Introduction

If you buy farm property such as machinery, equipment, or a structure with a useful life of more than a year, you generally cannot deduct its entire cost in one year. Instead, you must spread the cost over more than one year and deduct part of it each year. For most types of property, this is called depreciation.

This chapter gives information on depreciating property placed in service after 1986. For information on depreciating property placed in service before 1987, see Publication 534, Depreciating Property Placed in Service Before 1987.

For property used in a farming business, you must use the 150% declining balance method rather than the 200% declining balance method, or you can elect an alternative method. The methods you can use are discussed later under Depreciation Methods.

To help you understand depreciation and how to complete Form 4562, Depreciation and Amortization, see the filled-in Form 4562 in chapter 20.

This chapter also provides information on figuring both cost depletion (including timber depletion) and percentage depletion.

The last section of this chapter discusses amortization of section 197 intangibles, reforestation costs, pollution control facilities, and the costs of going into business.

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