Depreciation Schedule

What is a depreciation schedule?

A depreciation schedule is a document that outlines the expected decrease in the value of assets, such as property or equipment, over a specific period. It helps property owners or investors understand and calculate the tax-deductible depreciation on their assets. 

What is straight line depreciation? 

The simplest way to calculate depreciation is called the straight-line method. It assumes that an asset depreciates an equal dollar amount each period over its lifetime. 

Suppose you purchase a piece of equipment for your business that costs $10,000, and you estimate its useful life to be 5 years. Also suppose that the remaining value (salvage value) at the end of its life is $2000, meaning that $8000 is the total depreciable cost over its 5 year life span. 

With the straight-line method, the annual depreciation on this asset would be $1600 ($8000 / 5 years). 

How does depreciation affect my tax? 

Depreciation on your property’s contents or select assets can affect your taxable income by allowing you to use it as a deduction. However, this is contingent on the asset meeting certain conditions including: 

• A limited life expectancy (effective life).
• The assumption that the asset will reasonably be expected to decline in value (depreciate) over the time it's used.

This deduction helps account for an asset's wear and tear. It recognises that as businesses or investors use equipment, buildings, and other assets, these assets lose value.