Bonus Depreciation
Quick definition
An additional first-year depreciation allowance for qualifying business property, including vehicles, claimed on top of regular depreciation.
Bonus depreciation is an extra first-year depreciation allowance for qualifying business property. For vehicles, it can be combined with Section 179 to front-load a large first-year deduction.
Confirm the current-year rate
The bonus depreciation percentage has changed several times with recent tax legislation. Confirm the rate that applies to the year your vehicle was placed in service before relying on a number, because it is not a fixed figure.
Who benefits
Bonus depreciation favors owners of higher-cost vehicles using the actual expenses method. Passenger cars are still subject to annual luxury auto caps. Track your business-use percentage, since a drop in later years can trigger recapture.
Related terms
Depreciation
Deducting the purchase cost of a business vehicle over its useful life, instead of all at once.
Section 179
A federal tax provision that lets businesses deduct the full cost of qualifying vehicles in the year of purchase, instead of depreciating them over time.
Depreciation Recapture
Adding previously deducted depreciation back into income, triggered when business use of a vehicle falls below a threshold or the vehicle is sold at a gain.
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