How to Use This Calculator
- 1
Enter your asset details
Input the total cost of the asset, the applicable bonus depreciation percentage (e.g., 20% for 2026), your tax bracket, and the IRS-defined useful life in years.
- 2
Review your results
The calculator shows three cards — First-Year Total Deduction, Immediate Tax Savings, and Lifetime Tax Savings — plus an insights panel with the bonus breakdown and a full depreciation schedule table.
Example Calculation
A business owner purchases a $50,000 asset and takes 100% bonus depreciation in a 25% tax bracket with a 5-year useful life.
Cost of Asset
50,000
Bonus Depreciation Percentage
100
Tax Bracket
25
Useful Life of Asset
5
Results
First-Year Total Deduction
$50,000
Immediate Tax Savings
$12,500
Lifetime Tax Savings
$12,500
Insights card shows bonus depreciation of $50,000 (100% of cost), remaining basis fully expensed with no straight-line needed, and bonus-only tax savings of $12,500.
Tips
Compare 2026's 20% Rate Against Full Expensing
At the 2026 rate of 20%, a $75,000 asset yields a $27,000 first-year deduction and $6,750 in immediate tax savings at a 25% bracket — compared to $75,000 and $18,750 with 100% bonus. Use the calculator to see how the phase-down affects your purchase timing.
Model Higher Tax Brackets for Maximum Savings
Increasing the tax bracket from 25% to 32% on a $100,000 asset at 40% bonus raises your immediate tax savings from $12,143 to $15,543. Enter your actual combined rate to see true dollar savings.
Use Section 179 to Supplement Lower Bonus Rates
With bonus depreciation phasing down, consider pairing it with Section 179. On a $50,000 asset at 60% bonus, the first-year deduction is $34,000 with $8,500 in tax savings at 25%. Section 179 could cover additional basis that bonus depreciation no longer reaches.
Check State Conformity Before Filing
Not all states follow federal bonus depreciation rules. A $50,000 asset with 100% bonus saves $12,500 federally at 25%, but your state may disallow it entirely, reducing your actual combined savings. Always verify your state's conformity before relying on the federal number.
How Bonus Depreciation is Calculated
The core formula for bonus depreciation centers on the eligible cost and the applicable IRS bonus rate:
Bonus Depreciation = Cost of Asset x Bonus Depreciation Percentage
Remaining Basis = Cost of Asset - Bonus Depreciation
Annual Straight-Line = Remaining Basis / Useful Life
First-Year Total Deduction = Bonus Depreciation + Annual Straight-Line
Tax Savings = First-Year Total Deduction x Tax Rate
For example, a $50,000 asset at 60% bonus with a 5-year life and 25% tax rate:
- Bonus Depreciation: $50,000 x 0.60 = $30,000
- Remaining Basis: $50,000 - $30,000 = $20,000
- Annual Straight-Line: $20,000 / 5 = $4,000
- First-Year Total Deduction: $30,000 + $4,000 = $34,000
- Immediate Tax Savings: $34,000 x 0.25 = $8,500
TCJA Phase-Down Schedule
The Tax Cuts and Jobs Act set 100% bonus depreciation for 2017-2022, with a 20-percentage-point annual phase-down:
| Year | Bonus Rate | Bonus on $50,000 | First-Year Deduction (5-yr life) | Tax Savings (25%) |
|---|---|---|---|---|
| 2022 | 100% | $50,000 | $50,000 | $12,500 |
| 2023 | 80% | $40,000 | $42,000 | $10,500 |
| 2024 | 60% | $30,000 | $34,000 | $8,500 |
| 2026 | 20% | $10,000 | $18,000 | $4,500 |
| 2027+ | 0% | $0 | $10,000 | $2,500 |
Each row assumes a $50,000 asset with a 5-year useful life.
At 0% bonus (2027+), the only deduction is the $10,000 annual straight-line amount.
Depreciation Schedule Walkthrough
With partial bonus depreciation, the calculator generates a year-by-year schedule.
For a $50,000 asset at 60% bonus and 5-year life:
| Year | Opening Basis | Depreciation | Cumulative | Closing Basis |
|---|---|---|---|---|
| 1 | $50,000 | $34,000 | $34,000 | $16,000 |
| 2 | $16,000 | $4,000 | $38,000 | $12,000 |
| 3 | $12,000 | $4,000 | $42,000 | $8,000 |
| 4 | $8,000 | $4,000 | $46,000 | $4,000 |
| 5 | $4,000 | $4,000 | $50,000 | $0 |
Year 1 combines the $30,000 bonus with the $4,000 straight-line deduction.
The remaining $20,000 is spread evenly across the 5-year recovery period at $4,000 per year.
Frequently Asked Questions
What is bonus depreciation?
Bonus depreciation is an accelerated tax deduction that allows businesses to immediately deduct a large percentage of an eligible asset's purchase price in the year it is placed in service. The formula is: Bonus Depreciation = Cost of Asset x Bonus Depreciation Percentage. For example, a $50,000 asset at 100% bonus yields a $50,000 first-year deduction.
What is the bonus depreciation rate for 2026?
Under the TCJA phase-down schedule, the bonus depreciation rate for 2026 is 20%. For a $75,000 asset with a 5-year useful life at 25% tax, this means $15,000 in bonus depreciation plus $12,000 annual straight-line on the remaining $60,000, for a first-year total deduction of $27,000 and $6,750 in immediate tax savings.
How do I calculate the first-year total deduction?
First-Year Total Deduction = Bonus Depreciation + Annual Straight-Line Deduction. At 60% bonus on a $50,000 asset with a 5-year life: bonus is $30,000, remaining basis is $20,000, annual straight-line is $4,000, so the first-year total is $34,000 — or 68.0% of the asset cost.
How are tax savings calculated?
Immediate Tax Savings = First-Year Total Deduction x Tax Rate. For a $50,000 asset at 100% bonus and 25% tax rate, the first-year deduction is $50,000 and the immediate tax savings are $12,500. Lifetime Tax Savings always equal Cost x Tax Rate ($12,500 in this case) since the full cost is eventually depreciated.
Can bonus depreciation create a net operating loss?
Yes. Bonus depreciation can contribute to or create a net operating loss (NOL). Under the TCJA, NOLs can be carried forward indefinitely to offset up to 80% of taxable income in future years but cannot be carried back. A $50,000 bonus deduction could push a business with $40,000 in other income into a $10,000 NOL.
What assets qualify for bonus depreciation?
Generally, new or used tangible property with an IRS recovery period of 20 years or less qualifies — including machinery, equipment, computers, vehicles, and certain qualified improvement property. The calculator's Useful Life input corresponds to this recovery period (e.g., 5 years for vehicles, 7 years for equipment). Real estate typically does not qualify.