Declining Balance Method

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Declining Balance Method

A way of calculating the depreciation of an asset whereby one subtracts a certain percentage of its current value each year. For example, suppose an asset costing $100,000 depreciates 10% each year. After the first year, it depreciates to $90,000. In the second year, one deducts 10% from the $90,000, rather than the original $100,000. Thus, the depreciated value after the second year is $81,000. This is a common means of calculating depreciation.
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The cost of property in the 3-, 5-, 7-, and 10-year classes is recovered using the 200-percent declining-balance method (i.
The cost of 15- and 20-year property is generally recovered using the 150-percent declining-balance method over 15 and 20 years, respectively, and the half-year convention, with a switch to the straight-line method to maximize the deduction.
Turnbull notes that in two years, when the law conforms the recovery periods used for AMT purposes with those used for regular tax purposes, the decision whether to elect the 150% declining-balance method for new assets will be important because it will mean having to deal with only one depreciation schedule.
Taxpayers should also be aware that this is a straight-line method, unlike other modified accelerated cost recovery system 15-year recovery property, which is generally eligible for the 150% declining-balance method.
For regular AMT purposes, depreciation will be calculated using the 120% declining-balance method over regular tax useful life.
Depreciation calculation uses the declining-balance method.
Depreciation is calculated by the declining-balance method.
Second, the method used to calculate reclassified assets was changed from straightline depreciation to the declining-balance method.
Under the current modified accelerated cost recovery system (MACRS), assets in the three-year, five-year, seven-year and 10-year classes are depreciated using the 200% declining-balance method.
The figures in the first column result from computing depreciation according to a conventional 150% declining-balance method, with switching to straight line.
13) For these assets, the 150% declining-balance method allowable for AMT is allowed for ACE depreciation.
00% declining-balance method the 150% declining-balance method, or the straight-line method generally depending on the class life of the property.