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%-business-use test, you must ignore the investment use percentage. This more-than-50%-business-use test must be met to claim the first-year expensing deduction and accelerated MACRS.

Example:

  • You purchase a computer for $2,000 to use for your business and to track your personal investments
  • Investment use is 50%
  • Business use is 40%

Result:

  • You may use 90% (50% plus 40%) of the cost of the computer for determining the computer's depreciable basis.
  • Your computer's depreciable basis is $1,800 (90% x $2,000).
  • However, for purposes of claiming first-year expensing and accelerated MACRS, the more-than-50%-business-use test has not been met and therefore, you may not claim first-year expensing or accelerated MACRS depreciation. You must use ADS straight-line depreciation over 5 years instead.

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:

  • First-year expensing is permitted
  • Accelerated MACRS is permitted

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).

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.

File your personal and small business taxes (Schedule C)