Big News on Bonus Depreciation: New Flexibility!

The IRS has issued new guidance on bonus depreciation under the Tax Cuts and Jobs Act (TCJA) that provides multiple options on the amount of the deduction you take. The announcement comes at a time when many businesses are planning their tax strategies for the end of the year leading into filing season.

The bonus depreciation provision of the TCJA allows a business to take a 100% first-year deduction for depreciation for qualified property acquired and placed in service after Sept. 27, 2017 and before Jan. 1, 2023. This quickly heightened the immediate benefits of cost segregation by raising the percentage (it was previously at 50%) and allowing investors to acquire property late in the year and still reap the benefits.

Now under IR-2019-135, you’re not limited to that 100% figure. You can select a 50% bonus depreciation or choose not to deduct the additional first-year depreciation at all. This choice of percentages means that you can select more or less depreciation in a specific year to help your income reach a specific tax bracket—providing even more avenues for strategic tax planning.

You can view the full revenue procedure here. We also suggest that you contact your business tax CPAs to see how might benefit from this new flexibility.

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