Often my clients ask me, what property can be depreciated. Here are some basic rules to use to evaluate on how to decide. You can depreciate property if it meets the following requirements:
- It must be property you own
- The property must be used in business or held to produce income. This rule does not hold for inventory. Since inventory is used for resale and is not held for use in your business, it is never depreciated.
- It must have a useful life that extends substantially beyond the year it is placed in service. This one is tricky.
- It must have a determinable useful life as interpreted by the IRS, which means that it must be something that wears out, gets used up, becomes obsolete, or loses its value. An exception, the cost of land is not depreciated
- If all of this is confusing or you need clarification in this area, please contact me.
