100% Bonus Depreciation Is Ending

100% Bonus Depreciation Ends This Year

Imagine this scenario. 

You work a W-2 job, paying your federal, state, and local taxes dutifully with every paycheck. 

Not tough to imagine considering 92% of Americans are employed and receive a W2.

But now picture this.

When it's time to file taxes, your CPA runs the numbers and is shocked at what she's about to tell you. 

She goes back onto her computer to double check. She's convinced there's something wrong here.

She looks up at you and the words come out.

"You'll owe $0 in taxes this year".

It's called Bonus Depreciation. And it's been around since 2002.

Back then, the U.S. was recovering from the effects of the Dot Com crash and the subsequent bear market post-9/11. Congress wanted to incentivize small business investment.

So they allowed businesses to immediately deduct the a large percentage of eligible purchases in the year it was purchased, as opposed to over its "useful life", i.e. 30+ years.

In 2003 it was raised from 30% to 50%.

In 2008 it upped to 50%.

In 2017 things went wild. It upped to 100% and extended out to 2026.

For 24 years, this completely legal tax loophole has increased in size and been continuously extended.

Now it looks like the show is coming to an end.

2022 is the last year for 100%. 

You see, unless Congress extends it again, the way the law is currently written starting in 2023 the Bonus Depreciation will start phasing out with 80% next year, then 60%, and so on until it's completely over in 2027.

OK, but what does this have to do with me you're wondering. I'm not a business, I just work a job.

Well, Bonus Depreciation has been used by Real Estate professionals to deduct depreciation on real estate purchases. The only catch is, you had to be a real estate professional.

That's where the short-term rental tax loophole comes in.

Real Estate pros can use Bonus Depreciation for any of their properties since Real Estate is active, i.e. full-time, income for them. 

But people who just work in regular W2 jobs (tech, engineers, marketing, doctors, lawyers, etc.) can still get Bonus Depreciation despite rental income being passive for them IF....

The property is a STR (short-term rental, think: Airbnb). 

If you want to learn more about, check out this guide from HallCPA LLC:

100% Bonus Depreciation might be ending, but there's always 80% next year!

Sam Bankman-Fried Arrested

We've never been big fans of crypto so this isn't all too surprising. 

But if you haven't been paying much attention, Sam Bankman-Fried, or SBF, was the Founder & CEO of FTX, one the largest centralized crypto exchanges in the world.

He was also violating (allegedly) his own TOS by using customer deposits to "lend" to a sister company, Alameda Research, which acted as a hedge fund making all types of risky speculative and highly leveraged bets.

When the crypto market turned earlier this year, Alameda lost a ton of money and FTX got stuck with it's pants down.

We sincerely hope that none of our readers had any funds invested on FTX. It could be a while if those funds are ever recovered, if at all.

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