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The IRS currently offers two special depreciation methods: Section 179 expense deduction and bonus depreciation. Each method is described below.

Section 179 Expense

Corporation and partnerships are eligible to take Section 179 expense on qualifying MACRS Section 1245 property when used more than 50 percent for business use and placed in service during the current tax year. Estates and trusts are not eligible for Section 179 expense and neither is rental property reported on Form 8825.

Partnerships and S-Corporations

Section 179 expense is reported on Schedule K and passed to the partners or shareholders and is not reported in ordinary income.

Bonus Deprecation

Bonus deprecation is allowed on new assets placed in service in the current tax year and used in the United States with a recovery period of 20 years or less. Certain leasehold improvements, restaurant property, and retail improvement property may also qualify for bonus deprecation. Used assets are not eligible for bonus depreciation. Bonus depreciation is calculated after Section 179 expense is taken and before current year depreciation is calculated.


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