How to Depreciate a Paved Driveway

The Internal Revenue Service provides a thorough guideline for determining the amount of appreciation, and by following its rules the process becomes a matter of plugging the correct information into the correct form. Consult your tax adviser for any specific information concerning your business.

Information Gathering

1. Add up the basis, or cost, for the paved driveway. Include items such as surveying costs, legal fees and insurance.

2. Determine the property class and recovery period. For a paved driveway, this will likely fall under the General Depreciation System (GDS) 15-year property. This class includes certain depreciable improvements made directly to land or added to it, such as shrubbery, fences, roads and bridges, according to the IRS.

3. Determine the date the paved driveway was placed in service or available for general use. Most likely, you'll take the half-year convention, which treats the property as if you have used for for six months of the tax year. The mid-quarter convention requires special considerations.

Depreciation Tables

1. Choose the depreciation method that you want to use based upon the information already provided. For example, one choice is the 150 percent declining balance rate over a GDS recovery period, which is used for property in the 15-year property classes.

2. Look in Appendix A, MACRS (Modified Accelerated Cost Recovery System) Percentage Table Guide, of Publication 946 to find your depreciation table. You can find the table by downloading IRS Publication 946 (see Resources). In this case, it would be Table A-1.

3. Check Table A-1 to determine your first-year depreciation of 5 percent. Your second-year depreciation is 9.5 percent, your third year is 8.55 percent and your fourth is 7.7 percent. The percentages continue to drop each year until the 16th year, when they end with 2.95 percent.

4. Fill out IRS Form 4562, Depreciation and Amortization, according to IRS directions. The six-part, two-page form allows you to take multiple deductions for depreciation at one time.