Bonus depreciation

Definition

Expensing qualifying assets in year one instead of over their lives.

Why It Matters

After a purchase price allocation, the equipment, vehicles, and furniture classes can often be written off immediately rather than depreciated over years, which turns part of the price into a first-year deduction and real cash. Under current law the first-year percentage is back at one hundred for qualifying property, but the boundary does the work: buildings, land, and goodwill never qualify, and goodwill amortizes over fifteen years instead. This is why buyers push allocation toward equipment and sellers push it away, and why the allocation schedule is negotiated rather than copied. Model the year-one tax cash with your CPA before you price the deal's returns.

In numbers: A $1.5M asset deal allocating $400k to trucks and equipment can expense that $400k in year one under current law; at a 30% combined rate that is $120k of tax cash the same allocation pointed at goodwill would spread over fifteen years.