March 14, 2011
This legislation, which was signed into law on December 17, 2010 expands and extends bonus depreciation through 2012. The Act provides 100% bonus depreciation for qualifying assets placed in service from September 9, 2010 through December 31, 2011. For qualifying assets placed in service from January 1, 2012 through December 31, 2012, the Act provides 50% bonus depreciation.
The 50% bonus depreciation provided in the Small Business Jobs Act of 2010 still applies to new assets placed in service from January 1, 2010 through September 8, 2010.
Bonus Depreciation Timeline:
- January 1, 2010 to September 8, 2010 – 50 Percent
- September 9, 2010 to December 31, 2011 – 100 Percent
- January 1, 2012 to December 31, 2012 – 50 Percent
These incentives apply to new/original use assets with a MACRS recovery period of 20 years or less.
In addition, the Act extends S179 Expensing through December 31, 2012. In 2012 a taxpayer may expense up to $125,000 of qualifying assets with a phase-out threshold of $500,000. The higher limits under the Small Business Jobs Act of 2010 are still effective for tax years 2010 and 2011.
Benefit: Businesses that made/make qualifying capital expenditures in 2010 – 2012 will realize greater tax benefits by way of further reducing or eliminating their current tax liabilities.
Consideration: Eligible businesses that are constructing new buildings or making improvements to existing buildings should consider having a cost segregation study performed for the 2010 tax year. A properly performed Engineering Based Cost Segregation Study can significantly increase the amount of project costs that qualify for these incentives.