 Most of this information comes from publication 946, how to depreciate property tax year 2022. You can find it on the IRS website, irs.gov, irs.gov. Looking at the income tax formula, we're focused on line one income. Remember in the first half of the income tax formula is in essence an income statement, although just an outline the scaffolding other forms and schedules flowing into these line items. One of those, the schedule C having business income minus business expenses in essence and income statement in and of itself, the net business income flowing into line one income in our income tax formula. If we look at the form 1040, we note that the schedule C would flow into the schedule one flowing into the first page of the form 1040 line number eight, the schedule C is the profit or loss from business form structured as an income statement where we have income minus expenses. We are focused on the expenses side of things here, business deductions in essence and more specifically on depreciation and more specifically still on a special type of depreciation. Remember the general outline is expenses that are ordinary and necessary in order to generate revenue or expenses we can typically take when we have a deviation, a big deviation with the purchase of property planting equipment from a cashed based type of system, meaning even if we have a cashed based type of system when we buy property planting equipment the code is gonna force us to do an accrual thing putting it on the books as an asset and depreciating it over its useful life which is a normal kind of accounting concept but then they might add accelerated depreciations which are still kind of normal accounting concepts but then special front loaded depreciations and 179 type of deductions which are more designed to like stimulate the economy and have rationale that is usually different than normal accounting rationale and that's what we're talking about here remembering that from a tax standpoint normally we would like to get the deduction as soon as possible we want the deduction to be as high as possible get it as soon as possible because of the time value of money although there are exceptions to that rule okay, given that we wanna talk about claiming the special depreciation allowance introduction so you can take a special depreciation allowance to recover part of the cost of qualifying property defined next placed in service during the tax year the allowance applies only for the first year you place the property in service so this is the point it's like a big upfront type of deduction that you might be able to get for types of property that you would otherwise have to depreciate over the useful life of the property the allowance is an additional deduction you can take after any section 179 deduction and before you figure regular depreciation under the makers that's the normal kind of depreciation method basically like a double declining method so we're trying to take this before we kick into that to the normal depreciation which would allocate over multiple years in the future the 179 as we have talked about in the past is another kind of format of special depreciation kind of upfront depreciation so for some time at this point in time they've been trying to stimulate the economy most likely overheating the economy trying to push too hard possibly at this point and that's why they've got these big front loaded items in the tax code now it looks like just from an economic standpoint that we might be overheating the economy right now which you would think that would lead them to kind of try to pull back on some of these kind of stimulating things but that's unpopular to do so it will be interesting to see in the future what they do with like the 179 deduction and the special depreciation deductions in any case you figure regular depreciation of makers for the year you place the property in service okay this chapter explains what is qualified property it also includes rules regarding how to figure and allowance how to elect not to claim an allowance and when you must recapture an allowance okay what is qualified property so your property is qualified property if it is one of the following qualified reuse and recycling property certain qualified property required after September 27th 2017 and certain plants bearing fruits and nuts the following discussion provides information about the types of qualified property listed above for which you can take the special depreciation allowance qualified reuse and recycling property you can take a 50% special depreciation allowance for qualified reuse and recycling property qualified reuse and recycling property is any machinery or equipment not including building or real estate along with any apportionance that used exclusively to collect, distribute or recycle qualified reuse and recyclable materials as defined in section 168 M3B of the internal revenue code qualified reused and recycling property also includes software necessary to operate such equipment the property must meet the following requirements the property must be depreciated under makers that's the general kind of depreciation rules the property must have a useful life of at least five years so it's not under five years in terms of the length of the life the original use of the property must begin with you after August 31st 2008 you must have acquired the property by purchase as discussed under property acquired by purchase in chapter two after August 31st 2008 with no binding written contract for the acquisition in effect before September 1st 2008 the property must be placed in service for use in your trade or business after August 31st 2008 so accepted property qualified reuse and recycling property does not include any of the following any rolling stock or other equipment used to transport reuse or recyclable materials property required to be depreciated using the alternative depreciation system that's the ADS not the makers which is the standard form at this point in time for other property acquired to be depreciated using ADS as required use an ADS under which depreciation system GDS or ADS applies in chapter four we'll talk more about that possibly later other bonus depreciation property to which section 168K of the internal revenue code applies property for which you elected not to claim any special depreciation allowance we'll discuss that later property placed in service and disposed of in the same tax year property converted from business use to personal use in the same tax year acquired okay certain qualified property acquired after September 27, 2017 so you can elect to take 100% special depreciation allowance for property acquired after September 27, 2017 and placed in service before January 1st, 2023 or before January 1st, 2024 for certain property with a long production period and for certain aircraft so your property is qualified property if it meets the following so we've got tangible property depreciated under makers tangible meaning you can touch it makers being the normal kind of depreciation type of rules with a recovery period of 20 years or less 20 years or less when you get over the 20 years you're often gonna start getting into like real estate property which has those longer lives over that point so computer software defined in and depreciated under section 167F1 of the internal revenue code water utility property, qualified film, television and live theatrical productions as defined in sections 181D and E of the internal revenue code a specified plant for which you made the election to apply section 168K5 for the tax year in which the plant is planted or grafted explained later under certain plants bearing fruits and nuts so it is not accepted property explained later under accepted property okay so qualified property must also be placed in service before January 1st, 2027 or before January 1st, 2028 for certain property with a long production period and for certain aircraft and can be either new property or certain used property