“2023 Tax Depreciation Changes You Need to Know”
As we move into a new tax year, there are a few changes to tax depreciation rules that could impact businesses. Here’s what you need to know for the year 2023:
Bonus Depreciation: The bonus depreciation percentage for qualified property placed in service in 2023 will be 50%. This means that businesses can deduct 50% of the cost of qualifying assets in the year they’re placed in service, rather than depreciating them over several years.
Section 179 Deduction: The maximum amount of the Section 179 deduction for qualifying property has increased to $1,150,000 for the year 2023. The phase-out threshold has also increased to $2,300,000.
Qualified Improvement Property: The Tax Cuts and Jobs Act of 2017 made a drafting error that prevented qualified improvement property (QIP) from being eligible for bonus depreciation.
However, the Consolidated Appropriations Act of 2021 corrected this error, making QIP eligible for 100% bonus depreciation for property placed in service after December 31, 2017.
Used Property: Previously, bonus depreciation was only available for new property. However, the Tax Cuts and Jobs Act of 2017 expanded bonus depreciation to include used property, provided that the property meets certain requirements.
Depreciation of Residential Rental Property: The Tax Cuts and Jobs Act of 2017 made changes to the depreciation rules for residential rental property. The recovery period for residential rental property has been shortened from 27.5 years to 30 years for property placed in service after December 31, 2017.
It’s important for businesses to be aware of these tax depreciation changes to ensure that they’re taking advantage of all available deductions and credits. Consider consulting with a tax professional to ensure that you’re maximizing your tax savings for the year 2023.