2011 Tax Changes: Guidance on 2010 Tax Relief Act’s 100% Depreciation Allowance

The IRS has announced new guidelines on the 2010 Tax Relief Act’s 100% depreciation allowance in regard to qualifying new property. This property must have been acquired after September 8, 2010 and before January 1, 2012. The new rules allow:

1) A 100% bonus depreciation where work on a big self-constructed piece of property began before September 9, 2010.

2) A taxpayer to decide to “step down” from 100% to 50% bonus depreciation on property placed in service in a tax year that includes September 9, 2010.

3) Allows a 100% bonus depreciation for eligible restaurant property or retail improvement property that meets the definition of qualified leasehold improvement improvement property.

4) The new rule also provides an out for certain business car owners who might otherwise be subject to a severe depreciation result.

Speaking of vehicles, under the 2010 Tax Relief Act, a taxpayer that buys and places in service a new heavy SUV after Sept. 8, 2010 and before Jan. 1, 2012, and uses it 100% for business, may write off its entire cost in the placed-
in-service year. A heavy SUV is one with a GVW rating of more than 6,000 pounds.

© 2011 Thomson Reuters/RIA. All rights reserved.