Bonus Depreciation 2013 and Beyond

Bonus depreciation is just that – a bonus amount of depreciation you get to claim in the first year. Bonus depreciation allows for an extra 50% depreciation on certain assets purchased in 2013. Currently the law for bonus depreciation expires in 2014. When tax bills are brought up in Congress and tax incentives are discussed, bonus depreciation is one of the items frequently discussed so it is possible that it gets extended for 2014.

Not all business assets purchased qualify for bonus depreciation. The assets must be placed in service during the year and they must have been new. Buying a used piece of machinery would not be eligible for bonus depreciation. Also, assets must have a depreciable life of 20 years or less, so you can’t go out and buy a building then write it all off with bonus depreciation. Taking 50% depreciation in the first year can be a real tax savings for businesses compared to a 3, 5, 7, or 15-year depreciation schedule.

Keep in mind that if you take 50% bonus depreciation, there will be less depreciation left for future years. Down the road your taxable income will increase since there is no depreciation left to take on the assets and a large tax bill will be due while you are still paying for the asset.

In accordance with Circular 230 Disclosure

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