New Tax Act Increases, Extends Bonus Depreciation on Real Property

SAN FRANCISCO-A piece of the Jobs and Growth Tax Relief Reconciliation Act of 2003 will be particularly beneficial to companies constructing a building and placing it into service before Jan. 1, 2005, according to Ernst & Young’s Real Estate Advisory Service.

The new law increases and extends “Bonus Depreciation” provisions on real property, including operating real estate assets owned by companies. Specifically, the Act provides an additional first-year depreciation deduction equal to 50% of the adjusted basis of qualified property. It is a 66.6% increase from the 30% first-year depreciation deduction that has been in place since the Job Creation and Worker Assistance Act of 2002 was passed in March of last year.

“I thought the 30% first-year depreciation deduction would have triggered more investment; but it wasn’t really noticeable,” Michael Whalen, national director for the construction division of Ernst & Young’s Real Estate Advisory, tells GlobeSt.com. “Hopefully this will provide the necessary incentive for those companies that have put off making a decision.”