Depreciation of Electronics

Depreciating electronics means lowering its value.

The Internal Revenue Service allows taxpayers to depreciate electronic equipment used in business activities. If you own a company and use electronics in operating activities, depreciate electronic assets at the end of the year.

Depreciation

Depreciation allows a business to recover the cost of electronic equipment over a specified number of periods. By doing so, this allows for the matching of revenues earned over a period with expenses incurred in generating these revenues. Depreciation is a non-cash item, meaning it is an accounting transaction used for tax purposes.

Electronics Depreciation

If an electronic asset was purchased after Dec. 31, 1986, the IRS allows a business or person to depreciate the asset over five years. If buying a professional camera valued at $5,000, the annual depreciation expense is $1,000 or $5,000 divided by five.

Other Considerations

Electronic equipment is considered a long-term asset, because it is most likely used for more than a year. Short-term assets are resources, such as cash and accounts receivable, used or sold within 12 months. Depreciating an electronic asset lowers the asset's book value.

References

• CCH Business Owner's Toolkit: Depreciation Methods
• Internal Revenue Service: Instructions for Schedule C