Federal tax
Depreciation
Depreciation is the way a business recovers the cost of equipment or other long-lived property by deducting part of the cost each year.
A business cannot usually deduct the full cost of a long-lived asset in one year. The IRS says you generally must depreciate such property. Depreciation recovers the cost over a number of years, and you deduct a part of the cost every year.
Equipment, vehicles and many buildings follow this rule. The yearly amount depends on the type of property and the IRS recovery period. A business can sometimes choose the Section 179 deduction to deduct more at once. Records of price and date matter, so track each asset's cost basis. The tax planning page covers timing equipment purchases.
Related terms
Sources
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