Can You Elect Out of Bonus Depreciation on an Amended Return?

Bonus depreciation is an accelerated depreciation method allowing businesses to deduct a portion of an asset’s cost in its first year of service. The deduction rate is currently being phased down; for property placed in service in 2025, the rate is 40%, decreasing to 20% in 2026 before being eliminated. Taxpayers can choose not to take this deduction, a decision known as “electing out.” This choice is typically made on an original tax return, but circumstances may lead a business owner to reconsider electing out after the return has been filed.

The Standard Election Out Procedure

The default treatment for qualifying property is to apply bonus depreciation, so a taxpayer must make an affirmative election to decline this treatment. This election is made on a timely filed federal income tax return for the year the property was placed in service, including any valid extensions. A taxpayer does not simply omit the bonus depreciation deduction; they must formally opt out.

The election is made by class of property, not for every asset a business owns. These classes are determined by the asset’s recovery period under the Modified Accelerated Cost Recovery System (MACRS). A business could, for example, elect out for all its 5-year property while still claiming bonus depreciation on its 7-year property. To execute the election, the taxpayer must attach a statement to their timely filed return that identifies the property classes being opted out of. Once this election is made on an original return, it is generally binding.

Correcting a Failure to Elect Out

If a taxpayer fails to make the election on their original return, there are limited circumstances under which it can be made late. A taxpayer who timely filed their return but forgot to make the election may be eligible for an automatic six-month extension. This grace period is calculated from the original due date of the return, excluding extensions. To make the late election, the taxpayer must file an amended return within this six-month window, attaching a statement that identifies the election being made. Once this window closes, making the election is not permitted unless the taxpayer receives special permission from the IRS through a private letter ruling.

A different situation arises if a taxpayer neither elects out nor claims the bonus depreciation. This is considered an improper method of accounting, and to correct it, the taxpayer must file Form 3115, Application for Change in Accounting Method, instead of a standard amended return.