Depreciation as a Tox Shield The term tax shield refers to the amount of income tax saved by deducting depreciation for Income tax purposes. Assume that Supreme Company is considering the purchase of an asset as of January 1, 2017. The cost of the asset with a five year. We and zero residual value is $105,600. The company will use the straight line method of depreciation Supreme's Income for tax purposes before recording depreciation on the sunt will be $49,200 per year for the next five years. The corporation is currently in the 25% tax bracket Required: Calculate the amount of income tax that Supreme must pay each year if the assets and is not purchased. 1. Amount of taxes paid of asset is not purchased is 2a. Amount of depreciation of asset is purchased it b. Amount of taxes paid if asset is purchased 3. What is the amount of the depreciation tax shield