Asset Depreciation for Small Business Owners
If you bought it for the business and it lasts more than a year, you probably should not expense the whole thing at once. Depreciation lets you spread that cost over the asset useful life, matching the expense to the revenue it helps generate.
Three methods matter for small businesses:
Straight-line is the simplest. You take the cost minus salvage value and divide by useful life. Same amount every year. Predictable. Boring. Works for most situations.
Declining balance accelerates the expense. Bigger deductions early, smaller ones later. Useful if you want to reduce taxable income faster or if the asset loses value quickly (think computers or vehicles).
Double-declining is declining balance on steroids. Twice the straight-line rate. Front-loads even more depreciation into the early years. Common for equipment that becomes obsolete fast.
Which one should you pick? Straight-line if you want simplicity. Accelerated methods if tax strategy matters more than book simplicity. Run the numbers with our calculator and see the difference before choosing.
Depreciation also affects your business valuation and profit margins. Use the Business Valuation Calculator to see how asset values impact your company worth, and the Profit Margin Calculator to factor depreciation into your pricing.
FAQ
Generally no. Once you pick a method, you are usually stuck with it for that asset. That is why comparing methods upfront matters. The calculator lets you see all three before you commit.
Section 179 lets you deduct the full cost of qualifying assets in the year you buy them, up to certain limits. It bypasses depreciation entirely. Useful if you need a big deduction now. Not every asset qualifies, and the rules change, so check with your accountant.
Did You Know?
Section 179 of the IRS tax code allows small businesses to deduct up to $1,220,000 of qualifying equipment purchases in 2026, meaning a $50,000 piece of equipment can be fully expensed in the year of purchase rather than depreciated over 5 years. The straight-line method is the most common depreciation approach used by small businesses, but accelerated methods like double-declining balance can yield 33% larger deductions in the first year on a 5-year asset, deferring more tax to later years. A $100,000 vehicle used 100% for business depreciated over 5 years generates $20,000 in annual deductions, but using the half-year convention in year one it yields only $10,000. Choosing the wrong depreciation method can cost thousands in lost tax savings — always model multiple scenarios using the BizCalcLab Depreciation Calculator before committing.