Financial Glossary
Straight-Line Depreciation
Straight-line depreciation is a method that allocates the cost of a fixed asset evenly across each year of its useful life. The annual expense is calculated by subtracting the asset's salvage value from its cost and dividing the result by the number of years in its useful life. Because the expense is the same each period, it is the simplest and most widely used depreciation method for financial reporting.
Problem & Application
Campground and STR owners use straight-line depreciation to expense buildings, furnishings, and equipment over time, turning a large upfront purchase into a predictable annual deduction. The method makes financial statements easy to read and budget against, though tax depreciation may follow different IRS rules and recovery periods, so book and tax figures often differ. Getting useful life and salvage value right matters because they drive the deduction every year the asset is held.
In Short
Straight-line depreciation is the default for predictability and simplicity, but its tax treatment can diverge from its book treatment. Aligning both correctly keeps statements clean and deductions defensible.