The new Small Business Jobs Act of 2010 was signed into law last week and it extends the additional first-year 50% depreciation allowance through the end of 2010. This rule allows providers to claim half of the depreciation on selected items in the first year and depreciate the remaining half under normal depreciation rules.
This rule was first introduced in 2008 and was scheduled to expire at the end of 2009. This last minute extension of the rule applies to purchases you made in 2010. Home improvements and the purchase of a home are not eligible for this rule.
Here's an example of how the rule works. If you spent $1,000 on some playground equipment and your Time-Space Percentage (and here) was 40% your business portion would be $400. Normally you would depreciate the $400 over 7 years. But the first year 50% depreciation allowance allows you to deduct $200 in 2010 ($400 x 50%) and depreciate the other $200 over 7 years. Your 2010 deduction on the $200 would be $28.58 for a total deduction of $228.58.
For details about this new rule and all other new rules affecting your business in 2010 see my upcoming 2010 Family Child Care Tax Workbook and Organizer that will be available in January 2010.
Copyright 2010, Tom Copeland, www.tomcopelandblog.com