150% accelerated depreciation (or 150% declining balance) is a method allowing businesses to deduct 1.5 times the straight-line depreciation rate from an asset's book value annually, front-loading expenses in early years. It reduces early-year tax liability and is often used for 15- or 20-year property under MACRS.
150% Declining Balance Method: Similar to the Double Declining Balance method, this method uses a lower rate of 150% of the straight-line rate. This method is less aggressive than DDB but still allows for accelerated depreciation. It can work for assets with a moderate rate of obsolescence.
150% and 125% declining balance methods are quite similar to DDB, but the rate is 150% or 125% of the straight-line rate (instead of 200% as with DDB).
Accelerated depreciation is any loss of value where the business depreciates (i.e., accounts for the value loss of a fixed asset in tax filings) at a greater proportion of an asset's expected lifetime value loss earlier in its life.
The double declining balance method of depreciation, also known as the 200% declining balance method of depreciation, is a form of accelerated depreciation. This means that compared to the straight-line method, the depreciation expense will be faster in the early years of the asset's life but slower in the later years.
The additional first year depreciation deduction percentage is for certain qualified property acquired and placed in service after December 31, 2024, and before January 20, 2025. In general, for certain qualified property acquired after January 19, 2025, the additional first year depreciation deduction is 100%.
A 20% depreciation rate means an asset loses 20% of its value (or cost basis) each year, commonly seen in the straight-line method for a 5-year asset, but 20% also reflects a recent phase-down of bonus depreciation under the TCJA before 100% was restored for 2025+; it can also refer to specific tax credits for historic rehabilitation or the permanent 20% QBI deduction for pass-through businesses.
Accelerated depreciation can be a powerful strategy to increase the profitability of your assets in the early years. Accelerated depreciation allows property owners to front-load depreciation deductions, significantly reducing tax liability in the early years of ownership.
There are two ways to calculate accelerated depreciation. The double-declining balance depreciation method and the sum of years digits method. The double-declining balance depreciation method is calculated by taking the cost of machinery multiplied by 2 and then multiplied by the depreciation percentage.
Personal Property (Section 1245): For assets like equipment, machinery, or vehicles, all prior depreciation claimed (including accelerated depreciation methods) is generally subject to recapture of depreciation and is taxed at your higher ordinary income tax rate.
3-, 5-, 7-, and 10-year property - the applicable method is generally the 200% Declining Balance method. 15- and 20-year property and property used in a farming business - the applicable method is the 150% Declining Balance method.
Under the General Depreciation system, there are three depreciation methods: 200 Percent Declining Balance, 150 Percent Declining Balance, and the Straight-Line Method. 200 Percent Declining Balance Method is used to depreciate property with lives of 3,5,7,10 years.
Example of double-declining balance
To apply the double-declining balance method, Calculate the straight-line depreciation rate as 1/5 = 20%. Double this rate to get 40%. The depreciation for each year will be Year 1: 40% of $10,000 = $4,000. Year 2: 40% of $6,000 ($10,000 - $4,000) = $2,400.
The 150% reducing balance method divides 150 percent by the service life years. That percentage will be multiplied by the net book value of the asset to determine the depreciation amount for the year.
Three examples of accelerated depreciation methods include the following: Double-declining-balance method (or 200% declining-balance method) 150%-declining-balance method. Sum-of-the-years'-digits (SYD) method.
MACRS 150% Election is a Declining Balance method that provides greater deduction during the earlier recovery years. Tip: MACRS 150% Election is an IRS depreciation method not commonly used by non-profit organizations.
Accelerated depreciation refers to any one of several methods by which a company, for 'financial accounting' or tax purposes, depreciates a fixed asset in such a way that the amount of depreciation taken each year is higher during the earlier years of an asset's life.
By expensing a larger portion of an asset's cost in the early years, accelerated depreciation lowers the taxable income during those years. This, in turn, reduces the immediate tax liability, providing businesses with more cash flow in the short term.
Also known as the reducing balance method, double declining is another accelerated depreciation method that, as the name implies, depreciates assets twice as fast as the declining balance method. It is another method that is commonly used by businesses.
What qualifies for bonus depreciation?
The four common types of depreciation methods used in accounting are Straight-Line, Double Declining Balance, Units of Production, and Sum-of-the-Years'-Digits, each spreading an asset's cost differently over its useful life to reflect usage or decline in value, with Straight-Line being the simplest and most common.
One Big Beautiful Bill Act
In 2025, the OBBB reinstated 100% bonus depreciation. Starting with property placed in service after Jan. 19, 2025, businesses can again deduct 100% of the cost of most qualifying property up front moving forward.
One of the downsides of rental property depreciation is the recapture tax. When you sell a depreciated property, you may be subject to a recapture tax on the depreciation deductions you previously claimed. This tax can be substantial and should be factored into your long-term investment strategy.
Assets valued at $20,000 or more can continue to be placed into the small business pool and depreciated at 15% in the first income year and 30% each income year after that. In addition, pool balances under $20,000 at the end of 2025–26 income year can be written off.