Additional (Bonus) First-year Depreciation for 2003 and 2004

The Job Creation and Workers Assistance Act of 2002 included a provision that allows up to 30% of qualified property to be deducted in the year the asset is placed into service. This bonus depreciation may be claimed on qualified property acquired or constructed after September 10, 2001, and before September 11, 2004.

The new law increases the bonus depreciation to 50% for qualified property placed in service after May 5, 2003 and before January 1, 2005. Taxpayers may elect the 30% additional depreciation rate for any class of property. If they make the election, the 50% amount does not apply to any property in that class.

Who Benefits?
Small businesses that want to write off assets faster. A larger deduction can reduce income tax as well as self-employment taxes.

Our Advice
Before making a decision to write-off assets, be sure to compare how a faster write-off will affect your taxes in future years. Also consider the effect of lowering your social security contributions on future social security benefits.

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