This article was published by the Center for American Progress.
By Seth Hanlon
This is part of a new CAP series called the “Tax Expenditure of the Week.” The series aims to explain the often-confusing constellation of tax breaks in a way the average taxpayer can understand. Every Wednesday we will focus on one tax expenditure, explaining what it is, what purpose it is intended to serve, and whether it is effective toward that purpose. We will also review relevant reform proposals.
Subjecting these dozens of tax breaks to greater scrutiny is part of our broader focus on making government work better and achieving better results for the American people, which is the goal of CAP’s “Doing What Works” project.
This week we’re looking at “accelerated depreciation,” the IRS rule allowing businesses to write off the costs of investments faster than they actually wear out.
What is accelerated depreciation?
Accelerated depreciation is the set of IRS rules that allow businesses to deduct from their taxable income the declining value of business-related investments, such as equipment and machinery, faster than the value of those assets actually declines.