Equipment Delivered in December but Not Operational
Practical decisions for business owners and real estate owners.
The decision
Equipment generally starts depreciating when it is ready and available for its intended business use. A December payment or delivery does not by itself establish that the equipment was placed in service before year-end.
Published · AE Tax Advisors Team
Separate five dates in the purchase file
Record the order date, payment date, delivery date, installation completion date, and date the asset became ready for its specific business use. These dates can differ by weeks. A medical practice may receive a machine before room work is complete. A manufacturer may take delivery while waiting for electrical service. A contractor may own a truck that still needs the equipment required for its assigned work.
IRS Publication 946 distinguishes delivery from readiness and availability. It also explains that actual first use can occur after an asset is ready and available. Do not automatically substitute the first customer invoice for the service date, and do not assume that a boxed machine in a warehouse is operational merely because the purchase was financed.
Illustrative equipment timeline
A fabrication business orders a machine on November 15, pays a deposit on December 1, and receives it on December 21. Installation finishes January 6, followed by completion of the work needed to make it operational on January 8. These facts point to reviewing January as the service period rather than treating the December delivery receipt as conclusive. The analysis should describe what remained unfinished at year-end.
Change the facts: installation and commissioning are complete on December 27, the machine is available for production, and the owner waits until January 3 to run the next customer order. The first job date alone would not establish January as the service date. The distinction is readiness for the specific use, supported by records. These are hypothetical timelines, not a conclusion about any particular purchase.
Build an evidence packet while events are happening
- Purchase order and contract, including required installation work.
- Delivery receipt identifying the actual equipment.
- Installer completion report and commissioning records.
- Dated photographs and operational test records.
- Required permits or approvals relevant to intended use.
- A short description of any unfinished work on December 31.
- The asset ledger entry and the service date used by the preparer.
Download the equipment readiness checklist. Use one line per asset, with references to the underlying evidence. A checklist does not replace the facts; it makes missing evidence easier to identify.
Update the cash forecast before reducing payments
If installation slips into the next year, send the new schedule to the advisor preparing the tax projection. Keep a version of the forecast without the anticipated deduction so the owner can plan the cash required if the asset is delayed. Ask the vendor for a realistic completion schedule, not a tax conclusion.
Depreciation timing is only one step. Eligibility for bonus depreciation or Section 179 and the amount usable on the owner’s return require separate review. Use the bonus election guide to understand how other equipment in the same class can affect that decision.
Give the preparer a factual memo
Write a brief memo stating what the equipment does, where it is located, what was complete at year-end, what remained, and which records support those statements. Keep it with the depreciation schedule. This is more useful than a vendor email promising a write-off or a bookkeeping entry dated December 31. Review readiness early enough that a changed installation date does not become a surprise when the return is prepared.
Source and scope
IRS Publication 946: when property is placed in service. Source checked September 26, 2026. Examples are hypothetical. This guide is general education, not a conclusion about your return. Read our editorial policy.
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