Nobody starts a small business thinking about depreciation. You buy a delivery van, you expense it, done. Except that is not how it works. The IRS says if the asset lasts more than a year, you spread the cost over its useful life.
I bought a $3K laptop for my business and thought "cool, I will deduct it all this year." My accountant explained MACRS and Section 179 and my head spun. But understanding it saved me $800 in taxes. Worth the headache.
Here is the short version. Depreciation matches expenses to revenue. A $25,000 machine that lasts five years should cost $5,000 a year, not $25,000 in year one.
The Three Methods
Straight-line is the default. Cost minus salvage divided by useful life. Same amount every year. Predictable. Good for buildings and furniture.
Declining balance front-loads depreciation. Bigger deduction in year one, smaller later. Good for computers and vehicles.
Double-declining is declining balance at double the rate. Biggest possible deduction in year one. Aggressive. Use our Depreciation Calculator to compare all three.
Which One?
Want simplicity? Straight-line. Want to reduce taxes now? Accelerated method. Not sure? Compare them in the Depreciation Calculator with your actual numbers.
Bottom Line
Use the calculator to compare methods, then talk to your accountant about your tax strategy.
Frequently Asked Questions
Spread big purchase cost over useful life.
Deduct full cost year one. Limit .16M 2026.
Front-loaded depreciation. 5-7 year typical.