As you may be aware, we moved our office to another suite in the same building recently. Our beautiful new office layout and decor was designed by the ladies on our staff.
During this process they asked if we could purchase some antique furniture for the reception area and conference room. My first reaction was... No! We can't expense AND depreciate items that appreciate in value!
Well, it turns out... I was not entirely correct...
First, What Business Assets Can I Typically Depreciate?
Business assets of office furniture, equipment, computers, vehicles, and buildings can be depreciated as long as they meet a few conditions:
- They are used to produce income, rent, or royalty for a business. (Exceptions may apply for assets that failed to produce income, although that was their primary purpose.)
- They wear out, decay, becomes obsolete, or lose value over time.
- They have a useful life that is measurable and longer than one year.
Of course, land cannot be depreciated.
So, How Can an Antique Be Depreciated?
While there is no guidance from the IRS on depreciating antiques, there are two big court cases in which the IRS lost regarding the depreciation of antiques. In both these cases, the taxpayers purchased antique violins and used them in their business which resulted in wear and tear on the instruments.
The taxpayers eventually sold their violins for more than they paid for them but the courts still agreed they were used in the course of their business, so in turn, they were able to depreciate them. Of course, the taxpayer had to pay capital gains tax on any appreciation above the purchase price and recapture taxes on the depreciation claimed.
So, antiques can be expensed and deducted under two conditions:
- The taxpayer physically uses them to conduct business; and
- Such business use subjects the antique to wear and tear.
So, as long as you actually use an antique in your business, it should be depreciable. For example, you could depreciate an antique desk, rug, or clock you use in your office. Paintings and decor are never depreciable.
If an antique you use in your business qualifies, you may depreciate the cost over several years or deduct all or most of the cost in a single year using Section 179 first-year expensing. If you already own antiques that you use in your business, but failed to depreciate, you may claimed the deductions you overlooked by filing IRS Form 3115.