How To Calculate Depreciation In Your Business The first thing to know is that a business must be in operation for at least a year to be able to claim depreciation. Depreciation is a percentage of the asset’s value that is allowed for in your accounting. If you own a $10,000 vehicle, and you use the vehicle for 10,000 miles, you can only deduct the first $10,000 of depreciation on your return. So if you have a 30-year-old car and it’s worth $10,000, you’re not allowed to deduct $3,000 on your tax return. For tax purposes, depreciation is determined based on the cost of the asset relative to its production cost.Voor zakelijk gebruik If the cost of the asset is $6,000 and the asset is only used for 30,000 miles, then you can only claim $1,000 of depreciation for the year. But if the vehicle is used for 10,000 miles and then put out of commission for 10 months and then put back in service, then the cost of the vehicle has fallen to $4,000 and you can claim $2,000 of depreciation. However, depreciation is different for different vehicles, and you have to know how to determine your own. Do the math and figure out how much your car is worth based on the annual depreciation rate, and then take that depreciation cost and subtract it from the car’s fair market value. And don’t forget that depreciation is not necessarily a liability. If you sell the car for $10,000 and then deduct $1,000 of depreciation on your return, then you’re not allowed to claim depreciation on your income taxes. However, if you sell the car for $10,000 and then deduct $2,000 of depreciation, you’re allowed to deduct the $3,000 of depreciation on your taxes. Determining Your Business’s Rent The next thing to know is the depreciation expense you must pay for rental property. You must also have been in business for at least one year in order to deduct the cost of an apartment or a commercial office. If you rent your property for $1,000 a month, and it’s your primary source of income, you can deduct $1,000 of your expenses. If you rent for $3,000 a month and pay $2,000 a month in rent, then you are only able to deduct $800 of your expenses.