That seems straightforward. But of course leave it to the IRS to write rules and regulations to try to pin down exactly how different classes of items depreciate.
Today, we’ll look at how the depreciation benefit has recently been juiced — and how you can benefit from it, if only for a limited amount of time still.
Depreciation is a tax break available to any business owner who buys property (all property, not just real estate) that isn’t used up in a single year.
There are multiple methods of depreciation. The easiest to understand is “straight line” depreciation. With that method, you basically take the purchase price of the depreciable property and you divide it by 27.5 years.
There are at least three other methods of depreciation, generally called “accelerated depreciation.” They are called1. Double declining depreciation,2. Sum of the year’s digits depreciation, and3. Unit of production depreciation.
One might use that if they prefer to get that deduction later due to being in a higher tax bracket then (or just to better match income to depreciation—remember it doesn’t do any good to get regular depreciation upfront if you don’t have enough income to use it).