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By: Jeffrey D. Hiatt, Director of New Business Development
MS Consultants, LLC
One of the key elements is the new ability to elect a step down from 100% Bonus Depreciation to 50%. Another key element is the clarification of the Qualified Restaurant Property (QRP) and Qualified Retail improvement Property (QRIP) definitions and guidelines.
Bonus Depreciation was first enacted effective 9/11/01 at 30%, enabling taxpayers to claim an extra 30% deduction, in addition to the normally prescribed depreciation, for qualified property placed in service during the specified time period. This was done as a tool to help stimulate the economy. Bonus Depreciation has followed a reverse correlation to the economy ever since, as we have seen it raised to 50%, reduced to zero, re-enacted at 50%, and currently in place at 100%.
Bonus Depreciation is currently at 100% for all original use property with a recovery period of 20 years or less placed in service after September 8, 2010. New construction must be placed in service after that date AND have a contract date after that date as well. Revenue Procedure 2011-26, for the first time, enables a taxpayer to elect a step down from 100% to 50% Bonus Depreciation for specific asset categories. This provides a tremendous tool for tax planning strategies for all taxpayers placing original use property in service during the current year, allowing some control over the amount of depreciation deductions to be taken in the current and subsequent tax years.
Historically Qualified Leasehold Improvement (QLI) property has been eligible for Bonus Depreciation, as long as it meets all of the Bonus Depreciation guidelines. Conversely, QRP and QRIP have been excluded from Bonus Depreciation consideration. However, Revenue Procedure 2011-26 now allows for Bonus Depreciation on QRP and QRIP, providing they possess a “dual character” property whereby they also meet the definition of QLI property. This rule change also allows for another opportunity in maximizing deductions and strategic tax planning for eligible taxpayers.
Bonus Depreciation, as well as QLI, QRP, and QRIP, since their respective inception dates, have provided the opportunity for tremendous tax savings for certain taxpayers. The new guidelines and definitions as discussed in Revenue Procedure 2011-26 amplify these opportunities, and allow for strategic tax planning for current year, as well as subsequent years.
MS Consultants, LLC is the leading independent provider of Cost Segregation Studies to small, local and regional CPA firms across the US. If you would like more information, please contact Jeffrey D. Hiatt, Director of New Business Development at [877] 633 9840 or via email at
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