[REG] Depreciation(MACRS, sec179, bonus depre), Amortization

Modified Accelerated Cost Recovery System (MACRS)

- greater depreciation expense upfront

- No Salvage value

 

Personal Property

3yrs	200% declining Balance M
5yrs	200% declining Balance M	automobiles, light trucks, computers, copiers
7yrs	200% declining Balance M	furniture, fixtures, machinery, equipment
10yrs	200% declining Balance M	Boat, transportation equipment
15yrs	150% declining Balance M	qualified improvements to the interior of nonresidential buildings, improvements made directly to the land
20yrs	150% declining Balance M	includes certain farm buildings and municipal sewers

 

- Half-year convention(general)

half year of depreciation in the year of acquisition/disposition

 

- Mid-quarter convention(exception)

apply if, 4thQ personal property acquired / Total personal property acquired > 40% 

placed in service or disposed of midway through the quarter placed

 

 

Real Property

- Mid-month convention

 

Residential property

STL depreciation, 27.5 yrs

 

Nonresidential property

STL depreciation, 39 yrs

 

Section 179 Expense Deduction(with MACRS)

Qualified real property improvement

- after-purchase improvements

- must be nonresidential real property(active trade or business)

ex: roofs, heating systems, ventilation systems, air-conditioning, fire protection, alarm, security systems

- Max annual deduction $1,220K, phase-out qualified purchases exceeds 3,050K (2024)

- acquired from an unrelated party during the year

-deduction is limited to taxable income(no loss)

 

Bonus Depreciation, 60%(2024)

- additional deduction of qualified property placed into service(with sec 179, MACRS)

- recovery period of 20 yrs or less

- not acquired from a related party

* Assets that are converted from personal use to business use are not eligible for bonus depreciation

* Assets that are acquired from a related party are not eligible for bonus depreciation

* Assets that were received as a gift/inherited are not eligible for bonus depreciation

Amortization

- intangible assets, ST, full-month convention

- recovery period for 180 months, 15yrs

* GAAP: subject to impairment test

 

Section 197 purchased intangibles (Goodwill)

Capitalized Research and experimental costs

- amort over no less than 60 months,

- begin economic benefit from the costs is first received

- no longer amort once the patent is obtained

Patents and Copyrights

Loan Costs

Capitalized Organizational Costs and start-up Costs

- immediate expense allowance $5K(reduced any excess of $50K), allowance for organizational and start-up costs each!

- amort any remaining costs after $5K, over 180 months

- begin with the month in which business operations start