The equipment you purchase for your business such as computers, machinery, and vehicles lose value over time.

In terms of your taxes, depreciation means the gradual charging to an expense account of a fixed asset’s cost over its useful life.

When I prepare your tax return I depreciate items if they meet the following 5 tests:

  1. It is property that the business owns including rental property.
  2. The asset is used in an income-producing activity
  3. The asset must have a determinable useful life.
  4. I expect the asset to last more than one year.
    If it’s going to last only one year, I expense the item in the tax return for the year that it was incurred.
  5. The asset cannot be certain types of property that are specifically excluded by the IRS tax code. If these rules are not met then the asset must be charged to an expense account in its entirety when it’s incurred.


That is not necessarily a bad thing for it reduces the amount of income in the current year in which the taxes must be paid. Tax depreciation only varies from the depreciation method used under GAAP accounting in terms of the timing of the depreciation expense.

Under tax law, items can be depreciated more rapidly than they can under GAAP.

GAAP is Generally Accepted Accounting Principles which is the standard framework for financial accounting.

Depreciation follows very specific guidelines and rules in Denver Colorado. That said, there is sometimes questions as to what category the depreciation goes into.

New technology items such as iPads or other tablet mobile devices do not HAVE a specific depreciation category in the IRS tax code, so we must decide based on how long we think the iPad or other smart device will be in service.

The real reason to have depreciation recorded correctly in your taxes is that you can take a deduction for a purchase over many years and tax returns.

Also, this helps you become ready to invest funds in replacing the item when it is out of date or when the latest iPad is simply what you now need for your business to run.

When calculated correctly if your business runs on hundreds of thousands of dollars worth of equipment, your tax savings can be significant and the use of that saved capital can be invested in the talents of your people or in expanding your business operation.

I take great care to make sure we specifically catalog every purchase of all your businesses technological and electronic equipment and machinery.
Together, we will make sure that we are taking advantage of every depreciation deduction we can for your business.

By simplifying both the numbers and the rules of law, I will explain everything to you in such a clear fashion that your taxes no longer become a “hope for the best” situation and are an understandable process in the growth of your life and your business.

~Joshua Berman 720.336.0950