What Does Tax “Depreciation” Mean and How Do the “Depreciation Methods” Work?
To help those of you who would like to refresh your understanding of basic concepts in leasing or even build some new knowledge, each month this section describes some fundamentals of the leasing and finance businesses that you need to know (and that may even be in the news). BLN answers the questions titled above that relate to the new federal tax law. You can also find the definition of other tax terminology in the Tax Glossary. Depreciation refers to the decline in value of property through its use and the passage of time, wear and tear, technological change, and obsolescence. Under federal income tax law, as the owner of income-producing property, you can take a deduction from your income for depreciation of property because it declines in value during the lease term. The Internal Revenue Code of 1986, as amended, and the related regulations, specify the depreciation deductions. They are based on the cost of the property, the depreciable life (the “recovery period” set by law) of t
