We’ve had bonus depreciation around for a while, but it has only been allowed on new assets. Previously, any used asset did not qualify for bonus depreciation. However, the Tax Reform bill not only increases the bonus expensing to 100%, but it allows bonus depreciation to be used on new and used assets. This can create immediate benefits for asset purchases.
Not only does this help operating businesses, but it can be an added benefit to acquisitions. Historically, in a business acquisition, any assets purchased did not qualify for bonus depreciation. Those assets were depreciated over their useful life. Now, certain tangible depreciable assets purchased in an acquisition can be expensed immediately. This is a large incentive for businesses to invest in tangible assets.