Section 168(k) Bonus Depreciation
A federal tax provision allowing first-year deduction of a percentage of the cost of qualifying business property, restored to 100 percent under OBBBA for assets placed in service after January 19, 2025.
Detailed Explanation
Bonus depreciation under IRC Section 168(k) applies to most tangible property with a recovery period of 20 years or less, off-the-shelf software, and qualified improvement property. Unlike Section 179, bonus depreciation has no taxable income limit and can create or increase a net operating loss. Originally scheduled to phase down to zero by 2027 under the Tax Cuts and Jobs Act, OBBBA permanently restored 100 percent bonus depreciation for qualifying assets placed in service after January 19, 2025. Used heavily with cost segregation studies to accelerate real estate deductions.
Related TS CPA Service
Year-round, proactive tax planning that puts more money back in your pocket, not the IRS's.
Learn about Tax Planning & StrategyRelated Terms
Section 179 Expensing
A federal tax provision allowing businesses to fully expense the cost of qualifying tangible property and certain real estate improvements in the year of purchase, up to a statutory cap.
Depreciation
The deduction of the cost of a tangible business asset over its useful life, reflecting wear, tear, or obsolescence.
Cost Segregation Study
An engineering-based analysis that reclassifies portions of a building into shorter-life property categories to accelerate depreciation deductions in the early years of ownership.
Depreciation Recapture
The portion of gain on sale of depreciated property that is taxed at higher rates rather than long-term capital gain rates, recovering previously claimed depreciation deductions.
Have a Question About Section 168(k) Bonus Depreciation?
Get a free, no-obligation answer from a licensed CPA. We respond the same day.
Get Your Free Quote