Office Furniture and Equipment is Depreciable over
a Seven Year Period

You are afforded several methods of depreciating furniture
and equipment.  This section of the Real Estate Owner website
discusses the depreciation deductions you may be entitled
to take for furniture and equipment you use in your home
for business. 

Qualifying Property
For qualifying business equipment purchased and place into
service in 2007, you may elect to deduct up to $125,000 of the cost.
Qualifying furniture and equipment include desks, chairs, lamps,
files, safes, fax machines, carpets, telephones, appliances, books,
etc...  This property is called seven year property because it's
presumed to have a depreciable life of seven years. 

Furniture and equipment are depreciable to the extent you use
these items for your business.  If you use the equipment for both
business and personal use, business use must exceed 50% in the
year the equipment is first placed into service to claim a first year
expensing deduction.

When it comes to depreciating furniture or equipment in your
business you can do one of the following:
 

Example: In July 2007, Matt Moore bought a desk and four chairs
for use in his office.  His total bill for the furniture was $2,100.  His
taxable business income for the year was $3,200 without any
deduction for the office furniture.  Matt can do one of the following:

The furniture in the example above is qualified property for
purposes of the 50% special depreciation allowance and 7-year
property under MACRS.  If Matt were to not take a section 179
deduction he would multiply $2,100, the cost of the furniture, by 50%
to figure his special depreciation allowance of $1,050.  His
depreciable basis after the special allowance is $1,050 ($2,100 -
$1,050).  He would the multiply the remaining $1,050 by 14.29%,
which is taken from the 7 year property MACRS depreciation
chart, to get his MACRS depreciation deduction of $150.05.

Personal Property Converted to Business Use
If you use furniture in your home office that was used previously
for personal purposes, you cannot take a section 179 deduction
for the property.  You can depreciate it however.  The method of
depreciation you use depends on when you first used the property
for personal purposes. 

If you began using the property for personal purposes after 1986
and change it to business use in 2006, depreciate the property
under MACRS.  The basis of the property changed from personal
to business use is the lesser of the following:
 

The adjusted basis of the property on the date of change. The fair market value of the property on the date of the change.

Depreciation Based On MACRS Tables
The amount you can depreciate your office furniture depends on when
you placed it into service for your office.  For example, if you place
your office furniture into service during the last 3 months of the year,
you will have to determine if you have to use the mid-quarter
convention to depreciate your furniture. 

To learn more about the different MACRS conventions, visit our
Depreciation Method page on Real Estate Owner.  There is a detailed
explanation of the different convention methods.









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