Depreciation Insights

September 10th, 2023 at 4:15 PM

In my continuous effort to provide value, here are some crucial insights into depreciation, particularly regarding business or rental assets.

When Does Depreciation Start?

Technically, depreciation begins not when you use an asset but when it’s ready and available for its intended purpose. For instance:

• A rental property begins depreciating when it’s available to rent, even if it hasn’t been rented yet.
• A farming tool is set to begin depreciation when you receive it, regardless of when you’ll use it.
• A business vehicle begins to depreciate when bought for business purposes, even if not driven yet.

Best Practices

To prevent any ambiguity, if a property is ready for rent, list it. For business vehicles, it’s ideal to drive them for business soon after purchase. This ensures there’s no question about their intent and use.

Assets That Are Vacant, Idle, or Standing By

Even if your asset is temporarily not in use, it doesn’t mean you stop claiming its depreciation. The continued depreciation applies to machines that are momentarily idle due to a lack of demand or a vacant rental property while you search for tenants.

When Does Depreciation End?

Business and rental properties typically remain depreciable until you remove them from their designated use, often when you sell or dispose of them.

Mark S. Fineberg, CPA