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What Is Depreciation and Why It Matters
Comparing Depreciation Methods
Depreciation for Tax Purposes (MACRS vs Book)
How Depreciation Affects Business Finances
Frequently Asked Questions
Straight-line depreciation spreads the cost evenly over the asset's life. Accelerated methods like double declining balance and sum-of-years digits front-load the expense, writing off more in the early years. Accelerated methods can provide larger tax deductions sooner.
For US federal taxes, the IRS requires MACRS (Modified Accelerated Cost Recovery System), not the methods shown here. MACRS has specific recovery periods and rates for different asset types. Consult a tax professional for your specific situation.
Salvage value is the estimated resale or scrap value of an asset at the end of its useful life. For example, a delivery van costing $50,000 might have a salvage value of $5,000 after 7 years. The depreciable base is cost minus salvage value.
No, land cannot be depreciated because it does not wear out or become obsolete. When you purchase real estate, you must separate the land value from the building value. Only the building portion can be depreciated, typically over 27.5 or 39 years.