Treasury and IRS Issue Guidance on the Additional Bonus Depreciation Allowance

The Treasury Department and the Internal Revenue Service have issued temporary regulations providing detailed rules on the additional first-year or "bonus" depreciation allowance.

As a result of recent amendments to the Internal Revenue Code, taxpayers may deduct an additional 30- or 50-percent first-year depreciation allowance for certain depreciable property. This depreciation allowance is in addition to the amount of depreciation otherwise allowable in the first year.

In general, the regulations provide the requirements that must be met for depreciable property to qualify for the additional first-year depreciation deduction. Further, the regulations instruct taxpayers how to calculate the additional first-year depreciation deduction and the amount of depreciation otherwise allowable for the property.

The regulations are effective for property that is acquired by a taxpayer after September 10, 2001 (for purposes of the additional 30-percent first-year depreciation allowance), or acquired after May 5, 2003 (for purposes of the additional 50-percent first-year depreciation allowance), and placed in service before January 1, 2005 (or, in the case of certain property, placed in service before January 1, 2006.) The regulations are also effective for New York Liberty Zone property that is acquired by a taxpayer after September 10, 2001, and placed in service before January 1, 2007 (or, in the case of certain real property, placed in service before January 1, 2010.)


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