Depreciation definition

Depreciation is the recovery of the cost of an asset by allowing a portion of that cost to be treated as a deduction on the business' tax returns over the useful life of the asset.

For example, for an asset with a useful life of 5 years, the cost basis of the asset would be amortized over that time period, with one fifth of the value being available as a deduction in each year.

Since there are a number of variables in the tax laws regarding the treatment of depreciation, be sure to consult with your tax professional.