Posts Tagged ‘Bonus Depreciation’

2010 Tax Relief Act – Bonus Depreciation and Section 179 Expense

Bonus depreciation: 2010 Tax relief Act extended bonus depreciation through December 31, 2012. The Act also increases 50% bonus depreciation to 100% for qualified assets (must be new property) acquired and placed in service after September 8, 2010, and before January 1, 2012. Unlike Code Sec. 179 expense, it is not limited to use by smaller business or capped at a certain dollar level.

BONUS DEPRECIATION-Effective dates and limitations
Asset placed in service Bonus amount
January 1, 2008-September 8, 2010   50%
September 9, 2010-December 31,2011 100%
January 1,2012-December 31,2012   50%

 Code Sec. 179 expense: Congress has repeatedly increased the dollar and investment limits under Code Sec. 179 to encourage business spending. The 2010 Small Business Jobs Act increased the Code Sec. 179 deduction  limits to $500,000 for businesses with total asset purchases of $2 million or less for tax years beginning in 2010 and 2011. The 2010 Tax relief act sets the maximum Sec. 179 expense for 2012 at $125,000 for companies purchasing up to $500,000 in eligible assets. Both amounts are indexed for inflation. For tax years beginning after 2012, the Act resets Sec. 179 expense amounts at $25,000 with a $200,000 total acquisition limitation, and the reset amounts are not adjusted for inflation.

§179 Expense
For Taxable years beginning in Deduction Limit Total Acquisition Limit
2009 $250,000 $800,000
2010 $500,000 $2,000,000
2012 $125,000* $500,000*
2013 $25,000 $200,000
*Indexed for inflation    

 Other important issues relating to bonus depreciation and Code Section 179 deduction:

Section 179 deductions are limited by net income, thus, it cannot be used to create a tax loss.  Used equipment qualifies for Section 179, but is not eligible for bonus depreciation.  Bonus depreciation can be used to create a tax loss.  Section 179 and bonus depreciation can be used in tandem when circumstances permit.

To see more examples of qualified property eligible for bonus depreciation, see my blog from October in the Archives which discusses qualified leasehold improvement, restaurant and retail properties

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