As simple as it seems to calculate depreciation for tax purposes, there are far too many options and variables to consider; such as in this recent exchange I had with a tax pro in Virginia:

One thing you should talk about is the fact that if more than 40% of depreciable purchases are made in the 4th quarter of a tax year, all depreciation of that asset class is subject to the mid-quarter convention, not the half-year.  So long as a taxpayer is 179-expensing everything, this doesn't matter (with the exception of listed property converted from personal assets).  However, someone hoping to depreciate other pieces of 5-year property using normal GDS tables would face a larger bill.  Not a deal-breaker, just something to throw into the calculation.
 
Ryan Ellis
www.ryanellisassociates.com

I wrote back:

Ryan:

Excellent point, although a little more technical than I usually like to get in this forum, which isn't intended to replace consultations with tax pros. 

That reminds me of the following email I received a while back from someone with a Federal government (not IRS) email address with the subject of "section179"

if i buy equipment for 400,000 (laser machine) in 04 how much can i depriciate?

My Reply:

Such an answer is impossible to give.  There are too many variables to consider before being able to calculate the Section 179 and depreciation deductions on such a purchase; such as what your taxable income is, how much you have spent on new equipment for the year, as well as when in the year the item was purchased. 

Your personal tax advisor can work out more precise figures for you.  If you aren't working with a tax pro, and you're ready to plunk down that much money for one machine, all I can say is I wish you lots of luck.

Thanks for writing Ryan, and I hope your tax season goes smoothly.

Kerry Kerstetter

Labels: 179

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 12/19/2004 06:17:00 PM Send this post: