What is an example of a standby cost?

A standby cost is the cost of owning an asset that is available for business use even when it isn’t actually being used. The IRS uses this concept most often with equipment, vehicles, and machinery.

Scenario You own a commercial generator that your business keeps on‑site in case of power outages.
It only runs a few times a year, but it’s always ready for use.

Annual costs you incur even when it sits idle

• Insurance: $300
• Storage space allocation: $500
• Preventive maintenance: $400
• Depreciation: $2,000

Total standby cost: $3,200 per year

These costs exist whether or not the generator is used, because the business keeps it available and ready.