Deductions and Write-Offs

For rental property placed in service after December 31, 1986 the depreciation cost is recovered over 27.5 years.
Only the cost of the structure is allowed as a depreciation deduction; the value of land cannot be depreciated.
If the property is used for commercial purposes, it must be depreciated over 39 years.

For a rental property with a class life of 27.5, the roof (improvement) would also use 27.5 as the recovery period. For a non-residential commercial building treated as 39 years MACRS property, the roof would also use 39 years.
Additions and improvements to a property are depreciated under MACRS in the same way as the deduction for the property would be figured if the property had been put in service at the same time as the addition or improvement.

Depreciation is the annual deduction allowed to recover the cost or other basis of business or investment property having a useful life of more than one year. Land is not depreciable. Depreciation and amortization deductions are reported on IRS Form 4562.

Amortization is similar to the straight line method of depreciation in that an annual deduction is allowed to recover certain costs over a fixed period of time.
Examples of amortizable items are costs of starting a business, goodwill, customer lists, franchise fees, licenses, trademarks and certain other intangibles, reforestation and pollution control facilities. Amortization is reportable on IRS Form 4562.

Generally, the maximum section 179 expense deduction is $500,000 for section 179 properties placed in service in 2013.
If you elect to expense section 179 property, you must reduce the amount on which you figure your depreciation or amortization deduction (including any special depreciation allowance) by the section 179 expense deduction.
You may elect to deduct all or part of the cost of certain qualifying property in the year you place the asset in service as opposed to recovering the cost over the assets useful life(depreciation). This choice is called a Section 179 Election.
Any disallowed amount in the current year may be carried over to future years.
The 179 deduction is reportable on IRS Form 4562. You can elect to expense part or all (up to $500,000) of the cost of section 179 property that you placed in service during the tax year and used predominantly (more than 50%) in your trade or business.

Equipment that is used for personal and business purposes is called "listed property".
Listed property includes automobiles (weighing 6,000 lbs. or less), cellular telephones, computers and peripheral equipment,
property used for entertainment, recreation or amusement, such as boats, airplanes, and photographic, sound or video recording equipment.
There are certain limitations associated with listed property. Listed property deductions are reportable on IRS Form 4562, part 5.

If the total cost basis of your business equipment was placed in service during the last 3 months of the tax year exceeds 40% of the total basis of all the property placed in service for the whole year, then a Mid-quarter convention applies.
Generally, the first year depreciation will be based as if the assets were placed in service in the middle of the last quarter of the tax year. This result will be a smaller first year calculation than the depreciation calculation using the half year convention.

Computer software used in a business or for investment purposes having a useful life of more than 1 year is depreciable over a 3 year life.

While 100% is reportable, only 50% of meals and entertainment are deductible on your business expense forms. • Be sure to keep good records on who was present, the dates and times, and the reasons for the entertainment and business discussions that took place. You may not deduct costs of meals and entertainment for personal reasons while traveling. If the trip is "primarily" business, most expenses will be considered as business expenses. If the trip is "primarily" personal and you conduct some minimal business, only those costs directly related to the business you conduct may be deductible.