What is the depreciation deduction?
The depreciation deduction is a percentage of the basis of depreciable property which is taken
yearly over the useful life of the property. The IRS rules determine the useful life of a particular item and the
percentage to use.
If your property is depreciable, you must either take:
the depreciation or
the section 179 deduction.
Disposing a property
When you dispose of the property, the depreciation you deducted or should have deducted must be
subtracted from the basis of the property when you determine your taxable gain or loss.
To determine the depreciation deduction, you need to understand:
who can claim depreciation (below),
when depreciation begins and ends.
Who can claim depreciation?
To claim depreciation, you must be the owner of the property and you must use the property in
your trade or business or for producing income. You own the property and can depreciate it even if you borrowed the
money to purchase it through a mortgage or other loan.
Generally, if you pay rent on property, you cannot depreciate it. Usually, only the owner of
property can depreciate the property. However, if you make permanent improvements to business property you rent,
you can depreciate those improvements.