{"id":29924,"date":"2024-03-26T08:23:46","date_gmt":"2024-03-26T13:23:46","guid":{"rendered":"https:\/\/shncpa.com\/?p=29924"},"modified":"2024-03-26T08:23:46","modified_gmt":"2024-03-26T13:23:46","slug":"coordinating-sec-179-tax-deductions-with-bonus-depreciation","status":"publish","type":"post","link":"https:\/\/shncpa.com\/coordinating-sec-179-tax-deductions-with-bonus-depreciation\/","title":{"rendered":"Coordinating Sec. 179 tax deductions with bonus depreciation"},"content":{"rendered":"

Your business should generally maximize current year depreciation write-offs for newly acquired assets. Two federal tax breaks can be a big help in achieving this goal: first-year Section\u00a0179 depreciation deductions and first-year bonus depreciation deductions. These two deductions can potentially allow businesses to write off some or all of their qualifying asset expenses in Year\u00a01. However, they\u2019re moving targets due to annual inflation adjustments and tax law changes that phase out bonus depreciation. With that in mind, here\u2019s how to coordinate these write-offs for optimal tax-saving results.<\/p>\n

Sec. 179 deduction basics<\/strong><\/p>\n

Most tangible depreciable business assets \u2014 including equipment, computer hardware, vehicles (subject to limits), furniture, most software and fixtures \u2014 qualify for the first-year Sec.\u00a0179 deduction.<\/p>\n

Depreciable real property generally doesn\u2019t qualify unless it\u2019s qualified improvement property (QIP). QIP means any improvement to an interior portion of a nonresidential building<\/em> that\u2019s placed in service after the date the building is placed in service \u2014 except for any expenditures attributable to the enlargement of the building, any elevator or escalator, or the internal structural framework. Sec.\u00a0179 deductions are also allowed for nonresidential building roofs, HVAC equipment, fire protection systems and security systems.<\/p>\n

The inflation-adjusted maximum Sec. 179 deduction for tax years beginning in 2024 is $1.22\u00a0million. It begins to be phased out if 2024 qualified asset additions exceed $3.05\u00a0million. (These are up from $1.16\u00a0million and $2.89\u00a0million, respectively, in 2023.)<\/p>\n

Bonus depreciation basics<\/strong><\/p>\n

Most tangible depreciable business assets also qualify for first-year bonus depreciation. In addition, software and QIP generally qualify. To be eligible, a used asset must be new to the taxpayer.<\/p>\n

For qualifying assets placed in service in 2024, the first-year bonus depreciation percentage is 60%. This is down from 80% in 2023.<\/p>\n

Sec. 179 vs. bonus depreciation<\/strong><\/p>\n

The current Sec. 179 deduction rules are generous, but there are several limitations:<\/p>\n