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ALERT: 100% Bonus Depreciation Ends December 31, 2022

Bonus Depreciation Calculator

The bonus depreciation calculator is on the right side of the page. It is free to use, requires only a minute or two and is relatively accurate. Bonus depreciation has different meanings to different people.

In our case, we are referring to the bonus depreciation made available by the “Tax Cuts and Jobs Act of 2017” and applies to property purchased after September 27, 2017.

Is Bonus Depreciation New?

Bonus depreciation is generous to property owners and real estate investors. Bonus depreciation in one form or another has been around for many years. Some incarnations have been more advantageous than others.

There was a less generous plan passed in 1981 that only applied to new property. In fact, this version of bonus depreciation is more generous than any prior bonus depreciation program because it applies to both existing and new assets acquired after September 27, 2017. This is true whether the property was investment real estate or equipment.

Bonus depreciation tax planning

Depreciation is Non-Cash Expense

Bonus depreciation takes many forms, including Section 179 depreciation. There have been scores of depreciation programs that give property owners additional depreciation since the Tax Code was introduced in 1913. Of course, additional depreciation increases expenses, with a non-cash expense. Few income tax deductions increase expenses and reduce taxable income. The natural question is why bonus depreciation is provided to help taxpayers reduce income taxes

Why is the U.S. Government so Generous with Bonus Depreciation?

The U.S. government uses the Tax Code both to raise revenue and to influence behavior. The intended impact of bonus depreciation is to increase investment activity. Despite generous bonus depreciation, the congress expected the 2017 tax act to raise more revenue than before. This has not been the case.

Conclusion

The take-away is that bonus depreciation is essentially a gift of lower income taxes for owners of assets that qualify while it is available. As code is currently written, it is fully available for assets purchased from September 27, 2017, through December 31, 2022.