Depreciation & Recapture
Question: Can the entire acquisition cost of a computer that I purchased for my business be deducted as a business expense or do I have to use depreciation?
Answer:
The acquisition cost of a computer purchased for business use:
- Can be expensed under Internal Revenue Code section 179, if qualified, by electing to recover all or part of the cost up to a dollar limit, by deducting the cost in the year you place the computer in service, and, if there is any remaining cost, it is depreciated over 5 years. If there is any remaining cost and if the computer is eligible for the 50-percent special depreciation allowance in the year you place the computer in service, 50% of the remaining cost is depreciated in the year you place the computer in service and the remaining 50% is depreciated over 5 years.
- Can be depreciated over a 5-year recovery period, if you elect not to expense any of the cost under section 179.
- May be eligible for the 50-percent special depreciation allowance in the year you place the computer in service if the computer meets certain conditions and the remaining cost is depreciated over 5 years, if you elect not to expense any of the cost under section 179.
Note: For tax years beginning in 2012, the maximum section 179 deduction you can elect for section 179 property placed in service during the tax year is $125,000 (increased by an inflation adjustment). This limit is reduced by the amount by which the cost of section 179 property placed in service in the tax year exceeds $500,000 (increased by an inflation adjustment). Also, the definition of section 179 property will no longer include qualified real property (such as qualified leasehold improvement property).
Additional Information:
Category: Sale or Trade of Business, Depreciation, Rentals
Subcategory: Depreciation & Recapture
