Depreciation is a critical aspect of tax planning for businesses, and changes to depreciation rules can have a significant impact on a company’s bottom line. In 2023, there are several changes to the rules of depreciation that finance executives need to be aware of.

Expansion of Bonus Depreciation

One of the most significant changes to depreciation rules in 2023 is the expansion of bonus depreciation. The new law allows businesses to take a 100% bonus depreciation deduction on qualified property, including new and used assets, purchased and placed in service before January 1, 2024. This change means that businesses can now write off the full cost of new assets in the year of purchase, which can significantly reduce their taxable income.

Changes to Section 179 Deduction

Another change to depreciation rules in 2023 is the expansion of the Section 179 deduction. This change increases the amount a business can write off under Section 179 to $1 million, up from $500,000 in previous years. The threshold at which the deduction begins to phase out has also been increased to $2.5 million, up from $2 million in previous years. This change provides significant tax savings to small and medium-sized businesses, allowing them to write off a substantial portion of their capital investments in the year of purchase.

Increase in the Depreciation Deduction for Passenger Automobiles

In 2023, there is an increase in the depreciation deduction for passenger automobiles. The new law increases the amount a business can write off for passenger automobiles from $10,100 to $10,700 for the first year, $16,100 to $16,800 for the second year, and $9,700 to $10,100 for each subsequent year. This change will provide additional tax savings for businesses that use vehicles for business purposes.

Changes to MACRS Depreciation Method

In 2023, there are also changes to the Modified Accelerated Cost Recovery System (MACRS) depreciation method. The changes include an increase in the recovery periods for qualified improvement property from 39 years to 40 years, and a change in the recovery period for qualified film, television, and live theatrical productions from 15 years to 20 years. These changes will impact the depreciation deduction businesses can claim for these types of assets.

Stay Informed of the Latest Tax Laws and Regulations

In conclusion, the changes to depreciation rules in 2023 provide significant tax savings to businesses. From the expansion of bonus depreciation to the increase in the depreciation deduction for passenger automobiles, finance executives must be aware of these changes and work closely with their tax advisors to ensure they are taking advantage of all available tax benefits. Staying informed and staying compliant with the latest tax laws and regulations is critical to maximizing the bottom line and ensuring long-term financial success.

Learn more about other 2023 tax changes.

Join the growing Controllers Council community or register for our newsletter to stay informed on tax changes and discuss with your peers.

Additional Tax Resources

Tax and ESG

The Controller’s Guide to Streamlined Sales Tax

A Controller’s Guide to Navigating Sales Tax Audits

Panel Discussion: How to Unburden Your Finance Team and Keep Them EngagedTuesday, April 4, 1 PM CST

Join our panel of corporate finance experts to learn how you can unburden and engage your finance staff through better processes, technologies, and opportunities including Barbara Salazar, CFO @ E2 Consulting Engineers; Glenn Hopper, CFO @ Eventus Advisory Group and author of Deep Finance: Corporate Finance in the Information Age; and Kristine Dosick, Controller @ behavioral health-tech evolvedMD.