Taxes

What Is Depreciation?

Depreciation is the process of spreading the cost of a long-lasting asset — such as equipment, vehicles, or buildings — over its useful life, instead of recording the whole cost as an expense at once. It reflects the asset’s gradual loss of value and is used both in accounting and for tax deductions.

Straight-Line Method

Annual depreciation = (cost − salvage value) ÷ useful life. A 10,000 machine with no salvage value and a five-year life is depreciated 2,000 per year.

Accelerated Methods

Declining-balance methods deduct more in early years and less later. Tax rules specify which methods and lives apply to each type of asset.

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🔗 Related Terms

Asset EBITDA Balance Sheet Total Cost of Ownership

More Taxes Terms

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Last updated: September 29, 2026. This definition is for general educational purposes only. It is not financial, investment, tax, legal, or medical advice, and it does not recommend any product or course of action. For decisions about your own situation, consult a qualified professional.