A Bonus from the Job Creation and Worker Assistance Act

Welch, Julie A.; Gardner, Randy
August 2002
Journal of Financial Planning;Aug2002, Vol. 15 Issue 8, p30
Academic Journal
This article discusses the 30 percent bonus depreciation provision of the U.S. Job Creation and Worker Assistance Act of 2002. This provision allows extra depreciation to be taken on qualified property in the year the item is first placed in service. This bonus is mandatory unless an election is made not to take the additional deduction. As a result of the extra depreciation in the first year, depreciation in subsequent year will be reduced because the total depreciation for the life of the property is still limited to the cost basis. To qualify for these provisions, several requirements must be met, including the date the property is placed in service, the age of the property, and the depreciable life and type of the property. The 30 percent bonus depreciation is mandatory for qualifying property unless the taxpayer elects out. Situations when it may be beneficial for a taxpayer to elect out include when a taxpayer has net-operating loss carryover that is about to expire and when the taxpayer anticipates being in a higher rate bracket in future years. A taxpayer can elect out on a timely filed tax return, including extensions. The election may be made for any class of property and for any tax year.


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