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100 Percent Bonus Depreciation Expiring Soon
Unless Congress revises the amount of bonus depreciation allowed in 2012, 100 percent bonus depreciation will only be available until December 31, 2011. For assets placed in service in 2012, the bonus rate is scheduled to drop to 50 percent. Bonus depreciation may only be claimed on the following types of property:
- MACRS property with a recovery period of 20 or fewer years;
- MACRS water utility property;
- MACRS qualified leasehold improvement property; and
- Depreciable computer software, whether developed internally or purchased.
Property cannot qualify for bonus depreciation if it is:
- Used property;
- Any property, except for computer software, that is not depreciated using MACRS (for example, intangible property); or
- An asset placed in service and disposed of in the same tax year.
The bonus deduction in 2011 is equal to 100 percent of the "unadjusted depreciable basis" of the qualified property. Unadjusted depreciable basis is generally the cost reduced by any amount expensed under Section 179 and any other required basis adjustments. Bonus depreciation is claimed in the tax year that a qualifying depreciable asset is placed in service.
Bonus depreciation for passenger automobiles is $8,000 in 2011 and 2012. A passenger automobile is any car, truck, or van with a gross vehicle weight rating (GVWR) of 6,000 pounds or less.
A truck or van (including an SUV) with a GVWR in excess of 6,000 pounds is not considered a passenger automobile and, therefore, is not subject to the $8,000 cap. Bonus depreciation allows expensing 100% of the cost of these vehicle first used in 2011 if used 100% for business. Wait until 2012 and the maximum bonus-depreciation write-off is 50 percent bonus depreciation.
If you have any questions about these or any tax developments, please contact Fred Schutz at 856-722-5300 ext. 201 or Dave Gill at ext. 210.
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