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.
About National Association of Tax ProfessionalsThe National Association of Tax Professionals (NATP) is the largest association dedicated to equipping tax professionals with the resources, connections and education they need to provide the highest level of service to their clients. NATP is comprised of over 23,000 leading tax professionals who believe in a superior standard of ethics and exemplify professional excellence. Members rely on NATP to deliver professional connections, content expertise and advocacy that provides them with the support they need to best serve their clients. The organization welcomes all tax professionals in their quest to continually meet the needs of the public, no matter where they are in their careers.
The NATP headquarters is located in Appleton, WI. To learn more, visit www.natptax.com.
Information included in this article is accurate as of the publish date. This post is not reflective of tax law changes or IRS guidance that may have occurred after the date of publishing. All taxpayer circumstances are different, and NATP recommends contacting research services if you have specific questions about your clients’ tax situations.