To start with, what is depreciation?
Depreciation is the allowance set aside for the taxpayer (that’s you) for anything (your telephone equipment, for example) that is worn, aged or broken during its use. Phone equipment is classified as ‘furniture and equipment’ as one of the categories that the Internal Revenue Services provided for this purpose. To fully read the document, just visit the IRS website and type “How to depreciate property” on its search engine: you may not want to print it all out (there are more than 5 chapters).
Can I claim depreciation on my telephone? Yes, you can if you meet the following requirements:
- Your telecom equipment can be depreciated once you use it for work or as a tool in your business. You may not claim a special deduction allowance, though, if you are not using this equipment mostly for work. That is, if you are not using it more than half of your time.
- The telephone must last more than a year since its first use.
- Your telephone should be something that is able to get worn out, or outdated.
- What if you are an employee? You can still claim depreciation for using the company telephone. That is, if your work really needs a telephone. Get documents from providers saying that a telephone is actually needed in your work place. You can even claim deductions on mobile phones if this is the case.
Now, you stop claiming for depreciation only when you throw the telephone away or when you have already bagged the deduction completely.
Determine if you are using your telecommunication equipment for business or personal use or both. You can only get depreciation from the business use of the phone. Secure documents to prove that you have used the equipment for such. For example, in a stay-at-home business where you use a phone, you may have to prove that the phone is used at least more than 50% of the time. Calling for a fresh supply of doughnuts during business hours is not work-related!
PBX equipment, for example, may be termed as a business-use or business-related appliance.
Spying equipment may be depreciated if you allowed this equipment to be rented or if you really work in a spy agency. You can claim the deduction on the cost of the rent, however, and not on the depreciation itself. On the other hand, if the rent requires the one who leased it to maintain it in good condition once returned, you cannot claim depreciation at all. Speaking of rent, you can get deductions if you fixed rented business property (even if, of course it was the engineer or the mechanic who did the actual repair).
After checking up the IRS rules and regulations to obtain a deduction, gather all necessary documents like the exact date the equipment was first used. Depreciation will start on that date up to five or seven years after (look up to which the telephone is classified).
The last step will be to submit tax forms. Now you can claim your depreciation from your telephone equipment.