Bonus Depreciation

What is bonus depreciation? The tax code generally requires businesses to deduct the cost of a large purchase, like a vehicle, equipment, or building, over it's useful life, rather than at the time of purchase. This can cause difficulty for some business when they've paid out the cash for the large purchase, but aren't allowed to deduct those expenses until a future year. This is where accelerated depreciation comes in. Bonus depreciation is one type of accelerated depreciation which allows you to take the full cost of the asset purchase immediately in the year of purchase (and placed in service) rather than delaying those deductions over a number of years. Bonus depreciation can be taken on assets with a normal class life of less than 20 years, generally vehicles, machinery & equipment, furniture & fixtures, and leasehold improvements. Unlike section 179 depreciation, there is no limit on total annual purchases or taxable income for bonus depreciation, making it the more desirable type of accelerated depreciation in many cases. Be sure and ask your CPA how you can maximize your benefits from your asset purchases.