Permanently idled property cannot be depreciated
The IRS recognizes a distinction between temporarily-idled property and permanently retired property, and the point when you stop depreciating the asset lies within the distinction.
You always stop depreciating property when you have fully recovered your cost or other basis. You fully recover your basis when your section 179 deduction, allowed or allowable depreciation deductions, and salvage value, if applicable, equal the cost or investment in the property.
Furthermore, you must stop depreciating property when you retire it from service, even if you have not fully recovered its cost or other basis. You retire property from service when you permanently withdraw it from use in a trade or business or from use in the production of income because of any of the following events:
- You sell or exchange the property.
- You convert the property to personal use.
- You abandon the property.
- You transfer the property to a supplies or scrap account.
- The property is destroyed.
You may continue to claim a deduction for depreciation on property used in your business or for the production of income if it is temporarily idle (not in use). For example, if you stop using a machine because there is a temporary lack of a market for a product made with that machine, continue to deduct depreciation on the machine.
For clarification on when you stop depreciating an asset, contact a ShindelRock tax professional.