Donna Genie explains bonus depreciation, which lets businesses fully deduct equipment purchases in the year they buy them. It was 100% through 2022, then phases down: 80% in 2023, 60% in 2024, 40% in 2025, 20% in 2026, and zero in 2027. Talk to a CPA about whether to use it.
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Bonus depreciation, a term everybody loves and nobody understands. But I'm here to tell you that bonus depreciation is an extra way to allow you to make investments and and fully deduct them in the year of purchase. So again, if you go out and you 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 probably four years now. I believe they came about in 2017. Again, we've had a lot of different variations on them over the years, but they are set to expire for the 100% depreciation as of January 1, 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 changed by tax laws. Of course, we are subject to go down to 80% bonus depreciation in 2023. Then we'll ratchet down to 60% in 2024, 40% and 20% and down to 2027. We have no bonus depreciation currently scheduled. So the long and short of that is not that it's going to make a major difference in what you do, but 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 declines 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 useful. So make sure that you are aware about depreciation. Don't be a depreciation expert. Leave that to us. As CPAs. However, be aware of how that affects you and ask the questions of your CPA before purchasing equipment.
I'm Donna Bordeaux from Calculated Moves. Please follow us on Facebook, Instagram and LinkedIn. Make sure you check out our blog and our website from the link below. Subscribe to our YouTube channel and hit the bell to be notified when we post. To contact me, email me@donnaalculatedmoves.com.
