Question:

Can you supply authoritative detail on the 50% bonus depreciation allowance? Specifically, I’m looking for information on qualified leasehold improvements.

Answer:

Have a Small Business Question?

Send us an email and we’ll try to answer it for you. Due to the volume of questions we receive, we are not able to answer all questions. Questions that are selected for publication may be edited for length and clarity. The 50% first-year bonus depreciation income tax deduction, which was recently extended under the government's stimulus act, allows taxpayers to recover the cost of qualified, new property, such as buildings, vehicles, furniture, and equipment that is placed in service by December 31, 2009.

Some business owners who make qualified improvements — such as adding new light fixtures and electrical or plumbing systems — to the interior of leased commercial property can also take advantage of the bonus depreciation break under the “qualified leasehold improvement property” provision, says James G. Burns, a tax attorney in Irvine, Calif. Just make sure that the portion of the building that was improved upon is exclusively occupied by the lessee or sub-lessee. The building itself must also be more than three-years-old and improvements must be conducted by the lessee, sub-lessee or lessor of that part of the building — all of whom must be unrelated.