Introduction

Depreciation is an annual income tax deduction that allows you to recover the cost or other basis of certain property over the time you use the property. It is an allowance for the wear and tear, deterioration, or obsolescence of the property.

This chapter discusses the general rules for depreciating property and answers the following questions.

• What property can be depreciated?

• What property cannot be depreciated?

• When does depreciation begin and end?

• What method can you use to depreciate your property?

• What is the basis of your depreciable property?

• How do you treat repairs and improvements?

• Do you have to file Form 4562?

• How do you correct depreciation deductions?

Useful Items You may want to see:

Publication

534

538

551

534 Depreciating Property Placed in Service Before 1987

538 Accounting Periods and Methods

551 Basis of Assets

Form (and Instructions)

Sch C (Form 1040)

Sch C (Form 1040) Profit or Loss From Business

2106

3115

4562

2106 Employee Business Expenses

3115 Application for Change in Accounting Method

4562 Depreciation and Amortization

See How To Get Tax Help at the end of this publication for information about getting publications and forms.