FAQ's >> Depreciation
Listed below are examples of frequent tax-related questions with corresponding answers. While many issues may seem straightforward, the
answers to many of these questions illustrate the complexity of the U.S. taxation system. For further assistance with these or any other tax
issues, please contact us.
Although the information provided herein is derived from data published by the Internal Revenue Service, it is not considered authoritative,
and should only be used as a general guide to understanding the underlying issues. Authoritative guidance should be obtained from a tax
professional or directly from the Internal Revenue Code, Regulations, Revenue Proclamations, Publications, Bulletins, Announcements, etc.
I have a home office. Can I deduct expenses like mortgage, utilities, etc., but not deduct depreciation so that when I
sell this house, the basis won’t be affected?
If you have qualified business use of your home and enough gross income from that business use to entitle you to a deprecation deduction,
you are required to reduce your basis in the home by the amount of depreciation allowed (deducted) or allowable (could have been deducted).
Whether you choose to deduct the depreciation on your current return(s) will not matter. For tax purposes, you will still be treated as if
you had taken the allowable deduction and your basis will have to be reduced.
How many years do I depreciate a new furnace installed as an improvement on residential rental property and what method do
I use to compute the depreciation?
Replacement of a furnace in a residential rental property is a capital improvement to the structure. The furnace is in the same class
of property as the property in which it is installed. Since the property is residential rental property, the furnace is, generally,
depreciated over a recovery period of 27.5 years using the straight-line method of depreciation and a mid-month convention.
I purchased a snow blower and a lawn mower strictly for use at a residential apartment building I own. Can I elect the
section 179 deduction to fully deduct the costs of the snow blower and lawn mower?
You cannot claim section 179 expense for property held to produce rental income (since it is use in connection with the furnishing of
lodging). These amounts are classified as 5-year property.
I expensed equipment and furniture (not used for residential rental property) two years ago under section 179, but
stopped doing business last year. Does any of this have to be recaptured and claimed as income, even though the items have not been sold?
If you claim a section 179 deduction for the cost of property in the year you place the property in service, and in a subsequent year, you
do not use it more than 50 percent for business, you may have to recapture part of the section 179 deduction.
