When depreciation ends

You must stop claiming depreciation (the process of deducting the purchase price of a fixed asset over several accounting periods) as soon as:

• The estimated useful life is up.
• You stop using the asset in your business.
• You sell or otherwise dispose of the asset.
• Book value (basis less accumulated depreciation) equals salvage value. (the estimated sales price of the property at the end of its useful life)

You may not depreciate an amount greater than the salvage value of the asset. To determine salvage value, make a reasonable estimate of what the asset will be worth at the end of its useful life.

An asset should remain on the books until it is disposed of, even if it has been fully depreciated. When an asset is disposed of, you must remove the book value of the asset from your chart of accounts. Rarely is an asset sold or otherwise disposed of for the same dollar amount as the book value. When the sales price exceeds book value, you must record a gain. When the sales price is below book value, record a loss.