Depreciation Rules for Business Assets
Business assets lose value over time, and the tax code lets you deduct that loss. Understanding depreciation rules can dramatically reduce your tax bill.
Depreciation Rules for Business Assets
What Is Depreciation?
Depreciation allows you to deduct the cost of business assets over their useful life, acknowledging that assets wear out over time.
MACRS (Modified Accelerated Cost Recovery System)
The primary depreciation method for U.S. taxes. Assets are grouped into classes:
| Asset Type | Recovery Period | |---|---| | Cars, computers | 5 years | | Office furniture | 7 years | | Land improvements | 15 years | | Residential rental | 27.5 years | | Commercial property | 39 years |
Accelerated Methods
- Double Declining Balance (DDB): Deduct more in early years
- Sum-of-Years-Digits: Another accelerated method
- Straight Line: Equal deductions each year
Half-Year Convention
Most assets are treated as placed in service at mid-year, regardless of actual date.
Section 179 Election
Immediately expense up to $1,220,000 of qualifying assets in 2025.
Bonus Depreciation
Deduct 40% of qualifying asset cost immediately in 2025.
Listed Property
Cars, computers used for both business and personal purposes have additional limitations.
Purchased business equipment? We'll calculate the optimal depreciation strategy.