Instructions For Schedule C 1040 - 2016 (Page 7 of 18) in pdf

trade, inventories, and land are not de-

See

Line

6, earlier, if the business use

cation” rules require you to allocate

preciable. Depreciation starts when you

percentage of any listed property drop-

(classify) your interest expense so it is

first use the property in your business or

ped to 50% or less in 2016.

deducted (or capitalized) on the correct

for the production of income. It ends

line of your return and receives the right

Line 14

when you take the property out of serv-

tax treatment. These rules could affect

ice, deduct all your depreciable cost or

how much interest you are allowed to

Deduct contributions to employee bene-

other basis, or no longer use the property

deduct on Schedule C or C-EZ.

fit programs that are not an incidental

in your business or for the production of

Generally, you allocate interest ex-

part of a pension or profit-sharing plan

income. You can also elect under sec-

pense by tracing how the proceeds of the

included on line 19. Examples are acci-

tion 179 to expense part or all of the cost

loan were used. See chapter 4 of Pub.

dent and health plans, group-term life

of certain property you bought in 2016

535 for details.

insurance, and dependent care assistance

for use in your business. See the Instruc-

If you paid interest on a debt secured

programs. If you made contributions on

tions for Form 4562 and Pub. 946 to fig-

by your main home and any of the pro-

your behalf as a self-employed person to

ure the amount to enter on line 13.

ceeds from that debt were used in con-

a dependent care assistance program,

When to attach Form 4562. You must

nection with your trade or business, see

complete Form 2441, Parts I and III, to

complete and attach Form 4562 only if

chapter 4 of Pub. 535 to figure the

figure your deductible contributions to

you are claiming:

that program.

amount that is deductible on Schedule C

Depreciation on property placed in

or C-EZ.

You cannot deduct contributions you

service during 2016;

How to report. If you have a mortgage

made on your behalf as a self-employed

Depreciation on listed property

on real property used in your business

person for group-term life insurance.

(defined later), regardless of the date it

(other than your main home), enter on

was placed in service; or

Do not include on line 14 any contri-

line 16a the interest you paid for 2016 to

A section 179 expense deduction.

butions you made on your behalf as a

banks or other financial institutions for

self-employed person to an accident and

If you acquired depreciable property

which you received a Form 1098 (or

health plan. However, you may be able

for the first time in 2016, see Pub. 946.

similar statement). If you did not receive

to deduct on Form 1040, line 29, or

Listed property generally includes

a Form 1098, enter the interest on

Form 1040NR, line 29, the amount you

but is not limited to:

line 16b.

paid for health insurance on behalf of

Passenger automobiles weighing

If you paid more mortgage interest

yourself, your spouse, and dependents,

6,000 pounds or less;

than is shown on Form 1098, see chap-

even if you do not itemize your deduc-

Any other property used for trans-

ter 4 of Pub. 535 to find out if you can

tions. See the instructions for Form

portation if the nature of the property

deduct the additional interest. If you can,

1040, line 29, or Form 1040NR, line 29,

lends itself to personal use, such as mo-

include the amount on line 16a. Attach a

for details.

torcycles, pickup trucks, etc.;

statement to your return explaining the

Any property used for entertain-

You must reduce your line 14 deduc-

difference and enter “See attached” in

ment or recreational purposes (such as

tion by the amount of any credit for

the margin next to line 16a.

photographic, phonographic, communi-

small employer health insurance premi-

If you and at least one other person

cation, and video recording equipment);

ums determined on Form 8941. See

(other than your spouse if you file a joint

and

Form 8941 and its instructions to deter-

return) were liable for and paid interest

Computers or peripheral equip-

mine which expenses are eligible for the

on the mortgage and the other person re-

ment.

credit.

ceived the Form 1098, include your

Exceptions. Listed property does not

share of the interest on line 16b. Attach

Line 15

include

photographic,

phonographic,

a statement to your return showing the

communication, or video equipment

name and address of the person who re-

Deduct premiums paid for business in-

used exclusively in your trade or busi-

ceived the Form 1098. In the margin

surance on line 15. Deduct on line 14

ness or at your regular business estab-

next to line 16b, enter “See attached.”

amounts paid for employee accident and

lishment. It also does not include any

health insurance. Do not deduct amounts

If you paid interest in 2016 that also

computer or peripheral equipment used

credited to a reserve for self-insurance

applies to future years, deduct only the

exclusively at a regular business estab-

or premiums paid for a policy that pays

part that applies to 2016.

lishment and owned or leased by the

for your lost earnings due to sickness or

person operating the establishment. For

Line 17

disability. For details, see chapter 6 of

purposes of these exceptions, a portion

Pub. 535.

of your home is treated as a regular busi-

Include on this line fees charged by ac-

ness establishment only if that portion

Lines 16a and 16b

countants and attorneys that are ordinary

meets the requirements under section

and necessary expenses directly related

280A(c)(1) for deducting expenses for

to operating your business.

Interest allocation rules. The tax treat-

the business use of your home.

ment of interest expense differs depend-

Include fees for tax advice related to

ing on its type. For example, home

your business and for preparation of the

mortgage interest and investment inter-

tax forms related to your business. Also

est are treated differently. “Interest allo-

C-7

Instructions For Schedule C 1040 - 2016 Page 7

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