EP 98 - Dangers of 100% Bonus Depreciation

The Mark Perlberg CPA Podcast

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4d ago 19:08

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Bonus depreciation offers enticing tax benefits but comes with significant hidden risks for business owners and investors who don't plan beyond the initial tax savings. We examine the dangers of relying too heavily on bonus depreciation strategies and provide alternative approaches that don't create future tax problems.
• Bonus depreciation allows writing off a percentage of qualifying assets immediately rather than over their useful life
• The Tax Cuts and Jobs Act provided 100% bonus depreciation from 2017-2022, now phasing down to 40% in 2025
• Financing assets for tax write-offs still requires paying the full purchase price over time
• After claiming depreciation, loan payments become essentially non-deductible, creating "paper income"
• Selling assets before their useful life creates depreciation recapture taxed at ordinary income rates
• More balanced tax strategies include income shifting, entity structuring, and hiring family members
• The Augusta Rule and employing children can provide up to $100,000 in deductions without creating future liabilities
• Prioritize assets that generate sufficient returns to justify their purchase beyond just tax benefits
• Smart tax planning considers both immediate savings and long-term financial implications
To learn how these concepts apply to your specific situation, visit prosperlcpa.com/apply and schedule a consultation.

Chapters

1. Excitement About Bonus Depreciation (00:00:00)

2. What Is Bonus Depreciation? (00:01:45)

3. The Hidden Dangers and Challenges (00:05:34)

4. Paper Losses vs Paper Income (00:10:38)

5. Better Tax Planning Solutions (00:14:49)

6. Key Takeaways and Final Thoughts (00:18:17)

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