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HB 477

Taxes - As introduced, allows a taxpayer to annually elect to take a bonus depreciation deduction of 40 percent of the cost of assets purchased on or after January 1, 2026, during the tax year in which the assets were purchased when calculating net earnings or net losses for excise tax purposes; allows the taxpayer to take the federal depreciation percentage if it exceeds 40 percent. - Amends TCA Title 67, Chapter 4, Part 20.

114th Regular Session (2025-2026) Introduced by Kevin Vaughan

Tennessee businesses can deduct 40% of asset costs in the purchase year for excise tax purposes, or use higher federal depreciation rates, effective January 1, 2026.

Meeting Canceled
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Bill Summary · HB 477

Legislative bill overview

HB 477 allows Tennessee taxpayers to claim an accelerated depreciation deduction of 40% of asset costs for newly purchased equipment (starting January 1, 2026) when calculating excise tax obligations. If federal depreciation rules allow a higher percentage, taxpayers can use the federal rate instead. This applies only to the tax year assets are acquired.

Why is this important

Accelerated depreciation reduces taxable income in the year of purchase, allowing businesses to defer tax payments and improve cash flow when making capital investments. This can incentivize business expansion and equipment purchases in Tennessee, though it also reduces state tax revenue in the short term.

Potential points of contention

  • Revenue impact: The state loses tax revenue upfront; fiscal analysis would show the actual cost to Tennessee's budget
  • Equity concerns: Primarily benefits capital-intensive industries and larger businesses that can afford immediate asset purchases; smaller businesses may see less benefit
  • Retroactivity questions: Why January 1, 2026 specifically? This timing may advantage certain industries or planned investments over others

Compiled from official sources — confirm details with the bill’s official record.

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