Bonus depreciation and Section 179 let you deduct equipment costs faster, but timing matters. A $10,000 deduction saves you more money in a 35% tax bracket than a 12% one, so sometimes it's smarter to defer the deduction to a higher-income year.
Why would you ever want to opt out of something where someone's trying to give you a bonus?
Well, IRS is saying, hey, here's some bonus depreciation. I'm going to say no, no, thank you. I'm good. I want to go ahead and pay taxes.
With accelerated depreciation, whether it's bonus or 179, this is not a gift from the IRS. This is your tax deduction that they are allowing you to take earlier than you normally would. A lot of times that makes sense because keeping our money, we can put that money to work for us. But there may be some situations where you don't want to use up your tax deduction all in the first year. Let's say you have not a great year and you don't have a lot of income. Well, lower income means lower tax bracket. If I use up all my tax deduction now, what happens in the future when I have more income and am in a higher tax bracket? If I have $10,000 of deductions available to me, I would rather use that when my tax bracket is 35% than use it when my tax bracket is 12%.
What’s REALLY Holding Your Painting Business Back? (Find Your Bottleneck in 5 Minutes)
