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

TurboTax Federal Free Edition - File Taxes Online

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

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


© 2012 - 2014 All rights reserved.

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

State Nm Us Tax

H&rblock ComPast Tax FormsAmending 2010 Taxes2012 Irs Form 1040ezIrs GovHow To File 1040ez OnlineFree File Federal And State Taxes2012 Amended Tax FormIrs Amended Tax Return 2011Irs Income Tax Forms 2011Ammended Tax ReturnFederal Income Tax Forms 2011Tax Forms 2012File Taxes FreeIrs Efile Form 4868Free Efile For 2012 Taxes2014 Federal Tax Form 1040ezEz Tax FormsH&rblock2011 Free Tax File2011 Tax Forms 1040ez1040nr ETurbotax 2011 Tax Preparation1040nr Tax Calculator1040x 2010 Instructions1040ezformFile A Free Tax ExtensionFederal Income Tax Instructions 1040ez2011 Taxes 2013Minimum Income To File TaxesState Income Tax Form1040nr 20111040ez Form InstructionsE File 1040x FreeHow To Fill Out The 1040ezIrs AmendmentHow To Do Amended Tax Return On TurbotaxWww Irs Gov Efile Index HtmlAmending A Tax ReturnIrs.gov/1040x

State Nm Us Tax

State nm us tax Publication 938 - Introductory Material Table of Contents Introduction Introduction Section references are to the Internal Revenue Code unless otherwise noted. State nm us tax This publication contains directories relating to real estate mortgage investment conduits (REMICs) and collateralized debt obligations (CDOs). State nm us tax The directory for each calendar quarter is based on information submitted to the IRS during that quarter. State nm us tax For each quarter, there is a directory of new REMICs and CDOs and, if required, a section containing amended listings. State nm us tax You can use the directory to find the representative of the REMIC or the issuer of the CDO from whom you can request tax information. State nm us tax The amended listing section shows changes to previously listed REMICs and CDOs. State nm us tax The update for each calendar quarter will be added to this publication approximately six weeks after the end of the quarter. State nm us tax Publication 938 is only available on the Internet. State nm us tax To get Publication 938, including prior issues, visit IRS. State nm us tax gov. State nm us tax Future developments. State nm us tax   The IRS has created a page on IRS. State nm us tax gov that includes information about Publication 938 at www. State nm us tax irs. State nm us tax gov/pub938. State nm us tax Information about any future developments affecting Publication 938 (such as legislation enacted after we release it) will be posted on that page. State nm us tax Other information. State nm us tax   Publication 550, Investment Income and Expenses, discusses the tax treatment that applies to holders of these investment products. State nm us tax For other information about REMICs, see sections 860A through 860G and the regulations issued under those sections. State nm us tax Prev  Up  Next   Home   More Online Publications
Print - Click this link to Print this page

TEB FAQs

Tax Exempt Bonds FAQs Regarding Reissuance
Frequently asked questions regarding the application of reissuance rules under section 1001 of the Internal Revenue Code.

Frequently Asked Questions on Tax Credit Bonds and Specified Tax Credit bonds
List of question and answers concerning Tax Credit and Specified Tax Credit Bonds.

Frequently Asked Questions on Filing Requirements for Build America Bonds, Recovery Zone Economic Development Bonds and Specified Tax Credit Bonds
FAQs on filing build America, recovery zone economic development, and specified tax credit bonds.

Frequently Asked Questions on Build America Bonds and Recovery Zone Ecomonic Development Bonds
Frequently asked questions on Build America and Recovery Zone Ecomonic Development bonds.

Tax Exempt Bond FAQs Regarding Record Retention Requirements
During the course of an examination, TEB agents request material records and information necessary to support a municipal bond issue's compliance with IRC section 103.

Page Last Reviewed or Updated: 26-Mar-2014

The State Nm Us Tax

State nm us tax 4. State nm us tax   Figuring Depreciation Under MACRS Table of Contents Introduction Useful Items - You may want to see: Which Depreciation System (GDS or ADS) Applies? Which Property Class Applies Under GDS?Rent-to-own dealer. State nm us tax Rent-to-own contract. State nm us tax What Is the Placed in Service Date? What Is the Basis for Depreciation? Which Recovery Period Applies?Recovery Periods Under GDS Recovery Periods Under ADS Additions and Improvements Which Convention Applies? Which Depreciation Method Applies?Depreciation Methods for Farm Property Electing a Different Method How Is the Depreciation Deduction Figured?Using the MACRS Percentage Tables Figuring the Deduction Without Using the Tables Figuring the Deduction for Property Acquired in a Nontaxable Exchange Figuring the Deduction for a Short Tax Year How Do You Use General Asset Accounts?Grouping Property Figuring Depreciation for a GAA Disposing of GAA Property Terminating GAA Treatment Electing To Use a GAA When Do You Recapture MACRS Depreciation? Introduction The Modified Accelerated Cost Recovery System (MACRS) is used to recover the basis of most business and investment property placed in service after 1986. State nm us tax MACRS consists of two depreciation systems, the General Depreciation System (GDS) and the Alternative Depreciation System (ADS). State nm us tax Generally, these systems provide different methods and recovery periods to use in figuring depreciation deductions. State nm us tax To be sure you can use MACRS to figure depreciation for your property, see What Method Can You Use To Depreciate Your Property in chapter 1. State nm us tax This chapter explains how to determine which MACRS depreciation system applies to your property. State nm us tax It also discusses other information you need to know before you can figure depreciation under MACRS. State nm us tax This information includes the property's recovery class, placed in service date, and basis, as well as the applicable recovery period, convention, and depreciation method. State nm us tax It explains how to use this information to figure your depreciation deduction and how to use a general asset account to depreciate a group of properties. State nm us tax Finally, it explains when and how to recapture MACRS depreciation. State nm us tax Useful Items - You may want to see: Publication 225 Farmer's Tax Guide 463 Travel, Entertainment, Gift, and Car  Expenses 544 Sales and Other Dispositions of Assets 551 Basis of Assets 587 Business Use of Your Home (Including Use by Daycare Providers) Form (and Instructions) 2106 Employee Business Expenses 2106-EZ Unreimbursed Employee Business Expenses 4562 Depreciation and Amortization See chapter 6 for information about getting publications and forms. State nm us tax Which Depreciation System (GDS or ADS) Applies? Your use of either the General Depreciation System (GDS) or the Alternative Depreciation System (ADS) to depreciate property under MACRS determines what depreciation method and recovery period you use. State nm us tax You generally must use GDS unless you are specifically required by law to use ADS or you elect to use ADS. State nm us tax If you placed your property in service in 2013, complete Part III of Form 4562 to report depreciation using MACRS. State nm us tax Complete section B of Part III to report depreciation using GDS, and complete section C of Part III to report depreciation using ADS. State nm us tax If you placed your property in service before 2013 and are required to file Form 4562, report depreciation using either GDS or ADS on line 17 in Part III. State nm us tax Required use of ADS. State nm us tax   You must use ADS for the following property. State nm us tax Listed property used 50% or less in a qualified business use. State nm us tax See chapter 5 for information on listed property. State nm us tax Any tangible property used predominantly outside the United States during the year. State nm us tax Any tax-exempt use property. State nm us tax Any tax-exempt bond-financed property. State nm us tax All property used predominantly in a farming business and placed in service in any tax year during which an election not to apply the uniform capitalization rules to certain farming costs is in effect. State nm us tax Any property imported from a foreign country for which an Executive Order is in effect because the country maintains trade restrictions or engages in other discriminatory acts. State nm us tax If you are required to use ADS to depreciate your property, you cannot claim any special depreciation allowance (discussed in chapter 3) for the property. State nm us tax Electing ADS. State nm us tax   Although your property may qualify for GDS, you can elect to use ADS. State nm us tax The election generally must cover all property in the same property class that you placed in service during the year. State nm us tax However, the election for residential rental property and nonresidential real property can be made on a property-by-property basis. State nm us tax Once you make this election, you can never revoke it. State nm us tax   You make the election by completing line 20 in Part III of Form 4562. State nm us tax Which Property Class Applies Under GDS? The following is a list of the nine property classifications under GDS and examples of the types of property included in each class. State nm us tax These property classes are also listed under column (a) in section B, Part III, of Form 4562. State nm us tax For detailed information on property classes, see Appendix B, Table of Class Lives and Recovery Periods, in this publication. State nm us tax 3-year property. State nm us tax Tractor units for over-the-road use. State nm us tax Any race horse over 2 years old when placed in service. State nm us tax (All race horses placed in service after December 31, 2008, and before January 1, 2014, are deemed to be 3-year property, regardless of age. State nm us tax ) Any other horse (other than a race horse) over 12 years old when placed in service. State nm us tax Qualified rent-to-own property (defined later). State nm us tax 5-year property. State nm us tax Automobiles, taxis, buses, and trucks. State nm us tax Computers and peripheral equipment. State nm us tax Office machinery (such as typewriters, calculators, and copiers). State nm us tax Any property used in research and experimentation. State nm us tax Breeding cattle and dairy cattle. State nm us tax Appliances, carpets, furniture, etc. State nm us tax , used in a residential rental real estate activity. State nm us tax Certain geothermal, solar, and wind energy property. State nm us tax 7-year property. State nm us tax Office furniture and fixtures (such as desks, files, and safes). State nm us tax Agricultural machinery and equipment. State nm us tax Any property that does not have a class life and has not been designated by law as being in any other class. State nm us tax Certain motorsports entertainment complex property (defined later) placed in service before January 1, 2014. State nm us tax Any natural gas gathering line placed in service after April 11, 2005. State nm us tax See Natural gas gathering line and electric transmission property , later. State nm us tax 10-year property. State nm us tax Vessels, barges, tugs, and similar water transportation equipment. State nm us tax Any single purpose agricultural or horticultural structure. State nm us tax Any tree or vine bearing fruits or nuts. State nm us tax Qualified small electric meter and qualified smart electric grid system (defined later) placed in service on or after October 3, 2008. State nm us tax 15-year property. State nm us tax Certain improvements made directly to land or added to it (such as shrubbery, fences, roads, sidewalks, and bridges). State nm us tax Any retail motor fuels outlet (defined later), such as a convenience store. State nm us tax Any municipal wastewater treatment plant. State nm us tax Any qualified leasehold improvement property (defined later) placed in service before January 1, 2014. State nm us tax Any qualified restaurant property (defined later) placed in service before January 1, 2014. State nm us tax Initial clearing and grading land improvements for gas utility property. State nm us tax Electric transmission property (that is section 1245 property) used in the transmission at 69 or more kilovolts of electricity placed in service after April 11, 2005. State nm us tax See Natural gas gathering line and electric transmission property , later. State nm us tax Any natural gas distribution line placed in service after April 11, 2005 and before January 1, 2011. State nm us tax Any qualified retail improvement property placed in service before January 1, 2014. State nm us tax 20-year property. State nm us tax Farm buildings (other than single purpose agricultural or horticultural structures). State nm us tax Municipal sewers not classified as 25-year property. State nm us tax Initial clearing and grading land improvements for electric utility transmission and distribution plants. State nm us tax 25-year property. State nm us tax This class is water utility property, which is either of the following. State nm us tax Property that is an integral part of the gathering, treatment, or commercial distribution of water, and that, without regard to this provision, would be 20-year property. State nm us tax Municipal sewers other than property placed in service under a binding contract in effect at all times since June 9, 1996. State nm us tax Residential rental property. State nm us tax This is any building or structure, such as a rental home (including a mobile home), if 80% or more of its gross rental income for the tax year is from dwelling units. State nm us tax A dwelling unit is a house or apartment used to provide living accommodations in a building or structure. State nm us tax It does not include a unit in a hotel, motel, or other establishment where more than half the units are used on a transient basis. State nm us tax If you occupy any part of the building or structure for personal use, its gross rental income includes the fair rental value of the part you occupy. State nm us tax Nonresidential real property. State nm us tax This is section 1250 property, such as an office building, store, or warehouse, that is neither residential rental property nor property with a class life of less than 27. State nm us tax 5 years. State nm us tax Qualified rent-to-own property. State nm us tax   Qualified rent-to-own property is property held by a rent-to-own dealer for purposes of being subject to a rent-to-own contract. State nm us tax It is tangible personal property generally used in the home for personal use. State nm us tax It includes computers and peripheral equipment, televisions, videocassette recorders, stereos, camcorders, appliances, furniture, washing machines and dryers, refrigerators, and other similar consumer durable property. State nm us tax Consumer durable property does not include real property, aircraft, boats, motor vehicles, or trailers. State nm us tax   If some of the property you rent to others under a rent-to-own agreement is of a type that may be used by the renters for either personal or business purposes, you still can treat this property as qualified property as long as it does not represent a significant portion of your leasing property. State nm us tax However, if this dual-use property does represent a significant portion of your leasing property, you must prove that this property is qualified rent-to-own property. State nm us tax Rent-to-own dealer. State nm us tax   You are a rent-to-own dealer if you meet all the following requirements. State nm us tax You regularly enter into rent-to-own contracts (defined below) in the ordinary course of your business for the use of consumer property. State nm us tax A substantial portion of these contracts end with the customer returning the property before making all the payments required to transfer ownership. State nm us tax The property is tangible personal property of a type generally used within the home for personal use. State nm us tax Rent-to-own contract. State nm us tax   This is any lease for the use of consumer property between a rent-to-own dealer and a customer who is an individual which— Is titled “Rent-to-Own Agreement,” “Lease Agreement with Ownership Option,” or other similar language. State nm us tax Provides a beginning date and a maximum period of time, not to exceed 156 weeks or 36 months from the beginning date, for which the contract can be in effect (including renewals or options to extend). State nm us tax Provides for regular periodic (weekly or monthly) payments that can be either level or decreasing. State nm us tax If the payments are decreasing, no payment can be less than 40% of the largest payment. State nm us tax Provides for total payments that generally exceed the normal retail price of the property plus interest. State nm us tax Provides for total payments that do not exceed $10,000 for each item of property. State nm us tax Provides that the customer has no legal obligation to make all payments outlined in the contract and that, at the end of each weekly or monthly payment period, the customer can either continue to use the property by making the next payment or return the property in good working order with no further obligations and no entitlement to a return of any prior payments. State nm us tax Provides that legal title to the property remains with the rent-to-own dealer until the customer makes either all the required payments or the early purchase payments required under the contract to acquire legal title. State nm us tax Provides that the customer has no right to sell, sublease, mortgage, pawn, pledge, or otherwise dispose of the property until all contract payments have been made. State nm us tax Motorsports entertainment complex. State nm us tax   This is a racing track facility permanently situated on land that hosts one or more racing events for automobiles, trucks, or motorcycles during the 36-month period after the first day of the month in which the facility is placed in service. State nm us tax The events must be open to the public for the price of admission. State nm us tax Qualified smart electric grid system. State nm us tax   A qualified smart electric grid system means any smart grid property used as part of a system for electric distribution grid communications, monitoring, and management placed in service after October 3, 2008, by a taxpayer who is a supplier of electrical energy or a provider of electrical energy services. State nm us tax Smart grid property includes electronics and related equipment that is capable of: Sensing, collecting, and monitoring data of or from all portions of a utility's electric distribution grid, Providing real-time, two-way communications to monitor or to manage the grid, and Providing real-time analysis of an event prediction based on collected data that can be used to provide electric distribution system reliability, quality, and performance. State nm us tax Retail motor fuels outlet. State nm us tax   Real property is a retail motor fuels outlet if it is used to a substantial extent in the retail marketing of petroleum or petroleum products (whether or not it is also used to sell food or other convenience items) and meets any one of the following three tests. State nm us tax It is not larger than 1,400 square feet. State nm us tax 50% or more of the gross revenues generated from the property are derived from petroleum sales. State nm us tax 50% or more of the floor space in the property is devoted to petroleum marketing sales. State nm us tax A retail motor fuels outlet does not include any facility related to petroleum and natural gas trunk pipelines. State nm us tax Qualified leasehold improvement property. State nm us tax    Generally, this is any improvement to an interior part of a building (placed in service before January 1, 2014) that is nonresidential real property, provided all of the requirements discussed in chapter 3 under Qualified leasehold improvement property are met. State nm us tax   In addition, an improvement made by the lessor does not qualify as qualified leasehold improvement property to any subsequent owner unless it is acquired from the original lessor by reason of the lessor's death or in any of the following types of transactions. State nm us tax A transaction to which section 381(a) applies, A mere change in the form of conducting the trade or business so long as the property is retained in the trade or business as qualified leasehold improvement property and the taxpayer retains a substantial interest in the trade or business, A like-kind exchange, involuntary conversion, or reacquisition of real property to the extent that the basis in the property represents the carryover basis, or Certain nonrecognition transactions to the extent that your basis in the property is determined by reference to the transferor's or distributor's basis in the property. State nm us tax Examples include the following. State nm us tax A complete liquidation of a subsidiary. State nm us tax A transfer to a corporation controlled by the transferor. State nm us tax An exchange of property by a corporation solely for stock or securities in another corporation in a reorganization. State nm us tax Qualified restaurant property. State nm us tax   Qualified restaurant property is any section 1250 property that is a building placed in service after December 31, 2008, and before January 1, 2014. State nm us tax Also, more than 50% of the building's square footage must be devoted to preparation of meals and seating for on-premises consumption of prepared meals. State nm us tax Qualified smart electric meter. State nm us tax   A qualified smart electric meter is any time-based meter and related communication equipment which is placed in service by a supplier of electric energy or a provider of electric energy services and which is capable of being used by you as part of a system that: Measures and records electricity usage data on a time-differentiated basis in at least 24 separate time segments per day; Provides for the exchange of information between the supplier or provider and the customer's smart electric meter in support of time-based rates or other forms of demand response; Provides data to the supplier or provider so that the supplier or provider can provide energy usage information to customers electronically, and Provides all commercial and residential customers of such supplier or provider with net metering. State nm us tax Net metering means allowing a customer a credit, if any, as complies with applicable federal and state laws and regulations for providing electricity to the supplier or provider. State nm us tax Natural gas gathering line and electric transmission property. State nm us tax   Any natural gas gathering line placed in service after April 11, 2005, is treated as 7-year property, and electric transmission property (that is section 1245 property) used in the transmission at 69 or more kilovolts of electricity and any natural gas distribution line placed in service after April 11, 2005, are treated as 15-year property, if the following requirements are met. State nm us tax The original use of the property must have begun with you after April 11, 2005. State nm us tax Original use means the first use to which the property is put, whether or not by you. State nm us tax Therefore, property used by any person before April 12, 2005, is not original use. State nm us tax Original use includes additional capital expenditures you incurred to recondition or rebuild your property. State nm us tax However, original use does not include the cost of reconditioned or rebuilt property you acquired. State nm us tax Property containing used parts will not be treated as reconditioned or rebuilt if the cost of the used parts is not more than 20% of the total cost of the property. State nm us tax The property must not be placed in service under a binding contract in effect before April 12, 2005. State nm us tax The property must not be self-constructed property (property you manufacture, construct, or produce for your own use), if you began the manufacture, construction, or production of the property before April 12, 2005. State nm us tax Property that is manufactured, constructed, or produced for your use by another person under a written binding contract entered into by you or a related party before the manufacture, construction, or production of the property is considered to be manufactured, constructed, or produced by you. State nm us tax What Is the Placed in Service Date? You begin to claim depreciation when your property is placed in service for either use in a trade or business or the production of income. State nm us tax The placed in service date for your property is the date the property is ready and available for a specific use. State nm us tax It is therefore not necessarily the date it is first used. State nm us tax If you converted property held for personal use to use in a trade or business or for the production of income, treat the property as being placed in service on the conversion date. State nm us tax See Placed in Service under When Does Depreciation Begin and End in chapter 1 for examples illustrating when property is placed in service. State nm us tax What Is the Basis for Depreciation? The basis for depreciation of MACRS property is the property's cost or other basis multiplied by the percentage of business/investment use. State nm us tax For a discussion of business/investment use, see Partial business or investment use under Property Used in Your Business or Income-Producing Activity in chapter 1 . State nm us tax Reduce that amount by any credits and deductions allocable to the property. State nm us tax The following are examples of some credits and deductions that reduce basis. State nm us tax Any deduction for section 179 property. State nm us tax Any deduction under section 179B of the Internal Revenue Code for capital costs to comply with Environmental Protection Agency sulfur regulations. State nm us tax Any deduction under section 179C of the Internal Revenue Code for certain qualified refinery property placed in service after August 8, 2005, and before January 1, 2014. State nm us tax Any deduction under section 179D of the Internal Revenue Code for certain energy efficient commercial building property placed in service after December 31, 2005, and before January 1, 2014. State nm us tax Any deduction under section 179E of the Internal Revenue Code for qualified advanced mine safety equipment property placed in service after December 20, 2006, and before January 1, 2014 . State nm us tax Any deduction for removal of barriers to the disabled and the elderly. State nm us tax Any disabled access credit, enhanced oil recovery credit, and credit for employer-provided childcare facilities and services. State nm us tax Any special depreciation allowance. State nm us tax Basis adjustment for investment credit property under section 50(c) of the Internal Revenue Code. State nm us tax For additional credits and deductions that affect basis, see section 1016 of the Internal Revenue Code. State nm us tax Enter the basis for depreciation under column (c) in Part III of Form 4562. State nm us tax For information about how to determine the cost or other basis of property, see What Is the Basis of Your Depreciable Property in chapter 1 . State nm us tax Which Recovery Period Applies? The recovery period of property is the number of years over which you recover its cost or other basis. State nm us tax It is determined based on the depreciation system (GDS or ADS) used. State nm us tax Recovery Periods Under GDS Under GDS, property that is not qualified Indian reservation property is depreciated over one of the following recovery periods. State nm us tax Property Class Recovery Period 3-year property   3 years 1   5-year property   5 years     7-year property   7 years     10-year property   10 years     15-year property   15 years 2   20-year property   20 years     25-year property   25 years 3   Residential rental property   27. State nm us tax 5 years     Nonresidential real property   39 years 4   15 years for qualified rent-to-own property placed in service before August 6, 1997. State nm us tax 239 years for property that is a retail motor fuels outlet placed in service before August 20, 1996 (31. State nm us tax 5 years if placed in service before May 13, 1993), unless you elected to depreciate it over 15 years. State nm us tax 320 years for property placed in service before June 13, 1996, or under a binding contract in effect before June 10, 1996. State nm us tax 431. State nm us tax 5 years for property placed in service before May 13, 1993 (or before January 1, 1994, if the purchase or construction of the property is under a binding contract in effect before May 13, 1993, or if construction began before May 13, 1993). State nm us tax The GDS recovery periods for property not listed above can be found in Appendix B, Table of Class Lives and Recovery Periods. State nm us tax Residential rental property and nonresidential real property are defined earlier under Which Depreciation System (GDS or ADS) Applies. State nm us tax Enter the appropriate recovery period on Form 4562 under column (d) in section B of Part III, unless already shown (for 25-year property, residential rental property, and nonresidential real property). State nm us tax Office in the home. State nm us tax   If your home is a personal-use single family residence and you begin to use part of your home as an office, depreciate that part of your home as nonresidential real property over 39 years (31. State nm us tax 5 years if you began using it for business before May 13, 1993). State nm us tax However, if your home is an apartment in an apartment building that you own and the building is residential rental property as defined earlier under Which Depreciation System (GDS or ADS) Applies , depreciate the part used as an office as residential rental property over 27. State nm us tax 5 years. State nm us tax See Publication 587 for a discussion of the tests you must meet to claim expenses, including depreciation, for the business use of your home. State nm us tax Home changed to rental use. State nm us tax   If you begin to rent a home that was your personal home before 1987, you depreciate it as residential rental property over 27. State nm us tax 5 years. State nm us tax Indian Reservation Property The recovery periods for qualified property you placed in service on an Indian reservation after 1993 and before 2014 are shorter than those listed earlier. State nm us tax The following table shows these shorter recovery periods. State nm us tax Property Class Recovery  Period 3-year property 2 years 5-year property 3 years 7-year property 4 years 10-year property 6 years 15-year property 9 years 20-year property 12 years Nonresidential real property 22 years Nonresidential real property is defined earlier under Which Property Class Applies Under GDS . State nm us tax Use this chart to find the correct percentage table to use for qualified Indian reservation property. State nm us tax IF your recovery period is: THEN use the following table in Appendix A: 2 years A-21 3 years A-1, A-2, A-3, A-4, or A-5 4 years A-22 6 years A-23 9 years A-14, A-15, A-16, A-17, or A-18 12 years A-14, A-15, A-16, A-17, or A-18 22 years A-24 Qualified property. State nm us tax   Property eligible for the shorter recovery periods are 3-, 5-, 7-, 10-, 15-, and 20-year property and nonresidential real property. State nm us tax You must use this property predominantly in the active conduct of a trade or business within an Indian reservation. State nm us tax The rental of real property that is located on an Indian reservation is treated as the active conduct of a trade or business within an Indian reservation. State nm us tax   The following property is not qualified property. State nm us tax Property used or located outside an Indian reservation on a regular basis, other than qualified infrastructure property. State nm us tax Property acquired directly or indirectly from a related person. State nm us tax Property placed in service for purposes of conducting or housing class I, II, or III gaming activities. State nm us tax These activities are defined in section 4 of the Indian Regulatory Act (25 U. State nm us tax S. State nm us tax C. State nm us tax 2703). State nm us tax Any property you must depreciate under ADS. State nm us tax Determine whether property is qualified without regard to the election to use ADS and after applying the special rules for listed property not used predominantly for qualified business use (discussed in chapter 5). State nm us tax Qualified infrastructure property. State nm us tax   Item (1) above does not apply to qualified infrastructure property located outside the reservation that is used to connect with qualified infrastructure property within the reservation. State nm us tax Qualified infrastructure property is property that meets all the following rules. State nm us tax It is qualified property, as defined earlier, except that it is outside the reservation. State nm us tax It benefits the tribal infrastructure. State nm us tax It is available to the general public. State nm us tax It is placed in service in connection with the active conduct of a trade or business within a reservation. State nm us tax Infrastructure property includes, but is not limited to, roads, power lines, water systems, railroad spurs, and communications facilities. State nm us tax Related person. State nm us tax   For purposes of item (2) above, see Related persons in the discussion on property owned or used in 1986 under What Method Can You Use To Depreciate Your Property in chapter 1 for a description of related persons. State nm us tax Indian reservation. State nm us tax   The term Indian reservation means a reservation as defined in section 3(d) of the Indian Financing Act of 1974 (25 U. State nm us tax S. State nm us tax C. State nm us tax 1452(d)) or section 4(10) of the Indian Child Welfare Act of 1978 (25 U. State nm us tax S. State nm us tax C. State nm us tax 1903(10)). State nm us tax Section 3(d) of the Indian Financing Act of 1974 defines reservation to include former Indian reservations in Oklahoma. State nm us tax For a definition of the term “former Indian reservations in Oklahoma,” see Notice 98-45 in Internal Revenue Bulletin 1998-35. State nm us tax Recovery Periods Under ADS The recovery periods for most property generally are longer under ADS than they are under GDS. State nm us tax The following table shows some of the ADS recovery periods. State nm us tax Property Recovery  Period Rent-to-own property 4 years Automobiles and light duty trucks 5 years Computers and peripheral equipment 5 years High technology telephone station equipment installed on customer premises 5 years High technology medical equipment 5 years Personal property with no class life 12 years Natural gas gathering lines 14 years Single purpose agricultural and horticultural structures 15 years Any tree or vine bearing fruit or nuts 20 years Initial clearing and grading land  improvements for gas utility property 20 years Initial clearing and grading land  improvements for electric utility  transmission and distribution plants 25 years Electric transmission property used in the transmission at 69 or more kilovolts of electricity 30 years Natural gas distribution lines 35 years Any qualified leasehold improvement property 39 years Any qualified restaurant property 39 years Nonresidential real property 40 years Residential rental property 40 years Section 1245 real property not listed in Appendix B 40 years Railroad grading and tunnel bore 50 years The ADS recovery periods for property not listed above can be found in the tables in Appendix B. State nm us tax Rent-to-own property, qualified leasehold improvement property, qualified restaurant property, residential rental property, and nonresidential real property are defined earlier under Which Property Class Applies Under GDS . State nm us tax Tax-exempt use property subject to a lease. State nm us tax   The ADS recovery period for any property leased under a lease agreement to a tax-exempt organization, governmental unit, or foreign person or entity (other than a partnership) cannot be less than 125% of the lease term. State nm us tax Additions and Improvements An addition or improvement you make to depreciable property is treated as separate depreciable property. State nm us tax See How Do You Treat Repairs and Improvements in chapter 1 for a definition of improvements. State nm us tax Its property class and recovery period are the same as those that would apply to the original property if you had placed it in service at the same time you placed the addition or improvement in service. State nm us tax The recovery period begins on the later of the following dates. State nm us tax The date you place the addition or improvement in service. State nm us tax The date you place in service the property to which you made the addition or improvement. State nm us tax If the improvement you make is qualified leasehold improvement property, qualified restaurant property, or qualified retail improvement property, the GDS recovery period is 15 years (39 years under ADS). State nm us tax Example. State nm us tax You own a rental home that you have been renting out since 1981. State nm us tax If you put an addition on the home and place the addition in service this year, you would use MACRS to figure your depreciation deduction for the addition. State nm us tax Under GDS, the property class for the addition is residential rental property and its recovery period is 27. State nm us tax 5 years because the home to which the addition is made would be residential rental property if you had placed it in service this year. State nm us tax Which Convention Applies? Under MACRS, averaging conventions establish when the recovery period begins and ends. State nm us tax 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. State nm us tax The mid-month convention. State nm us tax   Use this convention for nonresidential real property, residential rental property, and any railroad grading or tunnel bore. State nm us tax   Under this convention, you treat all property placed in service or disposed of during a month as placed in service or disposed of at the midpoint of the month. State nm us tax This means that a one-half month of depreciation is allowed for the month the property is placed in service or disposed of. State nm us tax   Your use of the mid-month convention is indicated by the “MM” already shown under column (e) in Part III of Form 4562. State nm us tax The mid-quarter convention. State nm us tax   Use this convention if the mid-month convention does not apply and the total depreciable bases of MACRS property you placed in service during the last 3 months of the tax year (excluding nonresidential real property, residential rental property, any railroad grading or tunnel bore, property placed in service and disposed of in the same year, and property that is being depreciated under a method other than MACRS) are more than 40% of the total depreciable bases of all MACRS property you placed in service during the entire year. State nm us tax   Under this convention, you treat all property placed in service or disposed of during any quarter of the tax year as placed in service or disposed of at the midpoint of that quarter. State nm us tax This means that 1½ months of depreciation is allowed for the quarter the property is placed in service or disposed of. State nm us tax   If you use this convention, enter “MQ” under column (e) in Part III of Form 4562. State nm us tax    For purposes of determining whether the mid-quarter convention applies, the depreciable basis of property you placed in service during the tax year reflects the reduction in basis for amounts expensed under section 179 and the part of the basis of property attributable to personal use. State nm us tax However, it does not reflect any reduction in basis for any special depreciation allowance. State nm us tax The half-year convention. State nm us tax   Use this convention if neither the mid-quarter convention nor the mid-month convention applies. State nm us tax   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 the year. State nm us tax This means that a one-half year of depreciation is allowed for the year the property is placed in service or disposed of. State nm us tax   If you use this convention, enter “HY” under column (e) in Part III of Form 4562. State nm us tax Which Depreciation Method Applies? MACRS provides three depreciation methods under GDS and one depreciation method under ADS. State nm us tax The 200% declining balance method over a GDS recovery period. State nm us tax The 150% declining balance method over a GDS recovery period. State nm us tax The straight line method over a GDS recovery period. State nm us tax The straight line method over an ADS recovery period. State nm us tax For property placed in service before 1999, you could have elected the 150% declining balance method using the ADS recovery periods for certain property classes. State nm us tax If you made this election, continue to use the same method and recovery period for that property. State nm us tax Table 4–1 lists the types of property you can depreciate under each method. State nm us tax It also gives a brief explanation of the method, including any benefits that may apply. State nm us tax Depreciation Methods for Farm Property If you place personal property in service in a farming business after 1988, you generally must depreciate it under GDS using the 150% declining balance method unless you are a farmer who must depreciate the property under ADS using the straight line method or you elect to depreciate the property under GDS or ADS using the straight line method. State nm us tax You can depreciate real property using the straight line method under either GDS or ADS. State nm us tax Fruit or nut trees and vines. State nm us tax   Depreciate trees and vines bearing fruit or nuts under GDS using the straight line method over a recovery period of 10 years. State nm us tax ADS required for some farmers. State nm us tax   If you elect not to apply the uniform capitalization rules to any plant produced in your farming business, you must use ADS. State nm us tax You must use ADS for all property you place in service in any year the election is in effect. State nm us tax See the regulations under section 263A of the Internal Revenue Code for information on the uniform capitalization rules that apply to farm property. State nm us tax Electing a Different Method As shown in Table 4–1 , you can elect a different method for depreciation for certain types of property. State nm us tax You must make the election by the due date of the return (including extensions) for the year you placed the property in service. State nm us tax However, if you timely filed your return for the year without making the election, you still can make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). State nm us tax Attach the election to the amended return and write “Filed pursuant to section 301. State nm us tax 9100-2” on the election statement. State nm us tax File the amended return at the same address you filed the original return. State nm us tax Once you make the election, you cannot change it. State nm us tax If you elect to use a different method for one item in a property class, you must apply the same method to all property in that class placed in service during the year of the election. State nm us tax However, you can make the election on a property-by-property basis for nonresidential real and residential rental property. State nm us tax 150% election. State nm us tax   Instead of using the 200% declining balance method over the GDS recovery period for nonfarm property in the 3-, 5-, 7-, and 10-year property classes, you can elect to use the 150% declining balance method. State nm us tax Make the election by entering “150 DB” under column (f) in Part III of Form 4562. State nm us tax Straight line election. State nm us tax   Instead of using either the 200% or 150% declining balance methods over the GDS recovery period, you can elect to use the straight line method over the GDS recovery period. State nm us tax Make the election by entering  “S/L” under column (f) in Part III of Form 4562. State nm us tax Election of ADS. State nm us tax   As explained earlier under Which Depreciation System (GDS or ADS) Applies , you can elect to use ADS even though your property may come under GDS. State nm us tax ADS uses the straight line method of depreciation over fixed ADS recovery periods. State nm us tax Most ADS recovery periods are listed in Appendix B, or see the table under Recovery Periods Under ADS , earlier. State nm us tax   Make the election by completing line 20 in Part III of Form 4562. State nm us tax Farm property. State nm us tax   Instead of using the 150% declining balance method over a GDS recovery period for property you use in a farming business (other than real property), you can elect to depreciate it using either of the following methods. State nm us tax The straight line method over a GDS recovery period. State nm us tax The straight line method over an ADS recovery period. State nm us tax Table 4-1. State nm us tax Depreciation Methods Note. State nm us tax The declining balance method is abbreviated as DB and the straight line method is abbreviated as SL. State nm us tax Method Type of Property Benefit GDS using 200% DB • Nonfarm 3-, 5-, 7-, and 10-year property • Provides a greater deduction during the earlier recovery years • Changes to SL when that method provides an equal or greater deduction GDS using 150% DB • All farm property (except real property) • All 15- and 20-year property (except qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property placed in service before January 1, 2014) • Nonfarm 3-, 5-, 7-, and 10-year property • Provides a greater deduction during the earlier recovery years • Changes to SL when that method provides an equal or greater deduction1 GDS using SL • Nonresidential real property • Qualified leasehold improvement property placed in service before January 1, 2014 • Qualified restaurant property placed in service before January 1, 2014 • Qualified retail improvement property placed in service before January 1, 2014 • Residential rental property • Trees or vines bearing fruit or nuts • Water utility property • All 3-, 5-, 7-, 10-, 15-, and 20-year property2 • Property for which you elected section 168(k)(4) • Provides for equal yearly deductions (except for the first and last years) ADS using SL • Listed property used 50% or less for business • Property used predominantly outside the U. State nm us tax S. State nm us tax  • Tax-exempt property • Tax-exempt bond-financed property • Farm property used when an election not to apply the uniform capitalization rules is in effect • Imported property3 • Any property for which you elect to use this method4 • Provides for equal yearly deductions (except for the first and last years) 1The MACRS percentage tables in Appendix A have the switch to the straight line method built into their rates 2See section 168(b)(5) of the Internal Revenue Code. State nm us tax 3See section 168(g)(6) of the Internal Revenue Code 4See section 168(g)(7) of the Internal Revenue Code How Is the Depreciation Deduction Figured? To figure your depreciation deduction under MACRS, you first determine the depreciation system, property class, placed in service date, basis amount, recovery period, convention, and depreciation method that applies to your property. State nm us tax Then, you are ready to figure your depreciation deduction. State nm us tax You can figure it using a percentage table provided by the IRS, or you can figure it yourself without using the table. State nm us tax Using the MACRS Percentage Tables To help you figure your deduction under MACRS, the IRS has established percentage tables that incorporate the applicable convention and depreciation method. State nm us tax These percentage tables are in Appendix A near the end of this publication. State nm us tax Which table to use. State nm us tax    Appendix A contains the MACRS Percentage Table Guide, which is designed to help you locate the correct percentage table to use for depreciating your property. State nm us tax The percentage tables immediately follow the guide. State nm us tax Rules Covering the Use of the Tables The following rules cover the use of the percentage tables. State nm us tax You must apply the rates in the percentage tables to your property's unadjusted basis. State nm us tax You cannot use the percentage tables for a short tax year. State nm us tax See Figuring the Deduction for a Short Tax Year, later, for information on the short tax year rules. State nm us tax Once you start using the percentage tables for any item of property, you generally must continue to use them for the entire recovery period of the property. State nm us tax You must stop using the tables if you adjust the basis of the property for any reason other than— Depreciation allowed or allowable, or An addition or improvement to that property that is depreciated as a separate item of property. State nm us tax Basis adjustments other than those made due to the items listed in (4) include an increase in basis for the recapture of a clean-fuel deduction or credit and a reduction in basis for a casualty loss. State nm us tax Basis adjustment due to recapture of clean-fuel vehicle deduction or credit. State nm us tax   If you increase the basis of your property because of the recapture of part or all of a deduction for clean-fuel vehicles or the credit for clean-fuel vehicle refueling property placed in service before January 1, 2006, you cannot continue to use the percentage tables. State nm us tax For the year of the adjustment and the remaining recovery period, you must figure the depreciation deduction yourself using the property's adjusted basis at the end of the year. State nm us tax See Figuring the Deduction Without Using the Tables, later. State nm us tax Basis adjustment due to casualty loss. State nm us tax   If you reduce the basis of your property because of a casualty, you cannot continue to use the percentage tables. State nm us tax For the year of the adjustment and the remaining recovery period, you must figure the depreciation yourself using the property's adjusted basis at the end of the year. State nm us tax See Figuring the Deduction Without Using the Tables, later. State nm us tax Example. State nm us tax On October 26, 2012, Sandra Elm, a calendar year taxpayer, bought and placed in service in her business a new item of 7-year property. State nm us tax It cost $39,000 and she elected a section 179 deduction of $24,000. State nm us tax She also took a special depreciation allowance of $7,500 [50% of $15,000 ($39,000 − $24,000)]. State nm us tax Her unadjusted basis after the section 179 deduction and special depreciation allowance was $7,500 ($15,000 − $7,500). State nm us tax She figured her MACRS depreciation deduction using the percentage tables. State nm us tax For 2012, her MACRS depreciation deduction was $268. State nm us tax In July 2013, the property was vandalized and Sandra had a deductible casualty loss of $3,000. State nm us tax She must adjust the property's basis for the casualty loss, so she can no longer use the percentage tables. State nm us tax Her adjusted basis at the end of 2013, before figuring her 2013 depreciation, is $4,232. State nm us tax She figures that amount by subtracting the 2012 MACRS depreciation of $268 and the casualty loss of $3,000 from the unadjusted basis of $7,500. State nm us tax She must now figure her depreciation for 2013 without using the percentage tables. State nm us tax Figuring the Unadjusted Basis of Your Property You must apply the table rates to your property's unadjusted basis each year of the recovery period. State nm us tax Unadjusted basis is the same basis amount you would use to figure gain on a sale, but you figure it without reducing your original basis by any MACRS depreciation taken in earlier years. State nm us tax However, you do reduce your original basis by other amounts, including the following. State nm us tax Any amortization taken on the property. State nm us tax Any section 179 deduction claimed. State nm us tax Any special depreciation allowance taken on the property. State nm us tax For business property you purchase during the year, the unadjusted basis is its cost minus these and other applicable adjustments. State nm us tax If you trade property, your unadjusted basis in the property received is the cash paid plus the adjusted basis of the property traded minus these adjustments. State nm us tax MACRS Worksheet You can use this worksheet to help you figure your depreciation deduction using the percentage tables. State nm us tax Use a separate worksheet for each item of property. State nm us tax Then, use the information from this worksheet to prepare Form 4562. State nm us tax Do not use this worksheet for automobiles. State nm us tax Use the Depreciation Worksheet for Passenger Automobiles in chapter 5. State nm us tax MACRS Worksheet Part I   1. State nm us tax MACRS system (GDS or ADS)   2. State nm us tax Property class   3. State nm us tax Date placed in service   4. State nm us tax Recovery period   5. State nm us tax Method and convention   6. State nm us tax Depreciation rate (from tables)   Part II   7. State nm us tax Cost or other basis* $     8. State nm us tax Business/investment use   %   9. State nm us tax Multiply line 7 by line 8   $ 10. State nm us tax Total claimed for section 179 deduction and other items   $ 11. State nm us tax Subtract line 10 from line 9. State nm us tax This is your tentative basis for depreciation   $ 12. State nm us tax Multiply line 11 by . State nm us tax 50 if the 50% special depreciation allowance applies. State nm us tax This is your special depreciation allowance. State nm us tax Enter -0- if this is not the year you placed the property in service, the property is not qualified property, or you elected not to claim a special allowance   $ 13. State nm us tax Subtract line 12 from line 11. State nm us tax This is your basis for depreciation     14. State nm us tax Depreciation rate (from line 6)     15. State nm us tax Multiply line 13 by line 14. State nm us tax This is your MACRS depreciation deduction   $ *If real estate, do not include cost (basis) of land. State nm us tax The following example shows how to figure your MACRS depreciation deduction using the percentage tables and the MACRS worksheet. State nm us tax Example. State nm us tax You bought office furniture (7-year property) for $10,000 and placed it in service on August 11, 2013. State nm us tax You use the furniture only for business. State nm us tax This is the only property you placed in service this year. State nm us tax You did not elect a section 179 deduction and the property is not qualified property for purposes of claiming a special depreciation allowance so your property's unadjusted basis is its cost, $10,000. State nm us tax You use GDS and the half-year convention to figure your depreciation. State nm us tax You refer to the MACRS Percentage Table Guide in Appendix A and find that you should use Table A-1. State nm us tax Multiply your property's unadjusted basis each year by the percentage for 7-year property given in Table A-1. State nm us tax You figure your depreciation deduction using the MACRS worksheet as follows. State nm us tax MACRS Worksheet Part I 1. State nm us tax MACRS system (GDS or ADS) GDS 2. State nm us tax Property class 7-year 3. State nm us tax Date placed in service 8/11/13 4. State nm us tax Recovery period 7-Year 5. State nm us tax Method and convention 200%DB/Half-Year 6. State nm us tax Depreciation rate (from tables) . State nm us tax 1429 Part II 7. State nm us tax Cost or other basis* $10,000     8. State nm us tax Business/investment use 100 %   9. State nm us tax Multiply line 7 by line 8   $10,000 10. State nm us tax Total claimed for section 179 deduction and other items   -0- 11. State nm us tax Subtract line 10 from line 9. State nm us tax This is your tentative basis for depreciation   $10,000 12. State nm us tax Multiply line 11 by . State nm us tax 50 if the 50% special depreciation allowance applies. State nm us tax This is your special depreciation allowance. State nm us tax Enter -0- if this is not the year you placed the property in service, the property is not qualified property, or you elected not to claim a special allowance   -0- 13. State nm us tax Subtract line 12 from line 11. State nm us tax This is your basis for depreciation   $10,000 14. State nm us tax Depreciation rate (from line 6)   . State nm us tax 1429 15. State nm us tax Multiply line 13 by line 14. State nm us tax This is your MACRS depreciation deduction   $1,429 *If real estate, do not include cost (basis) of land. State nm us tax If there are no adjustments to the basis of the property other than depreciation, your depreciation deduction for each subsequent year of the recovery period will be as follows. State nm us tax Year   Basis Percentage Deduction 2014 $ 10,000 24. State nm us tax 49%   $2,449   2015   10,000 17. State nm us tax 49   1,749   2016   10,000 12. State nm us tax 49   1,249   2017   10,000 8. State nm us tax 93   893   2018   10,000 8. State nm us tax 92   892   2019   10,000 8. State nm us tax 93   893   2020   10,000 4. State nm us tax 46   446   Examples The following examples are provided to show you how to use the percentage tables. State nm us tax In both examples, assume the following. State nm us tax You use the property only for business. State nm us tax You use the calendar year as your tax year. State nm us tax You use GDS for all the properties. State nm us tax Example 1. State nm us tax You bought a building and land for $120,000 and placed it in service on March 8. State nm us tax The sales contract showed that the building cost $100,000 and the land cost $20,000. State nm us tax It is nonresidential real property. State nm us tax The building's unadjusted basis is its original cost, $100,000. State nm us tax You refer to the MACRS Percentage Table Guide in Appendix A and find that you should use Table A-7a. State nm us tax March is the third month of your tax year, so multiply the building's unadjusted basis, $100,000, by the percentages for the third month in Table A-7a. State nm us tax Your depreciation deduction for each of the first 3 years is as follows: Year   Basis Percentage Deduction 1st $ 100,000 2. State nm us tax 033%   $2,033   2nd   100,000 2. State nm us tax 564   2,564   3rd   100,000 2. State nm us tax 564   2,564   Example 2. State nm us tax During the year, you bought a machine (7-year property) for $4,000, office furniture (7-year property) for $1,000, and a computer (5-year property) for $5,000. State nm us tax You placed the machine in service in January, the furniture in September, and the computer in October. State nm us tax You do not elect a section 179 deduction and none of these items is qualified property for purposes of claiming a special depreciation allowance. State nm us tax You placed property in service during the last 3 months of the year, so you must first determine if you have to use the mid-quarter convention. State nm us tax The total bases of all property you placed in service during the year is $10,000. State nm us tax The $5,000 basis of the computer, which you placed in service during the last 3 months (the fourth quarter) of your tax year, is more than 40% of the total bases of all property ($10,000) you placed in service during the year. State nm us tax Therefore, you must use the mid-quarter convention for all three items. State nm us tax You refer to the MACRS Percentage Table Guide in Appendix A to determine which table you should use under the mid-quarter convention. State nm us tax The machine is 7-year property placed in service in the first quarter, so you use Table A-2. State nm us tax The furniture is 7-year property placed in service in the third quarter, so you use Table A-4. State nm us tax Finally, because the computer is 5-year property placed in service in the fourth quarter, you use Table A-6. State nm us tax Knowing what table to use for each property, you figure the depreciation for the first 2 years as follows. State nm us tax Year Property Basis Percentage Deduction 1st Machine $4,000 25. State nm us tax 00 $1,000   2nd Machine 4,000 21. State nm us tax 43 857   1st Furniture 1,000 10. State nm us tax 71 107   2nd Furniture 1,000 25. State nm us tax 51 255   1st Computer 5,000 5. State nm us tax 00 250   2nd Computer 5,000 38. State nm us tax 00 1,900   Sale or Other Disposition Before the Recovery Period Ends If you sell or otherwise dispose of your property before the end of its recovery period, your depreciation deduction for the year of the disposition will be only part of the depreciation amount for the full year. State nm us tax You have disposed of your property if you have permanently withdrawn it from use in your business or income-producing activity because of its sale, exchange, retirement, abandonment, involuntary conversion, or destruction. State nm us tax After you figure the full-year depreciation amount, figure the deductible part using the convention that applies to the property. State nm us tax Half-year convention used. State nm us tax   For property for which you used a half-year convention, the depreciation deduction for the year of the disposition is half the depreciation determined for the full year. State nm us tax Mid-quarter convention used. State nm us tax   For property for which you used the mid-quarter convention, figure your depreciation deduction for the year of the disposition by multiplying a full year of depreciation by the percentage listed below for the quarter in which you disposed of the property. State nm us tax Quarter Percentage First 12. State nm us tax 5% Second 37. State nm us tax 5 Third 62. State nm us tax 5 Fourth 87. State nm us tax 5 Example. State nm us tax On December 2, 2010, you placed in service an item of 5-year property costing $10,000. State nm us tax You did not claim a section 179 deduction and the property does not qualify for a special depreciation allowance. State nm us tax Your unadjusted basis for the property was $10,000. State nm us tax You used the mid-quarter convention because this was the only item of business property you placed in service in 2010 and it was placed in service during the last 3 months of your tax year. State nm us tax Your property is in the 5-year property class, so you used Table A-5 to figure your depreciation deduction. State nm us tax Your deductions for 2010, 2011, and 2012 were $500 (5% of $10,000), $3,800 (38% of $10,000), and $2,280 (22. State nm us tax 80% of $10,000). State nm us tax You disposed of the property on April 6, 2013. State nm us tax To determine your depreciation deduction for 2013, first figure the deduction for the full year. State nm us tax This is $1,368 (13. State nm us tax 68% of $10,000). State nm us tax April is in the second quarter of the year, so you multiply $1,368 by 37. State nm us tax 5% to get your depreciation deduction of $513 for 2013. State nm us tax Mid-month convention used. State nm us tax   If you dispose of residential rental or nonresidential real property, figure your depreciation deduction for the year of the disposition by multiplying a full year of depreciation by a fraction. State nm us tax The numerator of the fraction is the number of months (including partial months) in the year that the property is considered in service. State nm us tax The denominator is 12. State nm us tax Example. State nm us tax On July 2, 2011, you purchased and placed in service residential rental property. State nm us tax The property cost $100,000, not including the cost of land. State nm us tax You used Table A-6 to figure your MACRS depreciation for this property. State nm us tax You sold the property on March 2, 2013. State nm us tax You file your tax return based on the calendar year. State nm us tax A full year of depreciation for 2013 is $3,636. State nm us tax This is $100,000 multiplied by . State nm us tax 03636 (the percentage for the seventh month of the third recovery year) from Table A-6 . State nm us tax You then apply the mid-month convention for the 2½ months of use in 2013. State nm us tax Treat the month of disposition as one-half month of use. State nm us tax Multiply $3,636 by the fraction, 2. State nm us tax 5 over 12, to get your 2013 depreciation deduction of $757. State nm us tax 50. State nm us tax Figuring the Deduction Without Using the Tables Instead of using the rates in the percentage tables to figure your depreciation deduction, you can figure it yourself. State nm us tax Before making the computation each year, you must reduce your adjusted basis in the property by the depreciation claimed the previous year. State nm us tax Figuring MACRS deductions without using the tables generally will result in a slightly different amount than using the tables. State nm us tax Declining Balance Method When using a declining balance method, you apply the same depreciation rate each year to the adjusted basis of your property. State nm us tax You must use the applicable convention for the first tax year and you must switch to the straight line method beginning in the first year for which it will give an equal or greater deduction. State nm us tax The straight line method is explained later. State nm us tax You figure depreciation for the year you place property in service as follows. State nm us tax Multiply your adjusted basis in the property by the declining balance rate. State nm us tax Apply the applicable convention. State nm us tax You figure depreciation for all other years (before the year you switch to the straight line method) as follows. State nm us tax Reduce your adjusted basis in the property by the depreciation allowed or allowable in earlier years. State nm us tax Multiply this new adjusted basis by the same declining balance rate used in earlier years. State nm us tax If you dispose of property before the end of its recovery period, see Using the Applicable Convention, later, for information on how to figure depreciation for the year you dispose of it. State nm us tax Figuring depreciation under the declining balance method and switching to the straight line method is illustrated in Example 1 , later, under Examples. State nm us tax Declining balance rate. State nm us tax   You figure your declining balance rate by dividing the specified declining balance percentage (150% or 200% changed to a decimal) by the number of years in the property's recovery period. State nm us tax For example, for 3-year property depreciated using the 200% declining balance method, divide 2. State nm us tax 00 (200%) by 3 to get 0. State nm us tax 6667, or a 66. State nm us tax 67% declining balance rate. State nm us tax For 15-year property depreciated using the 150% declining balance method, divide 1. State nm us tax 50 (150%) by 15 to get 0. State nm us tax 10, or a 10% declining balance rate. State nm us tax   The following table shows the declining balance rate for each property class and the first year for which the straight line method gives an equal or greater deduction. State nm us tax Property Class Method Declining Balance Rate Year 3-year 200% DB 66. State nm us tax 667% 3rd 5-year 200% DB 40. State nm us tax 0 4th 7-year 200% DB 28. State nm us tax 571 5th 10-year 200% DB 20. State nm us tax 0 7th 15-year 150% DB 10. State nm us tax 0 7th 20-year 150% DB 7. State nm us tax 5 9th Straight Line Method When using the straight line method, you apply a different depreciation rate each year to the adjusted basis of your property. State nm us tax You must use the applicable convention in the year you place the property in service and the year you dispose of the property. State nm us tax You figure depreciation for the year you place property in service as follows. State nm us tax Multiply your adjusted basis in the property by the straight line rate. State nm us tax Apply the applicable convention. State nm us tax You figure depreciation for all other years (including the year you switch from the declining balance method to the straight line method) as follows. State nm us tax Reduce your adjusted basis in the property by the depreciation allowed or allowable in earlier years (under any method). State nm us tax Determine the depreciation rate for the year. State nm us tax Multiply the adjusted basis figured in (1) by the depreciation rate figured in (2). State nm us tax If you dispose of property before the end of its recovery period, see Using the Applicable Convention , later, for information on how to figure depreciation for the year you dispose of it. State nm us tax Straight line rate. State nm us tax   You determine the straight line depreciation rate for any tax year by dividing the number 1 by the years remaining in the recovery period at the beginning of that year. State nm us tax When figuring the number of years remaining, you must take into account the convention used in the year you placed the property in service. State nm us tax If the number of years remaining is less than 1, the depreciation rate for that tax year is 1. State nm us tax 0 (100%). State nm us tax Using the Applicable Convention The applicable convention (discussed earlier under Which Convention Applies ) affects how you figure your depreciation deduction for the year you place your property in service and for the year you dispose of it. State nm us tax It determines how much of the recovery period remains at the beginning of each year, so it also affects the depreciation rate for property you depreciate under the straight line method. State nm us tax See Straight line rate in the previous discussion. State nm us tax Use the applicable convention as explained in the following discussions. State nm us tax Half-year convention. State nm us tax   If this convention applies, you deduct a half-year of depreciation for the first year and the last year that you depreciate the property. State nm us tax You deduct a full year of depreciation for any other year during the recovery period. State nm us tax   Figure your depreciation deduction for the year you place the property in service by dividing the depreciation for a full year by 2. State nm us tax If you dispose of the property before the end of the recovery period, figure your depreciation deduction for the year of the disposition the same way. State nm us tax If you hold the property for the entire recovery period, your depreciation deduction for the year that includes the final 6 months of the recovery period is the amount of your unrecovered basis in the property. State nm us tax Mid-quarter convention. State nm us tax   If this convention applies, the depreciation you can deduct for the first year you depreciate the property depends on the quarter in which you place the property in service. State nm us tax   A quarter of a full 12-month tax year is a period of 3 months. State nm us tax The first quarter in a year begins on the first day of the tax year. State nm us tax The second quarter begins on the first day of the fourth month of the tax year. State nm us tax The third quarter begins on the first day of the seventh month of the tax year. State nm us tax The fourth quarter begins on the first day of the tenth month of the tax year. State nm us tax A calendar year is divided into the following quarters. State nm us tax Quarter Months First January, February, March Second April, May, June Third July, August, September Fourth October, November, December   Figure your depreciation deduction for the year you place the property in service by multiplying the depreciation for a full year by the percentage listed below for the quarter you place the property in service. State nm us tax Quarter Percentage First 87. State nm us tax 5% Second 62. State nm us tax 5 Third 37. State nm us tax 5 Fourth 12. State nm us tax 5   If you dispose of the property before the end of the recovery period, figure your depreciation deduction for the year of the disposition by multiplying a full year of depreciation by the percentage listed below for the quarter you dispose of the property. State nm us tax Quarter Percentage First 12. State nm us tax 5% Second 37. State nm us tax 5 Third 62. State nm us tax 5 Fourth 87. State nm us tax 5   If you hold the property for the entire recovery period, your depreciation deduction for the year that includes the final quarter of the recovery period is the amount of your unrecovered basis in the property. State nm us tax Mid-month convention. State nm us tax   If this convention applies, the depreciation you can deduct for the first year that you depreciate the property depends on the month in which you place the property in service. State nm us tax Figure your depreciation deduction for the year you place the property in service by multiplying the depreciation for a full year by a fraction. State nm us tax The numerator of the fraction is the number of full months in the year that the property is in service plus ½ (or 0. State nm us tax 5). State nm us tax The denominator is 12. State nm us tax   If you dispose of the property before the end of the recovery period, figure your depreciation deduction for the year of the disposition the same way. State nm us tax If you hold the property for the entire recovery period, your depreciation deduction for the year that includes the final month of the recovery period is the amount of your unrecovered basis in the property. State nm us tax Example. State nm us tax You use the calendar year and place nonresidential real property in service in August. State nm us tax The property is in service 4 full months (September, October, November, and December). State nm us tax Your numerator is 4. State nm us tax 5 (4 full months plus 0. State nm us tax 5). State nm us tax You multiply the depreciation for a full year by 4. State nm us tax 5/12, or 0. State nm us tax 375. State nm us tax Examples The following examples show how to figure depreciation under MACRS without using the percentage tables. State nm us tax Figures are rounded for purposes of the examples. State nm us tax Assume for all the examples that you use a calendar year as your tax year. State nm us tax Example 1—200% DB method and half-year convention. State nm us tax In February, you placed in service depreciable property with a 5-year recovery period and a basis of $1,000. State nm us tax You do not elect to take the section 179 deduction and the property does not qualify for a special depreciation allowance. State nm us tax You use GDS and the 200% declining balance (DB) method to figure your depreciation. State nm us tax When the straight line (SL) method results in an equal or larger deduction, you switch to the SL method. State nm us tax You did not place any property in service in the last 3 months of the year, so you must use the half-year convention. State nm us tax First year. State nm us tax You figure the depreciation rate under the 200% DB method by dividing 2 (200%) by 5 (the number of years in the recovery period). State nm us tax The result is 40%. State nm us tax You multiply the adjusted basis of the property ($1,000) by the 40% DB rate. State nm us tax You apply the half-year convention by dividing the result ($400) by 2. State nm us tax Depreciation for the first year under the 200% DB method is $200. State nm us tax You figure the depreciation rate under the straight line (SL) method by dividing 1 by 5, the number of years in the recovery period. State nm us tax The result is 20%. State nm us tax You multiply the adjusted basis of the property ($1,000) by the 20% SL rate. State nm us tax You apply the half-year convention by dividing the result ($200) by 2. State nm us tax Depreciation for the first year under the SL method is $100. State nm us tax The DB method provides a larger deduction, so you deduct the $200 figured under the 200% DB method. State nm us tax Second year. State nm us tax You reduce the adjusted basis ($1,000) by the depreciation claimed in the first year ($200). State nm us tax You multiply the result ($800) by the DB rate (40%). State nm us tax Depreciation for the second year under the 200% DB method is $320. State nm us tax You figure the SL depreciation rate by dividing 1 by 4. State nm us tax 5, the number of years remaining in the recovery period. State nm us tax (Based on the half-year convention, you used only half a year of the recovery period in the first year. State nm us tax ) You multiply the reduced adjusted basis ($800) by the result (22. State nm us tax 22%). State nm us tax Depreciation under the SL method for the second year is $178. State nm us tax The DB method provides a larger deduction, so you deduct the $320 figured under the 200% DB method. State nm us tax Third year. State nm us tax You reduce the adjusted basis ($800) by the depreciation claimed in the second year ($320). State nm us tax You multiply the result ($480) by the DB rate (40%). State nm us tax Depreciation for the third year under the 200% DB method is $192. State nm us tax You figure the SL depreciation rate by dividing 1 by 3. State nm us tax 5. State nm us tax You multiply the reduced adjusted basis ($480) by the result (28. State nm us tax 57%). State nm us tax Depreciation under the SL method for the third year is $137. State nm us tax The DB method provides a larger deduction, so you deduct the $192 figured under the 200% DB method. State nm us tax Fourth year. State nm us tax You reduce the adjusted basis ($480) by the de