Be aware that the IRS prohibits business owners from depreciating certain items. These include inventory, land and property placed in service and disposed of in the same year. There is an exception to these rules regarding depreciation, however. Use Form 4562, Depreciation and Amortization , to report depreciation and the Section 179 deduction. The IRS provides several examples of each of these types of expenses that help taxpayers get a better feel for the rules of the road in this area.
Some examples are below.
Generally, when a business purchases a motor vehicle, that cost is a capital expense. The business owner can recover part of these costs through annual deductions for depreciation, but there are dollar limits. See Publication 463 . When it comes to repairs, most of these are deductible expenses. However, a major overhaul for a business vehicle will transform the repair expenses into capital expenses.