Use

• The most important factor for determining whether a property is commercial or not is how it is used. Commercial property is used in a business or for an income-producing activity. Also, if you use the property to produce income, the income must be taxable. If the property is only partially used for commercial purposes, use the percentage of time that it is used for commercial purposes for calculating deductions and depreciation.
  
  

Depreciable

• Commercial property should also be depreciable. Buildings, machinery, vehicles, furniture, equipment and most commercial property that is tangible is also depreciable. This means that the cost of the property is deducted from your income over the life of the property or a set number of years rather than during the year the purchase is made. Depreciable property must have a determinable useful life that lasts substantially longer than a year.
  
  

Record-Keeping

• The IRS may want to see proof of the costs and income associated with the commercial property. You need to keep records that show any income that the property produces and any expenditures made to purchase and keep up the property. If you are only partially using property for business use, such as a car for business and personal use, you will need to have proof of the amount of business use for which the property is available. This will support the percentage you use when prorating the property deductions and depreciation.
  
  

Idle Property

• Should the commercial property stop being used to produce income, it does not mean that it is not longer commercial property. The IRS recognizes there are times when property may be idle. As long as the property is still considered in use, then it is still depreciable, which allows the property to meet the requirements to be commercial. When you stop using the property for commercial reasons, then it is retired from service and no longer considered commercial.