Bonus Depreciation
Economic Stimulus Package Allows Bonus Depreciation for Projects Completed in 2008 and 2009
The Economic Stimulus Act signed on February 13, 2008, helps businesses in two ways. It gives companies a 50 percent bonus deduction on most shorter-life property placed in service in 2008 and 2009. It also increased — from $128,000 to $250,000 -- the §179 limit on expenses that small businesses can deduct from annual income, with a total cap of $800,000.
Bonus depreciation allows taxpayers to take a deduction of 50 percent of all property placed in service with a class life of 20 years or less. The remaining basis for the shorter-life property gets depreciated over the applicable MACRS recovery period. For every $1 million of 5-year property, the deduction will be approximately $600,000 in the first year.
Bonus Depreciation Qualifications:
To qualify for bonus depreciation in the first year, several criteria must be met:
- Depreciable property will qualify if the original use of the property commences with the taxpayer after December 31, 2007 and before January 1, 2009 but only if no written, binding contract for the acquisition of the property was in effect before December 31, 2007.
- Qualifying property is MACRS property that has a recovery period of 20 years or less.
- It may not be property that is required to be depreciated under the alternative depreciation system of §168.
Whether you are buying, building or improving a building, SourceCorp can help maximize your income tax deductions through an in-depth cost segregation study.
