What to Depreciate for a Business
Depreciation in business is used to spread out business expenses over the life of specific types of property. According to the Internal Revenue Service (IRS), you must follow several basic guidelines to be able to claim a depreciation on your tax return: You must own the property, and it must have a useful life past the time it was purchased or placed into service.
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Equipment
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A common business expense that is depreciated is equipment used for manufacturing or operations. Big-ticket items such as assembly lines, tools and other machines used in factory work are options for depreciation, as well as equipment used in commercial cooking, cleaning or construction. Such items have a large initial purchase price but maintain a useful life well past the first usage, so the expense can be spread over time.
Vehicles
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Trucks, vans and company cars are common expenses that can be depreciated. Vehicles, unlike many purchases, lose value as soon as they are driven off the lot, but they're considered assets in operating your business. Each year you can depreciate the loss of the vehicle's value as a business expense on your business's tax return until the vehicle stops running and ceases to become an asset. As far as claiming the vehicle's value, the IRS recommends that you measure the amount of time you use the vehicle for business. For example, if you use a van 50 percent of the time for your business, you would only claim half of the vehicle's depreciated value. Track your mileage and time carefully.
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Buildings
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As long as you've purchased a building and are not renting, you can depreciate the cost of the property. You cannot depreciate land, according to the IRS, but you can depreciate the cost of construction, and any upfront money you paid to purchase the property can be counted as a depreciation expense. Building types include office buildings, factories and even a portion of your home, as long as it is used for your business.
Office Equipment
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Another typical item that is depreciated is office equipment, as long as you have not leased or rented the equipment. Office equipment could include furnishings, office machinery such as copiers and fax machines, computer equipment and telecommunications machinery. While furnishings may have a long shelf life, telecommunications and computing equipment tend to be replaced relatively quickly, so your length of depreciation time might be limited to a short window.
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