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taxmap/pubs/p946-021.htm#TXMP6c3e7858 What Is the Basis for Depreciation?

Depreciation, Basis

Words you may need to know (see Glossary)

• Basis

The basis for depreciation of MACRS property is the property's cost or other basis multiplied by the percentage of business/investment use. For a discussion of business/investment use, see Partial business or investment use under Property Used in Your Business or Income-Producing Activity in chapter 1. Reduce that amount by any credits and deductions allocable to the property. The following are examples of some credits and deductions that reduce basis.

• Any deduction for section 179 property.
• Any deduction under section 179B of the Internal Revenue Code for capital costs to comply with Environmental Protection Agency sulfur regulations.
• Any deduction under section 179C of the Internal Revenue Code for certain qualified refinery property placed in service after August 8, 2005.
• Any deduction under section 179D of the Internal Revenue Code for certain energy efficient commercial building property placed in service after December 31, 2005.
• Any deduction under section 179E of the Internal Revenue Code for qualified advanced mine safety equipment property placed in service after December 20, 2006.
• Any deduction for removal of barriers to the disabled and the elderly.
• Any disabled access credit, enhanced oil recovery credit, and credit for employer-provided childcare facilities and services.
• Any special depreciation allowance.
• Basis adjustment for investment credit property under section 50(c) of the Internal Revenue Code.

For additional credits and deductions that affect basis, see section 1016 of the Internal Revenue Code.

Enter the basis for depreciation under column (c) in Part III of Form 4562. For information about how to determine the cost or other basis of property, see What Is the Basis of Your Depreciable Property in chapter 1.

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