When it comes to keeping thorough tax records, you have to consider a long list of things. One of those are fixed asset reporting and depreciation. Because not all of us are tax professionals, this might seem like intimidating jargon to you. So, we will break down what fixed assets and depreciation are and how they should be reported.
What Is A Fixed Asset?
Anyone doing business holds what are called fixed assets. These are assets that you acquired in order to complete day-to-day operations and generate income. These assets are not purchased with resale in mind. These are not investments in the sense that you are not looking to sell them for more than you purchased them.
In a business setting, fixed assets include things like computers, machinery, buildings, or real estate. Because these are so different than short-term assets, fixed assets are treated with more leniency during tax time.
What Is Depreciation?
This is just a fancy word for wear and tear sustained by fixed assets. The more worn any asset gets, the less it is worth. We see this in our everyday lives. Would you expect to pay the same amount of money for a used TV as you would a brand new one? Absolutely not. The used TV has been worn and lost some of its value.
This happens with fixed assets, but because they were not purchased with the idea of reselling them, it’s totally acceptable.
Fixed asset reporting and depreciation is important during tax time. Depreciation causes the value of fixed assets to drop — sometimes significantly. It is imperative that this depreciation is recorded and the correct valuation of fixed assets are noted so that your tax sheets display an accurate picture of the company’s overall worth.
Find Tax Help
We don’t expect you to grasp this complex tax issue in one simple article, which is why it is important to consult a tax expert when filing your taxes. TalkLocal makes them readily available through our innovative, service professional, concierge service. We bring the professionals to you, saving you time, energy, and maybe even some money. Try it out.
