Return on Software: Maximizing the Return on Your Software Investment

Depreciation Methods

Under U.S. tax code, the tax law that's in effect when the asset is bought determines an asset's depreciation method. Even though the tax code can change from one year to the next, bringing with it different depreciation methods, any given asset's depreciation method will stay the same regardless, for as long as the organization owns it. Once the depreciation method is assigned for an asset, that same method is used until it is sold or scrapped. This means that two different instances of the same kind of asset might be depreciated differently if the tax code changed between when each of them was bought.

The U.S. tax code has defined different depreciation methods three times in the recent past:

• Before 1981

• 1981 through 1986 ...