The American Taxpayer Relief Act reinstated 50 percent bonus depreciation and increased the expense allowance to $500,000 for 2013. Both incentive programs could have important implications for purchasers of horses, farm equipment and most other depreciable property. Below is a summary of these incentives:
Bonus Depreciation – allows taxpayers to write off 50 percent of the cost of new qualified depreciable property if the property is purchased and placed in service before 1/1/2014. Property is considered new if its original use commences with the taxpayer. Yearlings, for example, may qualify for this incentive.
Expense Allowance – allows taxpayers to write off the cost of new or used qualified depreciable property, up to $500,000, if the property is purchased and placed in service before 1/1/2014. The expense allowance is reduced dollar for dollar once qualified investments exceed $2 million. This incentive also was made retroactive to 2012 purchases. In addition to yearlings, broodmares may qualify for this incentive.
The $500,000 expense allowance and 50 percent bonus depreciation may be used together in some situations. For more information on how to best apply these incentives to your business, download this investment incentive flyer and consult a tax professional.