Why It Is Important to Review Your Depreciation Schedule
A depreciation schedule is a report that guides you about the amount of money that you can claim against the decreasing value of assets that qualify for such a benefit. Each jurisdiction has guidelines showing the different rates of depreciation that can be applied to different assets. This article discusses why you need to review the depreciation schedule of your business on a regular basis, such as each year.
Confirmation of Asset Ownership
Different assets age at different rates. For instance, your business car may age faster than the HVAC system. The aged assets may be disposed of once they are no longer useful. The review process enables you to delete the assets that your business no longer owns, such as those that were sold off or those that no longer work. In this way, you can be sure that your depreciation schedule does not contain assets that are no longer owned by the business. This can save you from facing tax fraud charges in case an investigation discovers that you kept claiming depreciation benefits against assets that your business no longer owned.
Confirming the Value of Assets
Another key reason why you should review your depreciation schedule is to confirm that the value assigned to each asset is the correct one. The review process can help you to get more tax benefits in case you discover that an item, such as the fire protection system, had been given a lower value than its true worth. Such a discovery may help you to adjust the depreciation schedule so that you can get the appropriate tax benefit that you are entitled to.
Adding New Assets to the List
Earlier on, it was mentioned that a business might sell off some of its assets or take them out of service once they become old. Similarly, your business may acquire new or additional assets that qualify for depreciation tax reporting. The annual review process is an opportunity for you to add those new acquisitions onto the depreciation schedule.
Addressing Issues of Longevity
Some of your assets may last for much longer than the expected duration indicated by the depreciation guidelines. For instance, the gate on your premises may last longer than the duration within which it could have been depreciated. The annual review process gives you a chance to refer to the current regulations of the tax authorities regarding how such assets should be treated when you are filing your tax returns.
One way to maximise your gains from a business is to take full advantage of the tax benefits offered by the expected depreciation of assets. Review your depreciation schedule annually so that you don't lose any opportunity to reduce your tax obligations.