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What property can I take a depreciation tax deduction for on my tax return?
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| Only property used in a trade or business or other income producing activity can be
depreciated on your tax return. You cannot claim depreciation on
your tax return on property that you hold for personal
purposes, such as your personal residence or your boat. The kinds of property that can be
depreciated on your tax return include machinery, equipment, buildings, vehicles, and furniture.
Depreciation for tax purposes is a very complex tax subject. First-year expensing under Internal Revenue Code
§ 179
allows a large tax deduction on your tax return in the first year.
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| Year |
Maximum
Tax Deductible Expense |
| 1996 |
$17,500 |
| 1997 |
$18,000 |
| 1998 |
$18,500 |
| 1999 |
$19,000 |
| 2000 |
$20,000 |
| 2001 |
$24,000 |
| 2002 |
$24,000 |
| 2003 |
$100,000 |
| 2004 |
$102,000 |
| 2005 |
$105,000 |
| 2006 |
$108,000 |
| 2007 |
$125,000 |
| 2008 |
$250,000 |
| 2009 |
$250,000 |
IRC Section 179 allows taxpayers
to write-off a fixed amount of capital expenditures on their tax return each tax year
($250,000 in 2009), rather
than depreciate them over multiple tax years. The maximum expensing tax deduction for an automobile
placed in service in 2009 is $10,960. For certain SUVs the expensing
limit is $25,000.
There are two primary limitations.
 | The first reduces the amount that can be expensed
on the tax return under
this section if taxpayers acquire more than $800,000 in Section 179 eligible property
during the tax year. The available $250,000 tax deduction is reduced dollar for
dollar for each dollar of Section 179 property placed in service
during the tax year above $800,000. If $1,050,000 of Section 179
property is placed in service the available tax deduction is $0. |
| The second limitation is that Section 179 expense cannot be greater than
the net income generated by the business for which the property was acquired. |
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|
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| Your
depreciation percentage tax deduction on your tax return is based on the Modified Accelerated Cost Recovery
System rates for your applicable convention and class life. |
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What are the MACRS Half
Year Convention Rates? |
MACRS HY Convention - 200DB/150DB |
Year |
3-Year |
5-Year |
7-Year |
10-Year |
15-Year |
20-Year |
| 1 |
33.33% |
20.00% |
14.29% |
10.00% |
5.00% |
3.750% |
| 2 |
44.45% |
32.00% |
24.49% |
18.00% |
9.50% |
7.219% |
| 3 |
14.81% |
19.20% |
17.49% |
14.40% |
8.55% |
6.677% |
| 4 |
7.41% |
11.52% |
12.49% |
11.52% |
7.70% |
6.6177% |
| 5 |
|
11.52% |
8.93% |
9.22% |
6.93% |
5.713% |
| 6 |
|
5.76% |
8.92% |
7.37% |
6.23% |
5.285% |
| 7 |
|
|
8.93% |
6.55% |
5.90% |
4.888% |
| 8 |
|
|
4.46% |
6.55% |
5.90% |
4.522% |
| 9 |
|
|
|
6.56% |
5.91% |
4.462% |
| 10 |
|
|
|
6.55% |
5.90% |
4.461% |
| 11 |
|
|
|
3.28% |
5.91% |
4.462% |
| 12 |
|
|
|
|
5.90% |
4.461% |
| 13 |
|
|
|
|
5.91% |
4.462% |
| 14 |
|
|
|
|
5.90% |
4.461% |
| 15 |
|
|
|
|
5.91% |
4.462% |
| 16 |
|
|
|
|
2.95% |
4.461% |
| 17 |
|
|
|
|
|
4.462% |
| 18 |
|
|
|
|
|
4.461% |
| 19 |
|
|
|
|
|
4.462% |
| 20 |
|
|
|
|
|
4.461% |
| 21 |
|
|
|
|
|
2.231% |
|
|
|
|
Assets
that can't be depreciated on your tax return
Not all assets can be
depreciated on your tax return. Land and farmland cannot be depreciated on
your tax return. Farm
buildings and machinery are depreciable on your tax return. Inventory and property held for
sale to customers cannot be depreciated on your tax return. Goodwill, going concern value, covenants not to
compete, information databases, customer lists, franchises, licenses, trademarks, and
other intangibles cannot be depreciated on your tax return but are amortizable over fifteen (15)
years on your tax return.
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 |
Related tax
information about depreciation tax deductions |
|
|
|
Itemized Tax Deductions |
|
IRS publications about depreciation tax deductions:
For more information, see Tax
Topic 704, Depreciation,
IRS Publication 946, How to
Depreciate Property, IRS Publication
225, Farmers Tax Guide, or
IRS Publication 534, Depreciating
Property Placed in Service Before 1987. Also see IRS Publication 17,
Your Federal Income Tax. |
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Ask Julian Block your IRS and tax questions! |
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|
 |
If you can't find the answer to your IRS or tax question in our
web you can call former IRS Special Agent and one of the country's foremost tax attorneys, nationally syndicated columnist ("The Tax
Adviser") Julian Block. Julian is also the tax Editor of Mutual Funds Magazine, America's premier investment magazine. To
call Julian for a tax consultation click
here. |
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