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From the Financial Hotline

By: Financial Hotline
Fall 2019 (Vol. 37, No. 3)

Q: I am buying a large piece of machinery for my business in December. Do I get to claim a full year of depreciation on my 2019 taxes?

A: The tax rules for depreciation include “conventions” or rules for figuring out how many months of depreciation you can claim. There are three types of conventions. To select the correct convention, you must know the type of property and when you placed the property in service.

The half-year convention applies to all property except residential rental property, nonresidential real property, and railroad gradings and tunnel bores unless the mid-quarter convention applies. All property that you begin using during the year is treated as “placed in service” (or “disposed of”) at the midpoint of the year. This means that no matter when you begin using (or dispose of) the property, you treat it as if you began using it in the middle of the year. For example, if you buy a $70,000 piece of machinery on December 15, If the half-year convention applies, you get one-half year of depreciation on that machine.

However, you may have to use the mid-quarter convention if the cost of equipment placed in service during the last three months of the tax year is more than 40 percent of the total cost of all property placed in service for the entire year. If the mid-quarter convention applies, the half-year rule does not apply, and you treat all equipment placed in service during the year as if it were placed in service at the midpoint of the quarter in which you began using it.

There’s also a mid-month convention rule that applies only to residential rental property, nonresidential real property, and railroad gradings and tunnel bores. It treats all property placed in service (or disposed of) during any month as placed in service (or disposed of) on the midpoint of that month.

Q: I need to purchase some expensive tools and equipment for my new job. My employer will reimburse me for the cost but only after I have worked for them at least one year. Are there any credit cards that offer 0% on new purchases?

A: Yes. Check out Capital One QuickSilver Rewards card. Their introductory APR is 0% for 15 months on balance transfers and purchases. This card also offers unlimited 1.5% Cash Back on every purchase, every day, no annual fee and a one-time $150 cash bonus after you spend $500 on purchases within 3 months from account opening. Go to www. and click on QuickSilver Rewards to apply.

Q: My father, an Army veteran, just passed away last month. My mother is struggling financially with very little income. Are there any VA benefits for widows?

A: Please accept our sincerest condolences. The Veteran’s Administration (VA) Survivors Pension offers monthly payments to qualified surviving spouses and unmarried dependent children of wartime Veterans who meet certain income and net worth limits set by Congress. To see if you qualify, fill out an Application for DIC, Death Pension, and/or Accrued Benefits (VA Form 21-534EZ)

Q: Today’s interest rates are a percent lower than my current mortgage rate. Should I refinance?

A: A general rule of thumb is that refinancing is worthwhile if the current interest rate on your mortgage is, at least, two percentage points higher than the prevailing market rate. However, a rule of thumb is not ironclad: every individual’s circumstances need to be analyzed. For example, if your lender is offering zero-point loans and no closing costs, even if your rate change is less than one percentage point, you may save some money by refinancing.

Interest rates aren’t the only determining factor. If you have paid most of the upfront interest on your current mortgage and are now paying more principal than interest, it probably won’t save you much interest to start all over with a new loan. Also, when you add in the closing costs to refinance your loan, on average it takes about three years before you break even. So, be sure you plan on keeping this home long enough to benefit from a new loan.