Accounting
Depreciation
Spreading the cost of a long-lived asset over its useful life rather than expensing it all in year one.
Definition
Depreciation matches the cost of an asset to the periods that benefit from it. Tax rules (Section 179, bonus depreciation) often allow much faster write-offs than book depreciation, which creates differences between the financial statements and the tax return that have to be tracked.
When It Matters
Whenever you purchase equipment, vehicles, computers, or real estate.
Common Questions
What's the difference between Section 179 and bonus depreciation?
Both accelerate deductions. Section 179 is elective and has income limits; bonus depreciation applies more broadly but is phasing down. The right one depends on your situation.