How to Depreciate a Mechanic's Work Tools

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The cost of tools that a mechanic uses in the normal operations of the business can be depreciated. Depreciation expense is deducted over the course of the tools' useful life. The number of years to use in calculating your depreciation will vary depending on the type of tools; a large tool such as a floor jack has a longer useful life than a small hand tool such as a wrench. Consult Internal Revenue Publication 946 for help in determining the number of years to use in calculating the depreciation.

Calculate the cost of the tools. The cost includes the price of the tools plus any installation, shipping or handling fees. You must obtain a receipt showing the vendor's name, the date of purchase, description and purchase price to validate your expense.

Determine the date the tools were put into service. This is when the tools became available for use in the business operation.

Determine the salvage value of the tools. This is the resale or scrap value of the tools after their useful life. This amount might be zero.

Calculate the amount that may be depreciated. For example, if the tools cost $1,000 and will be worth $100 at the end of the depreciation period, you may deduct $900 as depreciation over the useful life of the tools.

Calculate monthly depreciation. Assume the tools' useful life is five years (60 months.) Divide $900 by 60. You may deduct $15 in depreciation expense for every month the tool is in service.

Tips

  • Your expense may be eligible for Section 179 deduction, which would allow you to expense the entire amount of the purchase in the tax year the tools went into service. Consult the Internal Revenue Service or your accountant for details on Section 179 deductions.

References

About the Author

Johanna Miller has been writing professionally since 2010. She has been published in various online publications. Miller holds an Associate of Business degree with a concentration in accounting from Stark State College.

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