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Posted by on December 13, 2023 — Updated on September 20, 2024
Read this gym equipment depreciation guide for gym owners who need to understand the gym equipment depreciation life for commercial gym equipment and learn how much to depreciate gym equipment.
Use this guide on gym equipment depreciation, specifically for how gym owners should depreciate commercial gym equipment to understand one of the most important gym maintenance issues and gym owner tax deductions, key strategies for accounting for gyms, learning how to choose a gym bookkeeper and how to create a gym budget, gym sales forecasting, and all of the gym financial management considerations like what equipment is needed to open a gym, whether to buy or lease gym equipment, and all the other costs to opening a gym, that will contribute to an increase in gym revenue and profit.
It might seem like a lot to keep track of, but it’s important! Here’s what you need to know about depreciating gym equipment.
Read on to discover the essential gym depreciation requirements you need to know. And, of course, we all know that we want to increase gym revenue and profitability, we want to make your gym stand out, we want to motivate gym staff, and be one of the most successful gyms, so be sure to power up your gym business with the best gym management software and the best personal training software: Exercise.com.
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And much, much more.
Depreciation is an accounting method that helps business owners allocate the cost of tangible assets over their useful life. For gym owners, understanding how to depreciate gym equipment is vital for accurate financial reporting and tax purposes.
Read More: Gym Owner Tax Deductions
Maintain accurate records of all your gym equipment purchases, depreciation schedules, and any maintenance costs. This will be important for financial reporting and tax purposes.
Note: It’s important to consult with a tax professional or accountant for specific advice, as tax laws and financial reporting standards can vary and change.
This guide provides a basic framework for understanding and applying depreciation to commercial gym equipment, an important aspect of managing a gym’s finances.
Read More:
Here is a chart that outlines the estimated useful life and salvage value percentages for different types of gym equipment. This information is crucial for calculating depreciation:
| Equipment Type | Useful Life (Years) | Salvage Value (%) |
|---|---|---|
| Treadmills | 5 | 10 |
| Stationary Bikes | 5 | 10 |
| Weight Machines | 7 | 15 |
| Ellipticals | 5 | 10 |
| Free Weights | 10 | 20 |
The formula for calculating the annual depreciation expense using the straight-line method is:
[ \text{Annual Depreciation Expense} = \frac{\text{Cost of Equipment} – \text{Salvage Value}}{\text{Useful Life}} ]
Suppose a gym purchases a treadmill for $5,000. According to the chart, a treadmill has a useful life of 5 years and a salvage value of 10% of its cost. The salvage value is $500 (10% of $5,000). Using the formula:
[ \text{Annual Depreciation} = \frac{5000 – 500}{5} = \$900 ]
So, the annual depreciation expense for the treadmill is $900.
Leasehold improvements have a different depreciation life compared to gym equipment. Typically, the IRS allows for a depreciation life of up to 15 years for leasehold improvements. This would apply to modifications or enhancements made to the leased gym space, like installing new flooring or lighting.
I will now create a simple gym equipment depreciation calculator to demonstrate how to calculate depreciation for gym equipment.
Using the provided example for the treadmill:
The annual depreciation expense for the treadmill is calculated as follows:
[ \text{Annual Depreciation} = \frac{5000 – 500}{5} = \$900 ]
Therefore, the annual depreciation expense for the treadmill is $900.
This calculation is a straightforward example of how to use the straight-line method for gym equipment depreciation. The same formula can be applied to other gym equipment by adjusting the cost, salvage value, and useful life according to the specific equipment type.
Here are a few more examples with common gym equipment scenarios:
The annual depreciation expense for the stationary bike is calculated as:
[ \text{Annual Depreciation} = \frac{3000 – 300}{5} = \$540 ]
The annual depreciation expense for the weight machine is calculated as:
[ \text{Annual Depreciation} = \frac{8000 – 1200}{7} \approx \$971.43 ]
The annual depreciation expense for the free weights is calculated as:
[ \text{Annual Depreciation} = \frac{2000 – 400}{10} = \$160 ]
These examples demonstrate how to calculate the depreciation expense for different types of gym equipment using the straight-line method. The salvage value percentage and useful life can vary based on the equipment type, as outlined in the initial chart. This approach helps gym owners in gym budgeting and financial planning by providing a clear picture of the equipment’s annual depreciation expense.
The estimated useful life of gym equipment varies depending on the type of equipment and its usage. Typically, commercial gym equipment can last anywhere from 5 to 12 years with proper maintenance.
The lifespan of gym equipment depends on factors like quality, maintenance, and frequency of use. Commercial-grade equipment generally has a longer lifespan, often lasting 10 years or more.
Read More: Gym Equipment Maintenance Checklist
Gym equipment, especially high-quality, commercial-grade items, can hold significant value, although it does depreciate over time. The brand, condition, and demand for specific equipment types can influence how well it retains value.
Ellipticals depreciate similarly to other fitness equipment. In the first year, they can depreciate up to 50%, and this rate may continue over the next few years. The brand and condition significantly affect the depreciation rate.
For tax purposes, gym equipment is often categorized under the 7-year property class for depreciation. However, the actual depreciation method and schedule can vary, so it’s recommended to consult with a tax professional.
The useful life of gym equipment can be calculated by considering the manufacturer’s estimated lifespan, usage patterns, maintenance schedule, and observing the wear and tear over time.
The life expectancy of an elliptical machine, particularly in a commercial setting, typically ranges from 7 to 12 years, depending on usage and maintenance.
Gym equipment should be replaced when it shows significant wear and tear, becomes outdated, or frequently breaks down. Regular maintenance and inspections can help determine when replacement is necessary.
In a commercial gym, fitness equipment can depreciate quickly in the first few years, often around 40-50% in the first year and gradually in the following years. The exact rate depends on the type of equipment and its usage.
Gym equipment is typically classified as a tangible fixed asset in accounting terms. It’s a long-term asset that provides value to the business over several years.
Treadmills depreciate at a rate similar to other fitness equipment. They can lose up to 50% of their value in the first year and continue to depreciate over the next few years.
Treadmills can hold a portion of their value, especially if they are well-maintained and from a reputable brand. However, like most fitness equipment, they do depreciate over time.
Whether to buy or lease gym equipment depends on your business’s financial situation, the equipment’s cost, and your long-term plans. Leasing can be beneficial for keeping upfront costs low and equipment updated, while buying is more cost-effective in the long run.
Read More: Buy vs Lease Gym Equipment
To start a new gym, essential equipment includes cardio machines like treadmills and ellipticals, strength equipment like free weights and resistance machines, and functional fitness gear like kettlebells and yoga mats.
Read More: What equipment is needed to start a new gym?
The cost to open a gym varies widely depending on size, location, and type of gym. Initial costs can range from $10,000 for a small studio to several hundred thousand dollars for a large commercial gym.
Read More: Cost to Open a Gym
Exercise.com can help run a gym by offering comprehensive software solutions for membership management, scheduling, workout programming, progress tracking, and billing. Its platform streamlines daily operations, enhances member engagement, and provides robust tools for managing and growing your gym business.
Tyler Spraul 
