Depreciation is a way to deduct a specific business item (asset) over a period of years instead of all at once on an income tax return. It normally applies to items that are worth more than $100.00 and have a life expectancy of one year or more.
The Internal Revenue Service (IRS) classifies business items into categories. Some items can be fully deducted in the year they are put into service, but other items have a longer expected life and need to be depreciated. Depreciation is the term used to spread out the cost of a certain item over a period of time defined by the IRS.