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Frequently Asked Tax Questions

Sale or Trade of Business, Depreciation, Rentals - Depreciation & Recapture

  1. Can I deduct as a business expense the entire acquisition cost of a computer that I purchased for my business or do I have to use depreciation?
  2. On what form do I deduct the standard mileage rate for my business travel, and do I also need to figure depreciation of the vehicle?
  3. I have a home office. Can I deduct expenses like mortgage, utilities, etc., but not deduct depreciation so that when I sell this house the basis won't be affected?
  4. We have incurred costs for substantial work on our residential rental property. We replaced the roof with all new materials, replaced all the gutters, replaced all the windows and doors, replaced the furnace, and painted the property’s exteriors. What are the IRS rules concerning depreciation?

Rev. date: 01/13/2016

Can I deduct as a business expense the entire acquisition cost of a computer that I purchased for my business or do I have to use depreciation?

You may be able to deduct the acquisition cost of a computer purchased for business use in several ways:
Note: For taxable years beginning in 2015, a taxpayer may immediately expense up to $500,000 of Section 179 property placed in service during that taxable year, with a dollar for dollar phaseout of the maximum deductible amount for purchases in excess of $2,000,000. For taxable years beginning in 2015, it also extends the definition of section 179 property to include computer software and $250,000 of the cost of qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property.

Rev. date: 02/16/2016

On what form do I deduct the standard mileage rate for my business travel, and do I also need to figure depreciation of the vehicle?

Many taxpayers find using the standard mileage rate an easier way to expense their vehicle. You cannot depreciate the vehicle if you use the standard mileage rate. 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.
You can claim business use of an automobile on:

Rev. date: 11/05/2015

I have a home office. Can I deduct expenses like mortgage, utilities, etc., but not deduct depreciation so that when I sell this house the basis won't be affected?

Regular Method - No, all allowed or allowable depreciation must be considered at the time of sale. You can generally figure depreciation on the business use portion of your home up to the gross income limitation, over a 39 year recovery period and using the mid-month convention. As long as you determine actual expenses and the correct amount of allowed or allowable depreciation, the depreciation reduces the basis of your home accordingly, whether or not you actually claim it on your tax return.  
Simplified Option - Since 2013, there is a simpler option (see Revenue Procedure 2013-13). Qualifying taxpayers may use a prescribed rate ($5 per square foot limited to 300 square feet) to compute their business use of home deduction. This option used in lieu of determining actual expenses has the advantage of reducing taxpayers' recordkeeping burden. Under this option, depreciation is treated as zero and will not reduce the basis of your home. For more information, visit Home Office Deduction and Simplified Option for Home Office Deduction. In addition, under this optional method, taxpayers can still deduct business expenses unrelated to qualified business use of the home for that taxable year, such as advertising, wages, and supplies.

Rev. date: 11/05/2015

We have incurred costs for substantial work on our residential rental property. We replaced the roof with all new materials, replaced all the gutters, replaced all the windows and doors, replaced the furnace, and painted the property’s exteriors. What are the IRS rules concerning depreciation?

Replacements of the entire roof and all the gutters, and all windows and doors of your residential rental property:
Repainting the exterior of your residential rental property:
Replacement of the furnace in your residential rental property:
Note: A taxpayer whose average annual gross receipts is less than or equal to $10,000,000 may elect to not capitalize amounts paid for repairs, maintenance, or improvements of certain eligible building property if the total amounts paid during the taxable year for such activities do not exceed certain dollar limitations. For more information, see Safe Harbor Election for Small Taxpayers in Tangible Property Regulations - Frequently Asked Questions.