MACRS Depreciation and Taxes

[freedomatlast]

I bought an appliance for a residential rental property during December 2022. I'm using MACRS 5 year depreciation, 200% DB.

I have nothing else being depreciated over 5 years for tax year 2022.

Question: Can I use half year-convention or must I use mid-quarter convention?

The example the IRS gives in the instructions doesn't make it clear to me which way to go when I only have one item of MACRS 5 year property in this tax year.

I did my taxes using the half-year convention but am waiting to send them in seeking further clarification.

Thanks.

 

[qwerty3656]

My understanding is that it is 1/2 year convention.

 

[Jerry1]

I haven’t done business taxes for many years so excuse me if this doesn’t make sense any longer but is there some reason why you wouldn’t use section 179 and write the entire amount off in the year of purchase?

 

[Winemaker]

I haven’t done business taxes for many years so excuse me if this doesn’t make sense any longer but is there some reason why you wouldn’t use section 179 and write the entire amount off in the year of purchase?

+1

 

[kyzymurgist]

I haven’t done business taxes for many years so excuse me if this doesn’t make sense any longer but is there some reason why you wouldn’t use section 179 and write the entire amount off in the year of purchase?

This[emoji115]. Rental accounting got so much easier after that 2018 tax law change. I can't imagine an advantage to depreciation of every appliance replacement, minor kitchen remodel, or new flooring. I only wish it applied to roofs and fences too.

 

[freedomatlast]

Ok, thanks for the information on Sec 179.

Also, found the answer to the original question. It's Mid-quarter convention in this case.

 

[freedomatlast]

I haven’t done business taxes for many years so excuse me if this doesn’t make sense any longer but is there some reason why you wouldn’t use section 179 and write the entire amount off in the year of purchase?

One reason could be that taking a large amount of depreciation in a single tax year may push the taxpayer into paying AMT for that tax year.

 

[freedomatlast]

To answer Jerry1's question above, and to further clarify section 179 limitations for residential rental properties, from IRS publication 946, page 16:


"To qualify for the section 179 deduction, your property
must have been acquired for use in your trade or business. Property you acquire only for the production of income, such as investment property, rental property (if
renting property is not your trade or business), and property that produces royalties, does not qualify."