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Frequently Asked Tax Questions

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

  1. Can the entire acquisition cost of a computer that I purchased for my business be deducted as a business expense or do I have to use depreciation?
  2. On what form and line 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 substantial repairs to our residential rental property: new roof, gutters, windows, furnace, and outside paint. What are the IRS rules concerning depreciation?

Rev. date: 12/16/2013

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

The acquisition cost of a computer purchased for business use:
Note:  The American Taxpayer Relief Act of 2012 enhances the section 179 expense deduction. For tax years beginning in 2012 or 2013, the maximum section 179 deduction you can elect for section 179 property placed in service during the tax year is limited to $500,000. Taxpayers must reduce this limit when the cost of the section 179 property placed in service for the year exceeds $2,000,000.

Rev. date: 08/27/2014

On what form and line 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. 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.
The business use of an automobile is claimed on:

Rev. date: 12/16/2013

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?

Generally, depreciation on the business use portion of your home, up to the gross income limitation, is figured over a 39 year recovery period and mid-month convention.  As long as you are entitled to claim depreciation, it reduced the basis of your home accordingly, whether or not you actually claimed it on your tax return.  
However, beginning in 2013, there is a simpler option (Revenue Procedure 2013-13) where 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 is meant to reduce taxpayers' recordkeeping burden. Under this option, depreciation is treated as zero and will not reduce the basis of your home.  For more information, see Home Office Deduction and Simplified Option for Home Office Deduction on IRS.gov.  In addition, under this optional method, taxpayers may still deduct business expenses unrelated to qualified business use of the home for that taxable year, such as advertising, wages, and supplies.

Rev. date: 12/16/2013

We have incurred substantial repairs to our residential rental property: new roof, gutters, windows, furnace, and outside paint. What are the IRS rules concerning depreciation?

Replacements of roof, rain gutters, windows and furnace on a 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 and these repairs directly benefit or are incurred due to this restoration of your property, then the whole job is a capital 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.