Bonus Depreciation Planning refers to the strategic approach used by businesses to maximize their tax benefits through the accelerated depreciation of qualified property.
Under current tax laws, businesses can often deduct a significant percentage of the cost of eligible capital assets in the year they are placed in service, as opposed to spreading the deduction over several years. This immediate expensing can significantly reduce taxable income, leading to lower tax liability in the short term.
For example, if a company purchases new machinery for $100,000 and qualifies for a 100% bonus depreciation, it can deduct the entire $100,000 in the year of purchase, rather than depreciating it over its useful life. This planning involves assessing eligible assets, timing of purchases, and understanding the implications on cash flow and tax strategy.
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