How to Use IRS Depreciation Tables


Using the IRS Depreciation Tables

OK, collecting all of that information was the hard part. Now it's time to figure out which percentage table to use. Again, not difficult — just reference "Appendix A" of IRS Publication 946. Plug in your system, method, recovery period, convention and so forth, and the chart will tell you which table to use, from A-1 to A-20.

The tables themselves are remarkable easy to use. There are vertical columns for each property class (3-year, 5-year, etc.) and horizontal rows for each year of the recovery period. Choose the class and recovery year and you'll find the percentage of the property's basis (cost) that you can deduct for that year.

Of course, if all of this talk of tables and conventions seems a little overwhelming, you can always use tax preparation software to run all of the numbers for you. Just don't overlook the potential tax savings of depreciation if you run a small business.

For lots more information about tax deductions and running a successful small business, check out the related HowStuffWorks articles below.

Author's Note: How to Use IRS Depreciation Tables

There is a reason why millions of taxpayers use tax preparation software or an actual flesh-and-blood tax preparer to help file their income tax. All of the rules and definitions and calculations can be mind-numbingly complex. But I've found that the IRS really puts some thought into their posted instructions for each form, including helpful real-life examples of tax situations to illustrate each rule. Still, if your tax situation is complicated (home business, rental property, self-employed) it's worth having another set of eyes on your return — virtual or otherwise — to avoid making a costly mistake.

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Sources

  • IRS. "Publication 946: How to Depreciate Property." Jan. 28, 2014 (Nov. 21, 2014) http://www.irs.gov/pub/irs-pdf/p946.pdf

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