Bonus depreciation

Bonus depreciation is a tax treatment that has been used over the years by the federal government to encourage businesses to make capital purchases in order to stimulate the economy. In practice, it's an additional deduction, beyond that allowed by the standard depreciation schedule, of part of the cost of a depreciable asset, and it is allowed to be claimed in the year the property is purchased and placed in service.

For example, with regard to an asset that has a five-year depreciation schedule, instead of only one fifth of the asset purchase price being deductible in the first year, with a bonus deduction, some additional percentage would also be allowed. However, bonus depreciation does not allow for more total deductions than the asset purchase price, but rather front-loads part of the deduction in the first year.

Be sure to consult with your tax advisor about taking this deduction.