J.K. Lasser's Small Business Taxes 2017

CHAPTER 14 First-Year Expensing, Depreciation, Amortization, and Depletion

1. First-Year Expensing
2. Other Expensing Opportunities
3. General Rules for Depreciation
4. Modified Accelerated Cost Recovery System
5. Depreciation Methods
6. Bonus Depreciation
7. Limitations on Listed Property
8. De Minimis Safe Harbor Rule
9. Putting Personal Property to Business Use
10. Amortization
11. Depletion

First-year expensing, which is also called the Section 179 deduction after the section in the Tax Code that creates it, is a write-off allowed for the purchase of equipment used in your business. This deduction takes the place of depreciation—the amount expensed is not depreciated. For example, if you buy a desk for your business for $1,000, you can opt to deduct its cost in full in the year you place the desk into service. If you don't make this election and no other write-off option applies, you must write off the cost over a number of years fixed by law.

Depreciation is an allowance for a portion of the cost of equipment or other property owned by you and used in your business. Depreciation is claimed over the life of the property, although it may be accelerated, with a greater amount claimed in the early years of ownership. The thinking behind depreciation is that equipment wears out. In theory, if you were to put into a separate fund the amount you claim each year as a depreciation allowance, when your equipment reaches the end of its usefulness, you will have sufficient funds to buy a replacement (of course, the ...