The American Recovery and Reinvestment Act extends increased Section 179 expensing for small business equipment purchases made in 2009, as well as a 50% bonus depreciation allowance for new machine tools and other equipment ordered and placed into service during 2009.
The boost to $250,000 in Section 179 expensing is extended for new and used equipment purchases made and placed into service in 2009. The amount will decrease to $128,000 in 2010. In addition, the cap on how much equipment can be purchased to enjoy the write-off remains at $800,000 in 2009. In 2010, that amount drops to $510,000.
The one-year 50% bonus depreciation means an extra 50% of the cost of new equipment that you buy and start using in 2009 can be written off.
| 50% BONUS DEPRECIATION | |
| OLD LAW (pre-2008 change and 2009 extension) - $100,000 New System | |
| 1st year Total Depreciation = 14% | = $14,000 |
| 2009 LAW - $100,000 New System | |
| 1st year Bonus Depreciation = 50% of $100,000 | = $50,000 |
| PLUS 14% regular depreciation on remaining property basis ($50,000) | = $7,000 |
| Total 2009 Deduction on $100,000 system | = $57,000 |
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Section 179 Boost for Small Businesses Under the one-year extension, small businesses (whose total equipment purchases in 2009 do not exceed $800,000) can ALSO expense the first $250,000 for the 2009 tax year (until 1/1/10). The 50% bonus depreciation can then be taken on the remaining basis of a new system. |
|
| OLD LAW (pre-2008 change and 2009 extension) - $400,000 on New or Used Systems | |
| Section 179 Deduction | = $128,000 |
| PLUS 14% regular depreciation on remaining property basis ($272,000) | = $38,080 |
| TOTAL First-year Deduction | = $166,080 |
| 2009 LAW - $400,000 New Systems | |
| Section 179 Deduction | = $250,000 |
| PLUS 50% Bonus Depreciation on remaining basis | = $75,000 |
| AND 14% depreciation on remaining 1st year basis of property | = $10,500 |
| Total 2009 Deduction on $400,000 NEW Systems | = $335,500 |
| (Bonus depreciation does not apply to used equipment) | |
If you have any questions, contact Liz Nicolson, Government Relations Director, AMT, at enicolson@amtonline.org or 703-827-5229.
