How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Lev Your Own Question
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 29798
Experience:  Taxes, Immigration, Labor Relations
870116
Type Your Tax Question Here...
Lev is online now
A new question is answered every 9 seconds

Does a non profit have to depreciate? their buses, or can

Customer Question

does a non profit have to depreciate? for example their buses, or can they not depreciate on line 22 at all
Submitted: 2 years ago.
Category: Tax
Expert:  Lev replied 2 years ago.

Depreciation is an income tax deduction that allows a taxpayer to recover the cost or other basis of certain property. It is an annual allowance for the wear and tear, deterioration, or obsolescence of the property.

In order for a taxpayer to be allowed a depreciation deduction for a property, the property must meet all the following requirements:

--The taxpayer must own the property. Taxpayers may also depreciate any capital improvements for property the taxpayer leases.

--A taxpayer must use the property in business or in an income-producing activity. If a taxpayer uses a property for business and for personal purposes, the taxpayer can only deduct depreciation based only on the business use of that property.

--The property must have a determinable useful life of more than one year.
As for accounting purposes - nonprofits are required to record the purchase of long-lasting, substantial property and equipment (such as computers, vehicles, buildings, etc.) as assets in the financial records, and to charge a portion of the cost of those items in each year in which they have a useful life (capitalizing and depreciating fixed asset)

Due to the nature of non-for-profit activities , some long-term assets are not eligible for depreciation and are not recorded as assets in the financial statement.
Examples of such assets are works of art, historical treasures, historical buildings, libraries and general items placed in museum collections - these are not depreciated.
I might suggest the Form 990 general instruction G at http://www.irs.gov/pub/irs-pdf/i990-ez.pdf
line 42 on page 2 of the 990 is for reporting depreciation)
See also IRS Publication 538 at http://www.irs.gov/pub/irs-pdf/p538.pdf

Expert:  Lev replied 2 years ago.
Depreciation is an income tax deduction that allows a taxpayer to recover the cost or other basis of certain property. It is an annual allowance for the wear and tear, deterioration, or obsolescence of the property.
In order for a taxpayer to be allowed a depreciation deduction for a property, the property must meet all the following requirements:
--The taxpayer must own the property. Taxpayers may also depreciate any capital improvements for property the taxpayer leases.
--A taxpayer must use the property in business or in an income-producing activity. If a taxpayer uses a property for business and for personal purposes, the taxpayer can only deduct depreciation based only on the business use of that property.
--The property must have a determinable useful life of more than one year.
As for accounting purposes - nonprofits are required to record the purchase of long-lasting, substantial property and equipment (such as computers, vehicles, buildings, etc.) as assets in the financial records, and to charge a portion of the cost of those items in each year in which they have a useful life (capitalizing and depreciating fixed asset)
Due to the nature of non-for-profit activities , some long-term assets are not eligible for depreciation and are not recorded as assets in the financial statement.
Examples of such assets are works of art, historical treasures, historical buildings, libraries and general items placed in museum collections - these are not depreciated.
.
See form 990
http://www.irs.gov/pub/irs-pdf/f990.pdf
line 10b in Part X balance Sheet to report accumulated depreciation and
line 22 in part IX Statement of Functional Expenses for reporting current year depreciation
.
I appreciate if take a moment to rate the answer.
Experts are ONLY credited when answers are rated positively.
If you still have any doubts, need clarification - please be sure to ask.
I am here to help you will all tax related issues.