Publication 334
taxmap/pubs/p334-024.htm#en_us_publink100025336If property you acquire to use in your business is expected to
last more than 1 year, you generally cannot deduct the entire cost as a business
expense in the year you acquire it. You must spread the cost over more than 1
tax year and deduct part of it each year on Schedule C. This method of deducting
the cost of business property is called depreciation.
The discussion here is brief. You will find more information
about depreciation in Publication 946.
taxmap/pubs/p334-024.htm#en_us_publink100025337You can depreciate property if it meets all the following requirements.
- It must be property you own.
- It must be used in business or held to produce income. You
never can depreciate inventory (explained in chapter 2) because it is not held
for use in your business.
- It must have a useful life that extends substantially beyond
the year it is placed in service.
- It must have a determinable useful life, which means that
it must be something that wears out, decays, gets used up, becomes obsolete, or
loses its value from natural causes. You never can depreciate the cost of land
because land does not wear out, become obsolete, or get used up.
- It must not be excepted property. This includes property placed
in service and disposed of in the same year.
You cannot depreciate repairs and replacements that do not increase the value of
your property, make it more useful, or lengthen its useful life. You can deduct
these amounts on line 21 of Schedule C or line 2 of Schedule C-EZ.
taxmap/pubs/p334-024.htm#en_us_publink100025339The method for depreciating most business and investment property
placed in service after 1986 is called the Modified Accelerated Cost Recovery
System (MACRS). MACRS is discussed in detail in Publication 946.
taxmap/pubs/p334-024.htm#en_us_publink100025340You can elect to deduct a limited amount of the cost of certain
depreciable property in the year you place the property in service. This
deduction is known as the "section 179 deduction." The maximum amount you can
elect to deduct during 2010 is generally $500,000 (higher limits apply to
certain property).
This limit is generally reduced by the amount by which the cost
of the property placed in service during the tax year exceeds $2 million. The
total amount of depreciation (including the section 179 deduction) you can take
for a passenger automobile you use in your business and first place in service
in 2010 is $3,060 ($11,060 if you take the special depreciation allowance for
qualified passenger automobiles placed in service in 2010). Special rules apply
to trucks and vans. For more information, see Publication 946. It explains what
property qualifies for the deduction, what limits apply to the deduction, and
when and how to recapture the deduction.
 |
Your section 179 election for the cost of any sport utility vehicle (SUV) and
certain other vehicles is limited to $25,000. For more information, see the
Instructions for Form 4562 or Publication 946. |
taxmap/pubs/p334-024.htm#en_us_publink100025342You must follow special rules and recordkeeping requirements
when depreciating listed property. Listed property is any of the following.
- Most passenger automobiles.
- Most other property used for transportation.
- Any property of a type generally used for entertainment, recreation,
or amusement.
- Certain computers and related peripheral equipment.
For more information about listed property, see Publication 946.
taxmap/pubs/p334-024.htm#en_us_publink100025343Use Form 4562, Depreciation and Amortization, if you are claiming
any of the following.
- Depreciation on property placed in service during the current
tax year.
- A section 179 deduction.
- Depreciation on any listed property (regardless of when it
was placed in service).
| If you have to use Form 4562, you must file Schedule C. You
cannot use Schedule C-EZ.
|
Previous Page |
Table of Contents |
Index |
Next Page
