Book versus tax depreciation
Your financial statements and your tax return can use different methods, and usually should. Book depreciation should reflect how the asset is actually consumed; tax depreciation follows rules designed to incentivise investment.
Straight line
Equal expense across the useful life. Simple, predictable, and the right choice for book purposes in most cases because it matches the economics.
Accelerated methods and immediate expensing
Provisions allowing a large or complete deduction in the year of purchase pull the benefit forward. This is valuable when you are profitable now, and wasteful when you are not, because a deduction against no income has no immediate value.
The timing judgement
- Profitable this year, expecting lower income next: accelerate.
- Expecting substantially higher income later: spreading the deduction may be worth more.
- Loss-making: accelerating can waste the deduction entirely.
Keep the register accurate
A fixed asset register that nobody reconciles accumulates assets long since disposed of, which means depreciation continues on equipment that left the building. Reconciling annually against a physical check prevents it.
TallyWise provides this as part of our tax strategy services. Book a call to talk through your situation.
