Bonus Depreciation Options Table for First-Year Asset Write-offs from Brookwood Tax Service

This page last updated on
October 23, 2004

Bonus Depreciation Options Table
First-Year Write-Off Options Under New Depreciation Rules

This table outlines just four possible first-year write-off totals for $50,000 of new business assets with an IRS recovery period of 5 years, using combinations of:

	Section 179, first-year "expensing" of up to $102,000 (for 2004 - amount indexed for inflation in 2005 - 2007);
	50% or 30% Bonus depreciation for the year put in service (NOTE: These options expire after 12/31/2004.);
	"Regular" MACRS first-year depreciation, typically 20% of asset cost for a five-year life asset.

SOME AVAILABLE FIRST-YEAR WRITE-OFF OPTIONS
TYPE OF WRITE-OFF	MAXIMUM WRITE-OFF	MEDIUM-HIGH WRITE-OFF	MEDIUM-LOW WRITE-OFF	"REGULAR" WRITE-OFF
Section 179 Expense Deduction	$50,000	$10,000	None	None
50% "Bonus" First-Year Depreciation	None	$20,000	None	None
30% "Bonus" First-Year Depreciation	None	None	$15,000	None
"Regular" MACRS Depreciation	None	$4,000	$7,000	$10,000
TOTAL FIRST YEAR WRITE-OFF	$50,000	$34,000	$22,000	$10,000

If choosing to use all three types of write-offs (Section 179, ONE of the bonus depreciation rates and "regular" MACRS), take the write-offs in the order listed above. In other words, subtract the Section 179 expense deduction from the asset cost first. In the MEDIUM-HIGH WRITE-OFF example, selecting a Section 179 expense write-off of $10,000 reduces the $50,000 original basis to $40,000 . Then take 50% of $40,000 to arrive at the "bonus" depreciation deduction of $20,000. Subtract the $20,000 from $40,000 to reduce the basis to $20000. Then calculate the "regular" MACRS first-year depreciation by taking 20% of $20000, which equals $4,000.

If your business operates in one of the states (click for list) that does NOT recognize the 50 percent and 30 percent bonus depreciation, or allows only part of the bonus depreciation write-off, be sure to read about the potential tax traps on the Depreciation Uncoupling Caution page.

[Home] [Site Map] [Contact Us]

Bonus Depreciation Options Table First-Year Write-Off Options Under New Depreciation Rules

SOME AVAILABLE FIRST-YEAR WRITE-OFF OPTIONS

Bonus Depreciation Options Table
First-Year Write-Off Options Under New Depreciation Rules