Temporary Bonus Depreciation

The new simulus law provides qualifying taxpayers 50 percent fi rst-year bonus depreciation of the adjusted basis of qualifying property.

Property

To be eligible to claim bonus depreciation, property must be

1. eligible for the modified accelerated cost recovery system (MACRS) with a depreciation period of 20 years or less;
2. water utility property;
3. computer software (off-the-shelf); or
4. qualified leasehold property.

The property generally must be purchased and placed in service during 2008. Thus, the original use of the property must begin with the taxpayer and must occur after December 31, 2007, and before January 1, 2009.

The placed in service date is extended one year, through December 31, 2009, for property with a recovery period of 10 years or longer, for transportation property
(tangible personal property used to transport people or property), and for certain aircraft.

There cannot be a binding written contract before January 1, 2008, to acquire the property. Property qualifies only if it is acquired under a binding written contract entered into during 2008. In addition, the taxpayer must begin the manufacture, construction or production of qualifying property for the taxpayer’s own use during 2008.