--- title: "Depreciation: Definition and Sources | Tax Glossary" description: "Depreciation is the way a business recovers the cost of equipment or other long-lived property by deducting part of the cost each year." url: https://wallacecpa.multisites.ai/glossary/depreciation publisher: Wallace CPA phone: +1-877-682-1171 quote: https://wallacecpa.multisites.ai/contact --- 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](https://wallacecpa.multisites.ai/glossary/section-179-deduction) to deduct more at once. Records of price and date matter, so track each asset's [cost basis](https://wallacecpa.multisites.ai/glossary/cost-basis). The [tax planning page](https://wallacecpa.multisites.ai/services/tax-planning) covers timing equipment purchases. [Wallace CPA can helpTax planning](https://wallacecpa.multisites.ai/services/tax-planning) ## Related terms - [Section 179 deduction](https://wallacecpa.multisites.ai/glossary/section-179-deduction) - [Cost basis](https://wallacecpa.multisites.ai/glossary/cost-basis) - [Balance sheet](https://wallacecpa.multisites.ai/glossary/balance-sheet) - [Bookkeeping](https://wallacecpa.multisites.ai/glossary/bookkeeping) ## Sources 1. [IRS: Topic no. 704, Depreciation](https://www.irs.gov/taxtopics/tc704) ## Talk to Wallace CPA Call the Southlake office and say what you need: a return, an IRS letter, your books or a new business. Have the notice or last year's return nearby if you have one. [Call (877) 682-1171](tel:+1-877-682-1171)[Send a message](https://wallacecpa.multisites.ai/contact) 180 State Street, Suite 225, Southlake, TX 76092