Acceleration Depreciation

Depreciation is a mode by which you decrease the cost price of any real estate property from the taxes in a fixed time interval. The depreciation expense is not only about the taxes as most of the businessmen think so, but depreciation is so important that it is reflected in the annual statement of most of the companies showing the percentage of asset that had depreciated in value. Depreciation expense can be calculated in many ways, starting from the straight line depreciation formula to the MACRS (Modified Modified Accelerated Cost Recovery System) way of calculation.

Straight line depreciation takes the cost price of any real estate property and divides it by the end term of depreciation which is usually taken as five years. For example, if you invest a certain amount on any property, you can deduct one fifth of the amount each year from your taxes for five successive years. This is not always the case.

Accelerated Cost Recovery is a complex and much better form of calculating the accelerated depreciation of assets. The objective of accelerated depreciation is to give more weight of the depreciating amount to the first year of acquisition than into the remaining years. This way of calculating depreciation increases the initial year’s depreciation but cuts off the value towards the end of the term.