There are two approaches to writing off or depreciating the Furniture and Computer Equipment.
1.You may elect Section 179 rule, in order to write off the entire NEW computer and NEW Office
Furniture/Equipment.
But, you have to fulfill two conditions that are imposed by IRS;
a. Income limitation rule.
You must have taxable income equal to the s179 deduction you are claiming.
b. You cannot exceed the limit imposed by IRS in 2006 which is $108,000.
c. These assets must be newly acquired and used strictly for business only.
2. The other method is usually used when the assets acquired are not newly acquired or the
conditions of the s179 are not met. In this case, the Office Furniture is depreciated over 7 years,
and Computers are written off over 5 years.
The IRS uses an Modified Accelerated Cost Recovery System (MACRS) and as such the first few years tthe amount of depreciation calculated is twice as high as a straight line method. This is a complicated method, and a discussiion here would not be appropriate, however, you can access the IRS website at this location and read a detailed analysis if you are interested.
http://www.irs.gov/pub/irs-pdf/p946.pdf
