adjusted qualified elementary and secondary education expenses, see the examples in chapter 7, Coverdell Education Savings Account under Coordination With Qualified Tuition Program (QTP) Distributions . 1040 ez forms 2012 Coordination With Tuition and Fees Deduction. 1040 ez forms 2012   A tuition and fees deduction can be claimed in the same year the beneficiary takes a tax-free distribution from a QTP, as long as the same expenses are not used for both benefits. 1040 ez forms 2012 Losses on QTP Investments If you have a loss on your investment in a QTP account, you may be able to take the loss on your income tax return. 1040 ez forms 2012 You can take the loss only when all amounts from that account have been distributed and the total distributions are less than your unrecovered basis. 1040 ez forms 2012 Your basis is the total amount of contributions to that QTP account. 1040 ez forms 2012 You claim the loss as a miscellaneous itemized deduction on Schedule A (Form 1040), line 23 (Schedule A (Form 1040NR), line 9), subject to the 2%-of-adjusted-gross-income limit. 1040 ez forms 2012 If you have distributions from more than one QTP account during a year, you must combine the information (amount of distribution, basis, etc. 1040 ez forms 2012 ) from all such accounts in order to determine your taxable earnings for the year. 1040 ez forms 2012 By doing this, the loss from one QTP account reduces the distributed earnings (if any) from any other QTP accounts. 1040 ez forms 2012 Example 1. 1040 ez forms 2012 In 2013, Taylor received a final distribution of $1,000 from QTP #1. 1040 ez forms 2012 His unrecovered basis in that account before the distribution was $3,000. 1040 ez forms 2012 If Taylor itemizes his deductions, he can claim the $2,000 loss on Schedule A (Form 1040). 1040 ez forms 2012 Example 2. 1040 ez forms 2012 Assume the same facts as in Example 1 , except that Taylor also had a distribution of $9,000 from QTP #2, giving him total distributions for 2013 of $10,000. 1040 ez forms 2012 His total basis in these distributions was $4,500 ($3,000 for QTP #1 and $1,500 for QTP #2). 1040 ez forms 2012 Taylor's adjusted qualified education expenses for 2013 totaled $6,000. 1040 ez forms 2012 In order to figure his taxable earnings, Taylor combines the two accounts and determines his taxable earnings as follows. 1040 ez forms 2012   1. 1040 ez forms 2012 $10,000 (total distribution)−$4,500 (basis portion of distribution)     = $5,500 (earnings included in distribution)   2. 1040 ez forms 2012 $5,500 (earnings) x $6,000 AQEE  $10,000 distribution           =$3,300 (tax-free earnings)     3. 1040 ez forms 2012 $5,500 (earnings)−$3,300 (tax-free earnings)     =$2,200 (taxable earnings)                 Taylor must include $2,200 in income on Form 1040, line 21. 1040 ez forms 2012 Because Taylor's accounts must be combined, he cannot deduct his $2,000 loss (QTP #1) on Schedule A (Form 1040). 1040 ez forms 2012 Instead, the $2,000 loss reduces the total earnings that were distributed, thereby reducing his taxable earnings. 1040 ez forms 2012 Additional Tax on Taxable Distributions Generally, if you receive a taxable distribution, you also must pay a 10% additional tax on the amount included in income. 1040 ez forms 2012 Exceptions. 1040 ez forms 2012   The 10% additional tax does not apply to distributions: Paid to a beneficiary (or to the estate of the designated beneficiary) on or after the death of the designated beneficiary. 1040 ez forms 2012 Made because the designated beneficiary is disabled. 1040 ez forms 2012 A person is considered to be disabled if he or she shows proof that he or she cannot do any substantial gainful activity because of his or her physical or mental condition. 1040 ez forms 2012 A physician must determine that his or her condition can be expected to result in death or to be of long-continued and indefinite duration. 1040 ez forms 2012 Included in income because the designated beneficiary received: A tax-free scholarship or fellowship (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Veterans' educational assistance (see Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Employer-provided educational assistance (see chapter 11, Employer-Provided Educational Assistance ), or Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. 1040 ez forms 2012 Made on account of the attendance of the designated beneficiary at a U. 1040 ez forms 2012 S. 1040 ez forms 2012 military academy (such as the USNA at Annapolis). 1040 ez forms 2012 This exception applies only to the extent that the amount of the distribution does not exceed the costs of advanced education (as defined in section 2005(d)(3) of title 10 of the U. 1040 ez forms 2012 S. 1040 ez forms 2012 Code) attributable to such attendance. 1040 ez forms 2012 Included in income only because the qualified education expenses were taken into account in determining the American opportunity or lifetime learning credit (see Coordination With American Opportunity and Lifetime Learning Credits , earlier. 1040 ez forms 2012 ) Exception (3) applies only to the extent the distribution is not more than the scholarship, allowance, or payment. 1040 ez forms 2012 Figuring the additional tax. 1040 ez forms 2012    Use Part II of Form 5329, to figure any additional tax. 1040 ez forms 2012 Report the amount on Form 1040, line 58, or Form 1040NR, line 56. 1040 ez forms 2012 Rollovers and Other Transfers Assets can be rolled over or transferred from one QTP to another. 1040 ez forms 2012 In addition, the designated beneficiary can be changed without transferring accounts. 1040 ez forms 2012 Rollovers Any amount distributed from a QTP is not taxable if it is rolled over to another QTP for the benefit of the same beneficiary or for the benefit of a member of the beneficiary's family (including the beneficiary's spouse). 1040 ez forms 2012 An amount is rolled over if it is paid to another QTP within 60 days after the date of the distribution. 1040 ez forms 2012 Do not report qualifying rollovers (those that meet the above criteria) anywhere on Form 1040 or 1040NR. 1040 ez forms 2012 These are not taxable distributions. 1040 ez forms 2012 Members of the beneficiary's family. 1040 ez forms 2012   For these purposes, the beneficiary's family includes the beneficiary's spouse and the following other relatives of the beneficiary. 1040 ez forms 2012 Son, daughter, stepchild, foster child, adopted child, or a descendant of any of them. 1040 ez forms 2012 Brother, sister, stepbrother, or stepsister. 1040 ez forms 2012 Father or mother or ancestor of either. 1040 ez forms 2012 Stepfather or stepmother. 1040 ez forms 2012 Son or daughter of a brother or sister. 1040 ez forms 2012 Brother or sister of father or mother. 1040 ez forms 2012 Son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law. 1040 ez forms 2012 The spouse of any individual listed above. 1040 ez forms 2012 First cousin. 1040 ez forms 2012 Example. 1040 ez forms 2012 When Aaron graduated from college last year he had $5,000 left in his QTP. 1040 ez forms 2012 He wanted to give this money to his younger brother, who was in junior high school. 1040 ez forms 2012 In order to avoid paying tax on the distribution of the amount remaining in his account, Aaron contributed the same amount to his brother's QTP within 60 days of the distribution. 1040 ez forms 2012 If the rollover is to another QTP for the same beneficiary, only one rollover is allowed within 12 months of a previous transfer to any QTP for that designated beneficiary. 1040 ez forms 2012 Changing the Designated Beneficiary There are no income tax consequences if the designated beneficiary of an account is changed to a member of the beneficiary's family. 1040 ez forms 2012 See Members of the beneficiary's family , earlier. 1040 ez forms 2012 Example. 1040 ez forms 2012 Assume the same situation as in the last example. 1040 ez forms 2012 Instead of closing his QTP and paying the distribution into his brother's QTP, Aaron could have instructed the trustee of his account to simply change the name of the beneficiary on his account to that of his brother. 1040 ez forms 2012 Prev  Up  Next   Home   More Online Publications
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The 1040 Ez Forms 2012

1040 ez forms 2012 Tax Changes for Businesses Table of Contents 2001 ChangesNew 5-Year Carryback Rule for Net Operating Losses (NOLs) Electronic Form 1099 Tax Incentives for New York Liberty Zone Other 2001 Changes 2002 ChangesNonaccrual-Experience Method Issuance of Qualified Zone Academy Bonds Depletion Work Opportunity Credit Expanded in New York Liberty Zone Credit For Pension Plan Startup Costs Welfare-to-Work Credit Extended Work Opportunity Credit Extended Electric and Clean-Fuel Vehicles Renewable Electricity Production Credit Later ChangesSpecial Depreciation Allowance Extension of Placed in Service Date Special Liberty Zone Depreciation Allowance for New and Used Property Depreciation of Property Used on Indian Reservations Indian Employment Credit Extended 2001 Changes New 5-Year Carryback Rule for Net Operating Losses (NOLs) If you have an NOL from a tax year ending during 2001 or 2002, you must generally carry back the entire amount of the NOL to the 5 tax years before the NOL year (the carryback period). 1040 ez forms 2012 However, you can still choose to use the previous carryback period. 1040 ez forms 2012 You also can choose not to carry back an NOL and only carry it forward. 1040 ez forms 2012 Individuals, estates, and trusts can file Form 1045, Application for Tentative Refund. 1040 ez forms 2012 Corporations can file Form 1139, Corporation Application for Tentative Refund. 1040 ez forms 2012 The instructions for these forms will be revised to reflect the new law. 1040 ez forms 2012 Electronic Form 1099 For tax years ending after March 9, 2002, most Forms 1099 can be furnished electronically if the recipient consents, according to IRS regulations, to receive it that way. 1040 ez forms 2012 Tax Incentives for New York Liberty Zone New tax benefits are provided for the parts of New York City damaged in the terrorist attacks on September 11, 2001. 1040 ez forms 2012 These benefits apply to the newly created New York Liberty Zone, which is the area located on or south of Canal Street, East Broadway (east of its intersection with Canal Street), or Grand Street (east of its intersection with East Broadway), in the Borough of Manhattan. 1040 ez forms 2012 Tax benefits for the New York Liberty Zone include the following. 1040 ez forms 2012 A special depreciation allowance equal to 30% of the adjusted basis of qualified Liberty Zone property. 1040 ez forms 2012 It is allowed for the year the property is placed in service. 1040 ez forms 2012 No alternative minimum tax depreciation adjustment for qualified Liberty Zone property. 1040 ez forms 2012 Classification of Liberty Zone leasehold improvement property as 5-year property. 1040 ez forms 2012 Authorization of the issuance of tax-exempt New York Liberty bonds to finance the acquisition, construction, reconstruction, and renovation of nonresidential real property, residential rental property, and public utility property in the Liberty Zone. 1040 ez forms 2012 An increased section 179 deduction for certain Liberty Zone property. 1040 ez forms 2012 Extension of the replacement period from 2 years to 5 years for certain property involuntarily converted as a result of the terrorist attacks on September 11, 2001, but only if substantially all of the use of the replacement property is in New York City. 1040 ez forms 2012 For more information about involuntary conversions, see Postponement of Gain in Publication 547, Casualties, Disasters, and Thefts. 1040 ez forms 2012 In addition, for 2002 and 2003, the work opportunity credit is expanded by creating a new targeted group, consisting generally of employees who work in the Liberty Zone or, in certain cases, in New York City outside the Liberty Zone. 1040 ez forms 2012 For more information, see Work Opportunity Credit Expanded in New York Liberty Zone under 2002 Changes, later. 1040 ez forms 2012 For more information about the 30% special depreciation allowance, Liberty Zone leasehold improvement property, or increased section 179 deduction, see New York Liberty Zone Benefits, in chapter 5. 1040 ez forms 2012 In addition, the tax benefits for the Liberty Zone will be covered in a new edition of Publication 954, Tax Incentives for Empowerment Zones and Other Distressed Communities, available later in 2002. 1040 ez forms 2012 Other 2001 Changes Other changes are discussed in the following chapters. 1040 ez forms 2012 Chapter 4 Car Expenses Chapter 5 Depreciation 2002 Changes Nonaccrual-Experience Method Under current law, if you perform services and use an accrual method of accounting, you do not accrue income which, based on experience, you expect to be uncollectible. 1040 ez forms 2012 Beginning in 2002, this rule only applies if you perform services in the fields of health, law, engineering, architecture, accounting, actuarial science, performing arts, and consulting, or your average annual gross receipts for the 3 prior tax years does not exceed $5,000,000. 1040 ez forms 2012 As under current law, the nonaccrual-experience method will not apply to amounts on which you charge interest or a late payment penalty. 1040 ez forms 2012 For more information, see Nonaccrual-Experience Method in chapter 11 of Publication 535, Business Expenses. 1040 ez forms 2012 Issuance of Qualified Zone Academy Bonds State and local governments issue qualified zone academy bonds to raise funds for the use of qualified zone academies. 1040 ez forms 2012 The amount of bonds that may be issued was limited to $400 million each year for 1998, 1999, 2000, and 2001. 1040 ez forms 2012 This provision has been extended to provide for an additional $400 million of bonds to be issued each year for 2002 and 2003. 1040 ez forms 2012 For more information about qualified zone academy bonds, see Publication 954, Tax Incentives for Empowerment Zones and Other Distressed Communities. 1040 ez forms 2012 Depletion The suspension of the taxable income limit on percentage depletion from the marginal production of oil and natural gas that was scheduled to expire for tax years beginning after 2001 has been extended to tax years beginning before 2004. 1040 ez forms 2012 For more information on marginal production, see section 613A(c) of the Internal Revenue Code. 1040 ez forms 2012 Work Opportunity Credit Expanded in New York Liberty Zone The work opportunity credit is expanded to include a new targeted group consisting generally of employees who perform substantially all their services: In the New York Liberty Zone (defined earlier under Tax Incentives for New York Liberty Zone, under 2001 Changes), or Elsewhere in New York City for a business that relocated from the Liberty Zone due to the destruction or damage of its place of business by the September 11, 2001, terrorist attack. 1040 ez forms 2012 The credit is available to employers for wages paid to new employees and existing employees for work performed during 2002 or 2003. 1040 ez forms 2012 Certain limits apply. 1040 ez forms 2012 For more information about the work opportunity credit, see Publication 954, Tax Incentives for Empowerment Zones and Other Distressed Communities. 1040 ez forms 2012 Credit For Pension Plan Startup Costs The credit for pension plan startup costs is now allowed for plans that become effective after December 31, 2001. 1040 ez forms 2012 Previously, the credit was only allowed for plans established after December 31, 2001. 1040 ez forms 2012 For more information on the credit, see Important Changes for 2002 in Publication 560, Retirement Plans for Small Business. 1040 ez forms 2012 Welfare-to-Work Credit Extended The welfare-to-work credit that was scheduled to expire for wages paid to individuals who began working for you after 2001 has been extended to include wages paid to qualified individuals who begin work for you in 2002 or 2003. 1040 ez forms 2012 For more information on the welfare-to-work credit, see Publication 954, Tax Incentives for Empowerment Zones and Other Distressed Communities. 1040 ez forms 2012 Work Opportunity Credit Extended The work opportunity credit that was scheduled to expire for wages paid to individuals who began working for you after 2001 has been extended to include wages paid to qualified individuals who begin work for you in 2002 or 2003. 1040 ez forms 2012 For more information about the work opportunity credit, see Publication 954, Tax Incentives for Empowerment Zones and Other Distressed Communities. 1040 ez forms 2012 Electric and Clean-Fuel Vehicles The maximum clean-fuel vehicle deduction and qualified electric vehicle credit were scheduled to be 25% lower for 2002 and both were scheduled to be phased out completely by 2005. 1040 ez forms 2012 The full deduction and credit are now allowed for qualified property placed in service in 2002 and 2003. 1040 ez forms 2012 The phaseout of the deduction and the credit will begin in 2004, and no deduction or credit will be allowed for property placed in service after 2006. 1040 ez forms 2012 For more information about electric and clean-fuel vehicles, see chapter 12 in Publication 535, Business Expenses. 1040 ez forms 2012 Renewable Electricity Production Credit The renewable electricity production credit is extended to include electricity produced by facilities placed in service after 2001 and before 2004. 1040 ez forms 2012 Later Changes Special Depreciation Allowance You can claim the special depreciation allowance (an additional 30% depreciation deduction) for new property that you acquire before September 11, 2004, and place in service for your business generally before January 1, 2005, if you meet the other requirements for qualified property covered in chapter 5. 1040 ez forms 2012 Accordingly, you will generally no longer be able to claim the special depreciation allowance for the qualified property if you acquire it after September 10, 2004, or place it in service for your business after December 31, 2004. 1040 ez forms 2012 However, you will be able to claim the special Liberty Zone depreciation allowance (an additional 30% depreciation deduction) for most qualified property if you place it in service in the Liberty Zone after December 31, 2004, and generally before January 1, 2007, provided you meet the other requirements for qualified Liberty Zone property covered in chapter 5. 1040 ez forms 2012 Extension of Placed in Service Date To qualify for the special depreciation allowance, your property must meet certain tests, including the placed in service date test, as well as the other requirements covered in chapter 5 of this publication. 1040 ez forms 2012 To meet the placed in service date test, your property must generally be placed in service for use in your trade or business or for the production of income after September 10, 2001, and before January 1, 2005. 1040 ez forms 2012 However, certain property placed in service before January 1, 2006, may meet this test. 1040 ez forms 2012 Transportation property and property with a recovery period of 10 years or longer meet the test if one of the following applies. 1040 ez forms 2012 The property has an estimated production period of more than 2 years. 1040 ez forms 2012 The property has an estimated production period of more than 1 year and it costs more than $1 million. 1040 ez forms 2012 Transportation property is any tangible personal property used in the trade or business of transporting persons or property. 1040 ez forms 2012 For property that qualifies for the special depreciation allowance solely because of the one-year extension of the placed in service date, only the part of the basis attributable to manufacture, construction, or production before September 11, 2004, is eligible for the special depreciation allowance. 1040 ez forms 2012 Special Liberty Zone Depreciation Allowance for New and Used Property You can claim the special Liberty Zone depreciation allowance (an additional 30% depreciation deduction) for used property that you acquire after September 10, 2001, if the property meets the requirements listed under Qualified Liberty Zone Property in chapter 5 of this publication. 1040 ez forms 2012 You will be able to claim the allowance for both new and used property that you acquire after September 10, 2004, provided the property meets the other requirements for qualified Liberty Zone property. 1040 ez forms 2012 Depreciation of Property Used on Indian Reservations The special depreciation rules that apply to qualified property used on an Indian reservation were scheduled to expire for property placed in service after 2003. 1040 ez forms 2012 These special rules have been extended to include property placed in service in 2004. 1040 ez forms 2012 For more information about these rules, see Publication 946, How To Depreciate Property. 1040 ez forms 2012 Indian Employment Credit Extended The Indian employment credit that was scheduled to expire for tax years beginning after 2003 has been extended to include a tax year beginning in 2004. 1040 ez forms 2012 For more information about this credit, see Publication 954, Tax Incentives for Empowerment Zones and Other Distressed Communities. 1040 ez forms 2012 Prev  Up  Next   Home   More Online Publications