Bonus Depreciation Increased. For 2003 and 2004, bonus depreciation has been increased from 30% to 50% for qualifying property. This increase applies to property acquired after May 5, 2003 and before January 1, 2005. The original use of the property must begin after May 5, 2003 (meaning the property must be new property as is the case for Sec. 168(k) property that qualifies for the 30% rate). The property must be placed in service before 2005.
Also, if the qualifying property is subject to the luxury auto limits, these luxury auto limits are increased by $7,650 instead of $4,600. The $4,600 and $7,650 amounts are not adjusted for inflation, as is the case for the luxury auto limits. This additional depreciation applies for regular and alternative minimum tax purposes as well.
Taxpayers may choose not to take the 50% bonus depreciation, or may choose not to take either the 50% and 30% bonus, and therefore not claim any bonus depreciation. Also, the dates for claiming the 30% bonus depreciation are extended so that they cover property placed in service through 2004. Previously, the deadline was September 11, 2004.
If the property has a recovery period of at least 10 years, or is transportation property, the property must be placed in service prior to Jan. 1, 2006 to qualify for either the 50% or 30% bonus depreciation. Also, the definition of New York Liberty Zone property does not include any property that qualifies for either the 30% or 50% bonus depreciation provisions.
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