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Old 03-04-2017, 02:46 PM
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jonicurry jonicurry is offline
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Default Confused About Depreciation

Hi Tom, I am currently reading your 2016 Tax Workbook and Organizer, and I am confused about a few issues that I am hoping you can clarify.

1. Depreciating carpeting/vinyl flooring (that can be removed without damaging the floor): At the top of page 95, it says that if you began depreciating these items under the 39-year rule, you can switch over to the 7-year rules. But page 92 says that once you have chosen a depreciation method and have begun depreciating an item, you must continue using that method for the entire life of the item.

2. Depreciating office equipment: page 86 says that you may use the 50% bonus depreciation rule for office equipment purchased new in 2016 regardless of how often it is used in your business. But page 74 says that the 50% bonus depreciation rule may only be applied to office equipment used more than 50% of the time in business.

3. Along the same line as #2, the book says that computers are listed property and that you can only use the 50% Bonus rule if the computer's business use is more than 50%. Is this for computers only, or would this also apply for tablets?

4. On page 85, the book says that cell phones are listed property, but I thought IRS took cell phones out of the listed property definitions a few years ago.

5. And finally, one other question about listed property - are computers and passenger vehicles the only listed property? I have read in other sources that things like TVs and cameras are listed property as well.

Thank you so much for your help!
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Old 03-04-2017, 06:24 PM
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TomCopeland TomCopeland is online now
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Default depreciation

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Originally Posted by jonicurry View Post
Hi Tom, I am currently reading your 2016 Tax Workbook and Organizer, and I am confused about a few issues that I am hoping you can clarify.

1. Depreciating carpeting/vinyl flooring (that can be removed without damaging the floor): At the top of page 95, it says that if you began depreciating these items under the 39-year rule, you can switch over to the 7-year rules. But page 92 says that once you have chosen a depreciation method and have begun depreciating an item, you must continue using that method for the entire life of the item.

2. Depreciating office equipment: page 86 says that you may use the 50% bonus depreciation rule for office equipment purchased new in 2016 regardless of how often it is used in your business. But page 74 says that the 50% bonus depreciation rule may only be applied to office equipment used more than 50% of the time in business.

3. Along the same line as #2, the book says that computers are listed property and that you can only use the 50% Bonus rule if the computer's business use is more than 50%. Is this for computers only, or would this also apply for tablets?

4. On page 85, the book says that cell phones are listed property, but I thought IRS took cell phones out of the listed property definitions a few years ago.

5. And finally, one other question about listed property - are computers and passenger vehicles the only listed property? I have read in other sources that things like TVs and cameras are listed property as well.

Thank you so much for your help!
Carpeting is 7 year depreciation. If you started depreciating it over 39 years you can switch to 7 year depreciation. That's because it should have been depreciated over 7 years to begin with.
I think you read what I said about office equipment incorrectly. You can only use the 50% bonus depreciation rule for office equipment that is use 50% or more for your business.
To deduct a tablet using the 50% bonus depreciation rule you must be using it 50% or more for your business because it's a computer.
You are right that cell phones are no longer listed property. I will change this in the next edition of this book.
Technically an property used for "entertainment, recreation or amusement" is listed property, so that could apply to televisions and cameras.
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Old 03-05-2017, 01:46 PM
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Thank you Tom!
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Old 03-06-2017, 06:46 AM
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nannyde nannyde is offline
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Tom,
Could you explain home depreciation recapture again and please explain capital gains tax when one sells a home that has been used for a business.

I had quite the surprise when I sold my house almost three years ago because I didn't completely understand it.

Also, could you talk about the percent that is used in the recapture? Fortunately I didn't work the remainder of that year so I only had three months daycare income plus my book came out that year. That wasn't planned but it helped with the percent that was taken for recapture and capital gains. It is based upon the percent you pay in federal taxes that calendar year??? Is that correct? So it could be ten percent or higher??????
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Old 03-06-2017, 03:56 PM
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Default home depreciation

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Originally Posted by nannyde View Post
Tom,
Could you explain home depreciation recapture again and please explain capital gains tax when one sells a home that has been used for a business.

I had quite the surprise when I sold my house almost three years ago because I didn't completely understand it.

Also, could you talk about the percent that is used in the recapture? Fortunately I didn't work the remainder of that year so I only had three months daycare income plus my book came out that year. That wasn't planned but it helped with the percent that was taken for recapture and capital gains. It is based upon the percent you pay in federal taxes that calendar year??? Is that correct? So it could be ten percent or higher??????
When you sell your home and make a profit on the sale, you face two potential taxes. First, tax on the profit on the sale of your home. You can avoid paying most of the this tax if your profit is less than $250,000 (single) or $500,000 (married). Because you use your home for your business you may have to pay a little tax on the profit depending on your personal circumstances that are too complicated to explain here.
The second tax is a tax on the depreciation you claimed, or were entitled to claim, when you used your home for your business. This tax is always due, unless you do child care in the new home and execute a like-kind exchange. This tax is based on your family's tax bracket during the year you sold your home. The highest tax rate on this would be 25%.
I explain this in detail in my 2016 Family Child Care Tax Workbook and Organizer.
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