How Can You Benefit From Bonus Depreciation?

If you are a property owner, then you can benefit from bonus depreciation. Bonus depreciation is eligible on qualifying property with a class-life of 20 years or less.

What is Bonus Depreciation?

Bonus depreciation is a tax incentive that allows a business to immediately deduct a large percentage of the purchase price of eligible business assets. This type of incentive is offered either as an additional incentive or as a measure of relief for small- to medium-sized businesses that want to buy additional equipment. That’s according to Investopedia.

The amount of bonus depreciation varies from year to year and is always taken right away. This happens in the first year that the depreciable item is placed in service.

Notes About Bonus Depreciation

Purchases of Used Property

  • If acquired and placed in service after 9/27/2017 the property is allowed 100% bonus on the used property. This runs through 12/31/2022 and scales down from there (e.g . 1/1/2023 -12/31/2023 = 80%, 1/1/2024-12/31/2024 = 60%, 1/1/2025 -12/31/2025 = 40%, 1/1/2026 -12/31/2026 = 20%)

New Construction, Improvements, and Purchases of New Property

  • If acquired and placed in service after 9/27/2017 the property is allowed 100% bonus on the new property. This runs through 12/31/2022 and scales down from there (e.g .1/1/2023 -12/31/2023 = 80%, 1/1/2024-12/31/2024 = 60%, 1/1/2025 -12/31/2025 = 40%, 1/1/2026 -12/31/2026 = 20%).
  • Note: If the new construction, improvement, or purchase of new property contract was signed prior to 9/28/2017, then generally 50% bonus applies, and we use the Certificate of Occupancy or closing statement for the placed-in-service date. (Old bonus rules prior to 1/1/2012 are still applicable.)

Qualified Retail and Leasehold Property

  • If the property is acquired and placed in service after 9/27/2017 -12/31/2017 it is allowed a 100% bonus.
  • Note: If the improvement contract was signed prior to 9/28/2017, then 50% bonus applies, and we use the Certificate of Occupancy for Placed in Service.

Qualified Restaurant Property

  • If the property is acquired and placed in service after 9/27/2017 -12/31/2017 it is allowed 100% bonus on new and used property recovered at 5/15 years but not the “Restaurant Property”.

Why Can You Benefit from Bonus Depreciation?

For more information or a free consultation, please call Engineered Tax Services at (800) 236-6519.

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