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Category: Tax Questions

Bonus Depreciation by Year

The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (H.R. 4853) was signed into law by President Obama on Dec. 17, 2010.  The legislation includes an extension of the Small Business Jobs and Credit Act of 2010's "bonus depreciation" allowance through the end of 2011.  The bill temporarily increases bonus depreciation from 50 percent to 100 percent for investments placed in service after September 8, 2010 and through December 31, 2011.  For investments placed in service after December 31, 2011 and through December 31, 2012, the bill provides for the previous 50 percent bonus depreciation.

Placed-in-service dateBonus Depreciation Level
January 1, 2008 – September 8, 201050 percent
September 9, 2010 – December 31, 2011100 percent
January 1, 2012 – December 31, 201250 percent

Under the new Bonus Depreciation schedule, businesses may immediately write-off 100 percent of the cost of depreciable property (e.g., manufacturing and distribution equipment, computers, and computer software) acquired in the same calendar year, providing the equipment is used in the United States.

To be eligible for the 100 percent depreciation bonus, the equipment must meet the following requirements:
  • The equipment must be new.  In other words, the original use of the equipment must commence with the taxpayer claiming the depreciation bonus after September 8, 2010 and before January 1, 2012.
  • The equipment must be depreciable under Modified Accelerated Cost Recovery System (MACRS) and have a depreciation recovery period of 20 years or less.
  • The equipment must be purchased between September 8, 2010 and before January 1, 2012.
  • The equipment must be placed in service before January 1, 2012.
In addition, H.R. 4853 provides an additional year of increased Section 179 of the Internal Revenue Code expensing for 2012.  Before enactment of this bill, Section 179 expensing was set to return to lower levels in 2012.

For 2010 and 2011, companies can expense up to $500,000 as long as total purchases in either year do not exceed $2,000,000.  For each dollar over, the eligible expensing amount correspondingly drops by one dollar.  Thus, companies that spend more than $2,500,000 in 2010 or in 2011 on tangible personal property cannot take advantage of Sec. 179.  For 2012, companies can expense up to $125,000 as long as total purchases in either year do not exceed $500,000.

"First-Year Bonus Depreciation Increased to 100 Percent."
N.p., n.d. Web. 18 Jan. 2011.
http://www.mhi.org/media/news/10305


Last Updated: 7/22/2016


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