J.K. Lasser's Small Business Taxes 2022

CHAPTER 14First-Year Expensing, Depreciation, Amortization, and Depletion

1. Section 179 Expensing
2. Other Expensing Opportunities
3. Bonus Depreciation
4. General Rules for Depreciation
5. Modified Accelerated Cost Recovery System
6. Depreciation Methods
7. Limitations on Listed Property
8. De Minimis Safe Harbor Rule
9. Putting Personal Property to Business Use
10. Amortization
11. Depletion

There are a number of ways in which you can write off the cost of machinery and equipment. The method you use depends on your situation. And there are special write-off rules for realty and intangible property, and other types of property.

First-year expensing, which is also called the Section 179 deduction after the section in the Tax Code that created it, is a write-off allowed for the purchase of equipment used in your business. This deduction takes the place of depreciation—the amount expensed is not depreciated. For example, if you buy a desk for your business for $1,000, you can opt to deduct its cost in full in the year you place the desk into service. If you don't make this election and no other write-off option applies, you must write off the cost using depreciation over a number of years fixed by law or use bonus depreciation, described next.

Bonus depreciation, which is also called the special depreciation allowance, is another first-year allowance that is claimed unless you elect not to use it. Bonus depreciation applies to a variety of property (explained in Chapter 10).

Depreciation is an allowance ...