The tax code is regularly changing with the passing of every year, and it can be time consuming to keep track of all the changes to the fine print. One specific provision that is essential for individuals and businesses to be aware of is the phasing-out of bonus depreciation. With the tax season upon us, there is no better time for us at The Hechtman Group to inform you on how your tax return may be impacted by this provision.
What is bonus depreciation?
Bonus depreciation is a clause in the tax code that permits taxpayers to write off a segment of the costs of depreciable assets in the year they are placed into service. This can supply businesses and individuals with significant tax savings since it allows them to recuperate their investment faster than other traditional depreciation methods.
What exactly is being phased out?
The Tax Cuts and Jobs Act of 2017 introduced a tax provision that tentatively increased the allotted bonus depreciation portion from 50% to 100% with plans to phase it out over the next few years. However, subsequent legislation in December of 2019 extended this 100% bonus depreciation allowance through the end of 2022 and made it applicable for both used and new assets.
The schedule for the reduction of the allocated bonus depreciation is as follows: 20% reduction in 2023, followed by an additional 20% reduction every year until 2026. Following the final reduction in 2026, this bonus provision will be no longer available for 2027.
Next Steps
Contact us today to begin strategizing the optimal tax plan to take advantage of these bonus depreciation benefits while they still exist.
At The Hechtman Group Ltd, we understand that tax laws and regulatory and IRS requirements for real estate are vastly different from other financial services. Rich in industry experience, our CPAs and accountants can guide you through all the necessary steps while also creating best practice opportunities for long-term growth.
Our services include expertise in financial reporting, disposition planning, acquisition analysis, energy credits and deductions, tax planning and more.
Our client base includes architects, developers and builders, brokerage and construction firms, property owners, managers, and investors for commercial and residential properties.