The Depreciable Basis Formula, an essential calculation for business owners, provides an estimate of the amount that can be deducted each year from a tangible asset to account for its diminishing value due to wear and tear. By determining the depreciable basis, businesses are able to calculate their depreciation expense as part of their accounting activities and maximize returns on investments in equipment and other assets. To calculate the depreciable basis, you would use the asset’s cost and subtract any residual value to determine the total cost of ownership, then divide by the estimated useful life of the asset. This formula is essential for businesses to accurately measure their profits over time.