IRS Publication 946 explains how you can use depreciation to recover the cost of business or income-producing property. One of the key elements in determining the correct annual depreciation amount is selecting the appropriate property class. There are many property classes listed in Appendix B of this publication but we have also created additional classes for things that are not covered. Nonresidential Building Improvements is one of asset classes.
After May 12, 1993, nonresidential building improvements were depreciated under the straight-line method and the mid-month convention with a recovery period of 39 years.
Additionally, the Section 179 Expense Deduction was not allowed.
Additions or improvements made to property, including improvements by a lessee or lessor to leased property, are treated as separate items (assets) for MACRS depreciation. In general, depreciation on the addition or improvement is computed on the property added to or improved if such property had been placed in service at the same time as the addition or improvement.
This gives you the basic information that you need for a depreciation calculation but you still need to use a formula to get your answers. A straight-line calculation is used for this asset class and the mid-month convention will take half the monthly depreciation in the first period.
Look at sample spreadsheet below to see all the work that is involved in just one calculation. The highlighted formula shows the first year formula of a straight line calculation that was acquired in the middle of the year. As noted the first year calculation is dependent on the month placed in service. This calculation will continue for 40 years, click the spreadsheet image to see the full calculation results.
Let the Depre123 depreciation calculator take out the guess work. Just enter 3 simple values (Cost, Date, Class) and get all the answers. The calculator is a great way to view the depreciation results for a handful of assets. If you manage hundreds or thousands of fixed asset records then a trial of the full Depre123 application can demonstrate how to simplify the entire process of fixed asset management.
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