Deduction for depreciable asset in service less than one year
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doc3
New Member

Deduction for depreciable asset in service less than one year

I have a depreciable asset that was in service less than one year.  I gave the asset to charity when I removed it from service.  Turbo tax doesn't seen to let me take any depreciation for that asset.  Is that correct?  If so, can I include it in my business expenses?

5 Replies
MichaelDC
New Member

Deduction for depreciable asset in service less than one year

Yes. That's correct. Certain property cannot be depreciated including property placed in service and disposed of in the same year. That being said, there is De Minimis rule allows for expensing of business purchases of $2500 or less. Please feel free to post any additional details or questions in the comment section. 

Here are the rules and instructions you need to meet to take this election:

- You don't have an applicable financial statement (most people don't).
 - You have a consistent process for how you record expenses and assets.
 - You record these items as expenses on your books/records.
 - The cost of each item as shown on your receipt is $2,500 or less.
 
If you decide to take this option, a form called De Minimis Safe Harbor Election will show up in your tax return. First, go to the assets section of the TurboTax 'Home & Business' product to see if you qualify to take the election. If you qualify, then go to the expenses section and enter the item there. Essentially, qualifying for the 'De Minimis Safe Harbor Election' means your item can be entered as an expense and not an asset. This usually means that you get a greater tax benefit.

Note: Please enter those elections in the 'other miscellaneous expenses' category under the 'other common business expenses' section.

Additional note: It could seem to be double-dipping if you were to expense this and also claim a charitable contribution.

Rick19744
Level 11

Deduction for depreciable asset in service less than one year

So to complete the response on your question:
1) The above provides some guidance on if you would qualify for the deminimis safe harbor.  However, we have no idea of the cost of the equipment or the size of the business.  Both of these would come into play.
2) Having said that, you can contribute the asset to a charitable organization.  The deduction is the FMV of the asset at the date of contribution LESS any ordinary income recapture.  If you elected to deduct the cost under the deminimis rule (if you qualify), then this amount would reduce the charitable deduction, which I would venture to say would leave you with zero.  This makes sense, since there would be the potential of a double deduction which the IRS does not allow.
3) You could elect to just contribute the asset, take no depreciation (deminimis), and the value of the contribution would be the FMV of the asset, which I would assume is your cost given the short period of time the asset has been held.

So essentially you have the two options; possibly qualify for the deminimis deduction or donate (and no depreciation or expense deduction).

I assume you are most likely a pass-through entity.  It would probably make the most sense to take the deminimis deduction if you qualify as that deduction impacts page 1 of your 1040 which may be favorable to your state tax as well since most states are tied to federal AGI.  The charitable contribution deduction would be on Sch A and would be taken after AGI and possibly phased-out depending on your income level.
*A reminder that posts in a forum such as this do not constitute tax advice.*
doc3
New Member

Deduction for depreciable asset in service less than one year

I built the items from parts, so I have the cost of the parts.  The total is $4217 for all the parts, but I can break it down if that would help.  My business operated at a loss in 2017.  From what you said, it looks like the De Minimis deduction is the one that applies.  How do I get TurboTax to present me that option?
doc3
New Member

Deduction for depreciable asset in service less than one year

And yes, we're an LLC, so a pass-through.
Rick19744
Level 11

Deduction for depreciable asset in service less than one year

I would doubt that you would qualify for the deminimis safe harbor for that amount.
*A reminder that posts in a forum such as this do not constitute tax advice.*
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