Key Takeaways
- Tax Year 2024: 60% bonus depreciation.
- Applies to property with MACRS recovery ≤20 years.
- Both new and used property qualify (if first use by taxpayer).
- CAN create or increase NOL (unlike §179).
- Elect out on per-class basis.
- Anti-churning: not from related party, not previously used by taxpayer.
Last updated: January 2026
Bonus Depreciation
Why This Matters for the Exam
Bonus depreciation is automatic (unless elected out). The exam tests the rate, qualifying property, and comparison to §179.
Expect at least 3-4 questions on bonus depreciation.
Bonus Depreciation Rates
| Tax Year | Rate |
|---|---|
| 2022 | 100% |
| 2023 | 80% |
| Tax Year 2024 | 60% |
| 2025 | 40% |
| 2026 | 20% |
| 2027+ | 0% (unless extended) |
Qualifying Property
| Requirement | Description |
|---|---|
| MACRS recovery | ≤20 years |
| New or used | Yes (if first use by taxpayer) |
| Original use | Must be taxpayer's first use OR purchased used |
| QIP | Qualifies (15-year) |
Anti-Churning Rules (Used Property)
| Rule | Description |
|---|---|
| Not previously used | By taxpayer or predecessor |
| Not from related party | Spouse, >50% owned entity |
| Not by gift/inheritance | Must be purchased |
Bonus vs. §179 Comparison
| Feature | Section 179 | Bonus Depreciation |
|---|---|---|
| Mechanism | Election | Automatic |
| Dollar cap | $1,220,000 (Tax Year 2024) | None |
| Phase-out | $3,050,000 (Tax Year 2024) | None |
| NOL impact | Cannot create | CAN create/increase |
| Asset selection | Pick specific assets | Per-class only |
| Rate | 100% | 60% (Tax Year 2024) |
Elect Out
| Rule | Description |
|---|---|
| Election | Per MACRS class |
| Irrevocable | Once made for that year |
| Why elect out? | Save deductions for higher-rate years |
Calculation Example (Tax Year 2024)
| Item | Amount |
|---|---|
| Equipment cost | $100,000 |
| §179 elected | $0 |
| Bonus (60%) | $60,000 |
| Remaining basis | $40,000 |
| MACRS (Year 1) | Calculated on $40,000 |
Real-World Scenario (Tax Year 2024)
Scenario: Company buys $500,000 machinery (7-year). Wants maximum deduction.
- §179 election: Up to $500,000 (if under income limit).
- Bonus on remainder: $0 × 60% = $0.
- Alternatively: No §179, take 60% bonus = $300,000.
- MACRS on remainder: $200,000 basis for MACRS.
On the Exam
Expect 3-4 questions on bonus, typically:
- Rate Questions: "What is the Tax Year 2024 bonus rate?"
- Qualifying Questions: "Does used property qualify?"
- Comparison Questions: "Can bonus create NOL?"
The key is to remember: 60% for Tax Year 2024. Automatic (elect out per class). New AND used qualify. CAN create NOL. No dollar cap.
Test Your Knowledge
Taxpayer wants bonus for 7-year but not 5-year property. Allowed?
A
B
C
D
Test Your Knowledge
Tax Year 2024 bonus depreciation rate?
A
B
C
D
Test Your Knowledge
What disqualifies used machinery from bonus?
A
B
C
D