How to Depreciate a Motorhome Rental
If you are renting a motorhome and need to figure out the depreciation on the vehicle for record-keeping purposes, it is important to understand how to do so properly. By definition, depreciation is a reduction in the value of something over the passage of time because of regular wear and tear and age considerations. To properly calculate the depreciation of a rental over time, you have to use the correct figures in the process.
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Instructions
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Determine the total cost of the rental over the course of a year. In order for depreciation to need to be accounted for, it must be a long-term rental and assumably a primary residence. As a result, you would use the cost over a five-year period as the base for depreciation. For example, if a rental costs $10 per day, multiply $10 by 365 days in a year to get an annual cost of $3,650. Multiply $3,650 by five years and get a cost of $18,250.
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Use the straight-line method to determine depreciation. The straight-line method is based on a 5 five-year depreciation and has the vehicle depreciate equally each year. For example, using the total cost of $18,250, divide $18,250 by five and to arrive at a yearly depreciation of $3,650.
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Use the Modified Asset Cost Recovery System (MACRS) method of depreciation. Using this method, implement a "40-30-20-10" system, where the vehicle depreciates by 40 percent the first year, 30 percent in the second year, 20 percent in the third year, 10 percent in the fourth year and is finished in the fifth year. Using this method, take 40 percent of $18,250 to get a first-year depreciation of $7,300.
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Tips & Warnings
Each method is an acceptable accounting principle that can be used. Typically, individuals and companies will use whichever method is most beneficial to them in terms of taxes. Consult with a tax professional to determine which method is the most useful for your situation.
References
- "Federal Income Tax: Code and Regulations"; Martin Dickinson; 2010
