What Is Depreciation?

Depreciation is the process of deducting the cost of a business asset over its useful life, rather than all at once. The IRS assigns recovery periods to different types of property — for example, computers depreciate over 5 years and commercial real estate over 39 years. The most common method is MACRS (Modified Accelerated Cost Recovery System). Section 179 and bonus depreciation let you accelerate deductions. When you sell a depreciated asset, you may owe "depreciation recapture" taxes on the gain.