State Conformity with Federal Bonus Depreciation Rules
The Protecting Americans from Tax Hikes (PATH) Act of 2015 extended for several years the I.R.C. § 168(k) bonus depreciation rules while also modifying percentages and making permanent other provisions. Bonus has been extended retroactively to January 1, 2015 and forward through December 31, 2019 (and an additional year for longer production property). For the years 2015-2017, bonus remains at 50%, decreases to 40% in 2018 and 30% in 2019 before going to zero in 2020.
In 2016, Qualified leasehold improvement, qualified restaurant and qualified retail property has been replaced by qualified improvement property, which essentially follows the similar rules as in the past. Qualified improvement property is bonus-eligible using the appropriate bonus percentage for the year placed-in-service year, before January 1, 2020, and has a depreciable life of 15 years.
The Tax Increase Prevention Act of 2014 (TIPA) extended for one additional year the I.R.C. § 168(k) 50 percent bonus depreciation provision that applied to qualified property acquired between 2008 and 2012. As a result, instead of sunsetting in 2014, 50 percent bonus depreciation applies to property acquired and placed in service before Jan. 1, 2015. For certain aircraft and longer production period property, the “placed in service” deadline has been extended to Jan. 1, 2016.
The American Taxpayer Relief Act of 2012 (Pub. L. No. 112-240), enacted Jan. 2, 2013, extends for one additional year the current Section 168(k) 50 percent bonus depreciation provision that applied to qualified property acquired in 2008 through 2012. Thus, the Act extends bonus 50 percent depreciation to property acquired and placed in service before Jan. 1, 2014. The placed-in-service deadline is extended to Jan. 1, 2015, for certain aircraft and longer production period property.
The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (Pub. L. No. 111-312), enacted Dec. 17, 2010, which generally extends and temporarily increases the current I.R.C. § 168(k) 50 percent bonus depreciation provision for property placed in service before Jan. 1, 2013. In addition, the Act provides for temporary 100 percent bonus depreciation for property acquired and placed in service after Sept. 8, 2010, and before Jan. 1, 2012.
The Small Business Jobs Act of 2010 (P.L. 111-240, Title II), enacted Sept. 27, 2010, extends for one year the § 168(k) special allowance of first-year depreciation equal to 50% of the adjusted basis of qualified property to include qualified property acquired before Jan. 1, 2011, or acquired pursuant to a written binding contract which was entered into after Dec. 31, 2007, and before Jan. 1, 2011.
The American Recovery and Reinvestment Act of 2009 (ARRA) (P.L. 111-5), enacted Feb. 17, 2009, extends the additional first-year depreciation deduction for one year, generally through 2009 (2010 for certain longer-lived and transportation property). It also permits corporations to increase the research credit or minimum tax credit limitation by the bonus depreciation amount with respect to certain property placed in service in 2009 (2010 in the case of certain longer-lived and transportation property). The amendment applies to extension property, defined as property that is eligible qualified property solely because it meets the requirements under the extension of the special allowance for certain property acquired during 2009.
The Economic Stimulus Act of 2008 (P.L. 110-185), enacted Feb. 13, 2008, allows an additional first-year depreciation deduction equal to 50% of the adjusted basis of qualified property, for both regular tax and alternative minimum tax purposes for the tax year in which the property is placed in service. Original use of the property must commence with the taxpayer after Dec. 31, 2007, and the property must be placed in service during 2008. An extension of the placed in service date through 2009 is provided for certain property with a 10-year recovery period and certain transportation property.
List of States and Their Conformity with Federal Bonus Depreciation Rules
Below is a list of the states and their current decision as to the handling of bonus depreciation.
View a state below to see if it allows bonus depreciation. There is also a link to each state’s tax site so that you can keep up with any changes that might be made.
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