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Bonus depreciation deductions: year-end tax strategy

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Your company may benefit from a special “bonus depreciation” deduction if it acquires business property this year. The bonus depreciation deduction is equal to 50% of the cost of qualified new (not used) assets placed in service in 2009.

What’s more, you may be able to combine bonus depreciation with the Section 179 election. Plus, you can still claim the regular depreciation deductions for the remainder of the cost. However, the bonus depreciation deduction is scheduled to expire Dec. 31, 2009.

Strategy: Pile on year-end purchases of new business assets. Note that bonus depreciation is extended through 2010 for certain long-lived assets and transportation equipment.

Although first-year deductions for “luxury cars” are limited by other tax-law provisions, bonus depreciation provides a big boost. For a new luxury car placed in service in 2009, the limit is $10,960 (based on 100% business use). The usual first-year maximum is $2,960. 

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