October 25, 2024

As we approach the new year, it's crucial to stay informed about tax changes that could impact your business. In this video, DRB Senior Tax Manager Linsey explains the upcoming reduction in bonus depreciation, a tax incentive that lets businesses deduct a large percentage of new equipment or property costs from their taxes in the purchase year, providing faster cost savings.*

Take advantage of the current tax benefits before they decrease! Discuss how to invest in DRB technology before the end of 2024.

Video Summary

The Tax Cuts and Jobs Act of 2017 allowed taxpayers to write off 100% of depreciable property placed in service after September 27, 2017, through the end of 2022. However, starting in 2023, this bonus depreciation began decreasing by 20% each year. For instance, if you place property in service in 2024, you can claim 60% bonus depreciation. This will further decline to 40% in 2025 and 20% in 2026, with the provision set to expire at the beginning of 2027.

Understanding Qualified Property

Qualified property includes any assets depreciated using the MACRS method with a recovery period of 20 years or less, as well as off-the-shelf computer software with minimal to no customization.

Importance of "Placed in Service"

The term "placed in service" marks the beginning of an asset's depreciation period and is crucial for your tax planning. Choosing the right year to place your assets in service can significantly benefit your business.

Utilizing De Minimis Safe Harbor Elections

You also have the option to elect for De Minimis Safe Harbor Elections alongside bonus depreciation in the same year. This allows you to depreciate assets above a certain IRS-set threshold, which can enhance cash flow and simplify recordkeeping.

In conclusion, understanding and strategically utilizing bonus depreciation can provide substantial tax benefits to your business. Make sure to plan effectively to maximize your tax deductions!