A bonus first year depreciation allowance applies to “qualified property”.
Claimed in the first year that the property is acquired and placed in service by the taxpayer for use in its trade or business the bonus first year depreciation allowance is equal to the following percentage of the unadjusted depreciable basis of “qualified property”:
- ...100% if acquired (see below) and placed in service after Sept. 27, 2017, and before Jan. 1, 2023 (before Jan. 1, 2024 for certain aircraft and long-production-period property)
- ...80%, if placed in service after Dec. 31, 2022 and before Jan. 1, 2024 (before Jan. 1, 2025 for certain aircraft and long-production-period property).
- ...60%, if placed in service after Dec. 31, 2023 and before Jan. 1, 2025 (before Jan. 1, 2026 for certain aircraft and long-production-period property).
- ...40%, if placed in service after Dec. 31, 2024 and before Jan. 1, 2026 (before Jan. 1, 2027 for certain aircraft and long-production-period property).
- ...20%, if placed in service after Dec. 31, 2025 and before Jan. 1, 2027 (before Jan. 1, 2028 for certain aircraft and long-production-period property). (Code Sec. 168(k)(1); Code Sec. 168(k)(6)); Code Sec. 168(k)(2)(B) ; Code Sec. 168(k)(2)(C))
- ...50% if acquired or placed in service before Sept. 28, 2017 (except that 100% bonus depreciation was available for certain property that (1) was placed in service after Sept. 8, 2010 and before Jan. 1, 2012 (before Jan. 1, 2013 for certain long-production-period property and certain aircraft) and (2) meets certain other requirements)
Property won't be treated as acquired after Sept. 27, 2017 (see above), if it is acquired under a written, binding contract entered into before Sept. 28, 2017. And proposed regulations, on which taxpayers may rely before they become final, provide guidance as to the written, binding contact rule and for more generally determining whether property is acquired after Sept. 27, 2017 for purposes of being eligible for 100% of a bonus first year depreciation allowance.
The adjusted basis of the property is reduced by the bonus depreciation allowance, before computing the amount otherwise allowable as a depreciation deduction for the tax year and any later tax year. (Code Sec. 168(k)(1)(B)) There is no AMT depreciation adjustment for the entire recovery period of qualified property.
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