Tuesday, January 18, 2011
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.
Bonus Depreciation Level
January 1, 2008 – September 8, 2010
September 9, 2010 – December 31, 2011
January 1, 2012 – December 31, 2012
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:
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.
Business owners should seek professional advice from tax consultants and accountants to take advantage of bonus depreciation. Click here to download H.R. 4853.