Sen. Pat Roberts (R-KS) unveiled a proposal to permanently reinstate 50% bonus depreciation (S.B. 1660), which is a companion bill to Rep. Pat Tiberi's (R-OH) House bill, H.R. 2510. Sen. Debbie Stabenow (R-MI) has also introduced legislation (S.B. 1667) that would reinstate bonus depreciation for 2015 and 2016.
Used farm equipment will continue to have a seven-year life. In addition, 200% declining balance method becomes the default. However, for 15- or 20-year property or upon election, 150% declining.
Bonus Depreciation. Apart from Expensing rule (Section 179 Deduction), Bonus Depreciation is another tax write-off method available. It is a method to accelerate the rate of depreciation deduction. It states that 50 percent of the cost of the item can be deducted for the year when the item is put to service. The 50 percent ceiling applies for.
To qualify, the building must have a depreciable life of 20 years or less, which fits virtually all farm assets. Normally a machine shed, or shop or other general purpose farm structure is a 20-year depreciable asset, and is not eligible for the Section 179 first-year expensing deduction. However, these assets do qualify for a 50% bonus.
Using bonus depreciation, you can deduct a certain percentage of the cost of an asset in the first year it was purchased, and the remaining cost can be deducted over several years using regular depreciation or Section 179 expensing. For tax years 2015 through 2017, first-year bonus depreciation was set at 50%. It was scheduled to go down to 40% in 2018 and 30% in 2019, and then not be.
For example, if you have an asset that has a total worth of 10,000 and it has a depreciation of 10% per year, then at the end of the first year the total worth of the asset is 9,000. With this in mind, at the end of the next year the depreciation value is 900. The next again year the depreciation value is 810, and so on.
Extending full expensing to structures would allow companies to immediately deduct the cost of new buildings. The Tax Foundation General Equilibrium Model estimates that on a dynamic basis, enacting full expensing for new nonresidential structures would boost the long-run size of the economy by 1.4 percent. Full expensing for structures would lead to a 2.6 percent larger capital stock, a 1.2.
Calculate your depreciation rate per year. If you have a typical garden shed you likely determine the useful life to be 15 years. Using the straight-line method of depreciation, which is the most straight forward, you will depreciate 6.67 percent of the basis of the shed each year for 15 years. If the useful life is different than 15 years, you find this value by dividing 100 by the useful life.