What kind of depreciation method should I use?
If you're not sure or you don't want to make the decision, just go back to the Depreciable Asset Category screen to choose a category and then a specific "Asset Type" and we'll use the regular depreciation method associated with that asset type.
Two methods of depreciation are the straight line and declining balance methods. If ACRS or MACRS does not apply, you can use one of these methods.
Straight Line Method
This is the simplest method, where we'll just divide the total amount you can depreciate by the number of years remaining in the useful life. It means you'll generally get the same amount of depreciation deduction each year.
Declining Balance Method
This method allows you to recover a larger amount of the cost of the property in the early years of your use of the property. Instead of taking the same amount of depreciation deduction each year for the asset (straight line method), you'll get a bigger deduction in the first few years, then a smaller deduction in later years. The total will be the same.
If you choose "200% Declining Balance", it means that your depreciation deduction will be weighted even more heavily to the beginning of your asset's life than if you choose "150% Declining Balance".
Alternative Depreciation System (ADS)
If your asset is one of the following, choose the Alternative Depreciation System (ADS):
Two methods of depreciation are the straight line and declining balance methods. If ACRS or MACRS does not apply, you can use one of these methods.
Straight Line Method
This is the simplest method, where we'll just divide the total amount you can depreciate by the number of years remaining in the useful life. It means you'll generally get the same amount of depreciation deduction each year.
Declining Balance Method
This method allows you to recover a larger amount of the cost of the property in the early years of your use of the property. Instead of taking the same amount of depreciation deduction each year for the asset (straight line method), you'll get a bigger deduction in the first few years, then a smaller deduction in later years. The total will be the same.
If you choose "200% Declining Balance", it means that your depreciation deduction will be weighted even more heavily to the beginning of your asset's life than if you choose "150% Declining Balance".
Alternative Depreciation System (ADS)
If your asset is one of the following, choose the Alternative Depreciation System (ADS):
- Tangible property used predominantly outside the United States.
- Tax-exempt use property.
- Tax-exempt bond financed property.
- Imported property covered by an executive order of the President of the United States.
- Property used predominantly in a farming business and placed in service during any tax year in which you made an election under section 263A(d)(3) not to have the uniform capitalization rules of section 263A apply.
