Reminder: Bonus Depreciation Begins Phasing Out in 2023

For years, 100% bonus depreciation has been one of the most valuable tax planning tools available to businesses. It allowed companies to immediately deduct the full cost of qualifying assets (such as machinery, equipment, vehicles, furniture, and certain building improvements) in the year they were placed in service. This created significant tax savings and boosted cash flow for reinvestment.

However, starting January 1, 2023, bonus depreciation began phasing out. The schedule is as follows:

• 2023: 80% bonus depreciation

• 2024: 60% bonus depreciation

• 2025: 40% bonus depreciation

• 2026: 20% bonus depreciation

• 2027 and beyond: Eliminated (unless Congress extends it)

This means that while businesses can still claim bonus depreciation in 2023, the immediate write-off is no longer at 100%. Companies need to plan strategically around capital purchases to maximize deductions while the phase-out continues.

For real estate owners, Cost Segregation Studies are especially important in this new landscape. By identifying building components eligible for shorter depreciation schedules, property owners can still capture accelerated deductions—even as bonus depreciation phases down.

The bottom line: If your business plans to invest in new assets, early action can preserve more upfront tax benefits. Working with a qualified advisor ensures you’re making the most of the available deductions before bonus depreciation winds down completely.