How to Figure Out Depreciation for a Restaurant

Determining the income tax deduction for depreciation requires more information than only the property cost and beginning date. The calculation also demands identification of the depreciation system and property class. All of these factors permit you to find the correct percentage table provided by the Internal Revenue Service. In most cases, the General Depreciation System applies. Property class is based upon the number of depreciation years for a particular type of property, which is called the recovery period. Different property types have distinctive recovery periods. Most restaurant machinery and equipment is depreciated over a seven-year recovery period. Business real estate is normally depreciated over 39 1/2 years.

Instructions

1

Select the depreciation table to use for each restaurant property by examining the MACRS Percentage Table Guide in Appendix A of IRS Publication 946. The applicable row is General Depreciation System unless the Alternative Depreciation System applies for a property item listed on page 34 of Publication 946. Use a row for recovery period that matches the propertys description on page 35.

2

Find the depreciation table in Appendix A of Publication 946 for each property item indicated from your examination of the MACRS Percentage Table Guide.

3

Locate the percentage on the depreciation table that corresponds with the row for the property ownership year. Use the column in the table for restaurant real estate corresponding to the month of the first year the property was initially used. Columns in the tables for other property types list recovery periods to select.

4

Multiply the percentage on the depreciation table by the cost of the restaurant property item. The result is the depreciation expense for the specific item.

5

Add depreciation expenses calculated for all restaurant items. The sum is the total depreciation for all restaurant property combined.