If you bite into an apple, eventually that bite will turn brown; this brown is analogous to depreciation. Put another way, it is the concept behind the way bookkeepers account for the wear and tear on equipment. The IRS recommends the use of MACRS (Modified Accelerated Cost Recovery System), which is an accelerated depreciation methodology to account for the use of the medical equipment over its specified lifetime.
Review the MACRS depreciation method. The IRS recommends using MACRS for the depreciation equipment.
Determine what's right for medical equipment. Medical equipment can be very expensive, and depreciation expense can be a significant expense. Use the useful life of the equipment provided in the manual to determine a time period. Use the MACRS tables to determine the amount to write off each year.
Walk through an example. Using MACRS and assuming your medical equipment has a useful life of 10 years, let's compute depreciation expense: We are going to use MACRS at the 200 percent double-declining balance rate. For a 10 year period, the MACRS yearly depreciation expenses are: 10.00, 18.00, 14.40, 11.52, 9.22, 7.37, 6.55, 6.55, 6.56, 6.55, and 3.28 percent for Years 1 through 10, respectively.
Multiply the year by the rate to get the depreciation expense for that year: For instance, Year 1 depreciation expense for $100,000 piece of medical equipment is $100,000 * .1 or $10,000.
Always consult a CPA before making any changes to tax methodology.