The Tax Cuts and Jobs Act of 2017 introduced significant changes to depreciation rules, allowing businesses to immediately deduct a large percentage of the cost of eligible property in the year it is placed in service. This provision, often associated with the previous presidential administration, applies to qualifying new and used property with a recovery period of 20 years or less. For example, a company purchasing new equipment for its manufacturing facility could deduct a substantial portion of the cost upfront, rather than depreciating it over several years.
This accelerated deduction incentivizes capital investment by businesses, promoting economic growth through increased spending on assets like machinery and equipment. The immediate expensing of these costs reduces a company’s tax liability in the short term, freeing up capital for further investment or other business operations. The provision was initially set at 100% but has been phasing down since 2023, offering a decreasing percentage each year until its scheduled expiration.
