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Added bonus for ‘bonus depreciation’

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in Small Business Tax Deduction Strategies

Q. I don’t expect to show positive business income in 2011. Does that mean I can’t write off the cost of a new computer and cell phone? I.S., W. Hartford, Conn.

A. No. Under Section 179, your deduction is limited to the amount of income from your business activities. So you can’t rely on a Section 179 deduction for 2011. But you can still claim 100% first-year bonus depreciation for qualified new (not used) property. It doesn’t matter if you show a loss.

If bonus depreciation creates or increases a net operating loss (NOL) for the year, you can carry the NOL back up to two years or forward up to 20 years. For this purpose, “qualified property” includes property with a cost recovery period of 20 years or less, including computers and cell phones.

Tip: The bonus depreciation break covers only new (not used) property. In contrast, Section 179 applies to both new and used property.

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