Extra Depreciation in ‘08

published June, 2008

Most people know about the “Economic Stimulus Package” $600 checks the IRS is sending out to many taxpayers (You have to file the ’07 return before they’ll start processing your check.) What hasn’t received the attention it deserves is the boost to Section 179 and Bonus Depreciation for 2008 only.

Prior to the new legislation, Section 179 accelerated depreciation allowed up to $128,000 with the upper limit of Section 179 asset purchases at $510,000 (when the allowed deduction reduces dollar for dollar that you spend over $510,000).

After the legislation (and again, ONLY FOR 2008) the Section 179 can be up to $250,000 with the upper limit of assets purchased of $800,000.

Further, there’s another 50% of Bonus Depreciation for most assets with lives up to 20-years, so computers, furniture, goats, etc.

So in theory, if you buy $800,000 of goats in 2008, you could take:
$250,000 of Section 179 Depreciation
$275,000 of Bonus Depreciation ($800k-250k) x 50%
$55,000 of Regular 5 year Depreciation (20% of (800,000-250,000-275,000))
$580,000 total depreciation in ’08.

That’s a lot of goats, and a lot of depreciation!

Vehicles remain more limited than other assets. The maximum for a ‘sit down’ vehicle is $2,960, but you can go up to $10,960 if you qualify for the Bonus Depreciation (limits for a ‘step up’ vehicle are $3,160 and $11,160 with Bonus Depreciation). So you won’t see quite the results as you will with the goats. These limits are total depreciation regardless of Section 179, that’s all you get.As always, Section 179 requires the purchase of new properties, not just ‘new to you,’ and is mostly for tangible personal property, not real estate or patents, used in the US, etc.