Computer depreciation is spreading the cost of a laptop or desktop over the years you use it. On a straight-line book schedule with no salvage value, a $1,500 laptop kept four years is $375 of depreciation a year. Your tax return can use a different schedule.
We build SherpaDesk, a helpdesk and PSA (professional services automation) a small IT team can run alone. No contract. No implementation project. No dedicated admin. This guide is for the person who owns the device records, not the tax return. The steps work in a spreadsheet or any asset tool.
Key takeaways
Definition
The IRS defines depreciation as "an annual income tax deduction that allows you to recover the cost or other basis of certain property over the time you use the property." It calls it an allowance for "wear and tear, deterioration, or obsolescence."
For a laptop your policy capitalizes, the purchase doesn't hit one year's results in full. The IRS describes it as recovering the cost "over a number of years." Depreciation starts when the device is placed in service. It stops when the cost is fully recovered or when you retire the device, whichever comes first.
A laptop can carry two schedules. The books follow your accounting policy, as California's cost allocation plan does with straight-line over five years. The tax return follows IRS rules, which can differ: salvage value, for example, is "not used under MACRS," the IRS system for tax depreciation. IT rarely owns either schedule. IT owns the record both depend on: what the device cost, when it went into service, and when it left.
Your accounting policy sets a laptop's life on the books; IRS rules set the tax recovery period. The IRS defines useful life as "an estimate of how long an item of property can be expected to be usable in a trade or business or to produce income." Four different numbers get called a laptop's life, and they rarely match.
| Number | Who sets it | Example |
|---|---|---|
| Tax recovery period | IRS rules, applied by your accountant | A computer is 5-year property |
| Book useful life | Your accounting policy | California's 2026-27 cost allocation plan: equipment of $10,000 or more, 5 years |
| Warranty term | The purchase | 3 years in one practitioner's policy |
| Refresh cycle | IT and the budget owner | 3 to 5 years in several replies to one r/sysadmin thread |
California's 2026-27 statewide cost allocation plan for central service agencies depreciates equipment straight-line over five years, but only assets costing at least $10,000. Policies differ, so ask finance for yours before you build a schedule. One r/ITManagers member recalled buying laptops "around $1500" while accounting, they believed, "were doing a 3 year schedule on them."
Software follows its own rule. Where software can be depreciated, the IRS says to use "the straight line method over a useful life of 36 months."
The same amount every year.
A fixed rate on what's left.
The steps below build the book schedule with straight-line. It's the schedule you can rebuild on one line of a device record. The tax schedule is MACRS, covered in the IRS section below.
Three numbers sit on the same laptop, and each answers a different question. Mixing them up is how a team ends up arguing about whether a four-year-old laptop is "worth nothing."
| Value | What it is | Where it comes from | Decision it drives |
|---|---|---|---|
| Book value | Cost minus depreciation taken so far | Your schedule | The gain or loss recorded at disposal |
| Replacement cost | What a comparable new device costs today | A current quote | The size of next year's refresh line |
| Resale value | What a buyer pays for this used device | A buyback or recycler quote | Sell, redeploy, or recycle |
The tax version of book value is adjusted basis: "The original cost of property, plus certain additions and improvements, minus certain deductions such as depreciation allowed or allowable and casualty losses." Resale value is close to the IRS idea of fair market value: the price between a willing seller and a willing buyer, neither forced to deal.
Book value says nothing about whether a laptop still works. As one r/sysadmin member put it, depreciation "has absolutely no relation to the actual value of the asset." A fully depreciated laptop can run fine for years, and a laptop with $750 left can die tomorrow. When to repair or replace is a separate call, covered in our asset lifecycle management guide.
Before you start, get two things from finance: the capitalization threshold and the useful life per device category. You also need a device list with a unique ID per device; our IT asset inventory guide covers building one.
Example: you buy a $1,500 laptop and expect to use it for four years. The schedule rests on those two numbers.
Some organizations expense cheap devices instead of depreciating them. The IRS de minimis safe harbor lets you deduct up to $2,500 per invoice or item without an applicable financial statement (AFS), or $5,000 with one. It applies only to amounts you also expense on your books under a policy in place at the start of the year, written down if you have an AFS.
Schools spending federal awards have a separate rule. Under 2 CFR 200.1, a computing device is a supply when it costs below the lesser of your capitalization level or $10,000. That holds "regardless of the length of its useful life." One r/sysadmin member's employer skips the schedule: "We never depreciate anything as low value as a laptop, they just get expensed."
Example: your policy capitalizes laptops, so the $1,500 laptop gets a schedule. Under a policy that expenses items up to $2,500, it wouldn't.
Common mistake: building schedules for devices your finance team already expensed.
The IRS counts the price plus amounts such as sales tax (with one exception), freight charges, and installation and testing fees. Depreciation begins when the device is placed in service: "ready and available for its specific use," even if nobody uses it yet. Your book policy decides how a partial first year counts; the tax schedule uses a convention instead.
Example: $1,500 all-in, handed to the user on the first day of your fiscal year.
Common mistake: using the date the box arrived. A laptop still waiting to be imaged isn't ready for its specific use yet.
Take the useful life from your policy for the category. Salvage value is "an estimated value of property at the end of its useful life." If your book policy sets one, subtract it from the cost before dividing. The tax schedule ignores it.
Example: four years, no salvage value.
Common mistake: picking a different life per device. Set it per category, so 200 laptops follow one rule.
Book straight-line takes cost minus salvage and divides it by the years of useful life. Here, $1,500 ÷ 4 = $375 a year.
| Year | Depreciation | Taken so far | Book value at year end |
|---|---|---|---|
| 1 | $375 | $375 | $1,125 |
| 2 | $375 | $750 | $750 |
| 3 | $375 | $1,125 | $375 |
| 4 | $375 | $1,500 | $0 |
Common mistake: treating "$0" as a replacement date. It only means the cost is fully recovered on the books.
Store cost, in-service date, life, salvage, and book value on the same record as the device's tickets and repairs. Use the asset ID finance uses. One r/ITManagers member's rule: "Keep the asset id's consistent between your system theirs."
Example: the laptop's record shows $750 of book value after year two, next to its two repair tickets.
Common mistake: a depreciation spreadsheet in finance and a device list in IT, with no shared ID.
Depreciation stops when you retire the device, even if cost remains. Record the date, the method, and any sale proceeds, then tell finance. The same r/ITManagers member: "At year end tell them what you've thrown out or decommissioned so they can't write it off financially."
Rule: a sale price below book value is a loss on the books; above it, a gain.
Common mistake: recycling devices that stay on finance's register for years.
A sale above tax basis has its own rule. The IRS treats gain on depreciated personal property as ordinary income "to the extent of depreciation allowed or allowable on the property."
Depreciation turns a purchase into a yearly figure finance already plans around. Enter the capitalized cost of devices that share one useful life:
Full-year book depreciation
Capitalized cost ÷ useful life, for devices with the same life. No salvage value, no partial first year. Your numbers stay in the browser.
That figure is a book expense; the cash left when you paid for the devices. The cash question is what the replacement will cost when the time comes. Budget the refresh line from replacement cost, a current quote per category, not from book value.
The schedule does tell finance what to expect. One r/ITManagers member wrote: "If they write down a laptop over 5yrs, then they expect the laptop to be available until the fifth year." The same member's advice: if you replace it earlier, "you should inform Finance what has happened."
Depreciation sets an expectation, not a refresh date. Budget the refresh from replacement cost.
A steady cycle makes the budget predictable. One r/sysadmin member's team aims for "a 3-5 year cycle, with a goal to doing 1/3 of the fleet yearly." Their advice: "step 1 is ensuring you have an evergreen/refresh budget." Another ties the cycle to coverage: "At the end of the 3 years anyone can request a new device, no questions asked. At 5 years we forcibly retire a system." Their verdict: "It makes it extremely easy to forecast your budget with regards to devices."
The other path is visible too. A state university member gets refreshes "when we can find spare money in our budgets. Could be 5 years, could be 9 or 10."
For an MSP, a laptop the client owns is depreciated by the client. What you bring is the cost, in-service date, and disposal record for each device, plus the purchase forecast, a natural agenda item for a vCIO meeting. Our lifecycle guide covers refresh triggers and cycle length.
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Three IRS rules let a business deduct a laptop faster than a straight-line schedule would. Which one applies, if any, is a tax decision. Bring the device record and these questions to your accountant.
| Rule | What the IRS says | Conditions | Ask your accountant |
|---|---|---|---|
| Section 179 | Maximum deduction $2,500,000 for tax years beginning in 2025, reduced above $4,000,000 of property; $2,560,000 and $4,090,000 for 2026 | Dollar limit and business income limit; more than 50% business use in the first year | Do we expense this year's laptops under Section 179? |
| Special depreciation allowance ("bonus") | 100% for qualified property acquired and placed in service after January 19, 2025, unless you elect out; you can elect 40% instead in the first tax year ending after January 19, 2025 | Qualified property includes tangible property with a MACRS recovery period of 20 years or less | Are we taking the allowance or electing out? |
| De minimis safe harbor | Up to $2,500 per invoice or item; $5,000 with an applicable financial statement | Expensed on your books under a policy in place at the start of the year, in writing if you have an AFS; annual election statement with the timely filed original return | Does our book policy expense devices under $2,500? |
Source: IRS Publication 946, IRS Topic No. 704, and the IRS Tangible Property Final Regulations page, as of November 2026.
Three more details matter for a small office. The mid-quarter convention replaces half-year when more than 40% of the year's MACRS property bases went into service in the last three months. For this test, the bases are reduced by Section 179 and personal use, but not by the special allowance. Some property types are excluded. Ask whether a big fourth-quarter refresh triggers it.
Section 179 can be recaptured if business use drops to 50% or less during the recovery period. Computers and related peripheral equipment "are not included as listed property," so the extra listed-property rules for cars don't apply to them.
Whatever the return uses, keep one device record: purchase cost, the date it was ready for use, and the disposal details. Finance works out the book and tax bases and schedules from it.
These are the financial fields only. Owner, location, and status belong to the inventory record you already keep.
Check three numbers at each fiscal year-end:
We found no neutral benchmark for these, so compare each year with the last.
How this works in SherpaDesk
It's a helpdesk and PSA a small IT team can run alone. In Asset Manager, you can flag a device as a capital expense, keep its financial values, and see straight-line schedules on the Depreciation page. The values include acquisition, current value, replacement, depreciation, salvage, sale date, and net proceeds, and there's a Disposal page.
Tickets link to the asset, and services, products, and expenses can be assigned to it. Each record tracks service costs and total cost of ownership. If your books are in QuickBooks, Xero, or FreshBooks, SherpaDesk integrates with them.
Asset Manager is on High Camp: $55 per agent per month ($50 billed annually), with no contract and 14 days free, no card.
Schools are priced by student enrollment; ask sales for a quote.
Who this isn't for
Anyone deciding tax treatment: Section 179, the special allowance, MACRS conventions, or recapture. Tax filing and fixed-asset accounting decisions belong to your accountant. Comparing tools for the records first? See our IT asset management software guide, and for district fleets, our school asset management guide.
On a straight-line schedule, the rate is one divided by the useful life: 25% a year over four years, 20% over five. For US tax, the IRS treats a computer as 5-year property, and its 200% declining-balance rate is 0.40 on the remaining basis. Under the half-year convention (mid-quarter can apply instead), the first year is halved, and the method switches to straight-line once that gives an equal or greater deduction.
When you sell a depreciated device for more than its tax basis, the gain is treated as ordinary income up to the depreciation "allowed or allowable." Section 179 has a second form: recapture when business use falls to 50% or less during the recovery period. Report every sale price to finance so they can figure it.
On a straight-line book schedule, 20% a year means a five-year life. For tax, 20% can also be the first year of five-year MACRS: the 0.40 rate halved by the half-year convention. That applies to the basis left after any Section 179 deduction or special allowance. For a bonus rate, see the special allowance row in the IRS rules table.
It's recovering the cost of business property over several years instead of deducting it at once. The IRS puts it as "the recovery of the cost of the property over a number of years." For property used partly for personal purposes, only the business or investment share can be depreciated.
Yes, if one of three rules applies. Without an AFS, the de minimis safe harbor covers up to $2,500 per invoice or item that your books expense under a standing policy. You elect it each year with a statement on the timely filed original return. Section 179 and the special allowance can also write off a laptop in its first year. Keep the device record either way.
Whoever owns it. If the client buys it, it's on the client's books. If you lease devices and keep ownership, they're yours: the IRS lets you depreciate leased property "only if you retain the incidents of ownership." Either way, your record of cost, dates, and disposal is what both accountants need.
Patrick co-founded SherpaDesk and has led it as CEO since 2013. He has worked with IT service providers since 1998, first on network projects for schools and government offices, then on the helpdesk software their technicians use every day.