Bonus Depreciation Strategy Update

As discussed in our post on January 23, 2024, bonus depreciation for the 2023 tax year has been reduced to 80% of the cost of eligible property. (This is down from 100% bonus depreciation that applied in the 2022 tax year and in recent prior years.)

The bill that could retroactively change the bonus depreciation rules for the 2023 tax year has stalled in Congress. The future fate of the bill is presently unknown.

In prior years, legislation that has made retroactive changes has sometimes required taxpayers to amend returns that were already filed to reflect those changes. Since it is unknown if this bill will become a law, practitioners have to choose whether to finalize 2023 returns that claim 80% bonus depreciation or put such returns on extension, just in case a retroactive change occurs.

On balance, extending returns that will claim bonus depreciation can be a low-cost hedge to avoid the possible need for a time-consuming amendment, if new legislation were to be enacted.