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Depreciation

   If property you acquire to use in your business has a useful life of more than one
   year, you generally cannot deduct the entire cost as a business expense in the year
   you acquire it. You must spread the cost over more than one tax year and deduct
   part of it each year on Schedule C or C-EZ. This method of deducting the cost of
   business property is called depreciation. 

   The discussion here is brief. You will find more information about depreciation in: 

        Publication 946, How To Depreciate Property, and 
        Publication 534, Depreciating Property Placed in Service Before 1987. 

   What can be depreciated. You can depreciate property if it meets all of the
   following basic requirements. 

      1.The property must be used in business or held for the production of income. 
      2.The property must have a determinable useful life and that life must be longer
        than one year. 
      3.The property must be something that wears out, decays, gets used up,
        becomes obsolete, or loses value from natural causes. 

   What cannot be depreciated. You cannot depreciate: 

        Property placed in service and disposed of in the same year, 
        Inventory (explained in chapter 6), 
        Land, and 
        Repairs and replacements that do not increase the value of your property,
        make it more useful, or lengthen its useful life. You can deduct these amounts
        on line 21 of Schedule C.