# How to Claim Bonus Depreciation

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Last modified: 2026-05-29T19:39:17+00:00
Type: efin_guide

## Summary

How to Claim Bonus Depreciation. Comprehensive guide.

## Content

Bonus depreciation is claimed on IRS Form 4562 alongside Section 179 and MACRS. Unlike Section 179, bonus depreciation applies automatically to qualifying property unless you elect out.

How bonus depreciation works on the return

Bonus depreciation appears on Form 4562 Part II ("Special Depreciation Allowance"). The mechanics:

Determine equipment basis (cost minus Section 179 if any)
Apply bonus percentage (40% in 2025)
Result is bonus depreciation deduction
Remaining basis after bonus is subject to MACRS


2025 bonus percentage

40% in 2025. Phasing down 20% per year:

2025: 40%
2026: 20%
2027: 0% (under current law)


Congress could change this. Confirm current law at filing.

Qualifying property

Same property categories as Section 179:

Tangible personal property with recovery period of 20 years or less
Computer software
Qualified Improvement Property
Certain plants bearing fruits and nuts


Used property qualifies (since 2018) as long as new to you.

Election out

You can elect out of bonus depreciation on a class-by-class basis. Reasons to opt out:


State tax conformity issues
Multi-year tax planning
Avoiding creating excess deductions
Maintaining basis for future planning


Election is made by attaching a statement to your tax return for the year. The statement identifies the property class for which bonus is waived.

Per-class election

Bonus depreciation election out is by MACRS class (5-year property, 7-year property, etc.), not per-property. Either all qualifying property in a class gets bonus, or none does (within the elected-out class for that return).

To elect out:

Decide which class to opt out of
Attach written statement to the timely-filed return
Statement should reference IRC §168(k)(7) and identify class
Election is irrevocable once made for the year


Stacking with Section 179

Section 179 applies first, then bonus depreciation on remaining basis:


Calculate Section 179 election (up to limit and income)
Subtract from equipment basis
Apply bonus percentage to remainder
Subtract bonus from remaining basis
Apply MACRS to final remaining basis


Worked example

$400,000 equipment placed in service 2025. Taxable income $300,000.


Section 179 maximum: $300,000 (limited by income)
Remaining basis: $100,000
Bonus depreciation (40%): $40,000
Remaining basis: $60,000
Year 1 MACRS (5-year): $60,000 × 20% = $12,000
Total year 1 deduction: $352,000
Net taxable income: $300K - $352K = -$52K (NOL)


NOL implications

Bonus depreciation can create a net operating loss. The NOL carries forward indefinitely:

Apply against future taxable income
Track NOL carryforward on Form 1045 or 1138
NOL deductions limited to 80% of taxable income (post-2017 NOLs)


This is different from Section 179, which cannot exceed taxable income in the year claimed.

State conformity issues

Many states do not conform to federal bonus depreciation:

Some states decouple entirely
Some states allow partial bonus
Some states require add-back over multiple years


Track separate federal and state depreciation schedules where applicable. Your CPA handles this.

Form 4562 documentation

Required information:

Equipment description
Date placed in service
Cost or other basis
Bonus depreciation deduction
Election-out statement if applicable


Common questions

Can I take bonus depreciation without Section 179? Yes. Bonus depreciation can be claimed regardless of Section 179 election.

What if I do not file an election out and I want one? The default is to apply bonus. To opt out, you must affirmatively elect out on a timely-filed return.

Can I amend a return to change my Section 179 / bonus election? Section 179 elections can be amended within statutory time limits. Bonus depreciation election-out cannot be revoked once made.

How does bonus apply to used equipment? Used equipment qualifies as long as new to you and not acquired from a related party.

Common mistakes


Forgetting bonus is automatic; thinking it has to be elected
Missing the opt-out timing if needed
Not tracking NOL carryforward properly
State conformity errors
Not coordinating with Section 179 strategy


Action steps


Identify all qualifying equipment placed in service during the year
Calculate the optimal Section 179 + bonus stacking
Confirm state conformity
If electing out, attach proper statement to timely return
Track resulting NOL if any
Coordinate with multi-year tax planning