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Businesses are allowed to recover the cost of capital
expenditures over time according to a depreciation
schedule. These schedules vary based on the type of
equipment.
Recent
legislation passed in 2010, allows businesses to recover
the costs of capital expenditures made from September 8,
2010, and before January 1, 2012, faster than the
ordinary depreciation schedule would allow by permitting
these businesses to immediately write off 100% of the
cost of depreciable new property, which is called Bonus
Depreciation, for use in the United States.
Bonus
Depreciation Summary
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Bonus Depreciation allowance is equal to 50% of the
adjusted cost basis of qualified equipment and only
available through 12/31/10
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Bonus Depreciation applies to purchases of tangible
personal property with a Modified Accelerated Cost
Recovery System (“MACRS”) recovery period of 20
years or less. Some examples of 3, 5, 7, and 15 MACRS
equipment is outlined below:
a)
Qualifying 3 year property includes rent own
property
b) Qualifying 5 year property includes computer
hardware, software, switching equipment,
manufacturing production or extracting, solar or
geothermal energy equipment used to generate
electricity, & light trucks, etc.
c) Qualifying 7 year property includes office
furniture, agricultural
d) Qualifying 15 year property includes leasehold
improvements
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Equipment must be purchased and placed in service in
2010
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Equipment must be new
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You may not claim the depreciation bonus for 2010 if
a binding purchase contract existed prior to Jan. 1,
2010
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Allowed for both regular and alternative minimum tax
purposes
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Discretionary - Taxpayer need not claim the
depreciation bonus
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Depreciation bonus will expire at end of 2010
In
short Section 179 deduction & Bonus depreciation provide
the following benefits:
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100% first year deduction for equipment & software
purchases up to $500,000
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50% first year Bonus depreciation for purchases
greater than $500,000 and not capped
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Standard MACRS depreciation for remaining amounts
not covered by the above
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If you are
planning on acquiring new equipment or software and are
interested in seeing the tax potential benefit you may
receive as a result of the acquisition, please open our
calculator. You may find that if you lease the
equipment, the tax savings in the first year are
actually greater than the first year’s lease payments.
The
Economic Stimulus Act of 2008 and the American Recovery
and Reinvestment Act of 2009 provide businesses great
incentives to invest in new equipment and software.
Please
click here to use the
Section 179 Calculator.
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