Accelerated Depreciation

Intermediate đź’° Finance / Accounting

Definition

A method that front-loads depreciation expenses in early years of an asset's life, providing larger tax deductions sooner. It's the accounting equivalent of eating dessert first, with the IRS's blessing.

Example Usage

Using accelerated depreciation on the new equipment reduced our taxable income by $200,000 in year one, though it means smaller deductions later.

Origin

Popularized with the Modified Accelerated Cost Recovery System (MACRS) in the 1980s

Fun Fact

The IRS allows accelerated depreciation specifically to encourage business investment, essentially subsidizing capital expenditures through deferred taxes.

Source: Tax accounting and IRS regulations

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