Depreciation, Bonus or 179?

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For depreciation over the life of the asset, depreciation can be accelerated meaning larger depreciation in the first years and declining amount in later years. Or it can be straight-line meaning it depreciates the same amount in every year after the initial prurchase. The first year is less since it was not in the business' possesion the entire year. The effect on the adjusted basis of depreciated property under straight line is like the stairs in the picture above.

Then there is section 179 expensing. With income caps and total 179 limits, this deduction allows you to expenses up to 100% of the cost of the property. It is limited to net business income or taxable income for individuals (1040). If not all of the sectkion 179 expense can be claimed, it can be carryforward to subsequent tax years.

Finally there is Bonus Depreciation. Currently it is set at 100% through 2022. It differs from section 179 in that it is not limited by net or taxable income and it must be taken on all properties having the same class life (depreciation time) Therefore it may create an NOL which can be carried back 5 years or carried forward.


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