Cost Recovery, Depreciation, and Amortization

This chapter explains how the tax law allocates capitalized costs over time through depreciation, amortization, and expensing provisions. The main task is to identify the right recovery method, timing convention, and deduction limit for the asset in question.

In This Chapter

• MACRS Recovery Periods and Conventions explains the default depreciation framework for most tangible property.
• Section 179 and Bonus Depreciation Rules covers accelerated deduction rules and their limits.
• Tax Amortization of Intangible Costs explains how qualifying intangible costs are recovered.
• Cost Recovery Planning and Compliance connects cost-recovery choices to planning and reporting consequences.

How to Use This Chapter

• Read this chapter when asset-cost questions are missed because the wrong recovery system was chosen.
• Focus on what determines method, recovery period, and first-year timing.
• Revisit these sections when REG questions combine basis, Section 179, and bonus depreciation in one fact pattern.

In this section

• MACRS Recovery Periods and Depreciation Conventions
  How MACRS class lives, recovery periods, and timing conventions determine depreciation deductions.
• Section 179 and Bonus Depreciation Rules
  Eligibility, ordering, annual limits, phaseouts, and listed-property constraints for accelerated cost recovery.
• Tax Amortization of Intangible Costs
  Amortization rules for Section 197 intangibles, start-up expenditures, and organizational costs.
• Cost Recovery Planning and Compliance
  How to coordinate cost-recovery elections, substantiation, recapture awareness, and compliance controls.