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Changes to Bonus Depreciation in 2023 and Beyond

Writer's picture: Rick RubergRick Ruberg

Bonus depreciation has been a cornerstone of tax planning since its introduction. However, recent changes to the rules in 2023 have altered its benefits. Here’s what businesses and investors need to know.



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What Changed with Bonus Depreciation in 2023?


The 100% bonus depreciation introduced under the TCJA began phasing out in 2023:


  • 2023: Deduction reduced to 80%.

  • 2024: Reduced to 60%.

  • Phases out entirely by 2027 unless Congress acts to extend it.


Impact on Businesses and Investors


  • Reduced Deduction: Businesses must adjust their tax planning to account for smaller deductions.

  • Strategic Purchases: It may be advantageous to acquire assets sooner rather than later to maximize deductions.


What’s Next?


Legislation could extend or modify bonus depreciation. Staying informed about tax policy is crucial for businesses and investors.


Conclusion


While the phase-out of 100% bonus depreciation reduces its benefits, it remains a valuable tax incentive. Plan your asset purchases carefully to optimize your deductions.


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