Property that May Not be Depreciated

Certain types of property must be amortized rather than depreciated. Other types of property may neither be depreciated nor amortized.

You must amortize section 197 intangibles:

  • Section 197 of the Internal Revenue Code applies to assets acquired in connection with the purchase of a business. Their cost must be amortized over 15 years. For example, goodwill, customer lists, patents, copyrights, and formulas.

Items that may not be depreciated:

  • Trademarks and trade names may not be depreciated unless:
    • They were acquired as part of the purchase of a business they would be classified as section 197 intangibles and their cost may be amortized over 15 years.
  • Property purchased and sold in the same year:
    • You must hold property purchased for your business more than one year to claim depreciation on such property. 
  • Property purchased but not both ready and available for use in the year purchased.
    • To be depreciable, the property intended for use in your business must be both ready and available for use in the year purchased.
  • Land may never be depreciated
  • Antiques are generally not depreciable since they have no determinable useful life.
    • However, an antique actually used in the business may be depreciated because it will be subject to wear and tear. For example, an antique desk or a musical instrument used by a professional musician.

File your personal and small business taxes (Schedule C)