Save taxes with depreciation deductions
Tax Tip of the Week
November 23, 2015
Save taxes with depreciation deductions
As you know, you can claim a depreciation deduction for the "exhaustion" and "wear and tear" of property you use in your trade or business. Determining the most favorable method of depreciating business property is an important part of tax planning. Here are three depreciation rules to remember as you begin a year-end review of your asset acquisitions.
- Proof of purchase. To protect your depreciation deduction, you must establish the asset's depreciable basis by showing the cost, useful life or recovery period, and previously allowable depreciation.
- Electing to expense. You may elect to treat the cost of certain assets used in your active trade or business as a current expense in the year the asset is placed in service. One way to do this is Section 179 expensing. For 2015, the Section 179 expensing deduction is $25,000, with a spending cap of $200,000. The cap is the maximum you can spend on eligible assets before your Section 179 deduction is reduced. When deciding whether to elect Section 179 expensing, be aware of the "predominant use requirement." This rule will affect you if you use assets for both business and other purposes. In that case, you can claim Section 179 on the business portion only if more than 50% of the use is for business purposes. Note: As in the past, Congress may reinstate a more generous Section 179 deduction before the end of the year. We'll keep you updated.
- Extra requirements for "listed property." Listed property includes vehicles; certain entertainment, recreation, or amusement property; and computers and related equipment not used at your regular place of business. To prove the business use of these assets, you need to maintain additional substantiation that establishes the amount, time, place, and business purpose. Typically, this "substantiation" takes the form of written logs detailing your use of the asset.
If you purchased business assets during 2015, or are contemplating making a purchase before year-end, please give us a call. We're here to help you get the most tax savings possible.
"Tax Tips" are published weekly to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
© MC 2015
November 23, 2015
Save taxes with depreciation deductions
As you know, you can claim a depreciation deduction for the "exhaustion" and "wear and tear" of property you use in your trade or business. Determining the most favorable method of depreciating business property is an important part of tax planning. Here are three depreciation rules to remember as you begin a year-end review of your asset acquisitions.
- Proof of purchase. To protect your depreciation deduction, you must establish the asset's depreciable basis by showing the cost, useful life or recovery period, and previously allowable depreciation.
- Electing to expense. You may elect to treat the cost of certain assets used in your active trade or business as a current expense in the year the asset is placed in service. One way to do this is Section 179 expensing. For 2015, the Section 179 expensing deduction is $25,000, with a spending cap of $200,000. The cap is the maximum you can spend on eligible assets before your Section 179 deduction is reduced. When deciding whether to elect Section 179 expensing, be aware of the "predominant use requirement." This rule will affect you if you use assets for both business and other purposes. In that case, you can claim Section 179 on the business portion only if more than 50% of the use is for business purposes. Note: As in the past, Congress may reinstate a more generous Section 179 deduction before the end of the year. We'll keep you updated.
- Extra requirements for "listed property." Listed property includes vehicles; certain entertainment, recreation, or amusement property; and computers and related equipment not used at your regular place of business. To prove the business use of these assets, you need to maintain additional substantiation that establishes the amount, time, place, and business purpose. Typically, this "substantiation" takes the form of written logs detailing your use of the asset.
If you purchased business assets during 2015, or are contemplating making a purchase before year-end, please give us a call. We're here to help you get the most tax savings possible.
"Tax Tips" are published weekly to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
