For our USA IRS subscribers.

At first it may not be clear why GDS declining balance depreciation rates do not change as an asset depreciates with time, in following periods.

For example, if you have an asset placed in service in October, 2021 and you initially set the GDS Declining Balance method (mid-quarter) with a rate of 40% and an effective life of 5 years.

Then why, in the next tax year (2022) is AssetAccountant using a 40% depreciation rate instead of a 38% depreciation rate for tax purposes?

The reason for this is that Declining Balance acts on the remaining balance on the asset at the start of each year.

So, for example, if you have a $10,000 asset and you apply Mid Quarter in the final quarter of 2021, you should get:

Acquisition Cost Base: $10,000

Depreciation in 2021: $500 (40% / 8 * $10,000)

Remaining Balance at the end of 2021: $9500

Depreciation in 2022: $3800 (40% of $9500)

$3800 is 38% of the original cost base, but is 40% of the remaining balance at the start of 2022.


Whilst AssetAccountant provides a lot of guardrails to make sure we're aligning with IRS rules, we don't provide tax or accounting advice and it's up to the individual accountant to ensure that they are compliant.