Equipment Depreciation
Quick definition
Equipment depreciation allocates the cost of equipment over its useful life for accounting or tax purposes. It is not the same as a live resale-value estimate.
Depreciation and equipment ownership
Depreciation is an important component of ownership-cost analysis. Accounting depreciation, tax deductions and the economic change in resale value are related but distinct. A book value should not be presented as a guaranteed market price.
Using it in fleet decisions
When reviewing replacement or disposal, look at depreciation alongside repair history, expected use, financing and likely resale proceeds. A heavily depreciated machine can still be useful, while a newer machine may no longer suit the work. Telematics hours provide usage context rather than a depreciation method.
What to verify
IRS Publication 946 explains US tax depreciation. Eligibility, methods and tax elections depend on the taxpayer and property. Obtain accounting advice; this glossary does not prescribe a tax treatment or useful life.
Key facts
- Focus
- Asset cost allocation
- Important distinction
- Book value versus resale value
Related terms
Sources
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More Glossary terms
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