Salvage Value Law and Legal Definition
"Salvage value" may mean an amount estimated as expected to be realized or actually realized upon the sale of an asset at the end of its useful life. [NY CLS Pers P § 254]. All assets have a salvage value. This value is used in accounting to determine depreciation amounts and in the tax system to determine deductions.
The salvage value can be a best guess of the end value or can be determined by a regulatory body such as the IRS.
In accounting, the salvage value is used in conjunction with the purchase price and accounting method to determine the amount by which an asset depreciates each period.
Within the tax system, when a person donates an equipment s/he receives a tax deduction. The value of this deduction depends on the salvage value of the equipment. This salvage value is determined to be the current fair market value that could be obtained if the equipment had been sold on that day rather than donated.
