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Auditing Theory

Notes or obsolescence of the property.” Most types of tangible property (except land), including
buildings, furniture, machinery, and equipment are depreciable. Depreciable intangible property
includes patents, copyrights and software. Under straight-line methods, a property’s value is
depreciated at a constant dollar value per year over its expected life span.

10.11.2 Modified Accelerated Cost Recovery System (MACRS)

The MACRS depreciation model is used for calculating business income taxes and not
determining the value of a company. Under this depreciation regime the asset depreciation
calculation is based on a staggered formula, whereupon asset classes are designated a life span,
such as automobiles and light trucks, whose useful life cycle is 5 years. Then, a certain percentage
depreciation allowance is assigned to each year, as given in MACRS depreciation tables. This
formula depreciates the asset to zero, with no residual or “salvage” value associated with the
asset.

10.12 How to Deduct Office Equipment and Furniture?

This article was created by a professional writer and edited by experienced copy editors, both
qualified members of the Demand Media Studios community. All articles go through an editorial
process that includes subject matter guidelines, plagiarism review, fact-checking, and other
steps in an effort to provide reliable information. When it comes to office equipment and
furniture, there are several ways you can deduct the purchase costs as business expenses. Which
way you choose may depend how much the equipment or furniture cost or what your financial
situation is at the time.
Instructions

1. Keep the receipts for all office equipment and furniture purchased over the taxable year.
You will not have to produce these receipts to file your taxes, but they will be necessary to
prove your claim should you be audited.
2. Determine whether the new office equipment or furniture you acquired is depreciable.
Depreciable assets are defined as having a determinable life span exceeding one year and
for which a value can be calculated.

3. Decide whether you want to take a Section 179 deduction. A Section 179 deduction allows
you to take a full or partial deduction for the entire cost of the office equipment or
furniture in lieu of deducting the depreciated portion. If the financial situation of your
business is such that a significant reduction in income would provide needed financial
relief, this is a good option.
4. Determine whether you want to take the deduction as a depreciable asset. The benefit of
choosing to treat office furniture and equipment as a depreciable asset is that you can
spread the deduction over many years. There are usually years in which a business purchases
more of such assets than others, and it’s nice to be able to count on taking a deduction in
future years.
5. Use the MACRS Depreciation model (the most commonly used depreciation model for
business property) to calculate the depreciation of the office furniture and equipment you
intend to deduct from your income taxes. The IRS gives detailed instructions about how
calculate the depreciation on property in its Publication 946 (see Resources below).
6. Use form 4562 to record section 179 deductions and what you deduct as depreciating
property. This form is attached to your tax returns.

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