May I depreciate a single asset among multiple businesses?

[brooks-w]

I deducted depreciation for 80% usage of a new computer for my single business last year.  I started an additional, separate business this year, in which I use the same computer 20% of the time.  All usage is logged.  May I claim 70% and 20% asset usage and depreciate the same computer asset among my two businesses?

[SusanH · Accepted solution]

Yes you can allocate the usage of a single asset between two business. You must take care to not double-dip, taking the same expense for both businesses.

Care is needed when entering the asset on the new business. Please see the example below. Since the asset will not have been used before in the second business, you will need to enter the pre-percentage allocation adjusted basis of the computer (from business number 1) as it's 100% basis.

Since depreciation can be a very confusing topic, here's an example of what I mean using made up numbers.

Last year say you bought your computer for $1000; you use it 80% for business so you're working with $800 as your business basis (TurboTax would want the $1000 entered and would calculate the 80% usage amounts)

So your business #1 basis is $800 and say you took $50 in depreciation last year. For 2015, your actual adjusted basis would be $750 [$800 basis - $50 depreciation]. For business #1, you would change your business usage for business #1 to 70% and that's all you have to do.

For business #2, you need to enter the basis amount before you allocate the business usage but after depreciation that has already been taken. For business #2, you would enter your original basis as $950 [$1000 cost - $50 depreciation taken] and then enter your business use as 20%.

Entering the information as suggested above should result in proper depreciation for your computer without double-dipping.

[deMedici]

Does this principle apply to a single expense shared by two DBAs of an individual sole proprietorship? For example, last year I provided IT consulting services to a client (Business A), and I also began private tutoring college students (Business B). I have a monthly cell phone bill and a monthly internet service bill, which enables me to provide service for both business ventures from my home.

Following this principle of apportionment, I divided my phone bill and internet service bill in half and allocated each half to Business A and Business B on their corresponding Schedule C forms. Specifically, I spent $300 total on the phone bill for the year but reported that as a $150 communications expense for Business A and a $150 communications expense for Business B.

Is this the correct way to apportion any expenses that are incurred once from a single source but support multiple businesses under a sole proprietorship?

[B0555555]

BACKGROUND: I have two businesses where I use my computer and cell phone for each (40% Biz A, 40% Biz B, and 20% personal).  Biz A is single-member LLC (i.e. sole proprietor for tax purposes) and Biz B is a Multimember LLC.  So I add my Biz A expenses directly into the Business Section of turbo tax (Home and Business Edition) and for Biz B I enter my asset expense into the Personal Income > K-1 Section. 

PROBLEM STATMENT:  When I try and enter the asset utilization this way (40% Biz A, 40% Biz B, and 20% personal), TT gives me much less of a deduction than if I had allocated 80% Biz A, 0% Biz B, and 20% personal.  Also, I get a message stating that I may be required to recapture the previous year's depreciation since I received special depreciation in previous year.  

So what am I doing wrong here? Is there a way to allocate the asset as 40% Biz A, 40% Biz B, and 20% personal and still get the fully depreciation deduction and not have to recapture anything?  I would think this should be allowed since I'm collectively using the asset for business purposes 80% of the time (more than 50%).  

[alketamark]

I have the same question except my usage was about 50%, 10%, 40%.  51% is the minimum I believe to get the depreciation without having to recapture.   

I would like to know what I will need to do in the future to recapture and how will that effect future returns and would I be better off not claiming the asset for the other business that doesn’t use the asset at a high percentage.

Mark S