Reminder on Equipment Expensing
Bonus depreciation. Bonus depreciation is one of Congress' favorite mechanisms (along with Code Sec. 179 expensing) to encourage business spending. The new tax law signed back in February extends 50 percent bonus depreciation that expired at the end of 2008. Businesses can take advantage of bonus depreciation throughout 2009 (and longer for certain types of property – through 2010 for assets with a recovery period of 10 years or more). Bonus depreciation is taken on top of regular depreciation. While it can be valuable in the short term, keep in mind that a large current depreciation deduction results in smaller future deductions. Also good news in applying bonus depreciation to vehicles, the new law raises the first-year depreciation cap limits by $8,000. The new law also allows eligible businesses to monetize accumulated AMT and research tax credits in lieu of taking bonus depreciation for 2009.
Code Sec. 179 expensing. Like bonus depreciation, increased Code Sec. 179 expensing expired at the end of 2008. The new law revives it for 2009. Under the new law, Code Sec. 179 expensing for 2009 is $250,000 and the threshold for reducing the deduction is $800,000.