For nearly a decade, taxpayers have been able to claim enhanced bonus depreciation deductions under the Tax Cuts and Jobs Act. For 2024, the bonus depreciation allowance is reduced to 60 percent and unless the tax law changes, will continue to decrease by 20 percent each subsequent year until completely phased-out after 2026.
Depreciation is the recovery of the cost of property over a specified number of years. In other words, you can deduct a part of the cost every year until you fully recover the entire cost. Bonus depreciation is an accelerated business tax deduction that was originally enacted by Congress after September 11th as an incentive to encourage business investment. Rather than depreciating a large asset over the course of its lifetime, you can elect “bonus depreciation” and write-off a large chunk of the purchase price in the first year. For 2024, businesses can elect to write off up to 60 percent of the purchase price of a qualifying asset placed in service during the calendar year and then depreciate the remaining 40 percent cost of the property over the asset’s useful life.
Taking an immediate deduction on an eligible asset can be a great advantage for some businesses by significantly reducing taxable income and thereby reducing your overall tax liability. With the clock ticking, it may be the perfect time to reconsider any equipment needs and whether accelerating the timing of your purchase makes sense.
For more information, contact Michele Loretto, CPA, Senior Manager, at mloretto@tsacpa.com or 716.633.1373.
