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Peacock & French CPAs
Jul 01, 2025

Let’s talk about a word that sounds boring but can quietly save your business a lot of money over time: depreciation. It might not be as flashy as revenue growth or a big end-of-year bonus, but depreciation is one of the most underutilized tax strategies out there

Let’s talk about a word that sounds boring but can quietly save your business a lot of money over time: depreciation.

It might not be as flashy as revenue growth or a big end-of-year bonus, but depreciation is one of the most underutilized tax strategies out there — especially for small and mid-sized businesses. And if you’re not using it to your advantage, you’re likely leaving money on the table.

So let’s break it down — what depreciation actually is, how it works, and how smart business owners like you can turn it into a serious tax-saving tool.

Depreciation: What Is It, Really?

At its core, depreciation is a way of accounting for the wear and tear on your business assets over time. Think computers, office furniture, vehicles, equipment, even buildings. As these assets age and lose value, the IRS lets you deduct a portion of that cost each year — instead of all at once.

So instead of writing off a $50,000 machine in one swoop, you spread the deduction out over its useful life. That’s depreciation. Simple in theory — strategic in practice.

But here’s where it gets interesting: the how and when of depreciation can impact your tax bill in a big way.

What Can You Depreciate?

If you’re wondering whether you’re sitting on assets that could be lowering your tax bill, here’s a quick guide.

You can typically depreciate:

• Office furniture and fixtures
• Machinery and equipment
• Business vehicles (with caveats)
• Buildings (not the land, though!)
• Computers and tech
• Software (in some cases)
• Leasehold improvements

You cannot depreciate:

• Land (it doesn’t wear out)
• Inventory (that’s a separate ballgame)
• Personal-use property
• Anything you rent but don’t own

If you’ve made significant purchases for your business, chances are, you’ve got depreciable assets that should be working harder for you.

Different Ways to Depreciate — Yes, There’s More Than One

Here’s where it gets technical — but don’t worry, we’ll keep it light.

• Straight-Line Depreciation: Easiest to understand. Equal deduction every year over the asset’s useful life. Predictable, consistent, and IRS-approved.
• Declining Balance Method: Larger deductions in the early years, smaller in the later ones. Great if you want a tax break sooner rather than later.
• Units of Production Method: Tied to how much the asset is used. Most common in manufacturing or production-heavy businesses.

Choosing the right method isn’t just about preference — it’s about matching your strategy to your cash flow, your growth stage, and your industry.

Why Depreciation = Tax Savings

Here’s the best part: depreciation directly reduces your taxable income. Less taxable income = less taxes owed. It’s that simple.

Let’s say you bought $100,000 worth of equipment. Instead of paying taxes on that full $100K of income, you deduct a portion of that equipment’s cost each year — which could be thousands off your tax bill annually.

Plus, depreciation doesn’t affect your actual cash flow — it’s a “non-cash” expense. That means you’re lowering your tax bill without writing another check. That’s the kind of math we like.

Want to Speed Things Up? Meet Accelerated Depreciation

You don’t have to spread out those deductions over five or seven years. In some cases, you can claim a big chunk all at once, thanks to:

Section 179 Deduction

This allows you to deduct the full purchase price of qualifying equipment (up to a limit) in the year it's placed in service. It’s ideal for businesses looking to reduce their current-year tax burden — especially if you’ve had a profitable year.

Bonus Depreciation

This one’s been a game-changer. It lets you deduct a large percentage of an asset’s cost right away — no waiting. The rules around bonus depreciation have changed recently and are phasing out gradually, so it’s best to talk to a CPA about timing.

These accelerated options can make a major difference when planning major purchases or forecasting tax liability.

A Few Tips for Getting the Most from Depreciation

• Keep great records. Know when each asset was purchased, what it cost, and how it’s used.
• Think about timing. Buying something in December versus January can change your tax picture significantly.
• Work with your CPA. Choosing between straight-line or accelerated depreciation isn’t always obvious. A little guidance goes a long way.
• Review annually. Your business changes, and your depreciation strategy should too.

Watch Out for These Common Missteps

We see these all the time:

• Depreciating assets that don’t qualify
• Forgetting to recapture depreciation when selling an asset
• Misclassifying assets (buildings vs. improvements, etc.)
• Skipping accelerated depreciation without realizing it was an option

Mistakes in depreciation don’t just mean missed savings — they can trigger audits, penalties, or amended returns.

Know When to Call In a Pro

Depreciation might sound straightforward, but when you start layering in multiple asset types, purchases across different years, state-level variations, and changes to federal tax law — it gets complex fast.

This is especially true if you:

• Own property-heavy businesses (construction, real estate, manufacturing)
• Are planning large purchases soon
• Have multiple entities or investors
• Need help integrating depreciation with your broader tax strategy

Working with a professional ensures you’re not just staying compliant — you’re optimizing every opportunity to save.

Depreciation Is More Than a Line Item

Depreciation isn’t just something your accountant figures out behind the scenes. It’s a real, strategic tool that, when used intentionally, can make your business stronger — financially and operationally.

If you’re unsure whether you’re making the most of your depreciation deductions — or if you’re planning big purchases this year — now’s the time to revisit your strategy.

Peacock, Ellison & French CPAs helps business owners like you turn smart accounting into real-world savings. We’ll help you identify opportunities, ensure compliance, and maximize every deduction legally available to you.

Let’s talk about your depreciation strategy. You might be surprised just how much tax savings you’ve been missing.

Contact us today!