Main Street Business #612 Bonus Depreciation Explained: The Tax Strategy Everyone Gets Wrong
Mar 6, 2026
They debunk common myths about bonus depreciation and why advertised tax benefits often mislead investors. They compare short-term and long-term rental rules and when losses remain trapped. They explain material participation tests and the self-rental rule that can unlock or block deductions. They call out abused tax pitches and offer a practical checklist to avoid buying investments for tax write-offs alone.
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Bonus Depreciation Isn't A Free Lunch
- Bonus depreciation is widely promoted but its tax benefit is limited unless you can convert passive losses into active losses through material participation or exceptions.
- Many promoters gloss over material participation rules to sell strategies like solar, mining rigs, and short-term rentals.
Check The Investment Without The Tax Benefit
- Before chasing a tax write-off, evaluate whether the investment makes sense economically without the deduction.
- If the after-tax benefit (e.g., $37,000 saved on a $100,000 loss at 37%) still means a net loss, rethink the deal.
Ask Who Bears The Debt Behind The Write-Off
- Always confirm whether bonus depreciation relies on you contributing basis or guaranteeing debt.
- Ask the promoter to show where recourse debt appears if your write-off exceeds your cash investment.