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.
4 Responses Leave a comment
Is there a booklet or one page “cheat sheet” where I can see categories of what qualifies for depreciation?
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?
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
Tony,
There is not a minimum value. You can depreciate the stapler, but not the staples since these are considered consumable.