INSIGHTS & IDEAS

Liberalized Depreciation Rules for 2008

Hidden in the Economic Stimulus Act signed into law on February 13, 2008 are new significant depreciation deductions for property acquired in 2008 and 2009.  As the Press was distracted by the ridiculous rebates included in this tax legislation, these significant benefits have received little publicity.

Vehicles used 100% for business are entitled to receive additional first year depreciation up to $10,960 ($11,160 for light trucks).

Heavy SUV’s may qualify for $25,000 section 179 first year depreciation plus 50% additional first year bonus depreciation on the balance of the cost.  The balance if further depreciated under conventional methods. For example, $40,000 may be depreciated in the acquisition year on a $50,000 SUV.  So much for the gas guzzler tax! 

The limit on section 179 (first year depreciation) has been raised to $250,000 and is not phased out until equipment acquisitions exceed $800,000.

50% additional first year depreciation is also available for any qualifying assets including leasehold improvement property (otherwise amortizable over 39 years) made pursuant to a lease, occupied exclusively by the lessee and placed in service more than three years after the date the building was first placed into service.  The enlargement of a building, elevator or escalators, structural components benefiting a common area, or the internal structural framework of a building is not included.  A lease between related persons is also excluded.  These rules are rather complex and should be thoroughly reviewed prior to acquiring any qualified assets.