Bonus Depreciation Rule Explained

What is bonus depreciation? It's a rule that allows family child care providers to deduct certain items costing more than $2,500 in the first year they purchase them. Congress has passed various versions of this rule over the years. To use the bonus depreciation rule you must have purchased one of the following items: computers and other office equipment, fence, driveway, patio, furniture, appliances, car/truck and playground equipment. Essentially anything that costs more than $2,500. It does not apply to the purchase of a home or making a home improvement or an addition to the home. Computers and vehicles must be used at least 50% of the time in your business to be eligible to use this rule.

State Income Taxes

Some states do not follow this bonus depreciation rule and deny child care providers this deduction on their state tax return. They may require you to report as income on your state tax return some of the amount you deducted using this rule on your federal tax return. Check with your state department of revenue or your tax professional.

Tom Copeland – www.tomcopelandblog.com

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