[Anonymous]

Just making sure I’m understanding this right:

Taxpayer can expense up to $500,000 of the cost of the property as depreciation, granted the property placed in service during the year doesn’t exceed $2,000,000. Also, the property has to be new and used for business. Correct?

Then what’s the deal with bonus depreciation? Becker mentions that new, qualified assets acquired and placed in service after Sept 8, 2010 but before Jan 1, 2012 qualify for 100% write off.

So can the taxpayer claim both? I’m confused. Can anyone shed some light on this issue? Please:!)

[thechamp26]

Are you asking if you have a $750,000 asset, can you expense $500,000 under 179 and $250,000 under bonus? Yes if the property is qualified property.

[Justinnnn]

Agree with champ about stacking deductions. You would take 179, then bonus, then MACRS (in a situation where 100% bonus was not in place).

A lot of corporations place property in service that exceeds the investment phaseout. Those corporations default to section 168(k).

Bonus depreciation under section 168(k) was established as relief in 2001 after 9-11. Over the past ten years it has went from 30% basis deduction to 50%, to 100%. There were a couple of years between 2006 and 2007 where bonus depreciation as not allowed. Recently, qualified assets acquired and placed in service after Sept 8, 2010 but before Jan 1, 2012 qualify for 100% write off. In recent years, the bonus rules for leasehold improvement property (15-yr) which was not originally qualified for 168(k) was changed so it qualifies. If you are not taking 179, and do not wish to take bonus, you must make an election for each class of property (5, 7, 15).

Bonus does not have an investment limitation or phaseout, but there are some rules. The property must be held for original use and must be acquired and placed in service in the qualified period (you cannot “acquire” on September 7 and place in service on september 8th for 100% in lieu of 50%).

Beyond the scope of the exam, a lot of states do not conform to 179 and/or bonus, requiring a unique state modification OR to follow MACRS as if the property's basis was never reduced for 179/168.

REG 80 2/7/11
FAR 91 10/8/11
AUD 97 11/22/11
BEC 96 2/4/12

CPA 3/15/13

[Anonymous]

From https://www.section179.org/section_179_deduction.html

“What's the difference between Section 179 and Bonus Depreciation?

The most important difference is both new and used equipment qualify for the Section 179 Deduction (as long as the used equipment is “new to you”), while Bonus Depreciation covers new equipment only.”

Take Sec. 179 first, then Bonus Depreciation.

This website https://www.section179.org/ has loads of info on Section 179.

[Anonymous]

Will bonus depreciation be on the exam? I don't recall this being mentioned in depth in my review book nor have I gotten a question on it on my Test Prep Software. Weird.

[jamesblunt69]

@CPAMan

Very unlikely; I don't even know if I touched on it in my Individual Tax class let alone Becker. Focus on knowing 179 and how it phaseouts.

[Anonymous]

Thanks guys!!! I hope it's not tested, but it's better to know it now than be sorry during the test time!!

Also, thanks for pointing out the difference @Acct.

Section 179: Both new and used equipment qualify,

Bonus: Only New equipment.

Thanks:!)

[Anonymous]

At work we've begun working on tax returns and using Sec. 179 and Bonus Depr. and my boss just went over the difference with us so when I saw your question I was excited that it was something I might know.

Good luck!

[Anonymous]

haha that's an awesome feeling:!)

[Anonymous]

🙂

[Author]

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