Bonus Depreciation is a tax incentive that allows businesses to immediately deduct a portion of the cost of qualified assets. The deduction is taken in the year the asset is placed into service, rather than writing it off over the asset's "useful life." Bonus depreciation is frequently referred to as the extra first-year depreciation deduction.The bonus depreciation rules were changed as part of The Tax Cuts and Jobs Act (TCJA) passed in December 2017. Prior to TCJA, bonus depreciation was available for both new and used qualifying assets, but under TCJA only new qualifying assets are eligible for bonus depreciation.
The percentage allowed for bonus deprecation will also be increased from 50% to 100%. These changes are effective for property placed in service after September 27, 2017 and before January 1, 2023.Businesses should consult with their tax advisor to determine if they qualify for bonus deprecation and what amount they may be able to deduct under this incentive.