Depreciation is the process of deducting the cost of a business asset over a long period of time.
Bonus depreciation is a tax incentive for taxpayers who incur capital expenditures or spend money on certain depreciable assets.
Take advantage of the extended bonus depreciation through 2026 wherein the benefit allows 100% bonus depreciation for long-term assets placed in service after September 27, 2017, and before January 1, 2023. This amount begins to phase out in 2023, before sunsetting entirely in 2027.
Bonus depreciation amounts are scheduled to decrease as follows:
Property placed in service after December 31, 2022, and before January 1, 2024: 80% of the asset’s cost
Property placed in service after December 31, 2023, and before January 1, 2025: 60% of the asset’s cost
Property placed in service after December 31, 2024, and before January 1, 2026: 40% of the asset’s cost
Property placed in service after December 31, 2025, and before January 1, 2027: 20% of the asset’s cost
Bonus depreciation is optional—you don't have to take it if you don't want to. But if you would like to get the largest depreciation deduction you can, you will want to maximize this option whenever possible. Especially in instances when Section 179 is not an option.
Used (tangible) assets, not only new ones, beginning in 2018 qualify for bonus depreciation.
Placed in Service
Bonus depreciation requires the property to be “placed in service” at any time during the tax year. For example, if the printer is installed but not used, it is still eligible for depreciation. If, however, it is purchased but not installed, the deduction is taken in the year it was placed in service.
If you have any questions about how you can utilize bonus depreciation on your 2022 income tax return, make sure to reach out to our team!