Depreciating Assets

SaltPepper — Wed, 01 Apr 2020 13:03:17 GMT

I had another thread here that started 2 days ago but for some reason I'm no longer able to access it. Not sure if I broke a rule in my responses but apologies if I did.

My issue: I claimed assets in my 2017 tax return for my starting business which performed at a loss that year. My accountant informed me at the time that the assets would be fully depreciated to maximize my return. For 2018 filing, I decided to try TT and did the filing myself. Thinking the assets from 2017 were fully depreciated, I removed them while filing for 2018. Realizing later that this was not the appropriate move since the assets are still in use, I planned to add them back during my 2019 tax return and properly stating they are fully depreciated so I don't get a tax break twice for the same deductions.

Upon looking a little closer in my 2017 return, I realized the assets were never depreciated but instead spread out over 5 years using 200 DB HY. Section 179 was not used nor was Bonus Depreciation.

My questions now are as follows:

1. Can I simply add them back and start where the depreciation left off or do I have to amend my 2018 taxes? I realize this will become fully depreciated over 6 years instead of 5 since nothing was depreciated during 2018.

2. The 5 year time frame is based on the asset category selected at the time the assets were first filed. When I select the proper category now that best describes these assets, the time frame is 7 years, not 5. When I select a less appropriate category, it becomes 5, which would align with the original plan that was created in 2017 by my accountant. Is it a big deal if I keep it at 5 years even though the category doesn't describe the assets the best possible way?

Any clarification is appreciated!

Re: Depreciating Assets

Irene2805 — Wed, 01 Apr 2020 15:49:40 GMT

To keep the accounting as uncomplicated as possible, it would be better to amend the 2018 return with the assets included. Then transfer the return to your current (2019) return.

Go ahead and keep the asset life at 5 years since that was the life used originally. This is OK, as long as the assets could be considered in that category--for example, it's not a cow being described as tools/machinery :).

topic Depreciating Assets in Business & farm

Depreciating Assets

Re: Depreciating Assets