For businesses in Vancouver, depreciation plays a significant role in accounting and tax planning. Understanding how assets lose value over time can help businesses maximize deductions and manage financial health effectively.
What Is Depreciation?
Depreciation is the process of allocating the cost of a business asset over its useful life. Instead of deducting the full cost in the year of purchase, businesses spread the expense over multiple years.
- Applies to tangible assets like equipment, vehicles, and buildings.
- Reduces taxable income over time.
- Helps track asset value and replacement planning.
Types of Depreciation Methods
Businesses can choose different depreciation methods based on their needs:
- Straight-Line Depreciation – Spreads asset cost evenly over its useful life.
- Declining Balance Method – Accelerates deductions by applying a higher rate in earlier years.
- Units of Production – Depreciation based on asset usage, ideal for manufacturing equipment.
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Depreciation & Tax Deductions
Depreciation allows businesses to claim tax deductions on asset wear and tear. To make the most of deductions:
- Ensure assets qualify for Capital Cost Allowance (CCA).
- Keep accurate records of purchase dates and costs.
- Work with a CPA to apply the best depreciation method.
Learn more about Maximizing Small Business Tax Deductions.
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