2018 Bonus Depreciation Percentage
The 2018 Bonus Depreciation Percentage is 100%.
Effective 2018-01-01Source: 2018 Instructions for Form 4562 (IRS)Verified 2026-08-29
Compared with 2017
Every figure on this page is unchanged from 2017.
| Item | 2017 | 2018 | Change |
|---|---|---|---|
| Special depreciation allowance | 100% | 100% | +0% (+0.0%) |
Who it applies to
Taxpayers who place qualified property in service during the 2018 tax year
What changed this year, and why
For 2018, the special depreciation allowance (bonus depreciation) is 100% of the depreciable basis for qualified property acquired after September 27, 2017, and placed in service during the tax year.
Common questions
- What is the special depreciation allowance?
- The special depreciation allowance, commonly called bonus depreciation, is an additional first-year deduction that can be taken after any section 179 expense deduction and before regular MACRS depreciation.
- What property qualifies for the 100% allowance in 2018?
- Qualified property includes tangible property depreciated under MACRS with a short recovery period, computer software, water utility property, and qualified film, television, and live theatrical productions. The property must have been acquired after September 27, 2017, and can be either new or certain used property.
Every amount on this page is a published figure rather than yours. The First-year bonus depreciation on an asset takes the number you enter and works it out against them, showing which published figure it used.
What the percentage is applied to, and what is left afterwards
After calculating the special depreciation allowance for qualified property, taxpayers must determine the remaining depreciable basis for regular depreciation purposes. The allowance is applied first, reducing the property's depreciable basis by the allowance amount. The remaining cost or basis is then used to calculate regular MACRS depreciation deductions over the property's recovery period. This two-step process ensures that the total depreciation claimed does not exceed the property's cost or basis. For the 2018 tax year, the special depreciation allowance is 100% of the depreciable basis for qualifying property placed in service during the year. Because the allowance equals 100% of the basis, no remaining basis is left for regular MACRS depreciation in subsequent years. For property eligible for a lower percentage, the remaining cost after the allowance is subtracted becomes the basis for ongoing depreciation calculations. Taxpayers should carefully track both the allowance claimed and the reduced basis for their records.
Depreciating the remaining cost. After you figure your special depreciation allowance for your qualified property, you can use the remaining cost to figure your regular MACRS depreciation deduction (discussed in chapter 4). Therefore, you must reduce the depreciable basis of the property by the special depreciation allowance before fig- uring your regular MACRS depreciation deduction.
Publication 946 (2018), How To Depreciate Property (IRS)
Electing out, by class of property
You can elect, for any class of property, not to deduct any special depreciation allowances for all property in such class placed in service during the tax year. To make this election, you must attach a statement to your tax return indicating what election you are making and the class of property for which you are making the election. The election must be made separately by each person owning qualified property, such as by partnerships, S corporations, or for each member of a consolidated group by the common parent. Generally, the election must be made on a timely filed tax return including extensions for the year in which you place the property in service. If you timely filed your return without making the election, you can still make it by filing an amended return within a specified period after the original return's due date. Once you elect not to deduct a special depreciation allowance for a class of property, you cannot revoke the election without IRS consent, and a request to revoke requires a letter ruling. This election-out provision allows taxpayers to opt out of the special depreciation allowance if it is more beneficial to use regular MACRS depreciation instead.
You can elect, for any class of property, not to deduct any special depreciation allowances for all property in such class placed in service during the tax year.
Publication 946 (2018), How To Depreciate Property (IRS)
Recapture when you dispose of the property
When property for which a special depreciation allowance was claimed is disposed of, any gain on the disposition is subject to recapture rules. The gain is recaptured as ordinary income up to the amount of the special depreciation allowance previously allowed or allowable. This means that if the property is sold or otherwise disposed of for more than its adjusted basis, the portion of the gain attributable to the allowance must be reported as ordinary income rather than capital gain. The recapture ensures that the tax benefit from the accelerated deduction is recovered when the property is disposed of. Special recapture rules also apply to certain categories of property if they cease to be used in qualified locations or for qualified purposes after the allowance is claimed. Taxpayers should maintain records of all special depreciation allowances claimed to properly calculate recapture amounts upon disposition.
When Must You Recapture an Allowance? When you dispose of property for which you claimed a special depreciation allowance, any gain on the disposi- tion generally is recaptured (included in income) as ordi- nary income up to the amount of the special depreciation allowance previously allowed or allowable.
Publication 946 (2018), How To Depreciate Property (IRS)
How each figure was verified
Each number below was read from a stored copy of the document named beside it, and checked to occur word for word in the quoted sentence. The digest is of that stored text.
2018 Instructions for Form 4562 (IRS)
- Special depreciation allowance
Certain qualified property (defined below) acquired after September 27, 2017, and placed in service before January 1, 2023 (or before January 1, 2024, for certain property with a long production period and certain aircraft), is eligible for a special depreciation allowance of 100% of the depreciable basis of the property.