Accelerated Depreciation
IRS method providing for faster recovery of cost and earlier tax advantages than straight-line depreciation. A common type of accelerated depreciation is double-declining balance, which permits twice the straight-line annual percentage rate.
Example: A business purchases equipment for $100, to be depreciated over 5 years.
Straight-line depreciation: Depreciation rate of 20%
|
Year
|
1
|
2
|
3
|
4
|
5
|
|
Depreciation Expense
|
$20
|
$20
|
$20
|
$20
|
$20
|
Double-declining balance depreciation: Depreciation rate is 40% of remaining balance
|
Year
|
1
|
2
|
3
|
4
|
5
|
|
Depreciation Expense
|
$40
|
$24
|
$14
|
$9
|
$5
|