When is bonus depreciation taken for eligible property?

Bonus depreciation is designed to allow businesses to recover the cost of eligible property more quickly by providing a significant upfront tax deduction. The correct choice indicates that bonus depreciation is taken immediately when the property is placed in service. This means that as soon as the asset is put into use for business purposes, the taxpayer can claim the bonus depreciation for that tax year.

This immediate recognition benefits businesses by improving cash flow in the year the asset is bought and deployed. Since the tax code aims to encourage investment in business property and stimulate economic growth, allowing a large deduction right away can motivate businesses to invest more.

Other choices present different scenarios that don't align with the specifics of how bonus depreciation works. For example, bonus depreciation is not deferred to future years or tied to the sale of the asset, nor is it spread out over several years, which would defeat the purpose of the incentive designed to encourage immediate capital investment. Thus, the statement that it is taken immediately when the property is placed in service accurately reflects the policy behind bonus depreciation.