2022 Is the Last Year of 100% Bonus Depreciation — and 100% Business Meals: A Year-End Acceleration Checklist

Key takeaways

• IRC § 168(k) allows 100% bonus depreciation for qualified property placed in service in 2022. The percentage drops to 80% for property placed in service in 2023, 60% in 2024, 40% in 2025, and 20% in 2026.
• The 100% business meals deduction under IRC § 274(n), as temporarily expanded by the Consolidated Appropriations Act of 2021, applies to food and beverages from a "restaurant" for 2021 and 2022. The deduction returns to 50% on January 1, 2023.
• These are two separate tax benefits with the same expiration date — each requires independent analysis.
• Both create strong incentives for accelerating economic decisions. Neither requires fabricating timing — but both reward proactive attention to what is already in process.

The bonus depreciation window

How 100% bonus depreciation works

IRC § 168(k) allows a taxpayer to immediately deduct 100% of the cost of qualified property placed in service during the year, bypassing the ordinary depreciation schedule. For 2022, "qualified property" includes most depreciable business assets with a recovery period of 20 years or less under MACRS, computer software, and qualified improvement property.

The requirement is "placed in service" — the asset must be operational by December 31, not merely ordered or delivered. A piece of manufacturing equipment ordered in November but still in transit on January 1, 2023 does not qualify for 2022 bonus depreciation.

What shifts in 2023

The TCJA's bonus depreciation schedule was set at 100% for property placed in service after September 27, 2017 through December 31, 2022, then declining by 20 percentage points per year through 2026. No legislation has extended the 100% threshold. Under current law, a company that places $500,000 of qualified equipment in service in 2022 deducts $500,000 immediately. The same equipment placed in service on January 1, 2023 generates a $400,000 first-year deduction — a $100,000 timing difference in the deduction, translating to real tax cost based on the company's effective rate.

Specific assets where timing decisions are live

Equipment and machinery. If purchasing or leasing new equipment is already planned for early 2023, the question is whether the transaction can be advanced and the asset placed in service by year-end. The relevant inquiry is delivery and commissioning schedules, not just order dates.

Qualified improvement property. Interior improvements to nonresidential property — if not structural building components — qualify as QIP with a 15-year MACRS life, making them eligible for bonus depreciation. Tenant-improvement projects underway now that could be completed and the space placed in service before December 31 may warrant a timeline review.

Used property. Post-TCJA bonus depreciation applies to used property as long as the taxpayer has not previously used the property and has not acquired it from a related party. Used equipment purchases benefit from the same percentage as new.

The election alternative

Taxpayers who do not want to take 100% bonus depreciation can elect out of the provision and use regular MACRS depreciation instead. This election is made on a class-by-class basis and is irrevocable for the year. Some businesses prefer to avoid large first-year deductions to manage taxable income near net operating loss limits or to smooth out effective rates. The election-out analysis should be part of any year-end fixed-asset review.

The business meals window

What the 100% deduction covers

The Consolidated Appropriations Act of 2021 temporarily changed IRC § 274(n) to allow a 100% deduction — rather than the standard 50% limit — for food and beverages provided by a "restaurant" for business purposes, for tax years 2021 and 2022.

The IRS defined "restaurant" in Notice 2021-25 as a business that prepares and sells food or beverages to retail customers for immediate consumption. The definition excludes:

• Businesses that primarily sell prepackaged food or beverages not for immediate consumption
• Grocery stores, convenience stores, liquor stores, drug stores, and vending machines
• Employer-operated eating facilities — employee cafeterias and meals provided on business premises that otherwise fall under § 119

The practical effect is that restaurant meals — including delivery and takeout from a qualifying restaurant — are 100% deductible in 2022, while groceries purchased for a company meeting are 50% deductible at best.

What changes January 1

The 100% meals deduction expires December 31, 2022. Beginning in 2023, the standard 50% limitation under § 274(n) returns for all business meals, including meals from qualifying restaurants. No legislative proposal to extend the temporary provision has been enacted as of this writing.

Planning implications for meals

The meal deduction timing is less flexible than equipment timing — individual meals happen when they happen. But there are categories of planned business entertainment, client meals, and team events where the decision of whether to hold them in 2022 or early 2023 is genuinely within the business's control. A company planning a year-end client dinner or a team offsite should recognize that the same spending in January produces a 50-cent deduction where December spending produces a dollar.

The convergence: why both matter for the same businesses

Owner-managed businesses, particularly in manufacturing, professional services, and construction, often have both capital expenditure decisions and entertainment/meal activity in the fourth quarter. The convergence of two expiring 100% benefits at the same date means a single year-end planning session should address both — not because the analysis is identical, but because both require the same timing discipline before December 31.

Checklist: the questions to answer before December 31

• Which equipment purchases already planned for early 2023 can be advanced and placed in service by year-end?
• Which tenant-improvement or facility projects have a credible path to completion by December 31?
• Which large business meals or team events planned for January can be moved to December without disrupting the business?
• Has the company elected out of bonus depreciation for any asset class, and does that election remain appropriate given the 2023 phasedown?
• Has the bonus depreciation benefit been modeled against the § 461(l) excess business loss limitation for pass-through owners?

Bottom line

The last week of December 2022 is not a time to create transactions that do not make business sense. It is a time to make decisions that were already coming — and to make them on the right side of a calendar-year line that has real tax consequences. Both 100% benefits are gone at midnight.