What are the tax implications of depreciation?

What are the tax implications of depreciation?

Depreciation can reduce taxable income, leading to lower taxes. It allows businesses to recover costs over time.

How does depreciation affect my business's cash flow?

Depreciation is a non-cash expense, so it doesn't directly affect cash flow. However, it can lower tax payments, improving cash flow.

Are there different methods of depreciation for tax purposes?

Yes, common methods include straight-line, declining balance, and units of production. Each has different tax implications.

Can I claim depreciation on personal property?

Generally, depreciation is claimed on business assets. Personal property typically doesn't qualify unless used for business.

What records do I need to keep for depreciation?

You should keep purchase invoices, asset details, and any calculations related to the depreciation method used.