depreciable

Depreciable refers to property or other tangible assets that have a limited useful life and are used in a business or income-producing activity, making them eligible to be depreciated for accounting and tax purposes. Land is generally not depreciable because it does not wear out over time; common examples of depreciable assets include buildings, machinery, equipment, vehicles, and certain improvements. Some intangible assets with finite lives may be amortized instead of depreciated.

The depreciable basis of an asset is its cost minus any land value, plus any capital improvements. This basis is allocated over the asset’s estimated useful life, which is the period over which the asset is expected to contribute to revenue. Salvage value, if any, can limit the total amount subjected to depreciation. The choice of depreciation life and method affects both financial reporting and tax outcomes and is guided by accounting standards and tax regulations.

Depreciation methods vary. The straight-line method spreads the same amount of depreciation each year; accelerated methods, such as double-declining balance or the sum of years digits, front-load depreciation. Units-of-production ties depreciation to actual usage. In many jurisdictions, tax authorities also prescribe accelerated systems (for example, MACRS in the United States) with prescribed lifetimes and conventions.

Depreciation is a non-cash expense that reduces reported net income but does not directly affect cash flow. It creates a tax shield by lowering taxable income, influencing both accounting results and cash taxes. Proper classification, valuation, and method selection matter for financial reporting, tax compliance, and asset management.