For qualified property (defined below) placed in service in 2008, you can take an additional 50% special depreciation allowance. The allowance is an additional deduction you can take after any section 179 expense deduction and before you figure regular depreciation under MACRS. Figure the special depreciation allowance by multiplying the depreciable basis of the qualified property by 50%.taxmap/pubs/p225-031.htm#en_us_publink100079253
For farmers, qualified property generally is qualified GO Zone property, qualified Recovery Assistance property, certain qualified property acquired after December 31, 2007, and placed in service before January 1, 2009, and qualified disaster assistance property.taxmap/pubs/p225-031.htm#en_us_publink100079254
Farmers may be able to take a special depreciation allowance for qualified GO Zone property (including specified GO Zone extension property (as defined in section 1400N(d)(6)(C) of the Internal Revenue Code)). This is depreciable property that meets the following requirements.
- The property must be acquired by purchase after August 27, 2005. If a binding contract to acquire the property existed before August 28, 2005, the property does not qualify.
- The property must be placed in service in the GO Zone during the tax year.
- Substantially all of the use of the property must be in the GO Zone in the active conduct of your trade or business.
- The original use of the property within the GO Zone must begin with you.
For more information, including a description of the areas in the GO Zone, and a list of qualified GO Zone property and specified GO Zone extension property, see chapter 3 of Publication 946.taxmap/pubs/p225-031.htm#en_us_publink100079255
You may be able to take a special depreciation allowance for qualified Recovery Assistance property you acquired after May 4, 2007, and placed in service in the Kansas disaster area. For more information, see Publication 4492-A and Notice 2008-67, 2008-32 I.R.B. 307, available at www.irs.gov/irb/2008-32_irb/ar14.html
Certain qualified property (defined below) acquired after December 31, 2007, and before January 1, 2009, is eligible for a 50% special depreciation allowance.
Qualified property includes the following:
- Tangible property depreciated under the modified accelerated cost recovery system (MACRS) with a recovery period of 20 years or less.
- Water utility property.
- Off-the-shelf computer software.
- Qualified leasehold improvement property.
Qualified property must also meet all of the following tests:
- You must have acquired qualified property by purchase after December 31, 2007, and before January 1, 2009. If a binding contract to acquire the property existed before January 1, 2008, the property does not qualify.
- Qualified property must be placed in service after December 31, 2007, and placed in service before January 1, 2009 (before January 1, 2010, for certain property with a long production period and for certain aircraft).
- The original use of the property must begin with you after December 31, 2007.
You may be able to take a special depreciation allowance for qualified disaster assistance property placed in service in federally declared disaster areas during the tax year. A list of the federally declared disaster areas is available at the Federal Emergency Management Agency (FEMA) web site at www.fema.gov
. For more information, including the definition of qualified disaster assistance property and the eligible disaster areas, see chapter 3 of Publication 946.
You can elect, for any class of property, not to deduct the special depreciation allowance for all property in such class placed in service during the tax year. To make the election, attach a statement to your return indicating the class of property for which you are making the election.
Generally, you must make the election on a timely filed tax return (including extensions) for the year in which you place the property in service. However, if you timely filed your return for the year without making the election, you still can make the election by filing an amended return within 6 months of the due date of the original return (not including extensions). Attach the election statement to the amended return. On the amended return, write "Filed pursuant to section 301.9100-2."
Once made, the election may not be revoked without IRS consent.
If you elect not to have the special depreciation allowance apply, the property may be subject to an alternative minimum tax adjustment for depreciation.
When you dispose of property for which you claimed a special depreciation allowance, any gain on the disposition is generally recaptured (included in income) as ordinary income up to the amount of the special depreciation allowance previously allowed or allowable. For more information, see chapter 3 of Publication 946.