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.
RELATED SERVICES
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RELATED TERMS
ACCOUNTING
Fixed Asset
A long-lived physical asset used in the operation of the business — equipment, vehicles, buildings, computers.
ACCOUNTING
Balance Sheet
A snapshot at a single point in time of what a business owns (assets), owes (liabilities), and the owners' equity in it.
ACCOUNTING
Accrual vs. Cash Accounting
Two ways to recognize income and expenses — when money moves (cash) vs. when it's earned or owed (accrual).