What is depreciation?
Aug 5, 2009 Depreciation
TweetWhat is depreciation? In business, we deduct our expenses from our income. Business “stuff” we use, deplete, or wear down lowers our revenue and our taxable income. If the “useful life” of the “stuff” we use to produce income extends beyond one tax year, we need another way to still recover our original cost. This “long-term” method of cost recovery is called depreciation. There are five tests for depreciating property:
- You must own it.
- You must use it (place in service) for business or other income-producing activities.
- You must be able to determine its useful life.
- The useful life must be greater than one year.
- It must be qualified property according to IRS rules as stated in IRS Pub 946, How to Depreciate Property.
For property placed in service after 1986, you generally use the Modified Accelerated Cost Recovery System (MACRS). Prior to 1987, other methods to recover costs, like for example, Accelerated Cost Recovery System (ACRS), were used as detailed in IRS Pub 534, Depreciating Property Placed in Service Before 1987.
June 30th, 2011 at 10:00 pm
[...] neither a home office deduction (IRS Form 8829) nor report depreciation (Form [...]
September 3rd, 2011 at 5:05 pm
[...] neither a home office deduction (IRS Form 8829) nor report depreciation (Form [...]
January 11th, 2012 at 7:03 pm
Recommeneded websites…
[...]When I originally commented I clicked the “Notify me when new comments are added” checkbox and now each time a comment is added I get several emails with the same comment. Is there any way you can remove me from that service? Bless you![...]…