Discussion - declining balance, 15 and 20 year property is...

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Discussion for Chapter 8 Discuss how depreciation methods may affect your net income and the amount of income taxes a person and/or a business would have to pay. (Consider Straight-Line, MACRS Depreciation, and section 179 deductions in your answers) Straight-Line depreciation is the most common form used by business. Businesses take the purchase price of the asset, subtract its salvage and divide by the number of years in its “useful life.” Each year the taxpayer will record the depreciation expense on their income statement which will lower the businesses taxable income. Businesses compute depreciation expense using the tax basis, usually the cost, of the asset. The depreciation method depends on the MACRS property class: 3, 5, 7, 10 year property is Double-
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Unformatted text preview: declining balance, 15 and 20 year property is 150% declining balance, and 27.5 and 39 year property is Straight line depreciation. Depreciation for income tax purposes are based on the half-year convention. A company depreciates an asset to a zero value so that there is no salvage value at the end of its MACRS life. A taxpayer can elect to expense an asset up to $250,000 through Section 179 deductions if the asset is used at least 50% of the time during its first year and cannot be real property or property used to produce income. This expense is recorded on the income statement which will lower the businesses taxable income....
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