Depreciation 4065 Depreciation Leanne Brown

What is depreciation Spread the cost of an asset over its life. Used in income tax: assets that can be depreciated can not be deducted the year of its purchase.

What can be depreciated Machinery Livestock Orchards Equipment Farm buildings Anything that can be used for more than one year.

Can you list some items that can be depreciated?

Why are the assets written off over a longer period? Because they provide a service for several years

What causes a loss of value from an asset over time? Wear and tear do to use Out dated because of new technology Wear and tear from nature

What can be depreciated Property that is subject to wear and tear during production Farming assets with a useful life over one year Assets must have a determined useful life. Land can not be depreciated

Where do I start? There are three things to determine before you start Basis: cash paid or cash paid after trade in Service Date: when was it placed into service Method: method of depreciation used

Cost are recovered over a … 3, 5, or 15 year period 3 year: cars, trucks, tools, breeding swine, some race horses 5 year: machinery and equipment, breeding livestock, single purpose structures, fences, heavy trucks 15 year: buildings and barns

Two ways to calculate Depreciation Straight line Accelerated cost recovery system

Straight line method In a 3 year plan you can have a recovery period of 3, 5, or 12 years In a 5 year: 5, 12, or 25 years In a 15 year: 15, 35, or 45 years

Accelerated cost recovery system 3 year 25% 1 st year 38% 2 nd year 37% 3 rd year 5 year 15% 1 st year 22% 2 nd year 21% 3 rd year 21% 4 th year 21% 5 th year 15 year 5% 1 st year 10% 2 nd year 9% 3 rd year 8% 4 th year 7% 5 th year 7% 6 th year 6% 7 th through 15 th year