Are you considering buying a car, a computer, or other equipment, or a building?
Personal-use property is not deductible.
A business can deduct the full cost utilizing standard, bonus, or IRC Section 179 expensing.
Through 2022, bonus depreciation allows you to deduct 100% of the cost of personal property in one year. Sec. 179 provides for an annual deduction of up to $1,050,000 in personal property.
However, if you buy property to start a new firm, depreciation does not begin. To claim depreciation, you must be in business. It doesn't matter if you make sales or profits—just that your firm is viable.
Also, depreciation doesn't start when you buy a commercial property. It begins when you use property in your business. Not using the property is not required, but it must be available for use in your active business. This may happen after you buy the home.
Finally, if you employ normal depreciation, you must follow standards to identify the start month. The earlier you file, the higher your first-year deduction.
Personal property depreciation begins on July 1 of the first year (mid-year convention). However, if you buy 40% or more of your personal property in the fourth quarter, depreciation begins at the midpoint of the next quarter (mid-quarter convention).
First-year depreciation for real estate begins in the middle of the month of installation (mid-month convention).
If you need clarification or require my assistance, contact me!
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Spencer Accounting Group, LLC does not provide investment, tax, legal, or retirement advice or recommendations in these blogs. The information presented here is not specific to any individual's personal circumstances.
Keana Spencer is an Accountant, Entrepreneur, and Educator to her clients, with a strong passion. Keana has over 10 years of experience and through her practice, she is a source of knowledge and strategies to her clients.