Business Assets and Your Business Taxes

Your business assets are a big part of your business success. Using the assets of your business, you create products and services that are purchased by customers to create your income. When you buy or sell business assets, these transactions affect both your financial position and your tax situation.

This article provides information on business assets, including depreciation, capital gains, and recordkeeping requirements for assets In business, assets are things of value that are used in a business. The assets are of two types: tangible assets, like business vehicles, equipment, supplies, and buildings, and intangible assets, like copyrights, patents, and trademarks.

How Does Depreciation Affect Business Assets?

Two men looking at business assets on a clipboard in their warehouse.
Monty Rakusan / Getty Images 

Most business assets depreciate over time, decreasing in value because of use and obsolescence; these are called "depreciable assets." Understanding how depreciation works helps you make better business decisions on sale or purchase of assets. 

For example, depreciation allowances change each year, depending on tax laws. You might get a greater depreciation deduction in one year than another.

Depreciation can also be accelerated, giving you increased depreciation deductions in some years. This article discusses depreciation and accelerated depreciation, and how depreciation affects business assets. 

Does Sale of Business Assets Affect My Business Taxes? What About Capital Gains?

When you buy or sell a business asset, you sell it for more, or less, than you paid for it. If you sell the asset for more, you have a capital gain.  If you sell it for less, you have a capital loss. 

Knowing how capital gains affect business taxes is important in timing when to buy or sell an asset. This article explains capital gains on assets in more detail, including how assets are bought or sold as part of the sale or purchase of a business.

How Do I Keep Records on Business Assets for Tax Purposes?

For tax purposes, you must keep good records on your business assets, if you want to take deductions for asset depreciation and for capital gains and losses on the sale of business assets.  Starting with the purchase of the asset, keep records on every transaction relating to your assets, including annual depreciation, repairs or modifications to assets, and other transactions. 

What Methods Are Used to Value Business Assets?

Selling a business may mean selling the business stock, or it might mean selling the business assets.  In either case, you will probably be selling some business assets, and you need to know how these assets are valued in a business sale. 

How Do I Value Business Assets After a Disaster?

To determine the amount of a disaster loss, you must collect information on each asset in your business. The information you need to collect includes:

  • The cost basis of each asset
  • The fair market value of each asset both before and after the disaster
  • The amount of reimbursement by your insurance company for each asset.

Then you will have to retrieve information from insurance payments in order to determine the actual disaster loss, for reimbursement purposes.