Determine Eligible Property for Depreciation

This is the first question many people have when dealing with fixed assets.  What property am I allowed to depreciate?

Well, depreciation is basically a deduction for capital expenditure.  It is considered a reasonable allowance for the wear and tear of assets used in a trade or business or for the production of income.

Property is eligible for depreciation if meets all these conditions:

  • It is used for business or held for production of income.
  • It has a useful life exceeding one year.
  • It wears out or loses value over time.

Property is not eligible if:

  • The property has one year or less expected useful life.  This property can be deducted as current expenses in the year it is purchased.
  • The property disposed in the same year it is purchased.

Now I hope that gives you a better understanding of what you can depreciate.  If you have any questions about specific property, leave them in the comments.

JKoshar posted at 2009-6-23 Category: Depreciation | Tags: ,,

4 Responses Leave a comment

  1. #1Bill Tocket @ 2009-6-24 12:52

    Is there a booklet or one page “cheat sheet” where I can see categories of what qualifies for depreciation?

  2. #2Tony C. @ 2009-6-24 12:58

    Is there a minimum value for an asset in order to qualify for depreciation or is that up to the organization? Can a stapler be depreciated? What about the dozen boxes of staples I bought from Staples.com?

  3. #3dGuru @ 2009-6-26 06:00

    Bill,

    Here are the general classifications for “Common Business Assets”

    00.11 Office Furniture & Equipment
    00.12 Computers & Related Equip
    00.13 Office Machines
    00.21 Airplane (airframe & engines)
    00.22 Autos & Taxis
    00.23 Buses
    00.241 Light General Purpose Truck (<13k lbs)
    00.242 Heavy General Purpose Truck (>13k lbs)
    00.25 Railroad Car & Locomotives, except owned by a Railroad
    00.26 Tractor Unit (tractor-trailer)
    00.27 Trailer & Trailer Mounted Container
    00.28 Vessels, Barges & Tugs
    00.3 Land Improvements (1245 or 1250 Property)
    00.4 Industrial Steam & Electric Generation & Distribution
    B.1 Residential Rental Property
    B.2 Nonresidential Real Property, pre 5/13/93
    B.3 Nonresidential Real Property, post 5/12/93
    B.4 Computer Software
    B.5 Trees or Vines Bearing Fruit or Nuts
    B.6 Qualified Leasehold / Restaurant Leasehold Property
    B.7 New York Liberty Zone Leasehold Improvement Property

    In addition, there are many more “Industry Specific” classifications. For a detailed listing, please refer to IRS Pub 946:

    http://www.irs.gov/pub/irs-pdf/p946.pdf

  4. #4dGuru @ 2009-6-26 06:13

    Tony,

    There is not a minimum value. You can depreciate the stapler, but not the staples since these are considered consumable.

Leave a Reply

(Ctrl + Enter)