Bonus depreciation is basically “depreciation on steroids”. Bonus Depreciation is a tax incentive that allows a company to immediately deduct a large percentage of the cost of eligible assets, such as buildings, light fixtures and more, instead of depreciating them over the "life" of the asset. Bonus depreciation occurs in the first year of ownership.
Instead of depreciating an apartment complex over 39 years, which is the amount of time the government allows, we use a cost segregation study and take the depreciation in the first year.
During the Tax Cuts and Jobs Act in 2017, the government allows depreciation up to 100% until the end of 2022. Starting in 2023, the percentage drops to 80%. In 2024, bonus depreciation drops to 60%, and continues to drop over the next few years. Of course, Congress could renew bonus depreciation and change these percentages.
Bonus depreciation has enabled some people to eliminate their tax burden completely. However, please consult a CPA, lawyer, or financial advisor as this is not tax, legal, or financial advice.