What the Senate defeat of the American Jobs Act means for bonus depreciation
October 19, 2011
Following the defeat of the American Jobs Act by the Senate, the $447 billion bill must be broken into components in order for parts of it to potentially survive in further pieces of legislation.
Accounting Today notes that one component likely to be proposed separately in the future is 100 percent first-year bonus depreciation
. Under the act, it would have been extended through the end of next year. Pending further developments, it is currently set to expire at the end of the 2011 tax year. Until then, businesses are able to deduct the full purchase price of up to $500,000 of fixed assets
and other depreciable items purchased this year.
According to the website for Section 179 of the Internal Revenue Service's tax code, the incentive was introduced by the government to "encourage businesses to buy equipment and invest in themselves." After the expiration, the expense deduction limit drops to $125,000, and the beginning-of-phase-out amount drops to $500,000. For tax years beginning after 2012, the maximum Section 179 deduction and beginning-of-phase-out amount fall to $25,000 and $200,000, respectively.