Since the bonus depreciation phase-out begins in January 2024, the business would then be eligible for 60% bonus depreciation - not 100%.įor more information, check out the accountants’ guide to calculating depreciation for different property types. The phase-out schedule is as follows:īonus depreciation works by first purchasing qualified business property and then putting that asset into service before year-end.īonus depreciation is then reported to the IRS.įor example, if a business purchased new computer software in December 2023 but didn’t put it into service until January 2024, it would be required to wait until it filed its 2024 tax return to claim bonus depreciation on the software. Unless the law changes, the bonus percentage will decrease by 20 points each year for property placed in service after December 31, 2022, and before January 1, 2027. The 100% write-off of eligible property expired December 31, 2022. The passage of the Tax Cuts and Jobs Act (TCJA) in 2017 significantly changed the rules for bonus depreciation by allowing businesses to immediately write off 100% of the cost of eligible property acquired and placed in service after September 27, 2017, and before January 1, 2023. The remaining cost can be deducted over multiple years using regular depreciation methods until it phases out. Bonus depreciation - also known as the additional first-year depreciation deduction or the 168(k) allowance - accelerates by allowing businesses to write off a large percentage of an eligible asset's cost in the first year it was purchased.

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