The lucrative 100% Bonus depreciation deduction which incentive business owners to buy cars, real estate, start businesses, buy equipment and make improvements to their business is coming to an end.
The Facts
From 2017 to 2022 businesses benefited tremendously from the 100% Bonus depreciation. This meant when you bought equipment, built out a new dental or medical practice, or even purchased real estate, you were able to write off all of the qualified costs, even if the purchase was financed and not paid out right with cash.
Meaning buying $200,000 in equipment, with a loan, would allow you to take the full deduction this year even though you didn’t spend a single dollar of your cash.
Starting 2023 the Bonus deprecation goes to 80%. Then eventually it will drop to zero as shown below:
2024-60%
2025-40%
2026-20%
2027-0%
What this means for your business?
The tax benefit that was available previously will slowly and eventually go away. This also means business owners will need to engage their tax consultants to come up with alternative paths to minimize taxes.
What should you do?
Big purchases, opening practices, or buying real estate if it makes sense should be done earlier then later. Timing will be key here.
Disclaimer- Advise in this blog should not be taken as tax advise. Each person’s tax circumstance is different and unique. Using these strategies without full knowledge of the current IRS rules and regulations regarding the specific items discussed can result in heavy fines, penalties and interest. Please discuss the guidance in this document with a tax expert before making any decisions.
