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New 100% First Year Bonus Depreciation Deduction - By John R. Bullis, CPA

Updated: Feb 21, 2023

The new Tax Law increased the Bonus Depreciation Deduction from 50% to 100% for qualified property placed in service between Sept. 28, 2017 and Dec. 31, 2022.

Congress may extend that benefit after 2022 later, we will just wait and see.

The goal was to stimulate and help businesses so the economy would improve and more jobs would be created with at least some of the tax savings.

Qualified property includes nonresidential (commercial) improvements such as roofs, heating and air conditioning equipment, fire protection and alarm systems and security systems in addition to equipment and other personal property used in the business. Now that also applies to improving the interior portion of a building. Qualified property needs to be placed in service after the building was placed in service.

Qualified property also qualifies for the expanded section 179 deduction. However, bonus depreciation does not have to get ‘recaptured’ like section 179 depreciation does if the building is sold before the useful life of the qualified property expires.

The old bonus depreciation deduction in 2017 and before was only for new equipment. The new bonus depreciation deduction is allowed for both new and used qualified property.

For example, if you own a building that is not used for residential (lodging) and you do improvements to the interior or the roof or other qualified uses, you can deduct the entire cost as an expense.

If you have already filed your 2017 return and you added qualified property after Sept. 27, 2017 but just put it on the 2017 depreciation schedule (to claim expense over several years), you might consider amending the return and claiming the new 100% bonus depreciation deduction.

Will Rogers said “…except getting shot at and missed, there is nothing as satisfying as a tax deduction….”. With 2017 tax rates higher than 2018 and later, the deduction is more valuable in 2017 as long as it qualifies.

There are provisions that allow you to choose bonus depreciation instead of section 179 deductions. The Section 179 deduction is increased from $510,000 in 2017 to $1,000,000 in 2018 and later.

Did you hear “You have two choices in life: You can dissolve into the mainstream or you can be distinct. To be distinct you must be different. To be different, you must strive to be what no one else but you can be.” Alan Ashley-Pitt

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