Depreciation 101: Special Depreciation and the de minimis Election

To encourage business investment, Congress created Special Depreciation as a way for businesses to obtain an immediate tax break for purchasing long-lived assets.

This video tells you what does and what does not qualify for Special Depreciation and shows how Special Depreciation is reported on Form 4562 and the tax return.

The video also goes over the de minimis election, which allows business to deduct as an expense the cost of any asset with a price tag of up to $2,500.

2023 UPDATE: As stated in the video, the Special Depreciation Percentage for 2023 is 80%. The remaining 20% may be taken as a Section 179 Deduction or depreciated using ordinary MACRS.

0:00 Introduction
0:50 Why Special Depreciation?
1:42 What is Special Depreciation?
3:25 How does Special Depreciation work?
4:30 The de minimis Election
5:24 Conclusion

For a review of MACRS Depreciation, Click here:    • Depreciation 101:  What is MACRS?  

Additional Information and Resources:

IRS Publication 946: "How to Depreciate Property": https://www.irs.gov/pub/irs-pdf/p946.pdf (You'll find all the MACRS depreciation and asset recovery period tables in this publication)

IRS Form 4562: "Depreciation and Amortization": https://www.irs.gov/pub/irs-pdf/f4562...

Investopedia: "What is Bonus Depreciation?": https://www.investopedia.com/terms/b/...

Nolo.com: "IRS De Minimis Rule For Deducting Business Property" https://www.nolo.com/legal-encycloped...

The Tax Geek on The Site Formerly Known as Twitter: @taxgeekusa

The Tax Geek on Reddit: www.reddit.com/r/askataxgeek

Image Sources:

Storyblocks.com
Pexels.com
Wikimedia Commons (CC-SA 2.0 - 4.0)
Kenneth C. Zirkel
Joshua Doubek
Images of commercial kitchen equipment from www.webstaurant.com

NOTE: Any 2022 tax forms represented in this video have yet to be released by the IRS, and may differ from the forms that will ultimately be released. The 2022 tax forms as depicted are expected to be very similar to their 2021 counterparts.

Intro Music: "Bluesy Vibes" - Doug Maxwell - YouTube Audio Library

Outro Music: "Modern Attempt" - Track Tribe via YouTube Audio Library

DISCLAIMER: This video is for educational and informational purposes only. It is not intended to render tax advice or investment advice for individual situations. If you have questions regarding your particular situation, please consult with a qualified tax or investment professional.

The information in this video is current as of date of publication, and is subject to changes.