Accelerated Depreciation for Equipment refers to a method of allocating the cost of a tangible asset, such as machinery or vehicles, over a shorter period than its useful life. This approach allows businesses to deduct a larger portion of the asset’s cost in the early years of its life rather than spreading the expense evenly over its useful life, as seen in straight-line depreciation.
The most common accelerated depreciation methods include the Double Declining Balance method and the Sum-of-the-Years’ Digits method. For example, if a piece of equipment costs $10,000 and is expected to have a useful life of 5 years, using the Double Declining Balance method allows for a deduction of a greater portion of the cost in the first year, which can improve cash flow and reduce taxable income early on.
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