Furniture and Equipment Depreciation
Office furniture and equipment is depreciable over a seven year period under MACRS if used as part of your home business.
Qualifying Property for Furniture and Equipment Depreciation
For qualifying business equipment purchased and place into service in 2014, you may elect to deduct up to $500,000 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 for furniture and equipment depreciation.
When it comes to furniture and equipment depreciation in your business you can do one of the following:
- Elect a section 179 deduction for the full cost of the property.
- Depreciate the full cost of the property.
- Take part of the cost as a section 179 deduction and depreciate the balance.
Office furniture and equipment depreciation example: In July 2014, 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:
- 1. Take a section 179 deduction for the full cost of the office furniture.
- 2. Take part of the cost of the furniture as a section 179 deduction and depreciate the balance.
- 3. Depreciate the full cost of the office furniture.
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 below, to get his MACRS depreciation deduction of $150.05. The total deduction Matt can take is $1200.05 ($1,050 Section 179 allowance + $150.05 MACRS deduction.
|Half-Year Convention||Mid-Quarter Convention|
|Year||1st Quarter||2nd Quarter||3rd Quarter||4th Quarter|
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 expense with furniture and equipment depreciation 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 MACRS Depreciation page on Real Estate Owner. There is a detailed explanation of the different convention methods.