Changes coming to Bonus Depreciation in 2023
Bonus Depreciation is a great tax incentive that allowed businesses to immediately deduct a large percentage of the purchase price of eligible assets, rather than write them off over their “useful life.” This was created to encourage investment by small businesses and stimulate the economy. The Tax Cuts and Jobs Act (TJCA), raised bonus depreciation to 100% in 2017. This allowed businesses to deduct the full amount of the purchase price in the year that it was placed in service. For the tax year 2022, the bonus depreciation rate was still at 100%, but that is changing in 2023. For the tax year 2023, the maximum amount of bonus depreciation you can take on an eligible asset is 80%. For example, if you buy an asset for $10,000, you could have written off the entire $10,000 in 2022 if that asset qualified for bonus depreciation. If you were to buy the same asset, but in 2023, you would only be able to deduct $8,000 ($10,000*80%) immediately. It is important to keep up to date with tax laws that are changing rapidly year in and year out. If you have any questions regarding bonus depreciation or any other deductions for your small business, please reach out to the Professionals at the Center for Financial, Legal, & Tax Planning Inc., at (618) 997-3436.