Accelerated Depreciation
A depreciation method that recognizes higher expense in the early years of an asset's life and lower expense in later years.
What is Accelerated Depreciation?
Accelerated depreciation is any depreciation method that allocates a greater proportion of an asset's cost to earlier periods, front-loading the expense relative to straight-line depreciation. The most common methods are double declining balance (DDB) — which applies twice the straight-line rate to the declining book value — and sum-of-the-years' digits (SYD). Accelerated depreciation is used when an asset is expected to generate more economic benefit in its early years, when technology obsolescence is a risk, or to maximize tax deductions in the near term. For US federal tax purposes, the Modified Accelerated Cost Recovery System (MACRS) specifies mandatory accelerated depreciation schedules for most assets, which often differ from book depreciation and create deferred tax liabilities.
Example
A company purchases a delivery van for $50,000 with a five-year useful life and no salvage value. Under the double declining balance method, the DDB rate is 40% (2 × 20% straight-line rate). Year 1 depreciation: 40% × $50,000 = $20,000. Year 2: 40% × $30,000 = $12,000. Year 3: 40% × $18,000 = $7,200. This compares to $10,000 per year under straight-line. The front-loaded depreciation reduces taxable income more in early years, deferring taxes and improving after-tax cash flow in the near term.