What Is Depreciable Property?

Depreciable property is any asset that is eligible for tax and accounting purposes to book depreciation in accordance with the Internal Revenue Service's (IRS) rules. Depreciable property can include vehicles, real estate (except land), computers, office equipment, machinery, and heavy equipment. Depreciable property items are considered 澳洲幸运5官方开奖结果体彩网:long-term assets.

Understanding Depreciable Property

IRS Publication 946, "How to Depreciate Property," defines a depreciable property. According to the publication, to be depreciable, property must meet all of the following requirements:

• It must be a property you own.
• It must be used in your business or income-producing activity.
• It must have a determinable useful life.
• It must be expected to last for more than one year.

澳洲幸运5官方开奖结ಞ果体彩网:Property𒉰, plant, and equipment (PP&E) are depreciable assets, as are certain intangible properties such as patents, copyrights, and computer software; however, IRS Publication 535 also lists patents and copyrights as intangibles that must be 澳洲幸运5官方开奖结果体彩网:amortized instead of depreciated. Whether these intangibles are amortized or depreciated generally depends on the characterization of their useful life

In some cases, businesses can choose to 澳洲幸运5官方开奖结果体彩网:capitalize an asset, taking an expense (澳洲幸运5官方开奖结果体彩网:write off) in the current tax period and forgoing future depreciation, thus rendering it a non-depreciable asset, following IRC 澳洲幸运5官方开奖结果体彩网:section 179 rules.

Common Depreciation Methods

Two common depreciation methods are 澳洲幸运5官方开奖结果体彩网:straight-line and accelerated. Straight-line depreciation generates a constant expense each year, while 澳洲幸运5官方开奖结果体彩网:accelerated depreciation front-loads the expense in the early years. Some companies choose the accelerated method to shield more income from tax, though their reported net profits will be less in earlier years. This will reverse in the later years, as less depreciation expense is recorded.

Regardless of the method of depreciation employed, the depreciable property must have the same 澳洲幸运5官方开奖结果体彩网:cost basis, useful life, and 澳洲幸运5官方开奖结果体彩网:salvage value upon the end of its useful life.

Example of Depreciable Property

PepsiCo Inc. lists land, buildings and improvement, machinery and equipment (including fleet and software), and construction-in-progress under its PP&E account. The average useful life for straight-line depreciation for buildings and improvement is 15-44 years and 5-15 years for machinery and equipment. Land is not depreciable property. In the fiscal year 2021, the company recorded $2.48 billion in depreciated expenses and had $24.42 billion in 澳洲幸运5官方开奖结果体彩网:accumulated depreciation. None of its intangible assets were depreciated.