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.
More information about Bassets eDepreciation software can be found at Bassets.net. While there you can set up a demonstration, download a free evaluation copy and get a personalized pricing estimate.
Tony,
There is not a minimum value. You can depreciate the stapler, but not the staples since these are considered consumable.
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
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?
Is there a booklet or one page “cheat sheet” where I can see categories of what qualifies for depreciation?