IRS to publish guidance on special 50-percent bonus depreciation allowance

Due to intense interest in the area, the IRS will soon publish guidance on the special 50-percent bonus depreciation available during 2008.  If your company is on the cusp of purchasing and using property, significant tax benefits may come your way. 

Previous Benefit

Between 2002 and 2004, taxpayers who purchased and put certain business assets into use within specified areas of the country that were Presidentially-declared disaster areas could depreciate an entire 50-percent of the value of the asset during the first year of implementation for tax purposes.  This special “bonus” depreciation was allowed before and in addition to regular tax depreciation.       

2008 Benefit

The Economic Stimulus Act of 2008 now allows a similar benefit for all businesses, regardless of where they use their qualifying assets, as long as they put them into use between December 31, 2007 and January 1, 2009.  Qualifying property includes assets with a tax depreciation life of less than 20 years, property used by water utilities, off the shelf computer software, and leasehold property.  To administer this benefit, the IRS has instructed taxpayers to rely on the guidance previously released for the 2002 and 2004 tax benefit, since the two laws are very similar in substance.  The agency nevertheless will release guidance later this year specifically addressing special aspects of the new bonus depreciation under the Economic Stimulus Act. 

Guidance to Come

It would be wise to watch for this upcoming guidance if your company plans on claiming this bonus depreciation.  The January 1, 2009 deadline for placing these assets into service to entitle you to this large deduction is approaching quickly.  Due to economic conditions, many experts are looking for the IRS to liberalize the qualification rules as much as possible in this anticipated guidance. Stay tuned for more information. 

Cite: IR-2008-58