Most income tax systems allow a tax deduction for recovery of the cost of assets used in a business or for the production of income. Such deductions are allowed for individuals and companies. Where the assets are consumed currently, the cost may be deducted currently as an expense or treated as part of cost of goods sold. The cost of assets not currently consumed generally must be deferred and recovered over time, such as through depreciation. Some systems permit full deduction of the cost, at least in part, in the year the assets are acquired. Other systems allow depreciation expense over some life using some depreciation method or percentage. Rules vary highly by country, and may vary within a country based on type of asset or type of taxpayer. Many systems that specify depreciation lives and methods for financial reporting require the same lives and methods be used for tax purposes. Most tax systems provide different rules for real property (buildings, etc.) and personal property (equipment, etc.).
Read more about this topic: Depreciation
Other articles related to "tax depreciation, depreciation, tax":
... Since no capital deductions are allowed, depreciation on capital assets is not tax-deductible, although tax depreciation, known as "capital allowances ... Therefore interest payments and depreciation on finance leases is deductible ... would be deductible from taxable profits as tax depreciation in year 1 ...
... Depreciation calculations can become complex if done for each asset a business owns ... assets of a similar type acquired in the same year into a “pool.” Depreciation is then computed for all assets in the pool as a single calculation ... One half of a full period depreciation is allowed in the acquisition period and in the final depreciation period ...
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