What is Bonus Depreciation and How Can It Benefit Your Business?

Bonus depreciation is a powerful tax-saving tool for businesses investing in qualifying assets. Whether you’re acquiring new equipment, upgrading property, or undertaking large-scale renovations, understanding bonus depreciation can significantly impact your bottom line. Here’s how it works and why it matters.

What is Bonus Depreciation? Bonus depreciation allows businesses to deduct a significant portion (up to 100% for certain years) of the cost of qualifying property in the year it is placed in service. Unlike regular depreciation, which spreads the deduction over several years, bonus depreciation provides immediate tax relief.

Qualifying Property

• MACRS property with a recovery period of 20 years or less (e.g., machinery, furniture, equipment).

• Qualified Improvement Property (QIP): Interior improvements to non-residential property that are non-structural.

• Certain software, water utility property, and theatrical productions.
  

A manufacturing company purchases $500,000 worth of machinery in 2023. Under bonus depreciation rules, the business can deduct the full $500,000 in the first year, reducing taxable income and saving thousands in taxes.

How Arc&Ledger Can Help We specialize in helping businesses identify and maximize bonus depreciation opportunities. Contact us to explore how this strategy can benefit your operations.