Reading Time: < 1 minuteAs we head into tax planning season, you need to be aware of important changes coming to bonus depreciation coming January 1, 2023. The Tax Cuts and Jobs Act (TCJA) has allowed banks to take 100% bonus depreciation on qualified property both acquired and placed in service after September 27, 2017 and before January 1, 2023.
However, current law will eliminate 100% bonus depreciation after the first of the year. It is currently scheduled to phase down by 20% each year for property placed in service after December 31, 2022 and before January 1, 2027.
Bonus depreciation rates will decrease by 20% each year until it is entirely phased out:
2022: 100%
2023: 80%
2024: 60%
2025: 40%
2026: 20%
2027 and beyond: None.
If capital purchases are under consideration, be sure to understand the effect of bonus depreciation and the timing of your purchase. Consider accelerating the purchase and putting it into service a year or two early if you could benefit from higher depreciation rate savings. Keep this in mind as you consult with your tax advisor for year-end planning.
