Bonus depreciation allows businesses to immediately deduct a percentage of the cost of qualifying assets in the year placed in service — 60% in 2024, phasing down 20% per year under the Tax Cuts and Jobs Act schedule.
Bonus depreciation (also called 'additional first-year depreciation') is an accelerated depreciation incentive that lets businesses deduct a set percentage of qualifying property cost in year one, beyond Section 179 limits and without Section 179's income limitation. The Tax Cuts and Jobs Act of 2017 set bonus depreciation at 100% through 2022, then began a scheduled phase-down: 80% in 2023, 60% in 2024, 40% in 2025, 20% in 2026, and 0% starting 2027 (unless Congress extends it). Unlike Section 179, bonus depreciation can create or deepen a net operating loss (NOL), which can then be carried forward indefinitely (though limited to 80% of future taxable income). Bonus depreciation applies to both new and used qualifying property — a significant expansion under TCJA — provided the taxpayer did not use the property before acquiring it. For equipment-financing decisions, bonus depreciation combines with Section 179 to produce large first-year deductions. A business that finances $500,000 in equipment when bonus depreciation is 60% could combine Section 179 (up to income limit) plus bonus on the remainder to potentially deduct the majority of the cost in year one.
60% for property placed in service during calendar year 2024. This is down from 80% in 2023 and 100% in 2022. The phase-down continues: 40% in 2025, 20% in 2026, and 0% in 2027 under current law.
Yes, under the Tax Cuts and Jobs Act (2017), bonus depreciation applies to used property that is new to the taxpayer — the business acquiring it must not have previously used it. This expanded bonus depreciation significantly versus pre-2017 rules that restricted it to new property.
Key differences: (1) Bonus depreciation can create a net operating loss; Section 179 cannot exceed taxable income. (2) Bonus depreciation has no dollar limit; Section 179 caps at $1,160,000 in 2024. (3) Section 179 requires the property be used primarily in a trade or business; bonus depreciation has no 50% test. Both apply to qualifying property but serve different planning purposes.