You need to choose a depreciation method.
Straight-line or accelerated?
You need the right choice.
You need method clarity.
Depreciation method. Straight-line. Accelerated. Your decision.
This guide shows you how.
Method comparison. When to use each. Decision framework. Your clarity.
Read this. Compare methods. Choose wisely.
Key Takeaways
- Calculate both methods—use Depreciation Calculator to compare straight-line and accelerated
- Straight-line benefits—simple, predictable, equal expense each year
- Accelerated benefits—more deduction early, matches usage, tax benefit front-loaded
- Consider factors—tax strategy, cash flow needs, usage pattern, simplicity
- Choose based on needs—straight-line for simplicity, accelerated for tax strategy
Table of Contents
Why Method Matters
Method choice affects finances.
What happens with wrong method:
- Tax deductions are suboptimal
- Cash flow timing is poor
- Financial planning is off
- Opportunities are missed
What happens with right method:
- Tax deductions are optimized
- Cash flow timing is good
- Financial planning is accurate
- Opportunities are captured
The reality: Method enables optimization.
Straight-Line Method
Straight-line is simple and predictable:
How It Works
What it does:
- Equal depreciation each year
- Cost divided by useful life
- Simple calculation
- Predictable expense
Why it matters: Simplicity enables ease.
Benefits
What benefits:
- Simple to calculate
- Easy to understand
- Predictable expense
- Consistent financial statements
Why it matters: Benefits enable simplicity.
Drawbacks
What drawbacks:
- Same deduction each year
- No front-loading benefit
- Doesn’t match usage
- Slower tax benefit
Why it matters: Drawbacks limit optimization.
Pro tip: Understand straight-line. Simple, predictable, equal expense. Use when simplicity matters. Use our Depreciation Calculator to see amounts.
Accelerated Methods
Accelerated methods front-load deductions:
How They Work
What they do:
- More depreciation early
- Less depreciation later
- Matches usage pattern
- Front-loads tax benefit
Why it matters: Front-loading improves cash flow.
Benefits
What benefits:
- More deduction early
- Tax benefit sooner
- Matches usage
- Better cash flow timing
Why it matters: Benefits enable optimization.
Drawbacks
What drawbacks:
- More complex calculation
- Harder to understand
- Less predictable
- Lower deductions later
Why it matters: Drawbacks add complexity.
Pro tip: Understand accelerated. More deduction early, tax benefit sooner, matches usage. Use when tax strategy matters.
Comparing Methods
Compare methods side by side:
Use Depreciation Calculator
Calculate both:
- Use our Depreciation Calculator
- Calculate straight-line
- Calculate accelerated
- Compare results
- See differences
Why it matters: Comparison enables choice.
Total Depreciation
What to compare:
- Total depreciation same
- Timing differs
- Early vs. late benefit
- Cash flow impact
Why it matters: Total same, timing different.
Tax Impact
What impact:
- Accelerated: more tax savings early
- Straight-line: equal tax savings
- Cash flow timing differs
- Net benefit same
Why it matters: Tax impact affects cash flow.
Pro tip: Compare methods. Use calculator to see both. Total same, timing different. Choose based on needs.
When to Use Each
When to use each method:
Use Straight-Line When
When to use:
- Simplicity is priority
- Predictable expense needed
- Equal deductions preferred
- Simple accounting desired
Why it matters: Straight-line for simplicity.
Use Accelerated When
When to use:
- Tax strategy is priority
- Early tax benefit needed
- Usage matches pattern
- Cash flow timing matters
Why it matters: Accelerated for tax strategy.
Consider Both
What to consider:
- Tax strategy needs
- Cash flow requirements
- Accounting complexity
- Business situation
Why it matters: Consideration enables choice.
Pro tip: Choose based on needs. Straight-line for simplicity, accelerated for tax strategy. Consider both factors.
Decision Framework
Use framework to decide:
Step 1: Assess Needs
What to assess:
- Tax strategy priority
- Cash flow needs
- Accounting complexity tolerance
- Business situation
Why it matters: Assessment informs choice.
Step 2: Calculate Both
What to calculate:
- Use calculator for both methods
- See tax savings timing
- Compare cash flow impact
- Understand differences
Why it matters: Calculation enables comparison.
Step 3: Choose Method
What to choose:
- Based on needs
- Based on calculations
- Based on strategy
- Based on situation
Why it matters: Choice enables optimization.
Pro tip: Use framework. Assess needs, calculate both, choose method. Framework enables smart choice.
Your Next Steps
Compare methods. Understand differences. Choose wisely.
This Week:
- Review this guide
- Calculate both methods
- Compare results
- Assess your needs
This Month:
- Choose depreciation method
- Implement method
- Track results
- Optimize as needed
Going Forward:
- Review method choice
- Adjust if needed
- Optimize tax strategy
- Improve cash flow
Need help? Check out our Depreciation Calculator for method comparison, our depreciation demystified guide for understanding, our depreciation in practice guide for financial impact, and our depreciation dashboard guide for tracking.
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FAQs - Frequently Asked Questions About Choosing a Depreciation Method: Straight-Line vs. Accelerated for Small Business
What is the main difference between straight-line and accelerated depreciation?
Straight-line spreads the cost equally over the asset's useful life, while accelerated methods front-load larger deductions in the early years and smaller ones later.
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With straight-line depreciation, you divide the asset's cost by its useful life and take the same deduction every year. It's simple and predictable. Accelerated methods like double-declining balance or MACRS take larger deductions in the first few years and progressively smaller deductions afterward. The total depreciation over the asset's life is the same for both methods—only the timing changes. Accelerated methods give you more tax savings upfront, improving early cash flow, while straight-line provides consistent, even expense recognition.
When should a small business choose straight-line depreciation?
Choose straight-line when you prioritize simplicity, need predictable and consistent expenses on your financial statements, or prefer equal annual deductions.
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Straight-line depreciation is the best fit when your accounting complexity tolerance is low and you want a simple, easy-to-calculate method. It's also ideal when you need predictable expenses for budgeting and financial planning, or when your assets don't wear out faster in early years. Many small businesses prefer it for financial reporting because it creates smooth, consistent expense lines. If tax strategy isn't your primary concern and you value simplicity, straight-line is the right choice.
When does accelerated depreciation make more sense for a small business?
Choose accelerated when you want to maximize early tax deductions, need better cash flow timing in the first years, or when the asset's usage declines over time.
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Accelerated depreciation is the better choice when your tax strategy is a priority and you want to defer tax payments by front-loading deductions. It's especially useful when you need improved cash flow in the early years of owning an asset, such as after a major equipment purchase. It also makes sense when the asset genuinely loses more value in its early years—vehicles and technology equipment, for example, lose value faster initially. The trade-off is more complexity in your accounting and lower deductions in later years.
Does the total depreciation amount differ between straight-line and accelerated methods?
No. Both methods produce the same total depreciation over the asset's life—only the year-by-year timing of deductions differs.
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This is a common misconception. Whether you use straight-line or accelerated depreciation, you'll deduct the same total amount over the full useful life of the asset. The difference is entirely in timing. Accelerated gives you more deductions in years one through three and fewer in later years, while straight-line keeps every year the same. The practical impact is on cash flow and tax timing—getting larger deductions earlier means you pay less in taxes sooner, effectively giving you an interest-free loan from the government.
How do you decide which depreciation method is right for your business?
Assess your tax strategy priority, cash flow needs, tolerance for accounting complexity, and current business situation, then calculate both methods to compare.
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Use a three-step framework. First, assess your needs: Is tax optimization or simplicity more important? Do you need stronger cash flow in the near term? Second, calculate both methods for your specific assets using a depreciation calculator to see the actual dollar differences year by year. Third, choose the method that best aligns with your priorities. Consider consulting a CPA if the difference is significant, especially for high-value assets where the timing of deductions can meaningfully impact your tax bill and cash flow.
Can a small business use different depreciation methods for different assets?
Yes, you can apply different methods to different asset classes, using straight-line for some and accelerated for others based on each asset's characteristics.
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Small businesses aren't locked into one method for everything. You might use straight-line for office furniture that maintains steady value and accelerated for technology equipment that loses value quickly. The IRS allows different methods for different asset categories. This mixed approach lets you optimize tax benefits where accelerated makes sense while keeping things simple where it doesn't. Just maintain consistent records and document your method choice for each asset class.
Sources & Additional Information
This guide provides general information about choosing depreciation methods. Your specific situation may require different considerations.
For depreciation calculation, see our Depreciation Calculator.
For depreciation understanding, see our Depreciation Demystified Guide.
For depreciation impact, see our Depreciation in Practice Guide.
Consult with professionals for advice specific to your situation.
