KYLE LUSCZAKOSKI

lusczakoski @ doeren . com

One major tax deduction changing after this year is bonus depreciation , which is especially important for businesses who own machinery , computer systems , software , certain

The business interest limitation reverts to the original Tax Cuts and Jobs Act ( TCJA ) rule for the 2022 filing year , which imposes a limitation on the deduction for business interest expense and removes the addback of depreciation , amortization and depletion in the adjusted taxable income ( ATI ) calculation .

Under Section 163 ( j ), the amount of deductible business interest expense in a taxable year cannot exceed the sum of :

• The taxpayer ’ s business interest income

vehicles , equipment or office furniture . This is the last year businesses may claim the 100 % bonus depreciation deduction , as the deduction amount will drop each subsequent year by 20 % starting in 2023 and eventually sunset 2027 , unless it is extended by Congress .

Similar to bonus depreciation , Section 179 allows businesses to deduct 100 % of the purchase price of new and used eligible assets . While Section 179 still allows for businesses to claim an immediate deduction on certain capital acquisitions , there are additional limitations that may prevent assets from the same deductions under the bonus depreciation rule .

• 30 % of the taxpayer ’ s adjusted taxable income ( ATI ) and

• The taxpayer ’ s floor plan financing interest

This limitation applies to taxpayers with gross receipts of $ 27 million for 2022 ($ 26 million for 2019 , 2020 and 2021 ). Any business interest expense not allowed as a deduction due to the Section 163 ( j ) limitation is generally carried forward and treated as business interest paid or accrued in the next tax year .

The Coronavirus Aid , Relief , and Economic Security ( CARES ) Act temporarily changed the deduction , and taxpayers could elect to use 50 % of the ATI limitation for the 2019 and 2020 filing years and use their

If you plan on purchasing bonus deprecation qualifying property , it may be wise to do so and place it in service before year-end to maximize the 100 % deduction for 2022 .

To ensure you ’ re taking advantage of all the tax credits and incentives available for your business , be sure to work with your trusted business tax advisor for proactive planning .

ashorn @ doeren . com

BARBARA ASHORN

2019 ATI to compute their 2020 business interest limitation .

With the original TCJA rules returning , this will impact businesses that are more capital intensive and catch more taxpayers unaware . We strongly encourage you to work with your tax advisor to conduct proactive planning and ensure you ’ re making the proper tax elections related to your business activity .