Depreciation Update – Changes to Bonus Election

By: Morgan Hunt, CPA

Do you own a business that frequently purchases machinery, equipment, computers, or other assets? Are you contemplating purchasing such assets this year or next? Now may be the time to take advantage of the opportunity to maximize your tax savings!

Beginning in 2023, there is an annual reduction in the bonus depreciation deduction allowed for taxpayers under the Tax Cuts and Jobs Act of 2017. For any assets placed into service in 2023 that qualify for bonus depreciation, only 80% of their cost can be deducted this year versus 100% for the last 5 years. The deduction will continue to reduce by 20% annually through 2026. See the chart below

Year                                                Deduction

September 27, 2017 – 2022                 100%
2023                                                          80%
2024                                                          60%
2025                                                          40%
2026                                                          20%

Bonus depreciation is an accelerated depreciation deduction for property that meets specific criteria. This allows businesses to deduct a large percentage of new asset costs upfront and helps reduce their taxable income. Property eligible for bonus depreciation includes most assets that have a MACRS life of 20 years or less. Machinery, equipment, computers, software, and qualified improvement property all fall under a MACRS 20-year life. Vehicles are also included in this, but have special rules to qualify for bonus depreciation.

If you own a business and are planning on making large asset purchases that qualify for bonus depreciation, it would be advantageous to make these purchases before the end of 2023 so the assets will qualify for the 80% depreciation deduction. Reach out to our team at Suttle & Stalnaker to discuss how these changes in bonus depreciation may affect your business. We will provide personalized guidance and work with you to develop a customized plan that fits your goals and maximizes your tax benefits.

Suttle & Stalnaker, PLLC  is ready to help you. If you would like more information on how this applies to you, contact Ryan Mink, CPA at or at (304) 554-3371. You can also contact Morgan Hunt, CPA at or at (304) 554-3371.