What types of assets need to be depreciated

You've heard a lot about asset depreciation, but you don't know which of your many different types of assets need to be depreciation. Certain assets have to be depreciated, while others can't be.

Assets that can be depreciated

Here are the general categories of the types of assets that need to be depreciated:

1. if you use the asset in your business or any kind of trade.


2. if the asset is part of an investment property and is being held in order to produce income


3. if the asset is only useable or useful for a certain measurable period of time.
   
   • this period of time has to be for longer than a year
   
   
   • this period of time also has to be able to be calculated, or estimated, reasonably accurately


4. If the asset gets worn out, if it can be used up, if it can break down, if it has to be replaced because it's out of date, or if because if just loses value naturally.
   Here are some examples of types of assets that need to be appreciated: cars, machinery, computers, buildings, and any major improvements and additions made on things (rather than simply repairs).

How do you figure the depreciation of your assets? There are a number of different ways that you can calculate depreciation. If you choose straight-line depreciation, you subtract the same amount of money from the value of the asset throughout its life. Accelerated depreciation figures more loss at the beginning of the asset's life. Examples are declining balance depreciation, sum of the years digits depreciation, double declining balance, depreciation, and so on.
Assets that you can't depreciate
There are some assets that you can't claim depreciation expense on. The most common asset that can't be depreciated is land. Land is not considered to ever be able to be destroyed, so it can't lose value and go down to zero value like other assets. If you build something on land that you own, in order to determine the depreciation expense for the buildings, you have to subtract the cost of the land from the overall cost of the property that you own.
You also are not allowed to claim depreciation expenses when it comes to personal assets. This means that you can't figure out the depreciation for the house that you and your family live in, or a car that you just use for personal use. If you have an asset that you use half and half-half business and half personal-then you can only depreciate the part of the asset that is used for business.
You also cannot depreciate any items that you lease or rent. This means that if you have any property that you are using that you are renting-like a warehouse that you are renting, for example-you cannot figure depreciation expenses for these assets. You can, however, depreciate the cost of any improvements that you make on property that you are leasing. If you are leasing a warehouse, but you put all of these different improvements in them, you can depreciate the cost of those improvements.
Amortizable assets
There are certain assets that you aren't allowed to depreciate. However, you can still recover the costs of these assets through something that is called amortization. The way that amortization works is that you can deduct the cost in equal amounts over a particular period of time. For example, the amount of money that you spend to start up your business can be amortized-or subtracted for a period of 60 months after you begin business operations. Make sure that you check with your accountant.

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