Bonus Depreciation
Small Business Jobs Act of 2010 Extends and Increases the Allowance of Bonus Depreciation
The Small Business Jobs Act signed on September 27, 2010 gives companies a 50 percent bonus deduction on most shorter-life property placed in service from 2008 to 2012. The rate is increased to 100% for certain property placed into service between Sept. 8, 2010 and Dec. 31, 2011.
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.
| Placed In Service Dates | Bonus Depreciation Eligible | Bonus Depreciation Percentage | Notes |
|---|---|---|---|
| 09/10/01 - 05/05/03 | Yes | 30% | |
| 05/06/03 - 12/31/04 | Yes | 50% | 1 |
| 01/01/05 - 12/31/07 | No | N/A | |
| 01/01/08 - 12/31/09 | Yes | 50% | 2,3 |
| 01/01/10 - 09/08/10 | Yes | 50% | 3 |
| 09/09/10 - 12/31/11 | Yes | 100% | 3 |
| 01/01/12 - 12/31/12 | Yes | 50% |
1- Qualified Leasehold Improvements and Qualified Restaurant Property eligible for bonus depreciation if placed in service 10/23/04 - 12/31/04
2 - Qualified Restaurant Property eligible for bonus depreciation if placed in service 1/1/08 - 12/31/08
3 - Qualified Leasehold Improvements eligible for bonus depreciation
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.
