To write it off, or not to write it off? If you’re a contractor who regularly makes large equipment purchases, this can be a confusing question. It’s also an important one, as depreciation can be one of the most substantial expenses you face. Thankfully, accelerated depreciation gives you a way to potentially reduce your tax bill while acquiring the equipment you need. The rules surrounding it, however, can be hard to decipher.

Here’s what you should know about accelerated depreciation on construction equipment.

Consider an asset’s useful life.

Generally speaking, equipment or other property used in your trade or business that has a determinable useful life greater than one year needs to be capitalized. You can recover the cost of the asset through depreciation over an asset’s useful life.

Here are the useful lives for assets commonly used in the construction industry:

You don’t need to worry about depreciation for items up to $2,500. You can simply make an election to expense these on your tax returns and internal books.

Which type of accelerated depreciation applies?

Accelerated depreciation allows you to expense the full cost of an asset in the year you acquire it, meaning you can write off the full cost at once rather than spreading it out over the asset’s useful life. There are two types of accelerated depreciation—Section 179 and bonus—and it’s important to know which applies to your purchase.

Section 179 depreciation applies to property that is used more than 50% in the business and was purchased from an unrelated party. This type of depreciation is limited to your business taxable income. It allows you to expense up to $1,080,000 of property and begins phasing out dollar for dollar on $2,700,000 of eligible additions. These limits change year to year.