The Categories of Depreciation

Depreciation is the concept of claiming a business expense over a number of years, rather than claiming the expense in one year. 

In general, you must depreciate items that cost more than $100. In a previous article I discussed the exceptions to this general rule.

Let's now look at what items you can depreciate and what depreciation category they belong in. Any item you buy that costs more than $100 and use for your business must fit into one of the following categories:

Personal Property (Items not attached to your home or land)

    * Office Equipment - 5 year property

Computer, printer, copier, fax, desk, filing cabinets, scanner, printer stand, computer tables, and desk chair

    * Other Personal Property - 7 year property

Appliances (washer, dryer, freezer, refrigerator, microwave, dishwasher, etc.), furniture (tables, chairs, sofa, lawn furniture, rocking chair, etc.), bookcase, dehumidifier, entertainment center, hand/power tools, ladder, lamps, lawn furniture, outdoor play equipment, picnic table, rocking chair, rug/carpet/vinyl flooring, television, swing set, window air conditioner, etc.

Land Improvement (Items attached to the land and increase its value) - 15 year property

Cement slab, cement stairs and railing, driveway, fence, undergrounnd lawn sprinkler system, patio, new sewer line, sidewalk/walkway, swimming pool, etc.

Home Improvement (Items attached to your home and increase its value) - 39 year property

Attic fan, awnings, central air conditioning, deck, furnace, garage, new plumbing or electrical work, new room addition, porch, replacement windows, tile/wood flooring, remodeling, etc.

Home (Includes a trailer) - 39 year property

You always want to depreciate your home, no matter what! See my article, "Should You Depreciate Your Home?" 

Vehicle (Includes a car, truck or van) - 5 year property

You will only depreciate your vehicle if you use the actual expenses method for claiming vehicle expenses. If you use the standard mileage method, you will not depreciate your vehicle.

I've written a handout summarizing the above information.

For a complete list of hundreds of items you can depreciate, see my book, Family Child Care Record Keeping Guide.

See also: "What is Depreciation?" and "The Section 179 Rule: A Powerful Way to Cut Your Taxes."

Image credit: mathhockeypokemon.wikispaces.com

For details on how to your calculate depreciation deduction, see my 2011 Family Child Care Tax Workbook and Organizer.

Comments

[Michelle]

What if you bought a computer 3 years ago and depreciated it on your taxes for the last years but intended to claim it for the 5 years, but it no longer useable and threw it away, how do you account for this on your taxes?

[Tom Copeland]

When an item, such as a computer, doesn't last as long as you are depreciating it, claim the rest of the years of depreciation in the year it's no longer useable. Claim this on Form 4562, line 17 (2010 form).