2008 Bonus Depreciation Benefit

Here’s some good information:

On Monday, February 11, 2008, President Bush signed the Economic Stimulus Act of 2008 which includes depreciation provisions for businesses buying equipment and computer software and placing it into service in 2008. This tax relief provides an incentive for businesses to make investments this year.

Generally a trade or business must recover the cost of property over a predetermined period of years. The depreciation provisions under the Economic Stimulus Act of 2008 allows a trade or business to depreciate an additional 50% of the cost of an asset acquired and placed into service in 2008 in that year with the remaining basis depreciated in accordance with the statutorily prescribed recovery period. The types of property eligible for the bonus depreciation is purchased computer software which is generally defined as any program designed to cause a computer to perform a desired function. As such, the sale of Autodesk software should generally qualify for this incremental tax benefit.

What does this mean to you? In general, you will be able to deduct 67% of the cost of the software purchased in year of purchase (see example below).
This is generally how it works:

Example:

Autodesk Inventor Suite 2008 Commercial New SLM (pricing based on U.S.-Direct VAR Pricing Feb1 to April 30th, 2008)

WITHOUT BONUS DEPRECIATION
3 year useful life property (Software) with a cost of $5,295
Year 1 depreciation $5,295 / 3 = 1,765
Year 2 depreciation $5,295 /3 = 1,765
Year 3 depreciation $5,295 /3 = 1,765
Total depreciation            $5,295.00

WITH BONUS DEPRECIATION
3 year useful life property with a cost of $5,295
Year 1 depreciation $5,295 * 50% = $2,647.5
plus
                                 $2,647.5 / 3 = $ 882.5
                                                        $3,530
Year 2 depreciation $2,647.5 / 3 = $ 882.5
Year 3 depreciation $2,647.5 / 3 = $ 882.5
Total depreciation               $5,295.00

THESE ARE GENERAL GUIDELINES AND SHOULD NOT BE CONSTRUED AS TAX ADVICE. You should discuss your specific situation with your personal tax advisor.

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