With the exception of land most every type of tangible property qualifies for depreciation. This includes items such as:
- Buildings
- Machinery
- Vehicles
- Computers
- Office Furniture
Depreciation Criteria
To qualify as a depreciable item, the property must meet ALL of the following requirements:
- It must be property you own (regardless if money was borrowed by you to purchase it)
- It must be used in your business, or it must be used as an income generating activity
- It must have a determinable useful life
- It must be expected to be expected to have a useful life greater than 1 year
IRS Useful Life Table
The IRS Useful Life Table outlines the useful for the following commonly depreciated items that have widespread applicability to businesses:
See more of the common depreciable items in our Calculating Useful Life article.
What Property Cannot be Depreciated?
The IRS Publication 946 outlines what can and cannot be depreciated, but buckle up it’s long. Here are the items which cannot be depreciated:
- Land cannot be depreciated because it does not “wear out”, minus a few exceptions
- Leased property unless you retain incidents of ownership in the property – ownerships of incidents include:
- Legal title to the property
- Legal obligation to pay for the property
- Responsibility to pay maintenance and operating expenses of the property
- Responsibility to pay any property (or other) taxes on the property
- The risk of loss if the property were destroyed or damaged through obsolescence (defined as the process of becoming obsolete, or outdated, and no longer used)
Expert Help
When it’s time to select a depreciation method, consider enlisting the help of a CPA as depreciation can be complex, and this is merely an introduction. An experienced CPA will be able to guide you through the process, avoiding costly mistakes along the way.