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To allocate the purchase cost of an asset over its life.


The gradual reduction of an asset's value. It is an expense, but because it is non-cash, it is often effectively a tax write-off; that is, a person or company usually may reduce his/her/its taxable income by the amount of the depreciation on the asset. Because there are many different ways to account depreciation, it often bears only a rough resemblance to the asset's useful life. This may further benefit the company as they may continue to use the asset tax-free after its value has technically depreciated to nothing. See also: Amortization.


To reduce the value of a long-term tangible asset.
References in periodicals archive ?
168(i)-4(d)(3)(i), taxpayers take the adjusted basis at the beginning of the change year and depreciate the property over the shorter period.
35% of its debt is foreign-currency denominated or dollar-linked -- its debt stock consequently grows as its currency, the Real, depreciates.
The landlord capitalizes the cost of the improvements and depreciates them over 39 years.