| Depreciation means the rate a piece of equipment, | | | | income is being derived from its use), yet the business |
| machinery or other business asset decreases its | | | | still pays tax for it. Furthermore, the property tax paid |
| financial value because of wear and tear. The financial | | | | on the first year or full year of useful life is |
| value is the estimated price the asset will sell for if sold | | | | over-adjusted, as the tax is based on a |
| on the open market. The rate of depreciation is usually | | | | little-depreciated value, when it should have been |
| computed by dividing the cost of acquisition or its | | | | based on a fully-depreciated value. |
| purchase value by the number of years of its useful | | | | However, Section 179 of the Internal Revenue Code |
| life. The useful life is the length of time beginning from | | | | has raised the total amount that can be deducted as |
| date of purchase or first use, to the time it is expected | | | | depreciation cost on any business asset. Today, |
| to become too costly to use due to maintenance | | | | $100,000 may be deducted from the value of the |
| problems. The useful life is normally calculated or | | | | asset instead of the former $25,000. Furthermore, the |
| estimated; but, is based on commonly accepted time | | | | total amount is adjustable for inflation and, therefore, |
| lengths of identical or similar forms of assets. | | | | may grow still larger based on the yearly inflation rate. |
| Formerly, a business asset with a useful life of one | | | | Deductible under the Job Growth and Reconciliation |
| year is depreciated in the business books over a | | | | Act of 2003, under certain conditions, are machinery |
| number of years. This means that after one year, that | | | | and equipment, furniture and fixtures, and computer |
| property is already worthless (meaning no more | | | | software. |