Define: Depreciation

Depreciation is the gradual decrease in the value of an asset over time due to wear and tear, obsolescence, or other factors.

Yes, depreciation is generally considered a tax-deductible expense for businesses. It allows businesses to recover the cost of an asset over its useful life.

Depreciation can be calculated using various methods, such as straight-line depreciation, declining balance depreciation, or units of production depreciation. The specific method used depends on the asset and its expected useful life.

Not all assets can be depreciated. Generally, only tangible assets used in a business or for the production of income can be depreciated. Intangible assets, such as patents or copyrights, are typically amortized instead.

No, depreciation can only be claimed on assets used for business or income-producing purposes. Personal assets, such as a car used solely for personal transportation, cannot be depreciated.

Yes, businesses can choose to accelerate depreciation by using methods like the Modified Accelerated Cost Recovery System (MACRS). This allows for larger deductions in the early years of an asset’s life.

The ability to claim depreciation on gifted or inherited assets depends on various factors, such as the fair market value at the time of transfer and the relationship between the parties involved. It is advisable to consult with a tax professional for specific guidance.

No, if an asset was fully expensed under Section 179, it cannot be depreciated further. Section 179 allows businesses to deduct the full cost of qualifying assets in the year they are placed in service, up to a certain limit.

No, if you are leasing or renting an asset, you generally cannot claim depreciation on it. The owner of the asset would be entitled to claim depreciation instead.

Changing the depreciation method or recovering previously claimed depreciation may be possible in certain circumstances, such as when an asset’s use changes or if an error was made in the initial depreciation calculation. However, it is important to consult with a tax professional to ensure compliance with applicable laws and regulations.