I.e. We purchased a machine used for $25k in November of 2016 but have been making $500/month payment so we only have paid $1000 in 2016. So I put $25k as the asset to be depreciated or $1000?
You would put $25,000. The cost basis of an asset has nothing to do with loan payments. If interest is paid on future payments, you deduct the interest in future years.
While you may get a tax benefit for more than you have currently paid, that is how it works. Assets are depreciated, and the cost is based on sales price, not on payments made.
If you've ever taken a credit for college tuition, you would have experienced something similar- many students pay for their tuitions with loans, and get tax credits even if they've currently paid little or nothing.
You would put $25,000. The cost basis of an asset has nothing to do with loan payments. If interest is paid on future payments, you deduct the interest in future years.
While you may get a tax benefit for more than you have currently paid, that is how it works. Assets are depreciated, and the cost is based on sales price, not on payments made.
If you've ever taken a credit for college tuition, you would have experienced something similar- many students pay for their tuitions with loans, and get tax credits even if they've currently paid little or nothing.