Depreciable Basis

An asset's depreciable basis is the amount of the asset's acquired value for which a business is allowed to claim depreciation. A percentage of this basis is deducted each year. The depreciable basis is often (but not always) the cost or acquired value of the asset. Under some depreciation rules, other factors adjust the cost to determine the depreciable basis. These factors are salvage value, Section 179 expense or bonus depreciation, Section 168 Allowance, the ITC amount, and the business use percentage.

In summary, an asset's depreciable basis equals the following:

	the asset's acquisition value
times	the business-use percentage.
minus	the salvage value if the asset uses a straight-line, sum-of-the-years'-digits, or custom depreciation method
minus	* any Section 179 expense deduction or first-year bonus depreciation taken
minus	any ITC reduction amount
minus	* the 168 Allowance

* The system always reduces the acquired value by the 168 Allowance and Section 179 expense, if applicable to the depreciation method, when calculating the depreciable basis. The selection in the Include Section 168 Allowance and Section 179 in Expense field on the Edit Company screen does not affect the calculation of depreciable basis. Therefore, if you select Yes in this field (to include the 168 Allowance and Section 179 expense in depreciation), the depreciable basis will be less than the accumulated depreciation at the end of the asset’s life.

To see the figures used to calculate a particular asset's depreciable basis, run an Asset Basis Report for that asset.

Select here for an example.