Why Taking More Depreciation Isn’t Always the Best Move for Your Business
When it comes to tax planning, depreciation is one of the most powerful tools business owners have. In my last two posts, I talked about bonus depreciation vs. Section 179. Both strategies let you deduct the cost of fixed assets more quickly, reducing your taxable income today.
But here’s the kicker—taking too much depreciation in one year could actually cost you money in the long run.
The Sweet Spot with Depreciation
Let’s imagine you run a business and earn your entire income from it. You buy some equipment and decide to use Section 179 or bonus depreciation to write it all off, bringing your taxable business income down to zero.
Sounds great, right? Not so fast.
If your income is reduced to zero before applying personal deductions, you could miss out on other valuable tax benefits.
Example: Married with Kids
Suppose you’re married with two children. You qualify for:
- Standard Deduction (2025): $30,000 for married filing jointly
- Child Tax Credit: $1,000 per child (non-refundable)
If your business income is zero, you’ve essentially lost:
- The benefit of your $30,000 standard deduction
- Your $2,000 in child tax credits
Why? Because you don’t have taxable income for those deductions and credits to apply against.
A Smarter Strategy
Instead of wiping out your income with depreciation all at once, consider spreading it out. By taking just enough depreciation to keep some taxable income on the books, you’ll be able to take advantage of:
✅ Personal deductions (like the standard deduction)
✅ Non-refundable credits (like the child tax credit)
✅ Tax savings now and in future years
Key Takeaway
Depreciation isn’t just about reducing taxes today—it’s about balancing current and future benefits. The right strategy depends on your unique situation, and the good news is: you don’t have to make this decision until after the tax year but before filing your return.
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