top of page

2023 Bonus Depreciation Guide

Key Details & Related Resources


In 2023, businesses can leverage bonus depreciation, allowing them to deduct the complete cost of specific assets the year they're employed.

Common Terminology: 168(k), Section 168(k) bonus, first-year bonus depreciation, additional first-year bonus depreciation.

Eligibility Criteria for Bonus Depreciation

Do you qualify for this tax advantage? Bonus depreciation enables businesses to immediately deduct a more significant portion of eligible asset costs, bypassing the traditional approach of distributing deductions over multiple years.

Insights into 2023 Bonus Depreciation

What is Depreciation? Depreciation is the gradual reduction of an asset's worth due to wear, tear, or becoming outdated. With bonus depreciation, businesses can now deduct the entire purchase amount of eligible assets in a single year, rather than over the asset's "useful life". This results in a heftier tax deduction for the said year.

100% Bonus Depreciation: Recent tax legislation permits business owners to leverage 100% bonus depreciation. This provision enables them to deduct the full asset cost in its first year of service. For subsequent years, no depreciation would be applicable for that specific asset. Note that this provision is valid through 2023, post which the percentage may be progressively reduced unless there's a legislative extension.

Opting Out: In certain scenarios, like anticipating a higher income in the following years or facing a current year loss, it might be beneficial to forego bonus depreciation. The deduction might prove more valuable at potentially higher future tax rates.

Vehicles & Bonus Depreciation: Lighter vehicles (under 6,000 pounds) face limitations under Section 280F, restricting their bonus depreciation. However, vehicles weighing over 6,000 pounds don't face such constraints. The amount of bonus depreciation is adjusted based on the vehicle's business usage time (must be over 50%). Keep in mind, businesses intending to expense a heavier vehicle might find bonus depreciation more favorable than Section 179 expensing.

Note: The SUV limitation is valid for Section 179, which means that businesses planning to expense a heavier vehicle might benefit more from bonus depreciation as opposed to Section 179 expensing.

Additional Tax Planning Strategies

Stay informed and explore other tax planning strategies that might be beneficial for your clients. Discover how Ubiks can assist you in saving substantial amounts in taxes for your clientele.


  • Significant reduction in taxable income.

  • Lower self-employment taxes.

Points to Ponder

  • Maximizing current year depreciation will lead to diminished depreciation in the coming years.

  • Possibility of recapture, implying future taxation upon selling an expensed asset.

  • Potential conflict with Section 179 Expensing strategy.

Assumptions Made

  • Assets are tangible and acquired in the current year.

  • 100% business usage of assets.

  • The business's income sufficiently covers depreciation expenses, ensuring no operational loss due to these expenses.

  • The asset isn't a structure that would gain from cost segregation studies.

Prerequisites for Claiming Bonus Depreciation

  • The asset must be unfamiliar to the taxpayer.

  • MACRS-based depreciation of the asset with a life span under 20 years.

  • Real property is excluded.

Entities Eligible for Bonus Depreciation

  • Schedule C

  • Schedule E

  • Schedule F

  • Farm Rental

  • C Corporation

  • S Corporation

  • Partnership


Navigating the intricacies of tax planning is essential for any business aiming to maximise its financial potential. The 2023 Bonus Depreciation is a testament to the evolving landscape of taxation, offering businesses a golden opportunity to deduct a significant portion of their asset costs. By staying informed and leveraging such strategies, businesses can not only reduce their tax liabilities but also foster robust financial health. As always, it's advisable to consult with a tax professional to ensure all guidelines are met and to tailor these strategies to the unique needs of each business. The world of taxation might be complex, but with the right information and guidance, businesses can turn it into an advantage.

5 views0 comments


bottom of page