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General Depreciation System (GDS) is an accelerated depreciation system used by businesses to depreciate personal property for tax purposes. GDS is based on the declining-balance method of depreciation, which is a type of accelerated depreciation method.
Under the declining-balance method, depreciation is calculated by applying the designated depreciation rate to the non-depreciated balance of the asset. This means that a higher percentage of depreciation is applied to the earlier periods and decreases over the life of the asset. GDS depreciates personal property faster than the straight-line method, which applies the same amount of depreciation to each period over the life of the asset.
GDS is a part of the Modified Accelerated Cost Recovery System (MACRS), the primary method of weeding out the cost of property for tax purposes. Under MACRS, the depreciation of an asset can be taken over the course of multiple years, which further reduces the amount of tax liability for a business.
GDS is applicable for tax purposes, but can also help businesses in cash flow and budget management. By spreading the cost of an asset over multiple years, businesses have a higher likelihood of being able to afford the purchase of new or replacement equipment. GDS is generally recommended to decrease the cost of an asset up front.
GDS offers many advantages over other types of depreciation such as greater efficiency, lower debt service costs and the potential to receive larger deductions on taxes. By following the declining-balance method, businesses can spread out their depreciation even more over the life of the asset, limiting their immediate cost while also providing them with the necessary deductions needed to reduce their tax liability.
GDS is a simple and straightforward method of depreciation, which is appealing to businesses operating under tight budget restrictions. GDS allows businesses to manage their cost of depreciation without sacrificing the larger tax savings. It is the perfect depreciation system for businesses that plan to depreciate for tax purposes but are also looking to maintain some cash flow to offset the cost of the depreciation.
Under the declining-balance method, depreciation is calculated by applying the designated depreciation rate to the non-depreciated balance of the asset. This means that a higher percentage of depreciation is applied to the earlier periods and decreases over the life of the asset. GDS depreciates personal property faster than the straight-line method, which applies the same amount of depreciation to each period over the life of the asset.
GDS is a part of the Modified Accelerated Cost Recovery System (MACRS), the primary method of weeding out the cost of property for tax purposes. Under MACRS, the depreciation of an asset can be taken over the course of multiple years, which further reduces the amount of tax liability for a business.
GDS is applicable for tax purposes, but can also help businesses in cash flow and budget management. By spreading the cost of an asset over multiple years, businesses have a higher likelihood of being able to afford the purchase of new or replacement equipment. GDS is generally recommended to decrease the cost of an asset up front.
GDS offers many advantages over other types of depreciation such as greater efficiency, lower debt service costs and the potential to receive larger deductions on taxes. By following the declining-balance method, businesses can spread out their depreciation even more over the life of the asset, limiting their immediate cost while also providing them with the necessary deductions needed to reduce their tax liability.
GDS is a simple and straightforward method of depreciation, which is appealing to businesses operating under tight budget restrictions. GDS allows businesses to manage their cost of depreciation without sacrificing the larger tax savings. It is the perfect depreciation system for businesses that plan to depreciate for tax purposes but are also looking to maintain some cash flow to offset the cost of the depreciation.