Bonus Depreciation Decreased for 2023

The phase out of bonus depreciation is back! Why you need to take advantage of this deduction before its gone.

By Beacon Funding| Feb 16, 2023| 954 Views
Bonus Depreciation Decreased for 2023

The plan to phase out Bonus Depreciation is back. Since 2017 we were able to this tax incentive. Plans were announced to phase out in 2015, but that was changed in 2017 by the Tax Cuts and Jobs Act (TCJA). Here we are again!

What does this change mean for you?

Under Section 179, you may be eligible to write-off 100% of the purchase price of the equipment you finance up to the yearly deduction limit. And if you purchase (or finance) equipment over this year's deduction limit of $1,080,000, you may qualify for bonus depreciation.

In this article…

  1. Bonus Depreciation 2023
  2. Timeline to Phase Out Bonus Depreciation by 2027
  3. Enjoy 80% Bonus Depreciation While You Can
  4. The Sooner You Start The Financing Process, The Better
  5. How Can You Apply for Bonus Depreciation?

In this article, we provide you the latest changes to this year’s bonus depreciation, IRS’s updated timeline to discontinue this tax incentive, and how to take advantage before it phases out.

Bonus Depreciation in 2023

This year bonus deprecation is set at 80% (a 20% decline since 2022). Businesses can deduct 80% of the cost of certain assets in the first year they are acquired and placed into service.

Equipment that may qualify for this tax deduction includes tow trucks, screen-printing and embroidery equipment, landscaping equipment like skid steers, compact track loaders, mini-excavators, and other heavy machinery.

Timeline to Phase Out Bonus Depreciation by 2027

As of 2023,the rate for this tax deduction will decline by 20% over the next four years until it is no longer available.

  • 100% in 2022
  • 80% in 2023
  • 60% in 2024
  • 40% in 2025
  • 20% in 2026
  • 0% in 2027

A chart showing the bonus depreciation for 2022, 2023, 2024, 2025, 2026, 2027. Each year declines by 20% beginning in 2022.

Enjoy 80% Bonus Depreciation While You Can

To take advantage of this benefit’s full value, business equipment must be acquired and used before January 1st, 2024. If you’re reading this article before that deadline, there may still be time for you to utilize this deduction’s full benefit before it decreases even more.

Get answers about tax deductions for equipment financing by talking with a financing expert.*


Advantages of Bonus Depreciation

The main advantage of bonus depreciation is for businesses planning to purchase a significant amount of equipment for their operations. If this is your case, you can accelerate your tax deduction in order to benefit now.

Get More of Your Money Back

  • There is no annual limit, no matter how much equipment you acquire each year.
  • You can take the deduction, even if it creates a loss for tax purposes.
  • The government is rewarding you for growing your business, so take advantage of it!

You Should Know: For any year you elect bonus depreciation, you must take the deduction for the full cost of all assets of the same tax asset class acquired that year, for example all 5-year assets; but since the election is made annually, taking the deduction in one year does not affect your ability to elect, or not elect, it in the next year.

The Sooner You Start The Financing Process, The Better

Keep this in mind if you plan to finance equipment this year: The benefit of bonus depreciation applies only to equipment purchases in the same calendar year.

The sooner you start the process of financing equipment, the better. Odds are you will not only rest assured equipment will be available, but more likely you’ll receive tax incentives before the year ends.


How Can You Apply for Bonus Depreciation?

To file for bonus deprecation, you can use IRS’s Form 4562. This form can also be used for other types of depreciation and amortization. It is highly recommended to review the form’s instructions.

Pro Tip: Check your state to see if you qualify before you begin any depreciation calculations.

* Make sure to consult with your CPA or tax advisor prior to any equipment to discuss the tax savings for your business.

Beacon Funding
Beacon Funding

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Since 1990, small businesses nationwide have been able to grow with fast affordable equipment financing from Beacon Funding.