What Should a Business Owner Know About the Depreciation of Property Deductions!

What is the Depreciation Deduction?

It’s an annual tax deduction that allows your business to recover the cost of a property over the time that the property serves your business’ needs.

Quick example:
Your business bought a delivery truck for $25,000 & its expected lifetime is 5 years. Each year, you can deduct $5,000.

The business stops depreciating the asset when it has fully recovered the property’s cost or retired it from service.

Who? When? How? To deduct your business’ properties

  • Who? Any business or self-employed individuals.
  • When? Every year, at your Business’ Income Tax Filing.
  • How? Using IRS’ Form 4562 to figure out your depreciation value.

What type of property is depreciable?

  • Machinery & Equipment, such as: computers, a CNC machine, or a tractor.
  • Vehicles: any vehicle used for business purposes.
  • Furniture
  • Buildings
  • Land improvements (although the cost of the land itself is not depreciable)

Requirements

  • The Business is the owner of the property, even if it is subject to a debt.
  • The property is used by the business or to produce income: pretty straightforward: if you use the property to produce income, you can deduct it from income.

• If a property is used for both business & personal purposes, it can be depreciated only on the business portion.

  • You can determine a useful life: you must be able to determine the usable lifetime of the property before it wears out, is obsolete, or loses its value.
  • The property lasts more than a year: the property should last more than a year, otherwise, you can deduct it as a normal expense.
  • Is not an excepted property: like some intangibles, term interests, or equipment used to build capital.

Knowing further

If you’re thinking about deducting your business properties’ depreciation, but you prefer to do it the easy way, IOOGO Tax Experts are ready to help you!

Send us a message! We’ll answer any questions and help you to deduct your business assets!

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