depreciation - Depreciation (& Taxes) Outline The Big...

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Outline The Big Picture Definitions MACRS Taxes at disposal ©2005,2009 William O’Brien
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Depreciation – The Big Picture Taxes = tax rate * (Income – Expenses) Depreciation = decrease in value Depreciation increases taxable expenses, decreasing taxes.
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Definitions Business expenses: Expensed (aka “written off”) Common, short term expenses Labor, utilities, materials, insurance Depreciated Lose value gradually, can’t be 100% written off in year cost occurs Typically machinery or equipment + installation costs
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Definitions (2) Depreciable assets must: 1. Be used for business purposes 2. Must have a useful life that is measurable and life>1 year 1. Property has value that decays over time. Ex: Sally G.E. Nous invents a perpetual concrete batching plant that never wears out. Is it depreciable? Ex: Sam M.R. Keter replaces some gears in Sally’s machine so that they cause the machine to wear over time. Depreciable? Ex: Land.
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Definitions (3) Tangible Property – can be seen, touched, and felt Real : Land, buildings, and things growing on, or attached to the land. Personal
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depreciation - Depreciation (& Taxes) Outline The Big...

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