Answers · Deductions, assets & depreciation
How Does Tax Depreciation Work?
Depreciation is tax cost recovery for qualifying property used in business or income production over more than one year.
This question is answered in full on the main page for it.
How it works
The rule, and what it turns on.
MACRS under §168 is common; §179 and bonus can accelerate deductions. Land is not depreciable and placed-in-service date matters.
Example
$100,000 machine can be capitalized and recovered using an allowed depreciation method regardless of whether it was financed.
Common mistakes
What we see go wrong, and what we do instead.
- Depreciating land.
- Using loan term as recovery period.
A better approach
- Maintain book and tax depreciation schedules separately.
Authority
Where this comes from, so you can check it.
IRC §§167, 168 and 179; Treas. Reg. §1.167(a)-1; IRS Publication 946; Form 4562 and instructions.
Educational information, not individualized tax advice. Treatment depends on your facts, entity classification and tax year, and IRS instructions change. Confirm your own position with us before relying on it. Mint Associates does not provide legal services.
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