J.K. Lasser's Your Income Tax 2015: For Preparing Your 2014 Tax Return

Chapter 42Claiming Depreciation Deductions

There are several methods of claiming expense deductions for your purchases in 2014 of equipment, fixtures, autos, and trucks used in your business:

• First-year expensing (Section 179 deduction), which allows a deduction of up to $500,000 if this limit is extended to 2014, or $25,000 if it is not (42.3).
• Bonus depreciation, which is another first-year deduction at 50% of cost for eligible property, if this rule is extended for 2014 (42.20).
• Regular depreciation, which allows a prorated deduction over a period of years. Most business equipment is depreciable under MACRS (modified accelerated cost recovery system) over a six-year period. MACRS applies to new and used property. The objective of MACRS is to provide rapid depreciation and to eliminate disputes over useful life, salvage value, and depreciation methods. Useful life and depreciation methods are fixed by law; salvage value is treated as zero. If you do not want to use MACRS accelerated rates, you may elect the straight-line method.

Capital investments in buildings are depreciable using the straight-line method; residential buildings are depreciated over 27.5 years; nonresidential real property placed in service after May 12, 1993, is depreciated over 39 years (42.12). Specific annual rates for each class of property are provided by IRS tables.

Land is not depreciable.

• 42.1 What Property May Be Depreciated?
• 42.2 Claiming Depreciation on Your Tax Return
• 42.3 First-Year Expensing ...