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Can I take depreciation in the year I started my furniture…

Can I take depreciation...

Can I take depreciation in the year I started my furniture making business if I do not have a profit?

Accountant's Assistant: The Accountant will know how to help. Please tell me more, so we can help you best.

My son started a furniture making business this year and had about $15000 in revenue. He owned the equipment to make the furniture before he started the business. Can he depreciate the equipment and computer even though he did not have a profit? Also, his workshop is in the basement of the apartment he rents in San Francisco. The basement is only used as a workshop. Thank you for any information you can give.

Accountant's Assistant: Is there anything else the Accountant should be aware of?

I think that's it for now.

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Answered in 3 minutes by:
3/10/2018
Carter McBride
Carter McBride, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 1,276
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Hey! I'm Carter, I'm a CPA and can help you out.

Yes he can take depreciation on the equipment in a year of loss. The only type of depreciation he cannot take without a profit is IRC 179 depreciation which allows you to 100% expense the assets. However, he can still use bonus depreciation, which is 50% of any asset placed in service before late September 2017 and 100% after that.

He can claim business use of home if it is a Schedule C business for his workshop.

Let me know if you need anything else. If not, please leave a rating. Thanks!

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Customer reply replied 4 months ago
Clarifying, he can depreciate equipment he owned prior to starting the business? Is that depreciation based on when he first bought it for personal use? The business is a sole proprietorship. What does a Schedule C business mean?

Yea, he can transfer it to the LLC and then the LLC can depreciate it at what he originally bought it for. Bonus depreciation will not be available if he put the equipment into the company prior to September 2017.

Schedule C business is another way to say sole proprietorship.

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Customer reply replied 4 months ago
He is not an LLC. Clarifying, he is transferring the assets to the sole proprietorship. What kind of documentation would he need?

Since he's not an LLC, there is no documentation requirements. He would just add them to his fixed assets and start depreciating them as soon as he started using them in the business.

Carter McBride
Carter McBride, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 1,276
Experience: Adjunct Professor
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Carter McBride and 87 other Tax Specialists are ready to help you
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Customer reply replied 4 months ago
Since his workshop is about 1/2 the square footage of the apartment, can he deduct 1/2 his rent even though the business has a loss?
Customer reply replied 4 months ago
How can I get in touch with you specifically again through this website?
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