Section 179 Updates for 2023 Depreciation Deductions
Typically, if a property constitutes a capital expenditure, you’re unable to deduct its entire cost in a single year. Instead, you generally need to spread out the deduction through depreciation over subsequent years until you’ve fully recouped its cost.
Depreciation (noun) /dəˌprēSHēˈāSH(ə)n/: The recovery of the cost of the property over a number of years through tax deductions.
You have the option to choose Section 179, allowing you to recuperate the entire or a portion of the qualifying property’s cost, up to a specified dollar limit, in the tax year you put the qualifying property into use. However, the overall deductible cost, after applying the dollar limit, is capped at the taxable income generated from actively conducting a trade or business in that tax year. The deduction for Section 179 expense occurs in the same year you put the qualifying property into service.
For certain qualified property* placed in service after December 31, 2022, and before January 1, 2024, you can elect to take a special depreciation allowance of 80%. This allowance is taken after any allowable Section 179 deduction and before any other depreciation is allowed. There are also special rules and limits for depreciation of property, for more information, refer to Publication 946, How to Depreciate Property.
* acquired after September 27, 2017