Depreciation

[bayles]

Client is a construction worker who works various temporary job sites in several states. He has purchased a travel trailer to provide his housing near each job site. May he claim depreciation on this trailer as an employee business expense or is this a non-deductible personal expense?

[Gretel]

If he qualifies do claim out of town expenses, then, yes, depreciation may be claimed.

[Zee]

I'm curious...are these guys also provided a housing or reimbursement allowance of any kind?

[bayles]

Depreciation

Yes, they receive a per diem from each employer.

If depreciating the house trailer is OK, what life is used? I have one reference saying 7 yrs (GDS) and 10 yrs (ADS). I've read others that say it is 5 yr property. Because it is lodging, the IRS says it is not eligible for 179 expense deduction.

Note that the trailer qualifies as a second home to allow the deductibility of "mortgage" interest.

[Zee]

In my opinion, the trailer's depreciable life is 5 years, (Asset Class 00.27, Trailers and Trailer-mounted containers).

You have indicated the employee is receiving a per diem for housing and meals? Is that correct? If so, any deductions would be employee business expenses (Form 2106) subject to the 2% limitations. Second, only the amount the actual expenses exceeded the per diem amount would be deductible. As such, in my opinion, a calculation would be necessary to determine whether the there is any beneficial deduction after comparing actual expenses + trailer depreciation to the per diem amounts received. I would use a 5 year depreciable life on the trailer. Your added note that the interest on the trailer is second residence interest also suggests that the usage of the trailer isn't 100% business, this could also reduce the depreciation amount.

Of course, I could be wrong. Hopefully, my answer will stimulate other responses.

[Davc]

Is the per diem included in box 1 of the W-2?

[Gretel]

Yes, they receive a per diem from each employer.

If depreciating the house trailer is OK, what life is used? I have one reference saying 7 yrs (GDS) and 10 yrs (ADS). I've read others that say it is 5 yr property. Because it is lodging, the IRS says it is not eligible for 179 expense deduction.

Bayles, where did you find the information that a trailer is not eligible for Sec.179?

[Kram BergGold]

tax home

Does your client have a tax home? From your post it seems to me that he does not. If not the trailer is not deductible or depreciable.

[Gretel]

Bayles, where did you find the information that a trailer is not eligible for Sec.179?

Found it in Pub.225, but does it apply to farmers only?