The Tax Cuts and Jobs Act increases bonus depreciation rate to 100% for property acquired and placed in service after September 27, 2017, and before January 1, 2023. The rate phases down thereafter. Used property, films, television shows, and theatrical productions are eligible for bonus depreciation. Property used by rate-regulated utilities and property of certain motor vehicle, boat, and farm machinery retail and lease businesses that use floor financing indebtedness are excluded from bonus depreciation.
Timing Details
The 50% bonus depreciation rate applicable before the new law took effect has been increased to 100% for qualified property acquired and placed in service after September 27, 2017, and before January 1, 2023. The 100% allowance continues for five years, after which it is then phased down by 20% per calendar year for property placed in service after 2022. In general, the bonus depreciation percentage rates are as follows:
- 100% for property placed in service after September 27, 2017, and before January 1, 2023;
- 80% for property placed in service after December 31, 2022, and before January 1, 2024;
- 60% for property placed in service after December 31, 2023, and before January 1, 2025;
- 40% for property placed in service after December 31, 2024, and before January 1, 2026;
- 20% for property placed in service after December 31, 2025, and before January 1, 2027;
- 0% (bonus expires) for property placed in service after December 31, 2026.
Property acquired before September 28, 2017
Property acquired before September 28, 2017, is subject to the 50% rate if placed in service in 2017, a 40% rate if placed in service in 2018, and a 30% rate if placed in service in 2019. Property acquired before September 28, 2017, and placed in service after 2019 is not eligible for bonus depreciation. However, in the case of longer production property (LPP) and noncommercial aircraft (NCA), each of these placed-in-service dates is extended one year. Therefore, a 50% rate applies to LPP and NCA acquired before September 28, 2017 and placed in service in 2017 or 2018, a 40% rate applies if such property is placed in service in 2019, and a 30% rate applies if such property is placed in service in 2020. They continue to apply to property acquired before the September 28, 2017 cut-off date set by Congress.
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