Five-year property (including computers, office equipment, cars, light trucks, and assets used in construction) seven-year property (including office furniture, appliances, and property that hasn’t been placed in another category)
How Many Years Do You Depreciate Equipment?
Depreciation is an accounting term used to describe the reduction in value of an asset over time due to wear and tear, obsolescence, or other factors. Depreciation is a way of allocating the cost of an asset over its expected useful life. When it comes to equipment, the length of time you depreciate it depends on the type of asset.
The Internal Revenue Service (IRS) assigns a useful life to equipment for tax purposes. The useful life is based on the average life expectancy of the asset, accounting for depreciation and obsolescence. Generally, for tax purposes, the useful life of equipment is divided into recovery periods. Examples of recovery periods include three, five, seven, 10, 15, and 20 years.
The length of time you depreciate equipment also depends on the type of depreciation method you choose. There are two main types of depreciation methods: straight-line and accelerated. With the straight-line method, you depreciate the equipment over its entire useful life, as determined by the IRS. With the accelerated method, you depreciate the equipment over a shorter period of time. The IRS allows businesses to use the accelerated method to depreciate certain types of equipment over a three-, five