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IRS guidance coming on special 50% depreciation allowance

November 16, 2010

The Economic Stimulus Act of 2008 includes more than the ballyhooed $300 direct payments to individuals. It also provides several incentives to businesses, including a special 50 percent depreciation allowance for 2008 purchases, an increase in the depreciation limits on business vehicles, and an increase in the Section 179 small business expensing limitation.

The 50 percent "bonus depreciation" allowance for qualifying purchases is available to all businesses and applies to most types of tangible personal property and computer software acquired and placed in service in 2008.

It allows taxpayers to deduct 50 percent of the cost of qualifying property in addition to the regular depreciation allowance that normally is available.  

The IRS will issue guidance soon on how the special 50 percent depreciation allowance can be used to make capital investments this year; and guidance on the newly increased business expensing limitation.

Anticipating questions in the meantime, IRS representatives said businesses may rely on the regulations previously issued regarding bonus depreciation (found at Treas. Reg. Sec. 1.168(k)-1) until the latest guidance is issued.