Bonus Depreciation is Being Phased Out

By | March 11, 2023

In honor of tax time coming up in a month, did you know that Bonus Depreciation is being phased out starting this year? 

Tax Cuts Section 179 Equipment

We have an in-depth article about this, plus a bunch of other longer-form articles, in our media center, and while it’s my hope that you already read everything there, many people clicking that link will probably be seeing that page for the first time.  But that’s ok, better late than never, right? 

But let’s get back to Bonus Depreciation being phased out. 

For several years, it has been set at 100% of an item’s purchase price. But for 2023, it’s being cut to 80%. It’ll be 60% in 2024, 40% in 2025, 20% in 2026, and poof, gone in 2027. 

The big question is, will this affect you in 2023 and beyond? I would encourage you to read our article in the media center because it’s much longer than a blog post and goes into more detail regarding the parameters and such. But the short answer to that question is “ask your accountant”. 

I say defer to your accountant because many small and mid-size business owners don’t actually know what particular depreciation rules and structure their accountant is using – there are several options that are of varying benefit to all types of business situations, and sorting through them is a full-time job. Sometimes Bonus Depreciation makes more sense, and sometimes my old favorite Section 179 makes more sense. And sometimes both at the same time makes the most sense. 

One takeaway I do want to mention is to always take advantage of whatever rules are in place, and if you were using bonus depreciation (and are still going to use it), take advantage of that 80% if you can. If that means bumping a 2024 purchase to 2023, that’s what it means. It’s been my ongoing opinion that money now is always better than money later.  

Hopefully Bonus Depreciation gets a lifeline at some point, because helping businesses buy equipment is always beneficial. But until then, definitely take advantage of the highest percentage you can.  

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