What type of assets are generally excluded from depreciation calculations?

Personal-use assets are generally excluded from depreciation calculations because depreciation is designed for assets that are used in a trade or business context, where they contribute to the production of income. Personal-use assets, such as a personal vehicle or a residence used for personal purposes, do not generate income and therefore do not qualify for depreciation deductions under tax law. This principle is grounded in the idea that depreciation is meant to account for the wear and tear of assets that contribute to business operations, and since personal use does not pertain to business income generation, these assets are excluded from such calculations.

In contrast, assets used for investment may be subject to different tax treatments, but they are generally not excluded from depreciation calculations if they are used in a trade or business. Commercial real estate can be depreciated when it's utilized for business purposes, and business inventory is typically not depreciated at all but rather accounted for using cost of goods sold. The focus on business-related use when calculating depreciation highlights why personal-use assets are specifically excluded from these calculations.