Maximizing Deductions – Depreciation – LNK Tax Group

Normal Depreciation. Confirm assets are properly capitalized and being depreciated as many times this is not being done properly or at all. For example, a recent client owned a commercial building that was not capitalized or being depreciated, and the accountant had only the rental operations on the books.

Expense. The IRS allows for expensing items under certain limits, like small tools and equipment. The business sets a reasonable policy for capitalization limits, then expenses individual items under that limit. For example, if a client establishes $1,000 as the limit and buys a computer for $800, the computer would be expensed rather than depreciated.

Bonus Depreciation. In order to qualify for percent bonus depreciation, the original use of the property must begin with the taxpayer and the property must be: 1) Modified Accelerated Cost Recovery System (MACRS) property with a recovery period of 20 years or less, 2) depreciable computer software, 3) water utility property, or 4) qualified leasehold improvement property. Certain acquisition requirements and placed in service dates must also be met in order to qualify for 30, 50, or 100 percent bonus depreciation, and are discussed in more detail below.

Section 179. Similar to Bonus Depreciation, Section 179 allows full expensing of acquired assets (up to certain limits). Most equipment, furniture & fixtures (MACRS property) qualifies for Section 179 treatment.

Tax Savings Range:

$3,000 to unlimited, though there are limits on bonus and Section 179.

Our Thoughts:

Depreciation is a difficult concept. Let the experts at LNK Tax Group ensure that you get every deduction you are legally entitled to. Book a free 20 minute consultation with LNK Tax Group.

Disclaimer:

To ensure compliance with requirements imposed by the IRS, we inform you that any US federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and it cannot be used for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein. Always seek advice based on your particular circumstances from an independent advisor.