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straight-line depreciation
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straight-line depreciation


  a depreciation method that writes off an equal amount of the value of an asset over all periods in its estimated useful life;

For example:  If a company purchased a $100,000 machine depreciated over 5 years,  the expense would be recognized for tax purposes as $20,000 during each of 5 years.
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straight-line depreciation straightline depreciation
Strongly Associated with:   accelerated depreciation
Notes:
Depreciation is one of the complicated parts of the United States tax system. At first blush, one might think that if a company spent $100,000 for a machine, they should be able to deduct the $100,000 from their income in the year they spent it. But  the principle of U.S. tax law is that assets should be expensed over their useful life.

In an effort to keep people and companies from using unreasonably short useful lives to accelerate their deduction, the tax code specifies useful life for different kinds of investments.  Looking at the tax requirements for useful life demonstrates special interest influence on the tax code.

One common complaint from an industry that clearly lacks a strong lobby is for commercial roofs. If a new roof is added to a factory it has a 39 year life by law even though most roofs would do well to last half that long. The roof would have to be deducted using the straight line method which makes no allowance for inflation.
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Associated words [difficulty]:   straight-line depreciation
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Most commonly used in these subjects:   Personal Finance, Business
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