Properly categorizing assets as deductible or capitalizable can lead to significant tax savings and minimize errors in tax returns. This also allows you to provide valuable advice on asset management, timing of acquisitions and overall tax efficiency.
This knowledge is vital when supporting clients during audits and ensuring compliance with ever-evolving tax laws.
Below, you’ll find a few of the top questions from a recent webinar on the topic and their accompanying answers. If you choose to attend the on-demand version of this webinar, you’ll have access to the full recording and the entire list of Q&As.
Q: Is the class life of semi tractors three years?
A: Yes. The semi tractor has a class life of three years.
Q: If the property greatly appreciated before it was placed in service, would you use the fair market value as basis, or the actual cost?
A: Actual cost is the basis for depreciation in this case.
Q: If a building was already depreciated 15 years and a new roof is installed in year 16, is the roof depreciated for what is left on the original asset or what the original asset was depreciated for?
A: When completed, the new roof would be placed in service as a separate asset with a new depreciable life.
Q: The MACRS deduction doesn’t give you the full $10,000 depreciation, but the straight-line (SL) does. Why would you use the MACRS deduction versus the SL deduction?
A: It does give you the full $10,000 deduction. That’s why five-year property actually has six years of depreciation deductions. Depreciation continues until all the basis is used up.
To learn more about navigating fixed assets and depreciation, you can watch our on-demand webinar. NATP members can attend for free, depending on membership level! If you’re not an NATP member and want to learn more, join our completely free 30-day trial at natptax.com/explore.