# Step-by-step degressive cushioning

One of the most popular methods of calculating the depreciation of fixed assets is the degressive method. It assumes that the performance of a fixed asset decreases over time - so a decreasing depreciation rate should be assumed. It is also called the declining balance method because the net value of the fixed asset decreases with each annual write-off.

## What is degressive cushioning?

Depreciation write-offs can be made on the initial value of machinery and equipment included in groups 3-6 and 8 of the Classification and means of transport, excluding passenger cars. In the first tax year of using fixed assets, write-offs are calculated using the rates provided in the List of depreciation rates increased by a factor not higher than 2.0. On the other hand, in the following tax years, the base is the initial value reduced by the current depreciation charges, determined at the beginning of subsequent years of their use.

Importantly, the degressive method is not applied until the end of the period of full depreciation of a fixed asset, but until the amount of the write-offs equals the write-offs calculated according to the straight-line method. Then you should start calculating depreciation according to the straight-line rate. It should be remembered that the entrepreneur is obliged to continue the write-off method adopted at the beginning until the end of the depreciation period.

## Which assets are depreciated on a degressive basis?

To the closed catalog of fixed assets listed in art. 22k paragraph. 1 updof and art. 16k paragraph. 1 updop includes machines and devices from groups 3-6 and 8 of the Fixed Assets Classification, i.e .:

• boilers and energy machines,
• machines, apparatus and devices for general use,
• specialized machines, devices and apparatuses,
• Technical equipment,
• tools, instruments, movables and fittings, not elsewhere classified.

## Advantages of using the degressive method

Declining depreciation is particularly beneficial for high-income enterprises and for people who are just starting their own business. The tax benefits are better than when using the straight-line method, because the asset is redeemed faster in the initial periods after its purchase.This results in an increase in tax deductible costs that reduce the tax base.