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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 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 shingles, gutters, windows, furnace, and outside paint. What are the IRS rules concerning depreciation?

Rev. date: 01/12/2015

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: The Tax Increase Prevention Act of 2014 enhances the section 179 expense deduction in taxable years beginning in 2014. For taxable years beginning in 2014, 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 million. For taxable years beginning in 2014, 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: 01/22/2015

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. 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: 12/18/2014

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?

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 qualify to claim depreciation, the allowable depreciation reduces the basis of your home accordingly, whether or not you actually claim it on your tax return.  
However, in 2013 and later tax years, 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: 12/18/2014

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

Replacements of windows and furnace on a residential rental property:
Repairs, such as repainting, replacing roof shingles, and replacing a rain gutter on a residential rental property:
Note: Repainting your property, fixing gutters or floors, fixing leaks, plastering, and replacing broken windows, roof shingles, and rain gutters 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 contribute to the restoration of your property, then the whole job is a capital improvement. In this case, you should capitalize and depreciate the repair costs in the restoration or remodeling project as the same class of property that you have restored or remodeled as discussed above.