Bonus Depreciation

Bonus depreciation is a special depreciation allowance under IRS rules that allow you to cover part of the cost of the property placed in service during the tax year.

The allowance is an additional deduction you can take after any section 179 deduction and before you calculate your depreciation.

The taxpayer must claim bonus depreciation (unless an election is made out) during the asset interview. If the property qualifies for this allowance (Turbo Tax will offer bonus).

Bonus depreciation time frame

Before 9/27/17

• 50% bonus allowed on property acquired before this date

Between 9/27/23 - 1/1/23

• property acquired between this date is 100% allowed & unlimited

After1/1/23

• is 80% bonus depreciation allowed

Qualified (bonus) Property

Must meet 4 requirements to qualify

1. Must be a specific type of property (depreciable)

2. New vs used

   New property with useful life of 20 years or less

   new property if it wasn't:

   Acquired from a related party.

   Acquired from a tax free transaction.

   used by taxpayer or predecessor before acquiring it.

3. Depreciable property must be placed in service by taxpayer within a specific time period.

4. Depreciable property must be acquired by taxpayer after 9/27/17.

Non-qualified property

non-qualified property include:

• property placed in service and disposed of in the same year.

• property converted from business use to personal use in the same year.

• property required to be depreciated under alternative depreciation systems (ADS)

  include 50% or less (listed property).

• property for which the taxpayer elected not to claim any bonus depreciation.

• certain non-residential real property, residential rental property or farm property held by a business electing out of interest; expense limitations in IRS section 163(i).

To help client receive depreciation bonus you must:

• apply section 179 deductions

• apply special bonus allowance

• calculate regular depreciation