What is Bonus Depreciation?
Depreciation allows organisations to spread the cost of assets over the prescribed life of the asset. However Bonus depreciation is an incentive used by the US Government to stimulate the economy and encourage more aggressive buying patterns by businesses. By purchasing assets, organisations are able to reduce their taxable income, allowing them to take accelerated depreciation deductions in the first year of purchase.
Following a change to the 2017 Tax Act, businesses can now take 100% bonus depreciation (50% prior to the change) in the first year for certain qualified assets made after September 17, 2017.
Why is fixed asset software important for Bonus Depreciation?
As with most items relating to Income Tax, there are lots of rules and qualifications and this is where software can be a significant helper.
Smaller companies usually rely on a tax advisor to manage their tax deductions and just maintain GAAP books for basic bookkeeping. However, for mid to large size organisations or for those that want to manage tax inhouse and save professional service fees, Bonus Depreciation can be calculated using robust and function rich fixed asset software.
Here are examples of how RAM’s solution can help you manage the process:
- Bonus Depreciation can be applied retroactively to accommodate the change in the USTCJA via the recent CARES Act. At the same time, customers may also elect to make a change to the useful life an asset, for example, by using the simple Relife Event to ensure the asset is properly depreciated and your team is capturing the maximum amount of depreciation possible.
- The process of applying Bonus Depreciation is flexible, with the ability to make historical changes, where previous years can easily be re-opened to apply the new treatments as needed. Users will not need to restore backup copies of their databases, re-enter any information from previous hardcopy reports, or contact a vendor to have the system rolled-back.
Real Asset Management has been providing fixed asset solutions to manage US tax for over two decades and can help organisations to automate and streamline processes to comply with state GAAP rules and the preparation for tax filing. To find out more about our fixed asset software, please visit our solutions page.