Enter the cost (eligible basis) of the asset and the bonus depreciation rate into the calculator to determine the bonus depreciation amount. The tax year is optional and can be used to suggest a typical federal bonus rate for that year; it is not multiplied into the depreciation calculation. This calculator can also solve for cost or rate when the other two values are known.

Bonus Depreciation Calculator

Enter the asset cost and pick the tax year — we’ll use the current federal bonus rate.

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Bonus Depreciation Formula

The following formula is used to calculate the bonus depreciation amount for an asset when the bonus depreciation rate is known:

BD = (C * R) / 100

Variables:

  • BD is the bonus depreciation amount
  • C is the cost or eligible basis of the asset
  • R is the bonus depreciation rate (%)
  • Tax year (optional) may help determine the applicable rate under tax law, but it is not multiplied into the bonus depreciation formula.

To calculate the bonus depreciation, multiply the cost (or eligible basis) of the asset by the bonus depreciation rate, then divide the result by 100.

What is Bonus Depreciation?

Bonus depreciation is a tax incentive that allows a business to immediately deduct a large percentage of the cost of eligible business property, rather than write it off over the “useful life” of that property. This incentive is used to encourage businesses to buy equipment and invest in their operations. The Tax Cuts and Jobs Act of 2017 increased bonus depreciation to 100% for qualified property acquired and placed in service after September 27, 2017 and before January 1, 2023 (for many taxpayers). After 2022, the federal bonus depreciation percentage generally phases down (for example, 80% for 2023, 60% for 2024, 40% for 2025, and 20% for 2026, with 0% in 2027 under current law). Qualified property may be new or used (as long as it meets the requirements, such as being the taxpayer’s first use and generally being acquired from an unrelated party). The property must be placed in service in the tax year the deduction is claimed. Rules can vary by asset type and circumstances, and state conformity may differ.

How to Calculate Bonus Depreciation?

The following steps outline how to calculate the Bonus Depreciation.

  1. First, determine the cost (eligible basis) of the asset ($).
  2. Next, determine the bonus depreciation rate (%). (The applicable rate depends on tax law and the placed-in-service timing.)
  3. Next, calculate the bonus depreciation amount by multiplying the cost of the asset by the bonus depreciation rate and dividing by 100.
  4. Finally, subtract the bonus depreciation amount from the cost of the asset to get the remaining basis for regular depreciation (subject to applicable tax rules).
  5. After inserting the variables and calculating the result, check your answer with the calculator above.

Example Problem:

Use the following variables as an example problem to test your knowledge.

Cost of the asset ($) = 10,000

Bonus depreciation rate (%) = 50

Bonus depreciation ($) = (10,000 × 50) / 100 = 5,000

Remaining basis after bonus depreciation ($) = 10,000 − 5,000 = 5,000