1. What is Bonus Depreciation?

Bonus depreciation is a tax incentive that allows businesses to immediately deduct a large percentage of the purchase price of eligible assets, rather than writing them off over the useful life of the asset.

2. How Does the Calculator Work?

The calculator uses the bonus depreciation formula:

Where:

• \( Eligible\ Cost \) — The cost of eligible business assets ($)

Explanation: This calculation applies the current 100% bonus depreciation rate to determine the immediate tax deduction amount.

3. Importance of Bonus Depreciation

Details: Bonus depreciation provides significant tax savings for businesses investing in qualified property, improves cash flow, and encourages capital investment in the economy.

4. Using the Calculator

Tips: Enter the total cost of eligible business assets in USD. The value must be greater than zero.

5. Frequently Asked Questions (FAQ)

Q1: What types of property qualify for bonus depreciation?
A: Generally, tangible property with a recovery period of 20 years or less, certain computer software, and qualified improvement property.

Q2: Is there a limit to bonus depreciation?
A: There's no overall dollar limit, but the property must be new or used (with restrictions) and placed in service during the tax year.

Q3: How does bonus depreciation differ from Section 179?
A: Bonus depreciation has no spending cap or income limitations, while Section 179 has both limitations but can create a net operating loss.

Q4: Are there state-level differences?
A: Yes, some states don't conform to federal bonus depreciation rules, requiring separate state calculations.

Q5: Is bonus depreciation always 100%?
A: The percentage phases down in future years - 80% in 2023, 60% in 2024, 40% in 2025, 20% in 2026, and 0% after 2026 unless extended by Congress.