What is depreciation?

Depreciation is the consistent allocation of a tangible asset's cost over its estimated useful life. It allows businesses to recognize the gradual 'using up' of an asset as an expense on their income statement, reducing taxable profit.

Can I depreciate land?

No. Under IRS rules (and most global tax systems), land is not a depreciable asset because it does not have a determinable useful life; it does not wear out or get used up. You must always separate the land value from the building value before calculating depreciation.

What is the Section 179 SUV limit?

There is a specific limit on the amount of Section 179 expense you can take for certain heavy SUVs (vehicles between 6,000 and 14,000 pounds gross vehicle weight): $30,500 for 2024, $31,300 for 2025, and $32,000 for 2026. If you use 100% bonus depreciation under the OBBBA rules (available for qualifying property acquired on or after January 19, 2025), you can often deduct the full cost in the first year without this cap.

What is the difference between repairs and improvements?

This is a critical 'Safe Harbor' question. Repairs (like fixing a broken window) are fully deductible as expenses in the year they occur. Improvements (like replacing the entire roof) must be capitalized and depreciated over the recovery period (e.g., 27.5 years for residential rental buildings).

How do I depreciate computer software?

Off-the-shelf software is typically depreciated over 36 months (3 years) using the straight-line method. However, if the software is purchased as part of a computer hardware package and the cost isn't separately stated, it is depreciated over 5 years along with the computer.

What is Depreciation Recapture?

When you sell a depreciated asset for a gain, the IRS requires you to 'pay back' some of the tax benefits you received. This portion of the gain is taxed as ordinary income (up to 25% for real estate) rather than at lower capital gains rates. This is why many investors use 1031 exchanges.

Can I depreciate solar panels?

Yes. Solar energy property is typically 5-year property under MACRS. Note that if you take the Federal Investment Tax Credit (ITC), you must reduce your depreciable basis by one-half of the credit amount.

What is Salvage Value?

Salvage value is the estimated resale value of an asset at the end of its useful life. For internal book accounting, you subtract this from the cost to find the depreciable amount. For US federal tax purposes (MACRS), salvage value is always treated as $0, allowing for a larger deduction.

What is Amortization?

Amortization is the same as depreciation but applies to 'intangible' assets. Examples include patents, trademarks, and goodwill. These are usually amortized over 15 years under Section 197 of the Internal Revenue Code.

Depreciation FAQ

Answers to the most common (and complex) questions about asset depreciation, tax rules, and accounting methods.

Still have questions?

Check out our detailed guides for specific asset types or try one of our free calculators.

Sources & References

IRS Publication 946, How To Depreciate Property
IRS Publication 527, Residential Rental Property

MET

MyDepreciation Editorial Team

Editorial Team

Last updated: July 2026

Content is written and maintained by the MyDepreciation editorial team, based on IRS Publication 946, Publication 527, and other cited primary sources. This is not tax advice — consult a licensed tax professional for your specific situation.