Economic Stimulus Act of 2008, Section 103

Audio summary

A short audio walkthrough of this rule: what it says and why it matters for your study.

What it holds

Revived 50% bonus depreciation for qualified property acquired after December 31, 2007 and placed in service before January 1, 2009. Bonus had lapsed after 2005.

Where this comes from

Bonus depreciation was first created in 2002 as an economic stimulus measure. Congress raised it to 50% in 2003 and set it to expire. After 2005, the bonus window closed. Property placed in service in 2006 and 2007 did not qualify for any additional first-year bonus.

By early 2008, the economy was slowing. Congress wanted to give businesses a reason to invest quickly. The Economic Stimulus Act of 2008 was signed in February of that year. Section 103 of that law revived the 50% bonus.

What it established

Section 103 brought the 50% additional first-year depreciation back under Section 168(k). The rule applied to qualified property acquired after December 31, 2007 and placed in service before January 1, 2009.

The structure followed the original 2002 and 2003 framework. Property had to have a MACRS recovery period of 20 years or less to qualify. New property was the baseline requirement. The law also carried the bonus eligibility to certain computer software and water utility property.

How it shows up in a study

For property placed in service during 2008, a cost segregation study could unlock the 50% bonus on reclassified components. The study identifies the 5-year, 7-year, and 15-year property inside the building. Those components qualified for the bonus; the 27.5 or 39-year building shell did not.

This law is also part of the historical timeline of bonus depreciation. Understanding when the bonus was on and off helps explain the depreciation treatment on older properties. If you own a building placed in service in 2008, the study's first-year deduction figure reflects this law.

What it does not mean

The window was narrow. Property placed in service in 2009 or later needed a different law to qualify. The 2008 act did not extend beyond its one-year window without further action by Congress.

The 50% bonus also did not apply to the building itself. Only the property a study properly reclassifies into faster categories could qualify. And like all bonus depreciation, the deduction is a timing benefit. Total depreciation over the property's life stays the same. Only the timing changes.

Category

Bonus depreciation & expensing

Applies to

All property types

Status

Vetted

This page explains a tax authority in plain words. It is not tax advice for your situation. The way this authority applies to your property is reviewed by a licensed tax professional. Citation is provided so you or your advisor can read the primary source.