The Tax Cuts & Jobs Act enacted in 2017 introduced a provision known as “bonus depreciation” that allows businesses to deduct a larger portion of the cost of certain capital assets in the year they are placed in service. In 2022, the bonus depreciation rate stands at 100%, meaning businesses can deduct the entire cost of eligible assets in the year they are acquired and put into use. This favorable tax treatment is set to expire in 2023, reverting to a 80% deduction rate in 2024 and a 0% deduction rate in 2025 and beyond.
The bonus depreciation provision was introduced to encourage businesses to invest in capital assets, thereby promoting economic growth. It has been particularly beneficial for businesses that make significant capital investments, such as manufacturers and construction companies. The provision has also been credited with helping to boost GDP and create jobs.
