Computer Software Depreciation Calculation. IRS Publication 9. One of the key elements in determining the correct annual depreciation amount is selecting the appropriate property class. There are many property classes listed in Appendix B of this publication but we have also created additional classes for things that are not covered. Computer Software is one of the asset classes. Computer software is defined broadly to include any program designed to cause a computer to perform a desired function. However, a database or similar item is not considered computer software unless it is in the public domain and is incidental to the operation of otherwise qualifying computer software. Depreciable software acquired after 81. This software can also be expensed under section 1. Software is considered a section 1. Off the shelf software is not a section 1. Below are the associated class lives and recovery periods This gives you the basic information that you need for a depreciation calculation but you still need to use a formula to get your answers. A straight line calculation is used for this asset class and the full month convention will take a full month of depreciation in the first period. Look at sample spreadsheet below to see all the work that is involved in just one calculation. The highlighted formula shows the first year calculation as one twelfth of the annual amount meaning the asset started depreciating in the last period of your year.
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