Tax Depreciation Question

[OneLegJohn]

Do I write off labor I paid the Amish guy to install the tubing as a straight expense of 2010? I am depreciating the tubing I purchased for 5 years, however, I wasn't sure if the installation labor invoice should be depreciated or written off as a "regular" expense like say, plastic jugs. Any thoughts?

[bobbyjake]

You can handle the labor as part of the total tubing cost and depreciate it right along with the tubing or you can claim the labor as a single year and depreciate the materials over a life cycle. Your tubing has labor factored into the cost when you purchase it, as does your evap and all of the other equipment. Just itemize a list of the costs and then divide by the number of years. If anyone ever questioned you on it, you'd have a system that was tracked and consistent. Consistency is the key.

Now watch some accountant correct me...

[OneLegJohn]

I agree with you. I feel that the labor i pay to a contactor on a longterm capital investment, like a sugarhouse, should be depreciated 30 years. Even if I buy the material, which I depreciate for 30 years. Tubing material I depreciate for 5 years. But I wrote off the tubing labor paid for the entire year. Is that what you mean by not being consistent? As business owners, don't we have the choice on how we depreciate?

[Thompson's Tree Farm]

Be careful in calling it labor, it is custom work and if over $600, you need to give the guy a 1099 form.

[OneLegJohn]

Good point, Well contracted for the job. How does that sound? I considered him a contractor, as he won the bid. It makes me wonder, do I need to 1099 the plumber who installed my radiant heat pump?

[bobbyjake]

By Consistent, I mean... If in Year 1, you hang a new woods (or section of a woods) and you take the labor all as a single year, but materials over five years; then when you hang another new woods (or another section) next year (Year 2), do the same thing. Take the labor from Year 2 in a single year and take the materials over 5 years (four of which will overlap with Year 1's numbers). Where it gets tricky is when you have a lot of damage and have to due significant repairs, you should take that over the remaining life of the original tubing, so if Year 1's tubing gets destoyed by squirells in Year 3, then you should take the repair materials over the remaining years, Say Year 3, 4 and 5 (the reason being that when it comes time to take that tubing down and reset the whole woods, you aren't going to go through and cut out the newer repair work, it is going to be junk right along with the original stuff)....OR.... you take all repair efforts in a single year. Pick a methodology and stick with it, and keep a record.

If you are going to take the deduction for the labor/service and it is more than $600 to an individual, you need to give them a 1099. If your heat pump is a business deduction and you intend to write off the installation costs and they were more than $600, you are supposed to give the plumber a 1099.

[nelstone74]

It makes me wonder, do I need to 1099 the plumber who installed my radiant heat pump?

It depends on how the plumber's business is organized (the w9 is meant to be the formal way to find out and it also is the way to obtain a tax id number) if he is a corporation then he is not an independent contractor but if he is organized ast other partnership, sole prop, etc. Then he would have to receive a 1099 if your payments are over $600. Of course you should ask a real accountant or laywer. During an audit they don't yet put much weight in "I heard on this forum"

The worst part is that it doesn't have to make sense becuase its the law.