Bonus depreciation is a term everybody loves and nobody understands. However, I’m here to tell you that bonus depreciation is a different way to allow you to make investments and fully deduct them in the year of purchase. So again, if you go out and buy a new tractor, a truck, whatever, a piece of equipment or machinery, you can fully deduct that in the year of purchase.
We’ve been under bonus depreciation rules for the past four years. I believe they came about in 2017. Again, we’ve had a lot of different variations on them over the years, but they’re said to expire for 100% depreciation as of January 1st, 2023. So if you want to make a purchase this year and still have it deductible under the bonus depreciation, that is still 100% for 2022. However, in 2023, that will begin a decline unless change by tax laws. Of course, we will go down to 80% bonus depreciation in 2023. Then we’ll ratchet to 60% in 20, 24, 40%, and 20%. And down to 2027, we have no bonus appreciation currently scheduled.
So the long and short of that is not that it will make a significant difference in what you do. However, to know that that exists as we come into the end of the year to make decisions on timing for you now, just because that bonus depreciation decline does not mean that you won’t be able to deduct 100%, you may be able to, it just depends on your tax situation. It also depends on your tax situation, whether or not you even utilize bonus depreciation. There are cases where we elect out of it if it’s not helpful. So make sure that you are aware of depreciation. Don’t be a depreciation expert. Leave that to us as C.P.A.s. However, be mindful of how that affects you and ask the questions of your C.P.A. before purchasing equipment.
I’m Donna Bordeaux from Calculated Moves. Please follow us on Facebook, Instagram, and LinkedIn. Check out our blogs and our websites from the link below. Subscribe to our YouTube channel and hit the bell to be notified when we post. To contact me, email me at firstname.lastname@example.org.
Donna Bordeaux, CPA with Calculated Moves
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