@JackieC7 wrote:
I have a question about the taxes for my daughter who is a musician. She has had a business for a couple of year while in high school but will be going away to college for 4 years and won't be doing much gigging during those years. Once someone has started writing off the cost of her instrument, can they skip the years of education?
Thank you!
Jackie
If she stops her business, she can take the instrument "out of service" as a business asset and return it to purely personal use. Then, if she resumes business activities, she can place the instrument back "in service" as a business asset. However, when returning the instrument to service as a business asset, the depreciation clock starts over from the beginning (probably 7 years?) instead of where she left off. The value of the asset when placed in service again is either the present fair market value, or the previous depreciated value, whichever is lower.
For example, let's imagine a $5000 electric piano. If it was in service as a business asset for gigging for 2 years, she might have taken $1400 of depreciation, so the present adjusted cost basis is $3600. When she returns to gigging, I will assume the fair market value of a 6 year old used electric piano is $1500. That means if she returns it to service as a business asset, the value for depreciation is $1500, and it will be depreciated over a new 7 year clock instead of the remaining 5 years from the old clock. The "missing" $2100 of depreciation is not recoverable.
