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Depreciation Bonus and Section 179 Limits for 2024: What You Need to Know
As 2024 comes to a close, businesses must understand the updates to depreciation expenses, particularly bonus depreciation and Section 179 limits. These tax provisions play a crucial role in financial planning and can significantly impact your tax liabilities. Here's what you need to know to prepare for the upcoming tax season.

What Is Depreciation Expense?

Depreciation is an accounting method used to allocate the cost of a tangible asset over its useful life. This approach allows businesses to spread the expense of assets, such as machinery or equipment, across several years rather than taking a single large deduction in the year of purchase.

By matching the expense of using an asset with the revenue it generates, depreciation offers a more accurate picture of a company’s financial performance.

Bonus Depreciation for 2024

Bonus depreciation allows businesses to take an additional first-year deduction on the purchase of qualifying assets.
  • 2024 Bonus Depreciation Rate: The bonus depreciation rate has been reduced to 60%, down from 80% in 2023 .
  • How It Works: Businesses can immediately deduct 60% of the cost of eligible assets in the year they are placed in service, with the remaining cost depreciated over the asset's useful life.
Section 179 Deduction

The Section 179 deduction provides another way for businesses to maximize their tax savings by deducting the full purchase price of qualifying equipment and software in the year of purchase.
Key Points to Consider

1. Eligibility
  • Bonus depreciation and Section 179 apply to both new and used equipment if used for business purposes more than 50% of the time.
  • Certain assets, such as buildings and land, are excluded.
2. Timing
  • Assets must be purchased and placed in service within the tax year to qualify for deductions. Proper timing is essential to maximize these benefits.
3. Combination of Benefits
  • Businesses can use both bonus depreciation and Section 179 deductions in the same tax year.
  • Example: A company could apply the Section 179 deduction to the maximum limit and use bonus depreciation on the remaining cost of the asset.
4. Tax Planning
  • Strategic tax planning ensures businesses maximize deductions while remaining compliant with IRS regulations.
  • Consulting with a tax professional is highly recommended to navigate these complexities effectively.
The Bottom Line

Understanding the nuances of depreciation expenses, bonus depreciation, and Section 179 limits is essential for effective financial planning. These tax provisions allow businesses to:
  • Reduce taxable income
  • Improve cash flow
  • Reinvest in their operations
Make sure to consult with a tax professional to ensure compliance and to fully leverage these valuable deductions for your business.

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