IRS Logo
 
Print - Click this link to Print this page

Depreciation & Recapture

Question: Can I deduct as a business expense the entire acquisition cost of a computer that I purchased for my business or do I have to use depreciation?

Answer:

You may be able to deduct the acquisition cost of a computer purchased for business use in several ways:

  • You can expense it 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, by depreciating it over a 5-year recovery period. If there is any remaining cost and if the computer is eligible for the 50% special depreciation allowance in the year you place the computer in service, you can depreciate 50% of the remaining cost in the year you place the computer in service and depreciate the other 50% of the remaining cost over a 5-year recovery period.
  • You can depreciate the acquisition cost over a 5-year recovery period in the year you place the computer in service, if you do not elect to expense any of the cost under section 179 and if the computer is not eligible for the 50% special depreciation allowance in the year you place the computer in service.
  • The acquisition cost may be eligible for the 50% special depreciation allowance in the year you place the computer in service if the computer meets certain conditions and you do not elect to expense any of the cost under section 179. If eligible, then you can depreciate 50% of the cost in the year you place the computer in service and depreciate the remaining cost over a 5-year recovery period.

Note: The Tax Increase Prevention Act of 2014 enhances the section 179 expense deduction in taxable years beginning in 2014. For taxable years beginning in 2014, a taxpayer may immediately expense up to $500,000 of Section 179 property placed in service during that taxable year, with a dollar for dollar phaseout of the maximum deductible amount for purchases in excess of $2 million. For taxable years beginning in 2014, it also extends the definition of section 179 property to include computer software and $250,000 of the cost of qualified leasehold improvement property, qualified restaurant property and qualified retail improvement property.

Additional Information:


Category: Sale or Trade of Business, Depreciation, Rentals
Subcategory: Depreciation & Recapture

Please provide your feedback.

1. Was it easy to find your information within the above Frequently Asked Question?

2. How satisfied are you with the information provided within the above Frequently Asked Question?

3. If you still need help from the IRS, what would your next step be?




The OMB number for this study is 1545-1432.
If you have any comments regarding this study, please write to:
IRS, Tax Products Coordinating Committee
SE:W:CAR:MP:T:T:SP
1111 Constitution Avenue NW
Washington, DC 20224