Many people have heard of the term bonus depreciation, but many are also unfamiliar with the concept and its origins. What bonus depreciation does is allow a taxpayer to deduct an additional depreciation expense (on top of the normal depreciable amount) on an asset during the tax year acquired. The purpose behind this is to [...]
Correctly calculating depreciation on an asset requires the determination of an accurate cost basis. Often, companies may only use the purchasing price of the asset as the basis for calculating their depreciation costs. However, doing so fails to account for additional costs that should be depreciated along with the actual cost of the asset. Some [...]
With all of the rules and regulations governing depreciation, and the various methods of depreciation, one may find it difficult to actually calculate depreciation. This post will hopefully serve as a basic comprehensive guide to calculating depreciation under different circumstances. The following examples are based upon use of half year averaging convention.
Straight-Line Method:
Annual Depreciation [...]
When a piece of property is placed in service, you are required to use a particular convention to determine the depreciation deduction you will get for the year of acquisition. Below are the most commonly used convention types:
Half-Year (HALFYR): During the year an asset is acquired, only six months of depreciation is allowed regardless of [...]
There are two basic different methods of depreciation to choose from when depreciating an asset. These methods include Straight-line, and Declining Balance at either 200% or 150%. Choosing among these methods depends on how a company wishes to receive depreciation expenses.
The Straight-Line method is generally the most commonly used method due to its simplicity [...]
Below is a general overview of the history of depreciation through 1986. Included are major changes or additions to rules and regulations concerning the ways in which depreciation is determined and allowed.
1934: Up to this point the estimation of the useful lives of depreciable assets was not very regulated. Then, during the Great Depression, the [...]