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Bonus Depreciation Phase-Out Begins January 2023

November 29, 2022


The Tax Cuts and Jobs Act increased first year bonus depreciation to 100% through the end of 2022. 100% bonus depreciation allows businesses to write off the cost of certain assets in the year they are placed in service.

The deduction phases out over the next four years as follows:
• 2023 – 80% first year deduction
• 2024 – 60% first year deduction
• 2025 – 40% first year deduction
• 2026 – 20% first year deduction

The bonus depreciation deduction incentivizes businesses to invest in new equipment and property. This phase out encourages business owners to buy assets and place them in service by December 2022, while the 100% deduction is still applicable.

Members of Congress have indicated a possible extension of the 100% bonus depreciation, but the outlook is unclear.

Many taxpayers will still be able to fully expense purchases of qualifying property in 2023 with the Section 179 deduction, but the deduction is limited and is subject to additional restrictions.

For additional guidance from the IRS, click here. If you have additional questions, please reach out to your Wilkins Miller advisor.