Frequently Asked Tax Questions
Sale or Trade of Business, Depreciation, Rentals - Depreciation &
Recapture
Rev. date: 08/21/2012
The acquisition cost of a computer purchased for business use:
-
Can be expensed under Code section 179, if qualified, by electing to recover all or part of the cost up to a dollar limit, by deducting the cost in the year you place the computer in service, and, if there is any remaining cost, it is depreciated over 5
years.
-
Can be depreciated over a 5-year recovery period, if it is decided not to expense any of the cost under section
179.
-
May be eligible for a 100-percent special depreciation allowance if the computer meets certain conditions, instead of recovering the cost through the section 179 deduction and/or
depreciation.
NOTE: For tax years beginning in 2011, the
maximum section 179 deduction you can elect for qualified property (section 179
property) placed in service during the tax year is $500,000 ($535,000, for
qualified zone and qualified zone property). This limit is reduced by
the amount by which the cost of section 179 property placed in service
during the tax year exceeds $2,000,000.
Rev. date: 08/18/2012
To 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
- Be expected to last more than one 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: 08/18/2012
The standard mileage rate:
- May be used in calculating your automobile 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 an automobile 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),
Net Profit From Business, 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 21 of
Form 1040 Schedule A ,
Itemized Deductions.
Rev. date: 08/21/2012
If 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: 08/04/2012
Replacements
of roof, rain gutters, windows, and furnace on a residential rental property:
-
Are capital improvements to the structure because they materially add to the value of your property or substantially prolong its
life.
-
Would be in the same class of property as the residential rental property to which they are
attached.
-
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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