Ask the Grinder Guy: Time is Running Out on Bonus Depreciation for 2011

The Association of Equipment Distributors had a Bonus Depreciation Seminar earlier this year. Here are some facts from the session. Consult with your tax professional for more details.

Bonus Depreciation, New Equipment

• For 2011, Bonus Depreciation is 100% with qualifying new equipment purchase. 2012 deduction drops to 50%;
• This bonus can be used for current year, carry back (if you had to pay taxes in the past three years) or for carryover into 2012;
• Vehicle purchases: Vehicles over 6,000 lb (like heavy duty work pickup trucks) qualify for 100% deduction. For vehicles below 6,000 lb, luxury vehicle rules still apply but there is an additional $8,000 this year;
• Some states are not allowing this deduction for state taxes.

Sec 179 Deduction, New or Used Equipment

• For 2011, Bonus Depreciation is a max of $500,000 with qualifying new or used equipment purchase. 2012 deduction drops to $125,000. It starts to phase out at $2 million;
• This bonus can be used for current year but cannot be used for carry back. For carryover, deduction is limited to $25,000 a year;
• Some states are not allowing this deduction for state taxes.

Some Other Points

Trades—Deduction is equivalent to value of trade plus your cash out of pocket.

Internal Moves—Moving from inventory to rental fleet qualifies.

New—If equipment is on first rental and less than three months, it qualifies for new in the year it was put into service, otherwise use section 179.

Again, consult your tax professional for confirmation. More information and a bonus depreciation calculator is available at http://www.depreciationbonus.org.

| More...