Business Deductions

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10 Oddball Tax Deductions

11 Most Overlooked Tax Deductions

Updated for 2012

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Investment Use Property

You can treat investment use as if it were business use for the purpose of figuring the depreciable basis of the property.

In other words, you can combine your investment use percentage with your business use percentage and use the total of the two percentages for figuring the property's depreciable basis.

However, for purposes of determining the more-than-50%-busines-use test, you must ignore the investment use percentage. This test must be met to claim the first-year expensing deduction and accelerated MACRS.

Example:

Result:

What if the computer was used over 50% for business?

If, in the above example, the computer was used 60% for business and 30% for managing your investments (that produce taxable income):

First-year expensing:

If you claim the first-year expensing deduction (the Section 179 deduction), you must follow the rules for this deduction.

MACRS:

You would apply the MACRS depreciation rate to 90% of the cost of the computer. In the above example, the depreciable basis is $1,800 (90% x $2,000).

Caution! Although you may combine investment use with business use to figure your allowable depreciation, you cannot not claim the first-year expensing deduction or accelerated MACRS when business use is not over 50%. You must use use ADS straight-line depreciation. (ADS stands for: Alternative Deprecation System.)

Managing Your Investments

If you use your computer in your home office to manage your investments, the computer is considered listed property.

Listed property is certain property that may be used for both business and personal purposes.

If you use your computer strictly for managing your investments, you may not claim first-year expensing or deduct accelerated MACRS. You may only deduct ADS straight-line depreciation.

Caution! If you plan on claiming the home office deduction, be aware of the fact that using your home office for personal reasons, including managing your investments, may be cause for the IRS to disallow your home office deduction. This is because you must use your home office exclusively and regularly for your business and nothing else.

Next:

Depreciation: Depreciation Methods (MACRS); Form 4562, Depreciation and Amortization; How the General Depreciation System and Alternative Depreciation System Differ

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