Words you may need to know (see Glossary)
- Adjusted basis
- Placed in service
Figure the special depreciation allowance by multiplying the depreciable basis of the qualified property by 50% (or 30% if applicable). For qualified Liberty Zone property, multiply the depreciable basis by 30%. For qualified GO Zone property, qualified cellulosic biomass ethanol plant property, qualified Recovery Assistance property, qualified reuse and recycling property, qualified cellulosic biofuel plant property, qualified disaster assistance property, and certain qualified property acquired after December 31, 2007, and generally placed in service before January 1, 2010, multiply the depreciable basis by 50%.
For qualified property other than listed property, enter the special allowance on line 14 in Part II of Form 4562. For qualified property that is listed property, enter the special allowance on line 25 in Part V of Form 4562.
If you place qualified property in service in a short tax year, you can take the full amount of a special depreciation allowance.
This is the property's cost or other basis multiplied by the percentage of business/investment use, reduced by the total amount of any credits and deductions allocable to the property.
The following are examples of some credits and deductions that reduce depreciable basis.
- Any section 179 deduction.
- Any deduction for removal of barriers to the disabled and the elderly.
- Any disabled access credit, enhanced oil recovery credit, and credit for employer-provided childcare facilities and services.
- Basis adjustment to investment credit property under section 50(c) of the Internal Revenue Code.
For additional credits and deductions that affect basis, see section 1016 of the Internal Revenue Code.
For information about how to determine the cost or other basis of property, see What Is the Basis of Your Depreciable Property in chapter 1. For a discussion of business/investment use, see Partial business or investment use under Property Used in Your Business or Income-Producing Activity in chapter 1.taxmap/pubs/p946-016.htm#en_us_publink1000107496
After you figure your special depreciation allowance for your qualified property, you can use the remaining cost to figure your regular MACRS depreciation deduction (discussed in chapter 4). Therefore, you must reduce the depreciable basis of the property by the special depreciation allowance before figuring your regular MACRS depreciation deduction.taxmap/pubs/p946-016.htm#en_us_publink1000107497
On November 1, 2008, Tom Brown bought and placed in service in his business qualified Recovery Assistance property that cost $450,000. He did not elect to claim a section 179 deduction. He deducts 50% of the cost ($225,000) as a special depreciation allowance for 2008. He uses the remaining $225,000 of cost to figure his regular MACRS depreciation deduction for 2008 and later years.taxmap/pubs/p946-016.htm#en_us_publink1000107498
The facts are the same as in Example 1, except that Tom elects to deduct $325,000 ($250,000 + the increased dollar limit of $100,000 for qualified Recovery Assistance property) of the property's cost as a section 179 deduction. He uses the remaining $125,000 of cost to figure his special depreciation allowance of $62,500 ($125,000 × 50%). He uses the remaining $62,500 of cost to figure his regular MACRS depreciation deduction for 2008 and later years.taxmap/pubs/p946-016.htm#en_us_publink1000107499
If you acquire qualified property in a like-kind exchange or involuntary conversion, the carryover basis of the acquired property is eligible for a special depreciation allowance. After you figure your special allowance, you can use the remaining carryover basis to figure your regular MACRS depreciation deduction. In the year you claim the allowance (the year you place in service the property received in the exchange or dispose of involuntarily converted property), you must reduce the carryover basis of the property by the allowance before figuring your regular MACRS depreciation deduction. See Figuring the Deduction for Property Acquired in a Nontaxable Exchange, in chapter 4, under How Is the Depreciation Deduction Figured. The excess basis (the part of the acquired property's basis that exceeds its carryover basis) is also eligible for a special depreciation allowance.