Okay, in just a couple minutes, I'm going to explain something that's even better
right now in 2024 than bonus depreciation.
So a lot of you have probably heard if you're a business owner or
a rental property owner, you've heard that bonus depreciation has been tearing down over
the last couple years. In 2022,
it was at a hundred percent. 2023,
it was at 80%, 2024, it's at 60%.
And what that means like a bonus depreciation.
So for you as a business owner, say you're a dentist,
you own a dental practice and you go and buy,
let's say $10,000 of equipment. Under bonus depreciation in 2022,
you could write off a hundred percent of that in that year.
In 2023, it was only 80% of that, so it'd be 8,000,
2024, it'd be 60% of it,
it'd be a $6,000 deduction. And that,
that deduction directly impacts your taxable income.
So bonus depreciation was a big deal from 2018 to 2022,
it was a big deal because we could write off all,
all that in one year, which was amazing.
But in 2024, this current tax year,
it's at 60%. And just do the math on whatever you're looking at buying.
If it's an equipment, or a vehicle over 6,000 pounds or other,
or other things, you can only write off 60% of it in 2024 and
then 40% in 2025. Well,
here's what I want to tell you about,
and it's not going to be too long because it's really not that complex,
at least in the basic understanding of it. But there's an alternative to bonus
depreciation, and it's called the Section 179 Deduction.
The Section 179 Deduction has not been as popular over the last few years
because we had bonus depreciation. We kind of just forgot about it.
A lot of people weren't planning with it as much as they could have
because they didn't really need to. But in 2023,
we started to do it more. In 2024, it'll make a lot bigger of
a difference. But Section 179 is very similar to bonus depreciation
when it was at the 100% level.
So if you go and buy that equipment for your dental practice for $10,000
under the Section 179, Section 179 deduction,
we can use that to directly offset your taxable income by that $10,000.
So effectively, it is a 100% bonus,
bonus depreciation. The catch,
so this is why we like to bonus depreciation actually more than 179.
It's when you were at negative or near negative taxable income,
Section 179 deduction cannot create a loss for you.
So if you've, if you've had a tax return where you bought a bunch
of assets and you created a loss and you could offset some of your
other income, it was a amazing combination of buying assets and,
and offsetting other income. The Section 179,
we can't do it with that. But if you have positive,
so this is who it's good for. If you have positive taxable income,
if you're a business owner or a rental property owner,
if it's positive, like in this the plus is you're not in the red,
you, you don't have enough deductions yet to offset all that income.
The Section 179 can reduce that,
can reduce it all the way down to zero. So just make sure you're
planning for that. And if someone mentions,
oh, you can only write off 40% of this for bonus depreciation.
Next year, just have that in the back of your mind that the Section
179 deduction is something we can use,
something we can use when you have, when you do have that positive taxable
income. Just, we're just not creating losses with it.
So hopefully, and that's it for now. I'm not going to dive into all
the tax code of 179, but, uh,
uh, that is a very important thing to understand for business owners and real
estate investors.
