Where Form 1120 C Depreciation 2023-2024

In this presentation, we will take a look at the concept of depreciation as it relates to taxes, particularly focusing on small business income, self-employed businesses, sole proprietors reported on Schedule C. Depreciation will typically be considered an ordinary and necessary expense, one that can be deducted on the Schedule C for a business and lower the taxable income. However, the concept of depreciation will differ a little bit from the tax code to financial depreciation. On the financial side, depreciation is used to make the financial statements as correct as possible for decision-making purposes. When we move to depreciation from the tax code, we have other incentives because the tax code might want to stimulate the economy in some way. Therefore, the calculation of depreciation will differ. In other words, when we purchase something for business that's going to affect a longer period of time than just one period, such as a forklift, we don't just write it off as an expense in the year of purchase. Even though we might typically use a cash basis for small businesses, for larger purchases like a forklift or a building, we move from the cash basis to an accrual basis. We put the asset on the books and then expense it over its useful life. This is done because the asset will be used for multiple years and we want to allocate the cost to the periods in which it is used. For taxes, we often have accelerated depreciation methods and other incentives in place. This is to stimulate the economy and provide incentives for purchases. So, depreciation starts with the concept of large purchases that can't be expensed in the current year, even if paid for in the current year. These purchases are put on the books as assets and the...