Author: Robert K Valentine Jr. Depreciation planning runs on a handful of numbers that the IRS updates every year — how long an asset must be depreciated, how much of a luxury vehicle you can write off, and how large a Section 179 deduction you can claim before it starts phasing out. Those numbers are…
Section 1245 vs. Section 1250 Depreciation Recapture Explained (With Examples)
Author: Robert K Valentine Jr. When a depreciated business asset is sold at a gain, part or all of that gain often has to be reported as ordinary income rather than the more favorable capital gain, because depreciation deductions reduced your tax bill along the way and the tax code wants some of that benefit…
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Trading In a Business Vehicle: Why the Old Like-Kind Exchange Break No Longer Applies
Author: Robert K Valentine Jr. For decades, trading in a business vehicle was one of the easiest tax breaks in the code to explain to a client: no gain, no loss, no paperwork headache. You handed over the old truck, drove off in the new one, and any built-up gain simply rode along into the…
How to Calculate MACRS Depreciation for Real Property in the Year of Disposition (Mid-Month Convention)
Author: Robert K Valentine Jr. In an earlier article, we covered how the mid-month convention works when a building is placed in service — treating the acquisition date as the midpoint of that month, whether the property is 39-year nonresidential (commercial) real property or 27.5-year residential rental property. This article covers the other end of…
How to Calculate MACRS Depreciation in the Year of Disposition: Half-Year and Mid-Quarter Conventions
Author: Robert K Valentine Jr. Selling, scrapping, or trading in a business asset partway through its recovery period doesn't just stop depreciation cold. For MACRS personal property with a recovery period of 20 years or less — the 3-, 5-, 7-, 10-, 15-, and 20-year classes — the tax code still allows a partial depreciation…
How to Calculate Book Depreciation for Financial Statements: Straight-Line and Declining Balance Methods
Author: Robert K Valentine Jr. The depreciation you report on your financial statements doesn't have to match the depreciation you claim on your tax return — and for most companies, it doesn't. Tax depreciation follows MACRS, the recovery periods and conventions written into the Internal Revenue Code. Book depreciation — the depreciation shown on your…
MACRS Depreciation for Real Property: Commercial vs. Residential Under the Mid-Month Convention
Author: Robert K Valentine Jr. Depreciating a building is nothing like depreciating a vehicle or a piece of equipment. There's no bonus depreciation, no Section 179 deduction, and no choice of method — real property depreciates under MACRS using the straight-line method only, over a fixed recovery period, using a convention many business owners have…
How to Calculate Depreciation on a Luxury Business Vehicle: A MACRS Example
Author: Robert K Valentine Jr. If your business owns a high-end vehicle, you already know the IRS doesn't let you write it off the way you would a delivery van or a piece of office equipment. Passenger automobiles are subject to special "luxury auto" depreciation limits under Section 280F of the tax code, and those…
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Calculating MACRS Depreciation During a Short Year
Author: Robert K Valentine Jr. A short tax year — one covering less than 12 full months — shows up more often than most business owners expect: a new company adopts a fiscal year different from its start date, a corporation changes its year end, two entities merge, or a business dissolves partway through the…
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Section 179 vs. Bonus Depreciation in 2026: Which Should Your Business Use?
The OBBBA made 100% bonus depreciation permanent and raised Section 179 limits to $2,560,000 for 2026. Here is how the two deductions differ and how to use them together.
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