lutz logo
lutz logo
  • Services
  • News & Insights
  • About
  • Client Portal
Search
  • Services
  • Accounting
  • Advisory
  • Financial
  • M&A
  • Talent
  • Tech
  • Accounting Services
Services
  • Audit & Assurance
  • Client Advisory Services
  • Outsourced Accounting
  • Tax
  • Business Valuation
  • Litigation Support & Forensic
View All
Industries
  • Agribusiness
  • Construction
  • Family Office
  • Healthcare
  • Manufacturing & Distribution
  • Nonprofit
View All
News & Insights
Financial Access Checklist
Guide
Financial Access Checklist

Share this information with your spouse to assure you each have access to manage important financial tasks independently.

Read More
  • Advisory Services
Services
  • Accounting
  • Financial
  • M&A
  • Talent
  • Tech
View All
Resources
The Art of Budgeting
Recording
The Art of Budgeting + Smart Saving Strategies
Learn how to get your finances under control and increase your savings! Hear real-life examples and best practices to secure a successful future.
Watch Now
Business Insights
Comparing Business Valuation Methods
Blog
Comparing Business Valuation Methods: Which is Right for You?
Valuation experts rely on three primary approaches to determine the value of a business: income approach, asset approach, and market approach.
Read More
  • Financial Services
Services
  • Financial Planning
  • Investment Advisory
  • Retirement Plan Services
  • Pooled Employer 401(k) Plan
View All
Resources
  • Lutz Financial Blog
  • Our Team
  • Client Portal
  • Charles Schwab Login
  • Send Files Securely
Contact Us
NEWS & INSIGHTS
Website Featured Content Images
Market Commentary
Financial Market Updates

Read our latest financial market updates and sign up to receive them straight to your inbox.

Read More
  • M&A Services
Services
  • Sell-Side Representation
  • Transaction Advisory
  • Exit Planning
  • Business Valuation
View All
Resources
Selling a C Corporation
Blog
Factors to Consider When Selling a C Corporation

Understand the tax issues affecting both buyers and sellers involved in C corporation merger and acquisition transactions

Read More
Business Insights
Post-Acquisition Checklist
Guide
Post-Acquisition Checklist for a Seamless Transition
To help you navigate this critical period, we've compiled a comprehensive checklist covering key areas that demand attention after the deal closes. 
Read More
  • Talent Services
Services
  • Search & Staffing
  • Outsourced HR
  • HR Consulting
View All
Candidate Resources
  • Job Seeker Process
  • Current Opportunities
  • Lutz Internships
Contact Us
News & Insights
Overcoming Bias in Recruitment
Blog
Unconscious Bias in Recruitment: How to Overcome It
Learn how to take the bias out of recruitment and build a diverse, talented workforce with these tips.
Read More
  • Tech Services
Services
  • Outsourced IT
  • Data Analytics
  • Technology Strategy
  • Software Consulting
View All
Resources
When to outsource your IT
Blog
How to Know When It's Time to Partner with an IT Pro

One day your technology seems manageable, and the next you're wondering if you need more support. Here are the clear signs it's time to outsource your IT.

Read More
Business Insights
Untitled design (1)-Mar-08-2024-08-50-35-9527-PM
Video
Pella Client Testimonial
"I've used them for valuation work, stock transfers, hosting all of my technology, and now data analytics. I'd say they lead the pack in terms of anticipating what I'm going to need before I even know I need it."
View Now
Business Insights
BLOG
Explore Topics

Get the latest news and insights on relevant topics that matter most to you.

View All
Webinars & Events
Events
Register Today

Register for an upcoming event or access our library of on-demand recordings.

View All
Market Updates
COMMENTARY
Stay Informed

Catch up on market moves with our weekly update, featuring in-depth insights and analysis.

View All
Resources
EBOOKS & GUIDES
Download Now

Take a deep dive into challenging business topics with these free educational resources. 

View All
  • News & Insights
  • Business Insights
  • Webinars & Events
  • Market Updates
  • Resources
Business Insights
BLOG
Explore Topics

Get the latest news and insights on relevant topics that matter most to you.

View All
  • About
About

Lutz is a business solutions firm for people seeking a partner to help energize and heighten economic and organizational success.

Our Company
Our Team
Offices
Careers
Internships
Contact Us
  • Contact
Client Portal

Log in to your relevant client portal to access your account, upload documents, or make a payment.

Make a Payment
Accounting Client Portal
Financial Client Portal
Charles Schwab Login
Send Files Securely
Contact Us
  • Construction

Book vs. Tax Depreciation Methods in the Construction Industry

Clarke Beller, Audit Shareholder
February 14, 2022
Book vs. Tax Depreciation Methods in the Construction Industry

Plant, Property and Equipment (PP&E) is a vital component to most construction contractors’ operations, specifically for heavy equipment contractors and subcontractors. Outside of human capital, it is often the most important resource for contractors to complete their work on hand and compete for future work. PP&E also makes up a large portion of many contractors’ balance sheets and is subject to management estimates in the form of depreciation methods and useful lives. As these vary from contractor to contractor and often have a large impact on a bonding company’s view of your overall financial position (bonding capacity), it is important to understand the key book/tax depreciation differences and their implications on a company’s financial statements.

 

Book Methods

Book depreciation methods are set based on management’s estimate of the PP&E’s useful life and residual value. This estimate can be derived from historical experience with similar classes of assets or using published equipment guides and is typically documented in a capitalization policy. Generally Accepted Accounting Principals (GAAP) allow for straight-line and accelerated depreciation methods for book purposes; however, depreciation will occur over the asset’s useful life. GAAP also allows management to estimate the residual value of an asset at the end of its useful life. The residual value represents the scrap/salvage value that assets have at the end of their useful life.

 

Tax Methods

Contrary to book methods, tax methods are set by Congress and are subject to changes in tax legislation. Current tax law is very favorable and allows for a company to immediately expense qualifying PP&E in the year of acquisition through bonus or section 179 depreciation.

Bonus depreciation is not limited at the taxpayer level and allows for 100% of an asset’s cost to be taken as an expense in the year of acquisition. Bonus depreciation begins to phase out after the 2022 tax year with a full phase-out of 20% each tax year through 2027.

Section 179 depreciation is limited at the taxpayer level and allows for 100% of an asset’s cost to be taken as an expense in the year of acquisition. While no scheduled phase-out is anticipated, section 179 depreciation is limited on an annual basis at the individual and entity level.

 

Financial Statement Implications

Many pitfalls exist related to depreciation, with certain examples provided below:

  • Utilizing tax methods for internal financial statement purposes – Will result in understated profitability and equity.
  • Omitting residual value from large PP&E – Will result in understated equity and large gains on disposal.
  • Failing to record depreciation and disposals on a regular basis – Will result in significant swings in profitability throughout the year.

Overall, it is important to understand the needs of the users of the financial statements and work with your Lutz representative to ensure that these needs are met. Properly evaluating your PP&E strategy can help mitigate tax, bonding, and banking issues and ensure the business has the appropriate level of PP&E on hand while not creating unintended consequences.

If you have any questions or would like more information on this topic, please contact us today. You can also learn more about our construction accounting services here.

  • Analytical, Significance, Individualization, Responsibility, Context

Clarke Beller

Audit Shareholder

Clarke Beller, Audit Shareholder, began his career in 2010. With a background in financial analysis, he has developed a strong foundation in financial reporting and business operations. Clarke serves as the construction niche lead, demonstrating his expertise and leadership in this sector. 

Specializing in audit and consulting services for privately held companies, Clarke focuses primarily on the construction industry. He oversees audits, reviews, and compilations while offering business consulting on a monthly, quarterly, and annual basis. Clarke values Lutz's customer-first approach, which allows him to apply his analytical skills and industry knowledge to help clients succeed.  

 

At Lutz, Clarke embodies the firm's "say it straight" philosophy, offering honest and candid insights to clients. His ability to dissect complex financial data and present clear, actionable recommendations ensures clients receive transparent, reliable guidance. 

 

Clarke lives in Omaha, NE, with his wife Kayla and their two sons, Brock and Brant. Outside the office, he spends time golfing, boating, and following football. 

402.778.7964

cbeller@lutz.us

Connect on LinkedIn

Recent News & Insights

Recent News
Lutz Announces Redemption of Ron Nebbia’s Shares
Lutz, a Nebraska-based business solutions firm, announces the redemption of ownership held by ...
Read More
Market Commentary
2025 Has Been a Boring Year + 5.14.25
2025 Has Been a Boring Year Imagine you went to sleep on New Year’s Eve and just woke up ...
Read More
Job Seeker
5 Ways to Maximize Your Chances of Employment
Let’s face it, job searching can be a rollercoaster. One moment you're motivated, the next ...
Read More
Guide
Finding a Lifelong Career
You’ll spend over 90,000 hours of your life at work. That’s more time than you’ll spend with ...
Read More
module-bg-desktop module-bg-mobile

Let’s get you where you want to go.

We work to simplify complexities, help make critical business decisions, and confidently focus on the things that are truly important to you. We embrace your business as our own to spark the right solutions and help you thrive.
Contact Us
Lutz-Logo-white
  • Services
    • Accounting
    • Consulting
    • Financial
    • M&A
    • Talent
    • Tech
  • About
    • Our Company
    • Our Team
    • Offices
    • Careers
    • Internships
    • Current Opportunities
  • Client Portal
    • Make a Payment
    • Accounting Client Portal
    • Financial Client Portal
    • Send Files Securely
    Submit RFP
TOLL-FREE: 866.577.0780 | © Lutz & company, PC 2025 | Privacy Policy
Follow us on Facebook Follow us on LinkedIn Twitter - X Logo Follow us on Instagram Follow us on Facebook