The IRS has issued Revenue Procedure 2011-26, which provides guidance on claiming the 50% or 100% first-year depreciation bonus for qualifying business property. This article provides a general overview of bonus depreciation and details the specifics of the new guidance.

Revenue Procedure 2011-26 offers new guidance on 50% and 100% bonus depreciation

The IRS has issued Revenue Procedure 2011-26, which provides guidance on claiming the 50% or 100% first-year depreciation bonus for qualifying business property.

The guidance explains the requirements for claiming 100% bonus depreciation and allows taxpayers to elect 50% bonus depreciation in lieu of 100% bonus depreciation for certain property placed in service in 2010. It also outlines special requirements for self-constructed property and procedures for claiming missed 50% bonus depreciation on property placed in service before the tax break was reinstated in late 2010.

Background

When bonus depreciation is allowed, it’s generally available for new property (with certain exceptions) that falls within one of the following categories:

•Tangible personal property with a useful life of 20 years or less under the modified accelerated cost recovery system (MACRS),
•Off-the-shelf computer software,
•Water utility property, or
•Qualified leasehold improvements.
The current version of bonus depreciation was introduced by the Economic Stimulus Act of 2008, which provided an additional first-year depreciation deduction generally equal to 50% of the cost of qualifying property acquired and placed in service in 2008. In 2009, the American Recovery and Reinvestment Act extended 50% bonus depreciation through Dec. 31, 2009.

In 2010, two important developments affected bonus depreciation. Click HERE to read more and find out what developments these were.