Depreciation Bonus information clearinghouse
 
Information about Depreciation Bonus and Sec. 179 Expensing


 Text of H.R. 5771 to extend bonus depreciation and Sec. 179 to the end of 2014
  
 View the 2013 AED Depreciation Bonus brochure
  
 Free Bonus Depreciation/Sec. 179 Allowance Calculator
  
 Multi-industry letter to Congress urging 50% depreciation bonus extension
  
 AED letter to Senate Finance Committee highlighting the positive enhancement an extension of the depreciation bonus would add to MAP-21
  
 Multi-industry letter to Congress urging reinstatement of 100 percent depreciation bonus for 2012 and other pro-growth tax policies
  
 Text of H.R. 4196 to extend 100 percent depreciation bonus through 2012
  
 Letter to Congress Urging 100 Percent Depreciation Bonus Extension through 2012
  
 JCT Explanation of the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010
  
 Summary and Text of the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010
  
 Explanation Of The Tax Provisions in the Small Business Jobs Act Of 2010
  
 2010 IRS Revenue Procedure on Sec. 179 Cost Limitations
  
 Small Business Jobs Act (H.R. 5297)
  
 AED National Chairman Dennis Vander Molen's Testimony Before the House Small Business Committee on the Depreciation Bonus
  
 Letter to Congress Urging Bonus Depreciation Reinstatement
  
 2008 AED/NUCA Depreciation Bonus Study
  
 2003 AED/NUCA Study on Impact of the Depreciation Bonus
  
 

Summary of 2003 AED/NUCA Depreciation Bonus Study

  
 Link to IRS Website
  

Depreciation Bonus Information Clearinghouse

News Alert!! Congress Votes to Reinstate Bonus Depreciation, Increased Sec. 179 Expensing for 2014

On Dec. 16, 2014, the U.S. Senate passed the Tax Increase Prevention Act (H.R. 5771). The House of Representatives approved the bill in early December and the White House has indicated President Obama will sign it.

The legislation reinstates for 2014 only a number of tax provisions that expired at the end of 2013, including 50 percent bonus depreciation and higher Sec. 179 expensing levels ($500,000 with a $2 million phase-out cap).

NOTICE: The information on this site is provided by Associated Equipment Distributors as a public service to equipment purchasers. It should not be construed as tax advice or as a promise of potential tax savings or reduced tax liability. For more information about the bonus depreciation, contact your tax professional or visit the Internal Revenue Service website.



Depreciation Bonus At A Glance
  • The Tax Increase Prevention Act reinstates 50 percent depreciation bonus for 2014.
  • Depreciation bonus helps businesses that buy new equipment cut their tax bill by allowing them to depreciate ("write off") more of the cost the equipment in 2014.
  • Applies, among other things, to purchases of tangible personal property (including construction, mining, forestry, and agricultural equipment) with a MACRS recovery period of 20 years or less. (An IRS table of MACRS cost recovery periods for different types of property is available here.)
  • Applies to new equipment only ("original use" must occur with the taxpayer claiming bonus depreciation).
  • Equipment must be purchased and placed in service in 2014 by the taxpayer claiming bonus in order to qualify.
  • In lieu of claiming bonus depreciation, companies may instead elect to accelerate alternative minimum tax (AMT) credits.
  • Discretionary - Taxpayer need not claim the depreciation bonus.
Sec. 179 Expensing At A Glance
  • For 2014, Sec. 179 expensing levels return to $500,000 with a $2 million phase-out (i.e., taxpayers can expense $500,000 in purchases as long as total purchases don't exceed $2 million).
  • New and used equipment is eligible for expensing
  • Can be combined with depreciation bonus (i.e., expense first $500,000 of equipment purchases and take bonus depreciation on new equipment purchases between $500,000 and $2 million).

For more information about the Tax Increase Prevention Act from the House Ways & Means Committee, click here.

For more about technical issues, please consult IRS Publication 946: How to Depreciate Property.



Frequently Asked Questions


Q: What requirements does equipment have to meet to be eligible for the depreciation bonus?
A: The equipment must meet the following requirements to qualify for bonus depreciation:
  • The equipment must be depreciable under the modified accelerated cost recovery system (MACRS) and have a depreciation recovery period of 20 years or less. The MACRS cost recovery period for construction equipment is generally five years. For an IRS chart detailing the MACRS recovery periods for various types of property, click here. Check with your tax professional.
  • The original use of the equipment must commence with the taxpayer claiming the depreciation bonus after Dec. 31, 2013.
  • The equipment must be purchased prior to Jan. 1, 2015.
  • The equipment must be placed in service before Jan. 1, 2015. Certain equipment with a recovery period of 10 years or more and certain transportation property can be placed in service before Jan. 1, 2016 and still qualify for the depreciation bonus. Check with your tax professional.

Q: What do the 2014 capital investment incentives (depreciation bonus and increased Sec. 179 expensing) mean for my business?
A: By lowering your taxable income, the depreciation bonus and Sec. 179 can cut your 2014 tax bill, thereby freeing up cash in the near term.

Q: Is there any downside to taking advantage of bonus depreciation?
A: The more you depreciate now, the less you’ll be able to depreciate later. In other words, your tax bill in future years may be higher because you’ll have less to deduct. But ask yourself this: Would you rather have the tax savings in your pocket now to invest in your company or would you rather have Uncle Sam hold onto your money for a couple additional years?

Q: How does the depreciation bonus work?
A: Companies that buy new equipment in 2014 can depreciate 50 percent of the cost in the first year, plus the percentage of the remaining basis in the equipment that would ordinarily be depreciable under MACRS. For a $100,000 piece of equipment with a five-year MACRS life, the 2014 depreciation would be $60,000: $50,000 depreciation bonus, plus 20 percent of the remaining $50,000 basis. However, this is just a general example of how the law works. Every taxpayer is unique, so check with your tax professional about whether and how you would benefit from bonus depreciation.

Q: Does the equipment have to be new to qualify for the depreciation bonus?
A: Yes. To be eligible, the “original use” of the equipment must commence with the taxpayer claiming the depreciation bonus after Dec. 31, 2013.

Q: If I’m leasing a piece of equipment and I decide to buy it, can I claim the depreciation bonus?
A: There is one very limited exception to the “new” requirement. If Company A is leasing a piece of equipment (e.g., from a distributor) and Company A is the first and only user of the equipment (i.e., it hasn’t been rented or leased to any other customer) and Company A converts the lease to a purchase within three months of the start of the lease period, then Company A may claim the depreciation bonus on the equipment. Check with your tax professional for more details.

Q: How long do I have to take advantage of the deprecation bonus?
A: The depreciation bonus is temporary. To qualify, the new equipment must be acquired and placed in service by the taxpayer claiming the depreciation bonus before Jan. 1, 2015.

Q: Do I have to use the deprecation bonus?
A: No. You may elect out of depreciation bonus (meaning it’s your choice whether to use it). Additionally, in lieu of claiming bonus depreciation, companies may instead elect to accelerate alternative minimum tax (AMT) credits.

Q: What are the Sec. 179 expensing limits for 2014?
A: For the tax years beginning in 2014, companies can expense up to $500,000 as long as total purchases do not exceed $2 million. For each dollar over $2 million, the eligible expensing amount correspondingly drops by one dollar. Thus, companies that spend more than $2,500,000 on tangible personal property cannot take advantage of Sec. 179 (but they can still use the depreciation bonus, assuming the equipment meets all the qualifications).

Q: Does the equipment have to be new to qualify for Sec. 179?
A: No. Unlike the depreciation bonus, Sec. 179 expensing can be applied to both new and used equipment.

Q: Can Sec. 179 and the depreciation bonus be combined?
A: Yes. Companies eligible for Sec. 179 can also combine it with the depreciation bonus for even bigger tax savings.

Q: Do the TIPA capital investment incentives apply only to construction equipment?
A: No. A broad range of tangible personal property (but not real estate) is eligible for special tax treatment in 2014.

Q: Where can I get more information about bonus depreciation and Sec. 179?
A: IRS Publication 946 - How to Depreciate Property provides a good overview of how bonus depreciation and Sec. 179 operate. Keep in mind that the guidance document hasn’t yet been updated for 2014, so keep the date changes from the TIPA in mind when you read it.

Q: Where can I get more information about everything that was in the Tax Increase Prevention Act?
A: A section-by-section summary of the Tax Increase Prevention Act prepared by the House Ways & Means Committee is available here.

Q: What should I do if I have other questions?
A: Contact your accountant, attorney, or other tax professional in your area if you have further questions.



Keep checking our DepreciationBonus.org Web site for more information.

Please note that the information on this site is provided by the Associated Equipment Distributors as a public service to equipment purchasers. It should not be construed as tax advice or as a promise of potential tax savings or reduced tax liability.

For more information about the depreciation bonus, contact your tax professional or visit the Internal Revenue Service website.

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