Review 2012 depreciation rules

Review 2012 depreciation rules

Cost recovery, depreciation — whatever name you choose, the tax benefits of writing off the purchase price of your business assets continue to evolve. Here are current Section 179 and bonus depreciation rules that will apply to your 2012 federal income tax return.

  • Leasehold improvements. When you elect bonus depreciation for certain interior improvements and alterations you make to commercial rentals, you can deduct up to 50% of the cost. For 2012, leasehold improvements have to meet five tests, including a restriction limiting the deduction to a building that’s been in service for three years.

    The bonus depreciation deduction reduces basis, and the remaining cost of the improvements must be depreciated over 39 years.

  • Automobiles. Bonus depreciation also applies to new vehicles you buy and begin using in 2012, and can increase your deduction by up to $8,000.

    Section 179 expensing is available for business autos, both new and used. Certain heavier vehicles, such as SUVs weighing more than 6,000 pounds, can qualify for a $25,000 write-off.

  • Equipment. Furniture, office equipment, and other property you use to operate your business can qualify for Section 179 expensing. For 2012, the maximum immediate deduction is $139,000.

    New business equipment with a useful life of 20 years or less may also qualify for bonus depreciation.

State laws often vary from federal depreciation rules, and those differences can affect the amount of your deduction and the elections you choose to make. Give us a call here at Dye and Whitcomb L.L.C. to discuss what options will work best for your business.