Let’s say you buy a $45,000 flatbed trailer for your business. You don’t just toss that expense on your taxes and move on. Not always.
Instead, you might depreciate it.
That means you spread the cost out over several years instead of deducting it all at once. Sounds annoying? It kind of is. But done right, it can save you a chunk of money, year after year, without you spending anything new.
What Counts as a Depreciable Business Expense
The IRS loves rules. And one of those rules is this: If something lasts longer than a year, you probably can’t write it off all at once.
Things like equipment, vehicles, furniture, computers and tools don’t get deducted all at once. Instead, you depreciate the item, which just means deducting a little piece of it each year.
The idea is: your asset is “wearing down” slowly, so your tax deduction should too. Think of it like stretching your tax break over time on purpose.
Also, depreciation applies whether you pay cash, finance the asset, or even lease it in some cases. The key is ownership and usage, not how you paid.
How You Actually Claim Depreciation
Let’s take that $45,000 trailer.
If you depreciate it over 5 years, you might deduct:
- $9,000 in Year 1
- $9,000 in Year 2
- $9,000 in Year 3
- $9,000 in Year 4
- $9,000 in Year 5
You’re not spending that money again. You’re just getting tax credit for how much that thing “lost value.”
The IRS calls this “spreading the cost.” We call it a slow-motion write-off.
There are also different depreciation schedules for different asset types. For example, office furniture is typically depreciated over 7 years, while vehicles might be 5 years, And real estate? That’s 27.5 or 39 years, depending on whether it’s residential or commercial.
Speed Things Up with Section 179
Now, if waiting 3 years sounds lame, good news:
You might be able to write off the whole thing in Year 1 using Section 179 and/or Bonus Depreciation. These are IRS-approved fast tracks, but they come with rules, phaseouts, and a few gotchas. So don’t just click “yes” in QuickBooks and hope for the best.
Bonus depreciation used to be 100%, but it’s gradually phasing down. As of 2025, you may only be eligible for 60%, and that percentage keeps dropping unless Congress acts.
Section 179 also has a limit: if you buy more than a certain amount of equipment in a single year, your deduction might get capped or reduced. That’s why proper planning matters.
Why Smart Business Owners Lean on Depreciation
It’s not just a fancy word.
Depreciation:
- Lowers your taxable income
- Increases your write-offs
- Helps you plan purchases smarter
Smart use of depreciation means you pay less in taxes over time and keep more cash where it belongs: in your business.
And when your books reflect depreciation accurately, your profit reports match reality. Not just what’s in your bank account.
If You’re Buying Big Stuff, Know the Rules
Buying gear or equipment? Don’t just guess.
Done right, depreciation can save you thousands. Get it wrong, and it could cost you plenty.
A single misstep, like depreciating something that should have been expensed or vice versa, can flag your return for review or delay your CPA’s work. That’s real money and time lost.
Reach out and we’ll show you how to use depreciation like a pro, no tax degree required.
