According to the overview of the Tax Relief Act of 2010 provided by the US Senate Finance Committee*:
“Under current law, businesses are allowed to recover the cost of capital expenditures over time according to a depreciation schedule. Congress allowed businesses, beginning January 1, 2008 through December 31, 2009, to take an additional depreciation deduction allowance equal to 50 percent of the cost of the depreciable property placed in service in those years.
Under the Small Business Jobs Act of 2010, this temporary increase in the depreciation deduction allowance was extended through December 31, 2010. The bill extends and temporarily increases this bonus depreciation provision for investments in new business equipment.
For investments placed in service after September 8, 2010 and through December 31, 2011, the bill provides for 100 percent bonus depreciation.
For investments placed in service after December 31, 2011 and through December 31, 2012, the bill provides for 50 percent bonus depreciation.
The provision also allows taxpayers to elect to accelerate some AMT credits in lieu of bonus depreciation for taxable years 2011 and 2012.”
The bill dramatically increased the expensing limits under Sec. 179 of the Internal Revenue Code for any taxable year beginning in 2008. For the 2011 tax year, companies can expense up to $500,000 as long as total purchases do not exceed $2,000,000. For each dollar over, 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.
To be eligible for bonus depreciation, the “original use” of the sign must commence with the taxpayer claiming the depreciation bonus after September 8, 2010.
The depreciation bonus is temporary. To qualify for a 100% depreciation bonus, the sign must be installed before Dec. 31, 2011.
For more information please visit www.depreciationbonus.org and www.irs.gov, and contact your tax professional. You will find an easy to use calculator to figure cash saving at www.section179.org/section_179_calculator.html.