Tax Tip of the Week – Bonus Depreciation Back for 2011

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Depreciation Bonus depreciation is back for 2011 and has been improved. The IRS has issued a new ruling on this tax break that will be very useful for small business owners. (IRS Revenue Procedure 2011-26) 

The 2010 Tax Relief Act provides generous tax breaks for business owners who acquire qualified property. It authorizes the following:

100% bonus depreciation deduction for qualified property placed in service from Sept. 9, 2010 through Dec. 31, 2011 (Dec. 31, 2012 for property with a cost-recovery period of 10 years and longer and certain aircraft and transportation property 

50% bonus depreciation for qualified property placed in service from Jan. 1, 2012 through Dec. 31, 2012.

Component depreciation: If a business taxpayer began manufacture, construction or production of a larger self-constructed property before Sept. 9, 2010, the components may qualify for 100% bonus depreciation. In other words, the taxpayer can benefit for faster write-offs for qualified building parts. The components must be acquired or self-constructed after Sept. 8, 2010 and before Jan. 1, 2012.

A special election must be made by the tax return due date, including extensions, for the tax year the larger self-constructed property is placed in service. Also, you must attach a statement indicating whether the election is being made for all or some of the components.

Business vehicles: Under the new tax law, the first-year depreciation deduction for vehicles is increased by $8,000 due to the 100% bonus depreciation tax break. Therefore, most business car owners will be able to claim a deduction of $11,060 ($11,260 for a light truck or van) placed in service in 2011.

Like any good CPA, I need to add a disclaimer: unfortunately, it is impossible to offer comprehensive tax info over the internet, no matter how well researched or written. And remember, I love my readers but having me bookmarked on your computer doesn’t make you a client: before relying on any information given on this site, contact a tax professional to discuss your particular situation.