The American Reinvestment and Recovery Act (enacted in February 2009) attempts to encourage business investment by gives businesses the ability to take advantage of tax savings by accelerating depreciation on certain types of business equipment. These provisions allow you to expense more of the value of business equipment purchased in 2009, for a larger tax deduction.
Bonus Depreciation
The bonus depreciation provision allows you to depreciate 50 percent of the adjusted basis of certain qualified property during the year that the property is placed in service. To take advantage of this bonus depreciation provision for 2009, you must place the property in service (that is, buy it and have it operating) after December 31, 2008 and before January 1, 2010. You should be aware that some states modify or deny bonus depreciation for state income taxes. Check with your state department of revenue to see what the provisions are in your state.
Section 179 Depreciation
The other accelerated depreciation provision for 2009 involves Section 179 property. Under special provisions for 2009 you can expense up to $250,000 of section 179 property instead of the previous $128,000. There is an upper limit of $800,000 on all section 179 property placed in service during the tax year.
Use Form 4562-FY to provide information to the IRS on Section 179 depreciation and the special bonus depreciation.
If you are considering buying equipment, you may want to talk with your tax adviser to see if it would be a good tax move for you to buy this year rather than next year. And be sure to check to see if you state allows you to deduct these special depreciation allowances on your state income tax.
