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What is the best method of calculating depreciation for tax reporting purposes?


Morris Armstrong, Enrolled Agent
Armstrong Financial Strategies, Cheshire, CT

The “best method” is the one appropriate for your business and situation. That may sound snarky, but I don’t intend it to be. I just mean that sometimes people want to write something off as quickly as possible, even if they do not have the annual income to warrant it. So they accelerate the deduction schedule, only to realize later on that they would have been better off taking the depreciation at a slower, more consistent pace.

That is why, if given the choice, you should run the various depreciation-calculation scenarios through the tax program with an eye not only on the current return but on returns down the road, and the condition of your company in future years as well.



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