Frequently Asked Tax Questions
Sale or Trade of Business, Depreciation, Rentals - Depreciation & Recapture
Rev. date: 1/2010The acquisition cost of a computer purchased for business use:
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Can be expensed under Code section 179 in the first year, if qualified, by electing to recover all or part of the cost up to a dollar limit, by deducting it in the year you place the property in service, and any remaining cost is depreciated over 5 years.
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Can be depreciated over a 5-year recovery period, if it is decided not to expense any of the cost under section 179.
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May be eligible for a 50-percent special depreciation allowance if the computer meets certain conditions.
NOTE: Increased section 179 limits. The maximum section 179 deduction you can elect for qualified property (section 179 property) placed in service in 2009 is $250,000 ($285,000, for qualified zone and qualified renewal property). This limit is reduced by the amount by which the cost of section 179 property placed in service during the tax year exceeds $800,000. You may also see the IRS site for
Code Section 179 for the expanded definition.
Rev. date: 1/2010To be depreciable, the property must:
- Be owned by you
- Be used in your trade or business or income producing activity
- Be something that wears out or becomes obsolete
- Have a determinable useful life substantially beyond the tax year
The kinds of property that can be depreciated include, but are not limited to, machinery, equipment, buildings, vehicles, and furniture. Some intangible property may also be depreciable (e.g. patents).
Rev. date: 1/2010The standard mileage rate:
- May be used in calculating your car or truck expense
- Already includes depreciation expense
Instead of the standard mileage rate, you can use the actual expense method. If you use this method, you need to figure depreciation for the vehicle.
The business use of a car or truck is claimed on:
- Line 9 and Part IV of Form 1040, Schedule C (PDF), Profit or Loss from Business or, if eligible, line 2 of Form 1040, Schedule C-EZ (PDF), if you are a sole proprietor.
- Form 2106 (PDF), Employee Business Expenses or, if eligible, line 1 of Form 2106-EZ (PDF), Unreimbursed Employee Business Expenses, and then with other employee business expenses on line 20 Form 1040 Schedule A , Itemized Deductions.
Rev. date: 1/2010If you qualify, for the part of your home that is a home office:
If you do not claim depreciation on that part of your home that is a home office, you are still required to reduce the basis of your home for the allowable depreciation of that part of your home that is a home office when reporting the sale of your home.
Rev. date: 1/2010Replacements of roof, rain gutters, windows, and furnace on a residential rental property:
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Are capital improvements to the structure because they materially add to the value of your property or substantially prolong its life.
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Would be in the same class of property as the rental property to which they are attached.
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Are generally depreciated over a recovery period of 27.5 years using the straight line method of depreciation and a mid-month convention since the property is residential rental property.
Repairs, such as repainting the residential rental property:
NOTE: Repainting your property, fixing gutters or floors, fixing leaks, plastering, and replacing broken windows are examples of repairs. If you make repairs as part of an extensive remodeling or restoration of your property, the whole job is an improvement. In that case, you should capitalize and depreciate the repair costs as the same class of property that you have restored or remodeled as discussed above.
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