Congress
The IRS provides tables that have the percentages drawn for each year of the two different methods. Not only that, have established special of first year conventions it is supposed that buy their depreciable fixed assets on June 30. This is known as the half-year Convention. The idea behind this is that you could have bought some items before June 30 and some after that date. Therefore, so that it is easy to understand, that assume the greater and lesser amounts of depreciation it will be all out normal. In reality, the IRS does not even call it more depreciation.
It is called cost recovery. Let us be realistic. This is a political tool. Congress gives and takes. They have been playing with this system for years. If they want to stimulate growth in businesses that will shorten the useful life of the assets that companies can achieve a greater depreciation. If you are not in mood, which will extend the useful life of an item.
A good example is the 39 years set for the life of the commercial property. This means that if you rent a building for your business and make improvements, improvements are amortized in 39 years. Congress is now working on a Bill to make the fall of up to 15 years for leasehold improvements. Before December 31, 1986 we had ACRS or accelerated cost recovery system. At present, we have expedited or updated accelerated cost recovery system. All Congress and settings time rules that give it a different name. Keep in mind that there are different programs for different properties. For example, goods residential estate is depreciated over 27 years the non-residential real estate is depreciated over 39 years. In addition, if more than forty percent of their total purchases of fixed assets has occurred in the last quarter of the year, then, you must use a mid-quarter Convention. This Convention means that purchases made in the last quarter of the year were carried out on November 15. This prevents you from buying expensive equipment on December 31 and treat it as if it were purchased by June 30 and the obtaining of a greater depreciation expense. Understanding of how depreciation can be of great value to the small business owner, since it helps to know the tax implications in planning for the purchase of capital goods.