how depreciation is calculated

[Jimmy Jones]

Hello All,

I am trying to understand how depreciation of a long term upgrade (Solar) is calculated for tax purposes / understanding the real cost.  My question does the depreciation directly offset net profit?  

  Example:

Solar costs $27,500

Depreciate over 27.5 y

$27,500/27.5y = $1000 per year

Lets say the Net profit assuming all other costs before the solar install is $1000/month and I install solar example above would that be $0 income per month on paper?

Thanks

Jim

[Michael Plaks]

@Jimmy Jones

Without diving into small details - yes, in your example it will erase the $1,000 net profit to zero.