Our group is being asked to be the owners of donated instruments whose total value will be in the $5000 range. The School/Board of Ed. does not want to own the instruments nor does the person who is donating them. As we go forward I realize I am going to have to run some questions by practicing lawyers and accountants but I appreciate the initial help here on this site. Once I actually get some answers and get our organization on its feet, I can hopefully get back to the message board with what I have learned. Thanks!
What exactly is it you are considering depreciating? It's nice that you want to follow all the rules properly, but I think this would be overkill for most PTOs.
Typically you depreciate an asset to claim an expense against its declining value over time. An entity that is trying to minimize income for tax purposes usually wants to claim as much depreciation expense as possible. There's clause called "Section 179" that allows a business to write off all of the cost at once on equipment and vehicles (subject to certain restrictions, of course). So, say you were a small (for-profit) business that bought a machine costing $1000. You'd mostly likely claim a one-time $1000 expense as "section 179" and not depreciate the machine over years.
But I really don't think you even need to worry about it. A 501(c)(3) like Goodwill with buildings and vehicles and equipment is a very different animal than a PTO with a $900 popcorn machine.
Note - it's been a lonnngg time since I did small-business taxes.
Ally - your depreciation question might be above the knowledge of our little community, especially if you want a legal explanation. Your best bet is to call the IRS or an accountant and get a professional's perspective. And then come back and share it with us.
If you are already designated as a 501c3 organization, I don't think its necessary to include the items or depreciation value on your tax forms. If you are filing for your 501c3, than you may want to.
Thanks. Are there any other opinions on this? I had read in another post (after a search of the word "depreciation") that the depreciation rules were no different for a nonprofit. I wanted to get some additional input on the topic from those who have assets on their books and file returns. I would rather not depreciate our assets but, at the same time, want to do what's expected in the eyes of the IRS. I appreciate all of my questions being addressed! We are starting up the organization as "new" and all of the input helps get things in perspective.
