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: Wha...
Additional Information and Resources:
IRS Publication 946: "How to Depreciate Property": 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": www.irs.gov/pub/irs-pdf/f4562...
Investopedia: "What is Bonus Depreciation?": www.investopedia.com/terms/b/...
Nolo.com: "IRS De Minimis Rule For Deducting Business Property" 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 - RUclips Audio Library
Outro Music: "Modern Attempt" - Track Tribe via RUclips 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.

[@TheTaxGeek]

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.

[@nosheetrader]

I feel blessed that I found you to increase my tax knowledge.

[@TheTaxGeek]

Thanks, that's the goal of this channel. I believe everyone should be fully informed about the taxes they pay.

[@AhamedIqbal1]

Excellent video, very clear and right to the important points

[@ellenoir5678]

Top of the morning coach!!

[@romainecrawford2720]

Love you videos!!

[@nosheetrader]

You mentioned watching part 1 before watching and learning from this video lesson. I suggest you put the link to that lesson in the description or somewhere for easy access. Thanks.

[@TheTaxGeek]

I did put a link in the description, but I'll repeat it here: ruclips.net/video/0rN-S2QmNPU/видео.html
There is also a card in the video, but you might be watching on a platform that is not card-enabled.

[@anthonyminniti17]

Great explanation. Very well done, I actually understood it! Haha

[@TheTaxGeek]

I'm glad you found it helpful! Thanks!

[@gracyellenm]

Your videos are great!! Thanks for sharing. Still, something I don't understand is: is a business allowed to choose what method they wanna use it? For example, if a business by equipment, they can choose straight line or accelerated method, or is the IRS that decide that?

[@TheTaxGeek]

Yes. If a business wants to spread depreciation over a longer period of time, it can choose to depreciate assets using a straight-line "ADS" method with a longer recovery period.

[@victoriakurtz9181]

Thanks for the info! Question: Can a photographer write off their camera (100% business use) in full under the "supplies" category (line 22) in schedule C? Instead of depreciating the asset?

[@TheTaxGeek]

If the camera costs under $2,500, you take the cost of the camera as an "other deduction" and attach a statement to the return that you're claiming the deminimus election (tax software will automatically do this with a "check the box" option). If the camera costs over $2,500, you can take Special Depreciation, a section 179 deduction, or depreciate it using ordinary MACRS. Since a camera is "listed property," the details do have to be entered on line 26.

[@naynaysmile]

​@@TheTaxGeek what about a computer?

[@orrd]

I'm confused about the part where he says that bonus/special depreciation can't be used for appliances in rental properties. It can and is often used for appliances in rental properties and that's allowed for items that have a depreciable time period of under 20 years, which appliances do. I believe that part of the video was incorrect.

[@TheTaxGeek]

Yes, you are correct. It is the Section 179 Deduction you cannot take on assets used in rental service. I will edit out that small section of the video. Thanks for catching it!