Why would a taxpayer choose one depreciation method for financial statement preparation and a different depreciation method for income tax purposes?© BrainMass Inc. brainmass.com June 3, 2020, 11:23 pm ad1c9bdddf
There could be a variety of reasons including:
1. Using a faster method for tax reporting will increase deductible expenses and decrease taxable income. With less taxable income, the company will pay less income tax. Most companies like that a lot. The very generous Section 179 of the Internal Revenue Code allows the first $250,000 of equipment purchased in any one year to be expensed in full, subject to a couple of conditions that are not hard to meet.
2. GAAP requires standards ...
The response to the question lists five reasons for why depreciation methods might be different for book and for tax. Each reason has a short paragraph of explanation. Total word count is 324.