Bonus Depreciation
A tax break allowing businesses to deduct a large percentage of the cost of eligible assets in the year they are placed in service.
Bonus depreciation is a tax incentive that lets businesses immediately deduct a significant portion of the cost of new or used equipment and other qualifying assets. Instead of spreading the deduction over several years, businesses can write off a large chunk of the expense in the first year.
For example, if a company buys a new AI server for $100,000 and bonus depreciation is 80%, they can deduct $80,000 in the first year, reducing their taxable income significantly. This encourages businesses to invest in new technology and infrastructure.
Bonus depreciation allows businesses to deduct a percentage of the cost of qualifying new or used property in the year it is placed in service. This provision is designed to stimulate business investment by providing an immediate tax benefit. The Tax Cuts and Jobs Act of 2017 increased bonus depreciation to 100% for qualified property placed in service after September 27, 2017, and before January 1, 2023. The percentage has been phasing down since then, reducing by 20% each year.
Frontier AI labs like Anthropic are discussing economic impacts and policy responses to AI. Investments in AI hardware, such as specialized chips and servers, are substantial. Bonus depreciation can significantly lower the upfront cost of these investments for companies, influencing their decisions on scaling AI development and deployment.
- Preparing for AI’s economic impact: exploring policy responsesAnthropic · Anthropic Research ·
- Anthropic Claude
- Anthropic's discussion of AI's economic impact and policy responses may implicitly consider how tax incentives like bonus depreciation affect the cost of AI infrastructure investment.
- Section 179 Deduction
- This is another tax code section that allows businesses t
- Amortization
- This is the process of expensing the cost of intangible assets ove
- Capital Gains Tax
- This is a tax on the profit realized on the sale of a non-inv
The concept of bonus depreciation has evolved through various tax acts in the United States, aiming to encourage business investment. It is a component of the Internal Revenue Code.
While you cannot directly use bonus depreciation as an end-user, you can observe its effects by looking at the financial reports of companies investing heavily in AI hardware. Companies often mention their capital expenditures and tax strategies in their annual reports (10-K filings) which can be found on their investor relations websites.
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Questions people ask
- What kind of assets qualify for bonus depreciation?
- Generally, new or used tangible property with a recovery period of 20 years or less, including machinery, equipment, furniture, and certain improvements to buildings.
- Is bonus depreciation still available?
- Yes, but the percentage of the cost that can be deducted has been phasing down since 2023. It was 100% for property placed in service before 2023.
First seen on Subvolts Jul 8, 2026. Updated Sep 15, 2026. Written by an AI model from the items above and reviewed against them weekly; report an error.