Bonus depreciation is a tax incentive that allows businesses to depreciate a higher percentage of the cost of certain property in the year the property is placed in service. This means that businesses can deduct a larger portion of the cost of the property from their taxable income in the year the property is first used, rather than having to spread the deduction out over several years through regular depreciation.

The benefit to business owners is that it can significantly reduce their tax liability in the year the property is placed in service. This allows businesses to keep more of their revenue and reinvest it back into the business.

The bonus depreciation percentage and the types of property eligible for bonus depreciation can change from year to year and it depends on the tax laws at the time. Currently, for tax year 2021, bonus depreciation is 100% for new and used property acquired and placed in service after September 27, 2017, and before January 1, 2023. (You may need to reverify this as tax laws do change)

It’s important to note that bonus depreciation is only available for certain types of property, such as tangible personal property with a recovery period of 20 years or less and certain qualified improvement property. Additionally, businesses must follow specific rules and procedures to take advantage of bonus depreciation, so consulting with a tax professional is recommended.