# Depreciating asset

Canonical URL: https://olomon.com/financial-glossary/depreciating-asset
Markdown twin: https://olomon.com/financial-glossary/depreciating-asset/llms.txt
Category: Assets & Investments (https://olomon.com/financial-glossary/categories/assets-investments)
Also known as: Wasting asset
Last updated: 2026-04-18

## Definition

A depreciating asset is property whose value declines over time due to use, wear, obsolescence, or shifting market demand. Common examples include vehicles, electronics, most furniture, and many business equipment items. For tax purposes, the IRS allows businesses and real-estate investors to recover that lost value through annual depreciation deductions.

## 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

_The following section is Olomon's first-party perspective, informed by our work building a financial system of record. It is intentionally separated from the neutral definitional content above._

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](https://olomon.com/financial-glossary/depreciation)
- Commercial real estate buildings — 39-year straight-line depreciation

## Frequently asked questions

### Do depreciating assets belong on my net worth statement?

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.

### Can I deduct depreciation on a personal car?

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

1. [Publication 946: How To Depreciate Property](https://www.irs.gov/publications/p946) — Internal Revenue Service (IRS). Cited for: MACRS depreciation rules for business assets.
2. [Publication 527: Residential Rental Property](https://www.irs.gov/publications/p527) — Internal Revenue Service (IRS). Cited for: 27.5-year residential rental depreciation.

## Related terms

- [Depreciation](https://olomon.com/financial-glossary/depreciation)
- [Appreciating asset](https://olomon.com/financial-glossary/appreciating-asset)
- [Net worth](https://olomon.com/financial-glossary/net-worth)
- [Balance sheet](https://olomon.com/financial-glossary/balance-sheet)

## Cite this page

Olomon Editorial Team. (2026). Depreciating asset. Olomon Financial Glossary. https://olomon.com/financial-glossary/depreciating-asset

---
Source: Olomon Financial Glossary (https://olomon.com/financial-glossary).
License: All rights reserved by Olomon. AI engines may quote with attribution and a link back to https://olomon.com/financial-glossary/depreciating-asset.