The furniture depreciation formula is the method of calculating income tax deduction for furniture used in businesses or other income-producing activities. The two means of calculating depreciation are the general depreciation system, or GDS, and the alternative depreciation system, or ADS.
For a piece of furniture to qualify for a depreciation deduction, the taxpayer must own it and use it in a business-related activity. If the furniture is for both business and personal use, only depreciation for the business use can be deducted. A piece of furniture is placed in service not when it is bought, but when it is first put to use. Under GDS guidelines as of 2014, office furniture and fixtures fall into the category of 7-year property, so tax deductions are based on an estimation of a 7-year furniture lifespan. Adjustments must be made for short tax years, special depreciation allowances and occurrences such as vandalism or other breakage that causes the furniture to be withdrawn from service before the end of its estimated lifespan. Tables are available on the IRS website to help taxpayers calculate furniture depreciation.
Under most circumstances, GDS is used to calculate the depreciation of furniture. ADS is used only if the business use of the furniture is less than 50 percent, the furniture is mostly used outside the United States, the furniture is used for tax-exempt purposes, the furniture is used under certain circumstances in farming businesses or the furniture is imported from countries with which trade restrictions apply.