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Key takeaways
- Depreciating assets lose market value over their useful life.
- Most personal-use items (cars, electronics, appliances) depreciate; fine art and real estate often do not.
- Depreciation has two distinct meanings: economic loss of value, and a tax deduction for business or rental property.
- On a personal balance sheet, depreciating assets should be marked down regularly so net worth reflects reality.
How Olomon thinks about this
Households often inflate their net worth by carrying vehicles and electronics on the balance sheet at purchase price for years. Olomon prompts you to refresh depreciating-asset values on a sensible cadence and clearly separates appreciating from depreciating assets, so a CFP® or CPA looking at your household record sees a defensible picture rather than an aspirational one.
In-depth definition
Depreciating assets fall into two practical buckets. The first is personal-use property like cars, boats, electronics, and most furnishings, which lose resale value the moment they are purchased. The second is business and investment property — equipment, vehicles used in a business, and the building portion of a rental property — which the IRS allows to be depreciated as a tax deduction over a defined recovery period.
Examples
- Personal vehicles — typically 15–25% loss in the first year
- Consumer electronics — phones, laptops, TVs lose value rapidly
- Office and rental property equipment — depreciated under MACRS for taxes
- Residential rental buildings — 27.5-year straight-line depreciation
- Commercial real estate buildings — 39-year straight-line depreciation
Frequently asked questions
Yes — anything you own with material market value belongs on your personal balance sheet. The key is to mark it at fair market value, not original purchase price, and update it at least annually.
Generally, no. Depreciation deductions apply to property used in a trade, business, or income-producing activity. A personal vehicle qualifies only to the extent it is used for business, in which case partial depreciation may be available.
Sources
Primary, authoritative references.
- 1
Internal Revenue Service (IRS)
Publication 946: How To Depreciate PropertyCited for: MACRS depreciation rules for business assets
- 2
Internal Revenue Service (IRS)
Publication 527: Residential Rental PropertyCited for: 27.5-year residential rental depreciation
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Cite this page
APAOlomon Editorial Team. (2026). Depreciating asset. Olomon Financial Glossary. https://olomon.com/financial-glossary/depreciating-asset