Depreciation

Detailed Explanation

For tax purposes, depreciation is governed by the Modified Accelerated Cost Recovery System (MACRS) under IRC Section 168. Common methods include 200% declining balance and straight-line. Section 179 expensing and Section 168(k) bonus depreciation allow accelerated deductions: bonus depreciation under OBBBA was permanently restored to 100% for qualifying assets placed in service after January 19, 2025. Real property is depreciated over 27.5 years (residential rental) or 39 years (commercial). Depreciation reduces basis, affecting gain or loss when the asset is later sold.