Since lawnmowers provide business owners economic benefit for many years, owners should depreciate them for tax and accounting purposes. You can't always use the same depreciation method for book accounting purposes as you do for tax purposes. However, many small businesses that aren't required to follow generally accepted accounting principles can and choose to do so for simplicity's sake.
If you want a straightforward, intuitive way to depreciate your lawnmower, use the straight-line depreciation method. Annual straight-line depreciation is equal to the cost of the asset, less its salvage value, divided by the expected useful life. For example, say that you purchased your lawnmower for $4,000, expect to use it for 10 years and sell it for $500. The annual straight-line depreciation expense is $3,500 divided by 10, or $350 a year.
Straight-line is an easy way to depreciate a law mower, but it may or may not be the most accurate. If you think the value you get out of the lawnmower is tied to how many lawns you mow, go for the units-of-production method. The units-of-production uses some other variable, like number of lawns mowed, as the driving depreciation factor. For example, say that instead of a useful life of 10 years, you think you'll be able to mow 10,000 lawns before you sell your lawn mower. Using the units-of-production method, you will depreciate your mower $0.35 (3,500/10,000) for each lawn mowed.
Section 179 Expensing
You aren't able to immediately expense the cost of your lawnmower if you follow generally accepted accounting principles. However, the Internal Revenue Service does allow businesses to immediately expense certain business property such as lawnmowers. To immediately expense the property, you must have purchased the lawnmower for a price and acquired it for business use. At the time of this writing, business owners are able to expense up to $25,000 in eligible property annually.
If you weren't able to expense the total value of your lawnmower under Section 179, you'll need to depreciate the remaining value for tax purposes. Most business owners use the modified accelerated depreciation system, or MACRS, for tax purposes. That's because MACRS front-loads the depreciation tax deduction in the first few years of the asset's life, which means a quicker tax break for you. Lawnmowers usually qualify as seven-year property for tax purposes, and the Internal Revenue Service provides a table for calculating the annual deduction.
Based in San Diego, Calif., Madison Garcia is a writer specializing in business topics. Garcia received her Master of Science in accountancy from San Diego State University.