Question

which method do you think is best for taxable deductions and paying less taxes and why? Which you prefer to choose?

which method do you think is best for taxable deductions and paying less taxes and why? Which you prefer to choose?

Straight Line, MACRS, and Declining Balance methods

Answer 1

A company can claim the amount of depreciation of the fixed asset as a tax deduction. So the companies always prefer a method of depreciation which allows them to get more tax deductions.

Straight Line, MACRS, and Declining Balance methods are used by the company to calculate depreciation for their fixed assets. Among these methods straight line method is considered to be the best for taxable deductions and paying fewer taxes. In this method, the cost of the asset is spread evenly over a number of years. There are fewer chances for errors in straight line method. It is more consistent also. Moreover, the transition from the financial statements of the company to tax returns form is easy.

But in Modified Accelerated Cost Recovery System (MACRS) and Declining Balance methods, a greater portion of the cost is written off a in early years and only a smaller portion in later years.