As they say, the only constant is change.
Many readers are aware that bonus depreciation rates are set to begin phasing down in 2023. Beginning 1/1/2023, bonus will shift from 100% to 80%, and the rate will continue to decline by 20% annually through 2026. In 2023, 80% of an asset’s cost may be written off using bonus. Section 179 expensing, however, will continue to permit the immediate expense of 100% of the asset cost, and we expect to see the popularity of this incentive grow in the next year. For the last several years both incentives were essentially equivalent, but with bonus rates soon to decline, Section 179 expensing may play a larger role in tax plans going forward.
Let’s review some major differences between these two incentives. First, bonus depreciation permits the deduction of a percentage of a cost while Section 179 permits the expensing up to a set dollar amount. (The 2022 Section 179 deduction limit is $1,080,000.)
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