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  • Writer's pictureNeil Boone

Boost Your Business's Bottom Line: The Benefits of Bonus Depreciation

Bonus depreciation is a tax incentive that allows businesses to deduct a larger portion of the cost of qualifying assets in the year they are put to use. This means you can take a bigger tax deduction upfront instead of spreading it over several years through regular depreciation.

The amount of bonus depreciation you can take depends on the year in which the asset was put to use. For assets put to use between September 27, 2017, and January 1, 2023, businesses can take 100% bonus depreciation.

To qualify for bonus depreciation, the asset must be new, have a useful life of 20 years or less, and be put to use by December 31, 2022. Examples of assets that usually qualify include machinery, equipment, furniture, and some types of vehicles.

The benefits of bonus depreciation are that it helps businesses recover the cost of qualifying assets more quickly, which can improve cash flow and reduce taxes. However, bonus depreciation has some limitations. It's not available for used assets or leased assets, and it's subject to recapture if the asset is sold or disposed of before the end of its useful life.

If you're thinking about making a significant purchase for your business, check with your tax professional to see if you qualify for bonus depreciation and how it can benefit your business.

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