Bonus Depreciation

In addition to the Section 179 first-year expense deduction described above, the tax code currently authorizes another special depreciation allowance in the first year qualifying property is placed in service - bonus depreciation. You may be able to take a special depreciation allowance of 100 percent for 2011 (50 percent beginning in 2012). It can be taken in addition to, or in place of, the Section 179 expense deduction. More importantly, the bonus depreciation is available during 2010 on most depreciable property with an asset life of 20 years or less.

With the Section 179 expense deduction and bonus depreciation allowance, you can substantially reduce your taxable income in 2011. However, claiming these deductions will also reduce the basis of your property against which your regular depreciation deductions will be calculated.