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50% Bonus Depreciation Rule for 2013 |
by Tom Copeland
Providers who buy items in 2013 may be eligible to use a new 50% bonus depreciation rule. This rule allows providers to deduct 50% of the business portion of the item in 2013.
Property that is eligible for this special allowance includes: computers, office equipment, furniture, appliances, play equipment, fences, driveways, and a car. The purchase of home improvements or a home does not qualify. The item must be purchased new in calendar year 2013. A used item does not qualify.
Here’s an example of how the 50% rule works:
- Let’s say a family child care provider bought a living room couch for $1,000 in March 2013 and her Time-Space Percentage for the year is 40%.
- $1,000 x 40% = $400 (the business portion of the couch)
- $400 x 50% = $200 (the amount of the depreciation that can be deducted on Form 4562, line 14 in 2013)
- The remaining amount must be depreciated ($400 - $200 = $200)
- $200 x 14.29% = $28.58 (the amount that can be depreciated in 2013 using the 7 years accelerated depreciation rule on Form 4562, line 19c)
- Total amount of deductions for 2012: $200 + $28.58 = $228.58
Instead of using this rule, provider could depreciate the couch over seven years and deduct $57.16 ($400 x 14.29%) in 2013.
This handout was produced by Think Small (www.thinksmall.org).
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