The 2010 Tax Act extends numerous business tax provisions that had expired at the end of 2009, extending them for two years until December 31, 2011. However, the bigger news for businesses is the expansion of tax incentives for purchasing property:
100% Bonus Depreciation -- For certain new property acquired after September 8, 2010, and before January 1, 2012, businesses can elect 100% bonus depreciation, in essence writing off the entire cost of the asset in the year of purchase. A 50% bonus depreciation is available for qualified property placed in service in 2012, with only certain long-lived property and transportation property eligible for 100% expensing. This provision is not limited to small businesses and is not capped at a certain dollar value. In lieu of claiming additional first-year depreciation, a company can elect to claim additional research or minimum tax credits through December 31, 2012.
Code Section 179 Expensing -- To encourage business spending, for 2010 and 2011, businesses can expense, rather than depreciate, up to $500,000 of new or used tangible personal property. That limit is reduced dollar-for-dollar by the amount of property placed in service in excess of the limit of $2,000,000. While the 2010 Tax Act did not change those limits for 2010 and 2011, it did provide for a $125,000 property limit indexed for inflation (instead of $25,000) and a $500,000 investment limit indexed for inflation (instead of $200,000) for 2012.