OK. Do you not understand the concept of depreciation in general, or are you just not understanding how tax depreciation works in real life? Did you take a tax class in school? I would have thought Sec 179 would have been covered.

I tell our newbies all the time that tax requires you to think of the basic rule, then think of all the exceptions and additional provisions that effect the basic rule. The following is a oversimplied explanation of tax depreciation. Know this and you can at least sound half intelligent to your prickish boss.

MACRS is the basic rule. Number of years, declining balance, etc.

Bonus depreciation currently allows you to take a 50 percent off-the-top depreciation deduction in the first year. You then apply MACRS to the remaining 50 percent. Bonus is available for certain class lives, and the asset has to be new, not used. If you don't want bonus to apply, you have to elect out of it. So basically, you end up with a pretty large deduction in the first year, and significantly smaller deductions in the later years. You can use bonus regardless of your net income situation.

Section 179 is technically an expensing provision, but it is realistically a form of accelerated depreciation. The asset can be new or used, and it has to fit certain asset classes and lives. There are three limitations. One, it generally can't be used for assets in a rental situation. Two, there are limits to the amount of asset purchases you can use for Section 179, and if you buy too many assets in value, you can't use it at all (you probably will never see this with the busineses that would use a CPA firm of that size). The third one is big: Section 179 can't create a taxable loss. Any Section 179 that would create a taxable loss is carried over to the next year, where hopefully you have enough income to take it.

Now, there are ways to layer in the provisions of Section 179, Bonus, and MACRS, but that is beyond the scope of this discussion. This gives you the basics, now, you need to figure out the types of assets that each provision can apply to, and the best ways to use each one. The truck you are working on, can use this idea. If they had enough income, they could take 25K of Sec 179 on the truck, then bonus on the balance, then MACRS on the rest of the balance.

The journal entry would be to debit depreciation expense and credit accumulated depreciation.