50% Bonus Rule and $500 Safe Harbor Rule

playroom-furniture-for-kids#1: Using Minute Menu with the 50% Depreciation Rule

In the article I posted on my blog, “The 50% Bonus Depreciation Rule is Back for 2014!” , I explained the tax benefit of buying new items in 2014.

The new law allows you to deduct 50% of the business portion of many items in 2014, and depreciate the remaining 50% using the normal rules of depreciation.

Examples of such items include: Computer, office equipment, fence, furniture, appliances, patio, car/truck, and playground equipment. It does not apply to home improvements or a home.

How should you record such items in Minute Menu Kids Pro?

Treat these items as you would any other item you are depreciating. That is, enter them as Office Equipment, Furniture/Appliances, or Land Improvements. Since Minute Menu doesn’t do the depreciation calculation for you, it won’t calculate how much you can deduct using the 50% rule and how much you should depreciate. Let your tax preparer know which items on your list are eligible for the 50% rule (they must be purchased new in 2014). If you are doing your own taxes, follow the instructions in my article.


#2: Using Minute Menu with the $500 Safe Harbor Rule

According to a recent rule, you are allowed to deduct in one year, rather than depreciate, items you purchased in 2014 that cost less than $500. See my article “Correction: Written Depreciation Statement Not Required!”

How do you enter items in Minute Menu Kids Pro using this rule?

Here’s an example: You bought a washing machine for $485 in 2014. Before this new rule, you would enter it under Furniture and Appliances and depreciate it over 7 years. Now you can deduct the entire business portion in 2014.

Since you are using your washing machine for business and personal purposes, you must apply your time-space percentage. If your time-space % is 40%, then you can deduct $194 ($485 x 40% = $194).

In the end, it doesn’t matter what business category you put these items under. You can always create your own category. For items you would normally label as Furniture/Appliances or Land Improvements, I’d suggest putting them under “Household Items.”

Tom Copeland – www.tomcopelandblog.com

Image credit: www.cadeorg.com

Categories: Depreciation and Home, Record Keeping & Taxes

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