By: Martin M. Shenkman, CPA, MBA, JD
The tax laws have often included special incentives to encourage investment in equipment and other assets by businesses. The recession in 2008 and later encouraged Congress to enact such incentives. One such incentive is called "bonus depreciation". This benefit is available for equipment and other purchases which you cannot deduct under Code Section 179 elective expensing (see 179 in the glossary). The bonus depreciation benefit allows you to deduct (write off) in the year you purchase qualifying equipment or other qualifying property 50% of the cost. You cannot double dip --- if you wrote off part of the cost using the Section 179 elective expensing you cannot write off those same dollars a second time. Any cost of purchases which was not deducted under Section 179 or as bonus depreciation can qualify for general depreciation (cost recovery or MACRS) deductions. This extra first year deduction can be helpful in that it can reduce the cost of income tax in the year of acquisition. But if your business isn't profitable the extra deduction won't do you much good. Before making investments review your planned acquisitions with your CPA. Often, some simple planning steps can net you much better tax write-offs.
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