The IRS issued Tax Tip 2021-173, which addresses the depreciation of property deductions for small business owners. Depreciable property includes vehicles, buildings, equipment, machinery, and furniture; it does not include land (but certain land improvements may qualify). Small businesses can apply annual depreciation tax deductions when they use property specifically as part of their businesses; this is intended to help them recover the cost of that property.

According to the tax bulletin, small businesses can depreciate property that meets all of the below conditions:

  • The small business owns the property (even if subjected to debt).
  • The small business uses the property in a business or income-producing activity. Property used only for personal activities can’t be depreciated.
  • The property must have a determinable useful life.
  • The property must have be expected to last longer than one year.
  • The small business must not depreciate excepted property, as defined by the IRS.

Small businesses should use Form 4562 to calculate their deduction for depreciation.

Read Tax Tip 2021-173 in its entirety for more information about depreciation of property deductions for small business owners. Contact us to discuss how you might apply this tax tip to your own small business.


David Reape CPA

David M. Reape CPA
Director, Tax Services