Changes to Amount of Bonus Depreciation

A key provision introduced by the Tax Cuts and Jobs Act of 2017 (TCJA) will be changing for the upcoming tax year.

For qualified property acquired and placed in service after September 27, 2017, taxpayers are eligible to take 100% bonus depreciation for the entire purchase rather than taking depreciation over the life of the asset.  However, the eligibility for 100% bonus depreciation expires at the end of this taxable year, with eligible bonus depreciation phasing down by 20% annually until 2027 when there will no longer be any eligible bonus depreciation.

Eligible Dates (Property Placed in Service)

Amount of Bonus Depreciation

After September 27, 2017 and Before January 01, 2023

100%

After December 31, 2022 and Before January 01, 2024

80%

After December 31, 2023 and Before January 01, 2025

60%

After December 31, 2024 and Before January 01, 2026

40%

After December 31, 2025 and Before January 01, 2027

20%

After December 31, 2026

0%

 Property generally eligible for bonus depreciation includes:

  • Property with a recovery period of 20 years or less
  • Computer software (that is not a Section 197 intangible asset)
  • Water utility property
  • Qualified film, television, or theatrical production

Mazars’ Insight

Taxpayers evaluating the acquisition of capitalizable assets should consider the timing of when these assets will be acquired and placed in service and may wish to accelerate their purchase to recognize 100% bonus depreciation prior to the end of the year. Assets placed in service after December 31, 2022 will only be eligible for 80% bonus depreciation and will recognize tax depreciation over the life of the asset for the remaining 20%.

Please contact your Mazars professional for additional information.

Authored by: Ryan Vaughan and Andrew Kosoy

The information provided here is for general guidance only, and does not constitute the provision of tax advice, accounting services, investment advice, legal advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal or other competent advisers.