There is much confusion in the industry over the extension of the Tax Relief Act of 2010 regarding bonus depreciation. Here is a brief synopsis taken directly from the IRS website:

i. A 100% bonus depreciation deduction under § 168(k) is allowed for property acquired and placed in service after Sept. 8, 2010, and before Jan. 1, 2012;

ii. A 50% bonus first-year depreciation allowance under § 168(k) for property placed in service after Dec. 31, 2011, and before Jan. 1, 2013;

iii. Since the above are extensions of § 168(k), prior rules will apply to eligibility of assets;

iv. A two year extension (through Dec. 31, 2012) of the election to accelerate the AMT credit instead of claiming additional first-year depreciation; and

v. For tax years beginning after Dec. 31, 2011, setting the maximum expense-amount under § 179 at $125,000 and the investment-based phase-out amount at $500,000.

Of course, there are many questions as to what kind of property it can be applied to and, of course, there are varying opinions…again, the IRS has successfully created a potential audit for taxpayers because there is no bright-line test.

Stay tuned for more…