TN 13 (11-12)
RS 01803.120 Depreciation
A. Definition of depreciation
Depreciation is an income tax deduction that allows a taxpayer to recover the cost or other basis of certain property over the time the property is used. It is an allowance for the wear and tear, deterioration, or obsolescence of the property.
B. Policy for determining net earnings from self-employment (NESE)
In computing NESE, a taxpayer can take a reasonable deduction for depreciation. Most types of tangible property (except land), such as buildings, machinery, vehicles, furniture, and equipment are depreciable. Similarly, certain intangible property, such as patents, copyrights, and computer software is depreciable.
Usually, we do not question the amount of depreciation shown on a tax return. If an item of depreciation raises questions of validity, develop further.
For more information about deductions for depreciation, see IRS Publication 946.