Depreciation Opportunities Provide Tax Deductions

Updated on June 4, 2023

Posted on Aug 25, 2021 by Rhett Reuter, CPA, MT

For assets with a useful life of more than one year, the cost must be depreciated over a period of years. In most cases, the Modified Accelerated Cost Recovery System (MACRS) will be preferable to the straight-line method because you’ll receive a larger deduction in the early years of an asset’s life.

5 DEPRECIATION METHODS BUSINESS OWNERS NEED TO KNOW

But if you make more than 40% of the year’s asset purchases in the last quarter, you could be subject to the typically less favorable mid-quarter convention. When it comes to repairs and maintenance of tangible property, however, different rules may apply.

Careful planning during the year can help you maximize depreciation deductions in the year of purchase.

UNDERSTANDING THE TYPES OF DEPRECIATION BUSINESSES CAN UTILIZE

Other depreciation-related breaks and strategies are also available and, in many cases, have been enhanced by the TCJA. These include:

Bonus Depreciation
Section 179 Expensing Election
Tangible Property Repair Safe Harbors
Cost Segregation Studies

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THE DEFINITIVE GUIDE TO BUSINESS TAX CREDITS AND DEDUCTIONS

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Biz Tip Topic Expert: Rhett Reuter, CPA, MT

Rhett is a Senior Manager with SVA Certified Public Accountants and works closely with businesses advising them on tax and accounting issues that may arise throughout the year. He provides guidance and support on a variety of issues including IRS and state audits, various tax credits, like-kind exchanges, and structuring and exiting deals.

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