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Publication 534 2003 Tax Year

Publication 534
Introductory Material

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Table of Contents

Important Change for 1995

Major changes to Publications 534 and 946. This publication, as well as Publication 946,How To Depreciate Property, has been changed. Publication 534 has been shortened. It no longer contains general information on MACRS and the section 179 deduction. It contains a discussion of the accelerated cost recovery system (ACRS), the ACRS Percentage Tables, a discussion of other methods of depreciation, and a limited discussion of listed property. We expanded Publication 946 by adding material taken from Publication 534. We added more detail to the discussions of the section 179 deduction, the modified accelerated cost recovery system (MACRS), and listed property. We replaced the partialMACRS Percentage Tables with the complete ones from Publication 534. We also added the Table of Class Lives and Recovery Periods from Publication 534. We made these changes to eliminate most of the duplication that existed in the two publications. This will save money and make it easier for you to decide which publication you need. Use this publication to figure depreciation on property you placed in service before 1987; use Publication 946 to figure depreciation on property you placed in service after 1986.

Introduction

The law allows you to recover your cost in business or income-producing property through yearly tax deductions. You do this by depreciating your property, that is, by deducting some of your cost on your tax return each year. You can depreciate both tangible property, such as a car, building, or machinery, and certain intangible property, such as a copyright or a patent.

The amount you can deduct depends on:

  1. How much the property cost,
  2. When you began using it,
  3. How long it will take to recover your cost, and
  4. Which of several depreciation methods you use.

Depreciation defined.

Depreciation is a loss in the value of property over the time the property is being used. Events that can cause property to depreciate include wear and tear, age, deterioration, and obsolescence. You can get back your cost of certain property, such as equipment you use in your business or property used for the production of income by taking deductions for depreciation. Black's Law Dictionary

Amortization.

Amortization is similar to depreciation. Using amortization, you can recover your cost or basis in certain property proportionately over a specific number of years or months. Examples of costs you can amortize are the costs of starting a business, reforestation, and pollution control facilities. You can find information on amortization inchapter 12 of Publication 535, Business Expenses.

Alternative minimum tax.

If you use accelerated depreciation for real property, or personal property that is leased to others, you may be liable for the alternative minimum tax. Accelerated depreciation is any method, that allows recovery at a faster rate in the earlier years than the straight line method. For more information, you may wish to see the following:

  • Form 6251, Alternative Minimum Tax-Individuals, and
  • Publication 542, Tax Information on Corporations.

Ordering publications and forms.

To order free publications and forms, 1-800-TAX-FORM (1-800-829-3676). You can also write to the IRS Forms Distribution Center nearest you. Check your income tax package for the address.

If you have access to a personal computer and a modem, you can also get many forms and publications electronically. See How To Get Forms and Publications in your income tax package for details.

Telephone help.

You can call the IRS with your tax question Monday through Friday during regular business hours. Check your telephone book for the local number or you can call1-800-829-1040.

Telephone help for hearing-impaired persons.

If you have access to TDD equipment, you can call 1-800-829-4059 with your tax question or to order forms and publications. See your tax package for the hours of operation.

How To Use This Publication

This publication describes the kinds of property that can be depreciated and the methods used to figure depreciation on property placed in service before 1987. It is divided into three chapters and contains an appendix.

Chapter 1 explains the rules for depreciating property under the Accelerated Cost Recovery System (ACRS).
Chapter 2 explains the rules for depreciating property first used before 1981.
Chapter 3 explains the rules for listed property. Also this chapter defines listed property.
The appendix contains the ACRS Percentage Tables.

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