What Kind of Assets Can I Write Off?

A frequently asked question from clients, particularly as year-end approaches, is: "What can I buy to decrease my tax liability?" Many consider purchasing vehicles or making property down payments. However, important limitations exist on what qualifies.

For example, real estate purchases - including land and buildings - typically do not offer immediate tax deductions. Specifically, down payments on property do not themselves qualify for immediate write-offs.

Equipment and Bonus Depreciation

Assets eligible for immediate depreciation (bonus depreciation) include equipment that depreciates upon purchase and is not permanently affixed to buildings or property. This encompasses computers, tractors, dehumidifiers, trimming machines, and building appliances.

Vehicles and Business Use Requirements

Vehicles must demonstrate primary business use to qualify for bonus or Section 179 deductions. Vehicles require over 5% business use eligibility, with potential IRS recapture if this drops. When business use is under 50%, mileage deductions (currently $0.65 per mile) are safer alternatives. Business mileage reimbursements from personal vehicle use are non-taxable business expenses but require meticulous documentation.

Land and Real Property

Land itself is not depreciable since it appreciates rather than depreciates. Residential rental properties depreciate over 27.5 years and commercial buildings over 39 years - long-term deductions offering limited immediate relief. Non-permanently-affixed equipment like above-ground irrigation systems may qualify for bonus depreciation.