What is depreciation?
Aug 5, 2009 Depreciation
What is depreciation?What is depreciation? In business, we deduct our expenses from our income. Business “stuff” we use, deplete, or wear down lowers our revenue and our taxable income. If the “useful life” of the “stuff” we use to produce income extends beyond one tax year, we need another way to still recover our original cost. This “long-term” method of cost recovery is called depreciation. There are five tests for depreciating property:
- You must own it.
- You must use it (place in service) for business or other income-producing activities.
- You must be able to determine its useful life.
